Commission settles with real estate company, agent and developer over misleading advertising

The Commerce Commission has reached a settlement with Auckland-based Country Life Real Estate Limited, agent and shareholder Miles Wallace, and Avanti Developments Limited, after they admitted breaching the Fair Trading Act by incorrectly marketing and selling a property as a four bedroom home when building consent had only been obtained for a three bedroom home.

Between September 2005 and February 2006, County Life, with Miles Wallace acting as agent, advertised the property for sale on behalf of the property developer and vendor Avanti Developments. In that advertising, the attic space above the detached double garage was portrayed as one of the four bedrooms in the home.

In December 2005 Country Life, Miles Wallace and Avanti were advised by a prospective purchaser that building consent had not been obtained from the North Shore City Council for the attic space above the detached double garage to be constructed as a bedroom. Despite this advice, Country Life, Miles Wallace and Avanti continued with a marketing campaign describing the property as a 'brand new four bedroom home'.

Although the Council had issued a Code Compliance Certificate for the building works, the Certificate had been issued on the basis of the original building plans which had designated the space above the garage as an attic and not as a bedroom.

"Buying a home can be is one of the biggest decisions that consumers can make," Acting Director of the Fair Trading Branch, Stuart Wallace said. "One of the purposes of the Fair Trading Act is to ensure consumers have correct information when making such decisions."

"The Commission considers that the representations contained in the marketing of the property by Country Life, Miles Wallace and Avanti were misleading as to the characteristics of the land, in particular, the legal status of the bedrooms," Stuart Wallace said.

"The details of the building consent granted in respect of the property are not contained in the Land Information Report (LIM) and any prospective purchaser relies heavily on the information provided by real estate agents and property developers. This case highlights the need for prospective purchasers to fully investigate the Council's property files before entering into a contract to purchase real estate.

"This was a serious breach of the Fair Trading Act, as Avanti were fully aware, at the time the property was first marketed, that the building consent obtained for the property did not authorise the fourth bedroom. Despite becoming aware of this issue in December 2005, Country Life and Miles Wallace continued to market and in fact sell the property in February 2006 as a four bedroom home."

The Commission considered prosecuting Country Life, Miles Wallace and Avanti, but agreed to settle on the basis that the parties agree to satisfy all plans and building work required to make the attic space above the garage comply with the Building Act and North Shore City Council requirements to allow it to be described as a four-bedroom home.

"This settlement will send a clear message to the real estate industry, and property developers as vendors, that they have a legal obligation under the Fair Trading Act to ensure that all representations made in advertising about the status of a property must be accurate and not misleading," Stuart Wallace said.

Background

Country Life Real Estate Limited ("Country Life") is a registered company trading as a real estate business under the names "Premium" and "Premium Country", from offices at 27 William Pickering Drive, Albany, Auckland.

Avanti Developments Limited ("Avanti") is a registered company operating as a property development company from offices at 29 Northcroft Street, Takapuna, North Shore, Auckland.

The Fair Trading Act. In this case the Commission considers the relevant section of the Fair Trading Act is section 14(1)(b):

(1) No person shall, in trade, in connection with the sale or grant or possible sale or grant of
an interest in land, or with the promotion by any means of the sale or grant of an interest in land,-

(b) Make a false or misleading representation concerning the nature of the interest in the land,
the price payable for the land, the location of the land, the characteristics of the land,
the use to which the land is capable of being put or may be lawfully put,
or the existence or availability of facilities associated with the land.