How a homeless salesman’s scheme to flip South Auckland properties and extract rent from unsuspecting tenants along the way has burned banks, investment property buyers and the tenants — and caused a log jam in the courts.

Augustine Lau says you’d die in these parts if you lived here for any length of time. Your house would be broken into and you’d be robbed and killed.

But there are many who say Lau’s been trying to make a killing of his own.

It’s in the mean streets of Randwick Park and Clendon where Lau, a sometime land agent and emerald-level Amway salesman, plies his trade in a series of real estate deals designed to make a buck for both him and the Asian property investors he represents.

Auckland’s median house price might be around $500,000 but in these parts and in some of these properties, with the holes in the walls, the rubbish inside and out and the toilet pipes smashed by the cops looking for drugs, you’d be lucky to get $200,000. The tenants here are vulnerable. They’re mostly poor, mostly brown and often transient. An average tenancy lasts around six months, before the renters move on — or are pushed out.

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No, Augustine Lau wouldn’t last five minutes here. Not with those long, buffed and tapering nails on his little fingers, the outsized gold watch swinging loose on his slim wrist and three chunky gold rings on each hand. It’s a look at odds with his unshined shoes, the inches-too-long trousers and unkempt hair.

Tonight, he will sleep in his car. Or he may go to SkyCity Auckland, where he says he sometimes gets a free bed because he’s sent so many high-rollers to bet at the casino. He bets there, too, and says he makes about $500 a week.

Tomorrow, he will drive to the High Court at Auckland or the Tenancy Tribunal in Manukau to fight yet another of the legal battles that are engulfing — and gradually sinking — his property investment dream.

There are caveat fights, bankruptcy fights, rent fights, and Lau is in the thick of all of them. Police have been called, trespass orders and counter-orders filed. God knows when he finds time to sell the skin-care products, air purifiers and cooking utensils he talks up on the Amway website.

At the heart of these battles is a complex scam he has masterminded to exploit land-transfer laws and manipulate the court system. On the face of it, it’s a plausible plan.

Lau, aged 39, acts as an agent for 10-15 Chinese and Malaysian clients to whom he says he has family links. He puts deposits on dozens of rental properties in the Manurewa area. He doesn’t intend to complete the sales, but to on-sell the properties before the settlement date. The vendors — also Chinese nationals — are usually already behind with repayments to the bank. They cut their losses and “sell” to Lau for low prices, in some cases less than half of registered valuations subsequently obtained.

Lau says the vendors go back to Asia, although Metro believes many have never come to New Zealand in the first place. He says they return to collect funds to repay any debts owing on their properties, but a less charitable view is that they never intended to pay the outstanding balance of the mortgage. Certainly, those balances usually remain unpaid.

Lau does up some of the properties and organises a sale to a third party, taking the capital gain. His clients never officially purchase the property, and their name never appears on the title.

With no one paying the mortgage on the other properties, the bank soon steps in to recover its debt, and that’s when things get complicated.

Lau’s sale agreement says that if he doesn’t on-sell the property, his deposit converts to a five-year, pre-paid lease. On this basis, he registers a caveat on the property, which he uses to try to prevent it being sold to a new owner in a mortgagee sale.

When a mortgagee sale happens anyway, he insists the lease entitles him to keep collecting rent, even after new owners take possession. And continue to collect it he does — on behalf of his investors.

At least three parties are burned: the banks, which must chase the defaulting mortgagor through the courts for the unpaid loan; the new owners of the properties, who discover the rent is still going to Lau and not them; and, finally, the tenants, who are dragged through Tenancy Tribunal hearings and threatened with eviction because they’re not paying rent to the right person.

It doesn’t sound right and the courts have repeatedly said it isn’t. Mortgage conditions require bank consent before an agreement for sale, and s119 of the Land Transfer Act provides that a lease is not binding on a property unless the mortgagee has consented. That consent is never given in these cases, so Lau’s deal with the original owners is not valid.

But for each property — and its new owners and tenants — it takes time, frustrating court processes and expensive legal bills to set the record straight. And in the meantime Lau keeps collecting the rent.

He argues in some cases his deals are worth more than the bank gets at mortgagee sale and says he is a victim of their change of mind over allowing him to on-sell. As the court orders mount against him, he says he will fight on.

