NMa completes extensive investigation into real-estate traders
The Netherlands Competition Authority (NMa) has fined an additional 65 real-estate traders, with fines totaling EUR 6.4 million. In late 2011, the NMa already fined the 14 most active traders, with fines totaling EUR 6.3 million. The real-estate traders involved manipulated foreclosure auctions between 2000 and 2009. After the official foreclosure auctions, traders re-auctioned homes at other, secret auctions (so-called after-auctions), often at a higher price. The ‘profit’ (the difference between the price at the official auction and the price at the after-auction) was split among the traders involved. With these fines, the extensive investigation, which the NMa launched in 2009 and which was triggered by information it had received from the Dutch Tax Administration, has been completed.
In setting the levels of the fines imposed on the 65 traders, the NMa took into account all of the case’s circumstances, including the financial strengths of various traders. After administrative appeal proceedings, the NMa reduced the fines on the initial 14 traders to EUR 4.0 million in total (which had originally been EUR 6.3 million).
The NMa’s investigation revealed that traders were able to easily manipulate foreclosure auctions. A small circle of traders dominated the auctions, and outsiders were rarely seen. This is in part because of the risks involved with buying homes at foreclosure auctions. Buyers are generally not able to view homes in advance, and it sometimes even turns out that homes are rented out. Furthermore, the costs associated with the auction process are not transparent.
The NMa welcomes the growing trend of notaries organizing regional auctions. Such larger auctions attract bigger crowds, which makes it more difficult to set up cartels. The NMa expects a draft bill put forward by the Dutch Ministry of Security and Justice to bring about further improvements to foreclosure auctions. This bill proposes to reduce barriers to buying homes at foreclosure auctions. Among other proposals, it enables potential buyers to view homes in advance, and it requires mortgage providers (the banks) to invoke the provision in most mortgage contracts that prohibits renting out homes without permission from the banks. In addition, it will become easier to vacate homes, and the costs thereof will be borne by the mortgage provider. Chris Fonteijn, Chairman of the Board of the NMa, sees benefits from introducing internet auctions: ‘More individuals will be able to place bids on homes, which in turn leads to better prices and possibly to reduced mortgage shortfalls for the homeowners.’
In its publication ‘Market recommendations for foreclosure auctions of real estate,’ the NMa calls on all parties involved to improve the functioning of foreclosure auctions. The NMa also publishes ‘Guidelines for foreclosure auctions of real estate’ in order to make clear what is and what is not allowed at foreclosure auctions.
The collaboration between the NMa and the Dutch Tax Administration, which was formalized in 2009, perfectly dovetails with the integrated approach of the Dutch government in recent years to combat abuses in the real estate industry.
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