A couple who spent nearly $1 million on a Hawthorne property are suing the real estate agents and vendor, claiming that the property was advertised falsely and alleging misleading conduct by the real estate agent.
Malcolm and Samantha Stevenson have taken agency Bekdon Richards and vendor Tony Burchill to court, claiming losses and damages of over $178,000 after purchasing a two bedroom Victorian-style home in February 2014. In a statement of claim lodged last month with the Federal Circuit Court, the couple, who paid $960,000 for the Linda Crescent house, alleged the agency’s ads represented the land size as 490 square metres.
However, the true block size is 431 square metres, according to court documents. “If, before entering into the contract of sale, the applicants had known that the true land size area of the property was 431 square metres, the applicants would not have entered into the contract of sale,” court documents said.
The Stevensons need to buy another home of a sufficient size for their family, amounting to a “wasted” $54,000 in stamp duty, the claim said. Other losses and damages sought include $50,000, which the Stevensons claim is the difference between the price they paid and the property’s true value, $1200 in conveyancing fees, $1500 incurred for finance application, $30,500 in real estate agent fees when they sell, $38,125 in marketing and advertising costs and $3000 for a removalist.
When they signed the sale contracts, the Stevensons intended to build an extension to accommodate their family, documents said, creating a three bedroom house with three bathrooms, two living areas and a pool. But council would not allow their application, after DX Architects drew a design, because “space constraints” meant the extension exceeded regulation.
The couple planned to build a 392 square metre house, the maximum allowed on a 490 square metre block. But the land parcel’s true size amounted to a loss of 47.2 square metres on which they could build, documents allege. Instead, the Stevensons constructed a “modified extension” which is not big enough for their family, lawyers said in the statement. The decision has not yet been handed down by the court.
Misleading Conduct Losses Awarded By Supreme Court
In Queensland, a similar case was lodged in the Supreme Court over the Riparian Plaza by a buyer who purchased an apartment in the development believing that there were three car spaces. The buyer sued the real estate agent for false and misleading conduct.
Advertising issued by the agent on the seller’s instructions claimed that the unit came with “three secure car spaces located side by side”. Under the terms of the applicable development approval, however, one of these spaces was designated for storage use only. During pre-contract negotiations the buyer was not told the storage space could not lawfully be used as a car park.
Further, the storage space in question had a concrete plinth restricting its use as a car park. The agent agreed to remove the concrete plinth from the storage space prior to settlement of the contract, in order for the buyer to use the storage space for car parking. However, the development approval had never allowed for the space to be used for car parking.
In court the buyer argued that she was induced into entering into the contract on the basis of the agent’s misleading conduct that the storage space could be used for car parking.
The buyer argued that the effect of there being only two car parks capable of lawful use for car parking significantly reduced the value of the unit. The buyer claimed that had she known the storage space was not able to be lawfully used for car parking, she would not have entered into the contract. Consequently, the buyer suffered loss as a result of the agent’s false and misleading conduct.
The Supreme Court of Queensland has held that advertising material related to the 2010 sale of a residential unit in the Riparian complex in Brisbane was misleading and deceptive. In the case, Seirlis v Bengtson & Ors  QSC 240, the buyer was awarded damages and interest by the court on the grounds that the advertised claim regarding the potential use of a basement storage space as a car park was false.
The case highlights the importance of sellers ensuring their agents do not make false or misleading representations regarding properties in advertising material or during pre-contract negotiations. Further, the case highlights the importance of parties recording any such agreements or essential terms of the transaction in the contract. A real estate agent cannot engage in misleading conduct in order to make a sale.
What Is Misleading Conduct?
The Australian Competition & Consumer Commission (ACCC) outlines that It is illegal for a business to make statements that are incorrect or likely to create a false impression. This applies to advertisements or statements in any media (print, radio, television, social media and online) or on product packaging, and any statements made by a person representing your business.
For example, a business must not make false or misleading claims about the quality, value, price, age or benefits of goods or services, or any associated guarantee or warranty. Using false testimonials is also illegal.
When assessing whether conduct is likely to mislead or deceive, consider whether the overall impression created by the conduct is false or inaccurate.
It does not matter whether a false or misleading statement was intentional or not. Verbal statements and images can also be misleading.
Verbal claims can be false or misleading even if they are contradicted or clarified in writing (e.g. in a contract).
In some circumstances, failure to disclose information can be misleading. This is particularly the case if you provide some information but don’t mention important details that qualify the information provided. When a business passes on information it receives from a third party, it can still be in breach of the law if that information is misleading or deceptive – unless the business makes it clear that it is just relaying the information and isn’t giving any assurance about its accuracy.
The example that the ACCC provides on its website:
A real estate agent, relying on information provided by the vendor, told the purchaser that the land could be redeveloped. This wasn’t true. The agent is guilty of misleading or deceptive conduct even though he believed the information was correct. It is irrelevant that the purchaser could easily have discovered the error by making enquiries with the council.
If you believe you have been the victim of false or misleading conduct by a real estate agent, please contact us today. You may be able to seek remedy through the court for any losses you have sustained. We offer a free, 10-minute phone consultation – so get in contact with us today!