It is common that off-the-plan contracts include special conditions noting that marketing materials and representations by a vendor and it’s agent are not to be relied upon, but it’s one of those special conditions that people often overlook or don’t consider. Inaccurate, deceptive or misleading messaging in marketing materials can have a direct bearing on the purchasers. Here we share the findings and decisions of a relevant case where such conduct occurred.
In the recent case of Ripani v Century Legend Pty Ltd  FCA 242, the court has handed down the decision that the developers engaged in misleading and deceptive conduct, and the purchasers were entitled to rescind the contract and recover losses from the developer.
Summary of Ripani v Century Legend Pty Ltd  FCA 242
- In 2017 the purchasers entered into a contract of sale of real estate with the developer to purchase a property, off-the-plan.
- Prior to the purchasers entering into the contract, they relied heavily on marketing materials (a hard bound brochure including various images known as ‘renders’ that illustrated the apartment building and various aspects of the apartment once constructed).
- The brochure included a render (see below) which portrays a large free span opening between the inside of the living areas and the outside terrace of the apartment indicating a seamless integration of the indoor and outdoor areas. The brochure contained disclaimers and the words ‘artist impression’.
- The architect Rothe Lowman had informed the developer that the eight-metre free span could not be constructed due to height restrictions of the development and structural requirements and was therefore only likely to construct a three-metres free span instead.
- The architect had also recommended that the developer amend the renders prior to marketing launch or be transparent with all potential purchasers regarding the discrepancies/inaccuracies.
Decision by Federal Court
- The exclusion clauses contained within the Contract of Sale (extract below) are not effective at excluding the operation of the Australian Consumer Law. Further the clauses were not expressed in a manner that would make the purchasers aware that the renders were not an accurate depiction of what the apartment would look like post construction.
Special Condition 2.4
- The Purchaser acknowledges that:
- (a) no information, representation or warranty by the Vendor, the Vendor’s Agent or the Vendor’s Legal Practitioners was supplied or made with the intention or knowledge that it would be relied upon by the Purchaser; and
- (b) no information, representation or warranty has been relied upon; and
- (c) this Contract contains the entire agreement between the parties for the sale and purchase of the Property and supersedes all previous negotiations and agreements in relation to the transaction.
Special Condition 3.1
- The Purchaser acknowledges that:
- (a) It has purchased the Property as a result of the Purchaser’s own inspection and enquiry and that the Purchaser does not rely on any representation or warranty of any kind made by or on behalf of the Vendor or its agents or consultants;
- (b) The description of areas and measurements appearing in any marketing material for the Development are approximate descriptions only and may differ from actual areas and measurements of the Development (including the Property) on completion of the Development;
- (c) The Vendor has not made any representations or warranties of the views available from the Development or Property;
- (d) Any photographs and other images created for the marketing of the Development are for illustrative purposes only and subject to change and cannot be relied upon by the Purchaser;
- (e) Any potential views depicted in the photographs and other images may not be available from the completed Development or Property;
- (f) The Vendor has no control over any development by parties unrelated to the Vendor of property surrounding or nearby the Development; and
- (g) Information contained in any promotional and marketing material is a guide only and does not constitute an offer, inducement, representation, warranty or contract.
- The words ‘artist impression’ in the brochure did not have any effect in an off-the-plan context where they are a substitution for inspection.
- The disclaimer included in the brochure (and “hidden” at the very back of the brochure) was described as vague, ambiguous and meaningless and was given no importance in the marketing materials. Therefore, the disclaimer did not have the effect of curing the misleading and deceptive representations made by developer.
- The purchasers were therefore entitled to rescind the contract and seek to recover losses from the developer which included interest and bank fees paid in relation to the bank guarantee provided to the developer.
Decision by Federal Court
- Marketing materials must always be prepared as accurately as possible.
- If you, as the developer, are aware of any discrepancy or inaccuracies, you should discuss this with your solicitor so that appropriate disclosure can be made to accompany the marketing materials and special conditions included in the contract of sale.
- Selling agents should be briefed appropriately to ensure that they express any disclaimers and inaccuracies to prospective purchasers.
This is an important learning to developers to ensure that marketing materials (and including any display suite) are accurate and appropriate disclosures are made when selling a property off-the-plan, as if the end product doesn’t match what’s in the contract, there may be a claim at hand.
Burke & Associates Property Division
Kristy Muhlhan, an Accredited Specialist property law, Director and Principal lead of our Property & Development Division has extensive experience in the area of Property Development. Whether this is your first or 50th development Kristy can assist you with your legal requirements. Reach out to Kristy via email or contact our office for our property lawyers on +61 3 9822 8588..
For any other property or real estate requirements or assistance please contact our Property Division’s legal team to discuss how we can assist you by phoning us on +61 3 9822 8588.
Insight written by Wendy Toura