Off The Plan Sales and Commissions
In a recent case in the Federal Court, Walter and Nina Ripani made a claim against the developer Century Legend Pty Ltd. The basic claim was that the render in the photos did not reflect the actual property dimensions.
While the case continually used the term ‘render’, it was not used in the sense of being a cover of bricks or stone but instead used to refer to the ‘hero shot’, ‘hero image’ or ‘hero render’. In the marketing materials used by the developer and the selling agent (CBRE), the ‘hero shot’ depicted an open span between the living and outdoor areas that was over 12 metres. It was understood that this 12 metre span could be closed with the use of glass doors.
In the end, for engineering reasons, it was impossible to provide such a clear span and the largest length of the span would in fact only be 3.4 metres.
A picture of the open area is below. The Ripanis took an action against the developer, Century Legend, saying it was guilty of misleading and deceptive conduct under the Australian Consumer Law because the actual opening was going to be nothing like ‘hero image’ in the marketing materials. The judge decided that the developer was guilty of misleading and deceptive conduct, cancelling the contract and ordering that the deposit be refunded to the Ripanis.
What agents need to be careful of is that, in such circumstances, they are entitled to the commission already paid to them and also the commission paid on completion if the reason the purchaser avoids the contract has nothing to do with the agent.
In our experience, whether or not an agent is entitled to a commission based on an off the plan authority where the purchaser avoids the contract due to the developer’s agent is either unclear or may not allow an agent to retain any commission paid or claim any commission in the future.
In the Ripani matter, the commission payable was actually to some degree dealt with in the judgment. In this case, CBRE’s authority must have meant that they were entitled to retain the commission of $129,800.00 (50%) already paid. It is not clear whether the authority would have allowed them to claim the balance of their commission, which must have been $129,800.00.
Please ensure that the off the plan authorities at least give you an arguable position to retain the commission paid and be entitled to payment of the balance of commission if the contract is avoided by a purchaser, or if the vendor allows the purchaser to cancel the contract.
The contract had the usual disclaimers. The judge indicated that under consumer-type claims, the disclaimers would not be of much use – but he also commented that they were in very small font and with a background that made them difficult to read. The word ‘hidden’ was used; if you are going to use disclaimers (and you should), then they should be in the same font as the rest of the documentation and not hidden.
Lawyers always put in contracts that anything said before, during or after the contract negotiation cannot be used. This off the plan land contract contained the usual provisions but the judge said they are not relevant for consumer-type claims. The take out is that lawyers will continue to insert these types of clauses, but for claims under consumer laws they probably have little or no benefit.
For further information please contact the author, or any member of our Corporate & Commercial team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.