Holidays hit by securities breach

Summer holiday plans in Rotorua have been stymied after a resort rental scheme appears to have run foul of securities legislation.

Hotel operator Scenic Circle says Securities Commission concern means it can no longer offer rooms at the Marama Resort, 77 privately owned units 15 minutes from Rotorua on the Ohau Channel between Lakes Rotorua and Rotoiti.

Reservations for the Christmas break have been cancelled.

The commission says it has not decided the arrangement is in breach - which would mean shares would be voided. But it seems its correspondence has led owners to "terminate" the lease operating system.

Scenic Circle chain executive director Lani Hagaman said the company "had been forced to withdraw" from managing the hotel operations from last Sunday.

It had a management deal with Marama Point Owners, the company whose shareholders own the units and who said the commission had "required it to terminate" the lease operating pool. Unit-holders now had to surrender their leases, she said, which meant the availability of units could not be guaranteed.

Scenic Circle was disappointed at the turn of events, which came as "an unexpected blow".

It had entered the agreement "on the understanding that all legal compliances for the resort had been met" by the owners.

The chain, which began running the Marama Resort in August last year, and was now trying to help guests to find alternative accommodation, but it did not have other properties in the Rotorua region.

Last July, commission chairwoman Jane Diplock issued a warning about property developers and their advisers, saying they needed to consider securities law issues when planning their developments.

Developers have, when raising funds for various projects, sometimes inadvertently broken securities law that says a prospectus must be issued.

In the Marama Resort, investors bought units, then put them into a lease operating pool, from which rents were distributed.

Diplock said rights to join such schemes, which offered a proportionate share in the income, counted as "participatory securities".


Rental pool

* Marama Resort units are owned privately, but were managed by the Scenic Circle chain.
* Scenic Circle says it can no longer rent out the units as the Securities Commission has told owners to "terminate" the lease operating pool.
* Such pools share rentals among unit owners.
* The commission has written to owners, but did not order closure of the scheme.