While Malaysia-born Lau’s deals have been unravelling for about a year, it took a 23-year-old law clerk working unpaid for a Papakura legal firm to begin drawing together the threads of the labyrinthine, ingenious scheme.

Juanita Maxwell, a Waikato University law graduate, was on her first day of voluntary work at David Rice’s Papakura law firm in late July when Rice asked her to research a case for a client who couldn’t get the tenants at the investment property he’d just bought at mortgagee auction to start paying the rent to him.

The tenants argued their landlord — whose agent was Augustine Lau — had a five-year prepaid lease on the property which trumped the rights of the new owner whose name was on the title.

It could be, Rice told her, that this case might be connected with a High Court fight in April and May this year over a number of property caveats, all involving Lau.

When Maxwell hit “search” in the Lexus Nexus legal database, line after line of Lau-related cases popped up on screen.

For a 23-year-old who’d almost topped her class in the notoriously difficult land-law papers, it felt like a rain of coins from a poker machine.

Something, she knew, was going on here. But what was it?

Lau was an agent for a Ray White real estate franchise when he began doing his latest round of property deals for up to 15 investors. There are others about a decade ago which also went sour, but more on those later.

In 2010, he believed the post-Global Financial Crisis property market was ripe for good deals at low prices.

Lau makes no secret of the fact that when he went trawling Trade Me and newspapers for properties, he was looking for sellers in distress. With the GFC into its second year, they weren’t hard to find.

Enter Taiwanese property manager Hsiu-Yun Ting, who advertised houses for sale in a Chinese newspaper. The properties were all South Auckland rentals, with Maori or Pacific Island tenants, owned by Chinese clients based overseas.

“I told her all the properties advertised were in a rough area and she told me she got a husband who is Maori background — Glenn Folau,” says Lau. “She told me Glenn can look after the property because he’s Maori. Maori-Maori easy to communicate.”

Lau, on behalf of his investors, offered 20 per cent cash deposits on 20 of these properties. But there were conditions: a long settlement period of six to 12 months, and immediate possession. And immediate income from the tenants’ rent.

Then came the clause that has triggered the current raft of lawsuits: “The paid deposit can be converted to five years’ rent/lease if the vendor cannot provide clear title on settlement date.”

As Ting signs up tenants, whose homes she already manages, to new agreements in the names of Lau’s clients, Lau begins collecting the rent — payable to his company, Jesus Co Ltd. He says he starts doing up the properties — perhaps a lick of paint and a few repairs — and preparing them for onsale. But with the real owners now in default on their mortgage payments, the clock is ticking towards mortgagee sale. Legally, he has no more status than a cuckoo in the nest: none.

As the mortgagee sale looms, Lau and Ting do everything in their power to put off potential buyers, hand-painting signs warning them of the lease and saying the tenants cannot be disturbed for five years. Ting tells the tenants not to allow would-be buyers to inspect the properties.

Every legal decision in these cases so far insists Lau is flouting the law. In May, Associate Judge Tony Christiansen said: “There appears to be a careful design by interests connected to Mr Lau to obtain control of a property for an extended period by a process intended to frustrate the right of a mortgagee bank to access its security to effect repayment of its loans.”

But tenants have told Metro that at the time of the sale and for weeks afterwards, they believed Ting.

Beverley and Malcolm Taiapo, who signed a tenancy agreement on one such house in Melleray Place, Randwick Park, just a week before its mortgagee sale, said they asked Ting about the “for sale” signs when they finalised the contract. “She said, ‘No no no, that’s all finished now,’” Beverley Taiapo, a supermarket checkout supervisor, says.

They signed on June 4 this year and a week later, the property’s new owner arrived to tell them he was now their landlord and they would have to transfer their rental agreement to him. They refused. Malcolm Taiapo says he abused the new owner and told him to leave the property.

Thereafter, whenever the new owner turned up, the Taiapos would call Ting, Ting would call the police and the tenants say a “screaming match” then ensued between the parties. “It was stressful and embarrassing,” says Beverley Taiapo. “The whole neighbourhood would come out.” Police confirm having attended incidents at the property.

For three months, the Taiapos con­tinued to pay rent to Lau, until the new owner gained an eviction notice. It was at this point that the Taiapos realised the new owner was telling the truth and that Ting and Lau weren’t entitled to the rent.