One of Brisbane’s top real estate agencies is being sued by the vendor over claims that the home was sold to the agency’s principal in a sweetheart deal that undervalued the property by hundreds of thousands of dollars. Attwood Marshall Lawyers Commercial Litigation Senior Associate Jade Carlson explains the potential ramifications of false and misleading conduct and how these types of claims are resolved.
Background
Property seller, Lindsay Fawdry, filed a claim in Brisbane District Court in late October 2021 against Hutton & Hutton Inner East Principal Jarrod Perry and Real Estate Agent Sallyanne Smith claiming that the agency had breached the Australian Consumer Law by making false and misleading representations when selling his exclusive riverside cottage, ultimately inducing the seller to execute a contract for the sale of the property at a reduced price.
Mr Perry is “vigorously defending” the allegations.
Mr Fawdry is seeking $285,000, the amount he claims his property was undersold to Mr Perry by, plus interest and costs.
According to the court documents filed in this proceeding, Mr Fawdry claims that:
- He engaged H&H Inner East on or around 8 January 2021 to sell his property.
- The following day, Mr Smith, an agent at Hutton & Hutton Real Estate, contacted him advising that an offer of $915,000 had been made on the property by their agency’s principal, Mr Perry.
- Ms Smith advised him the offer was “a fair price based upon sale prices of comparable properties” and that it was desirable as it did not impose any conditions.
- That same day, he signed the contract, with settlement scheduled for 10 March 2022.
- The actual value of the property, as of 9 January 2022, was in fact between $1,175,000 and $1,200,000, which is far greater than the contract price.
- Ms Smith “knew or ought reasonably to have known that the purchase price was less than the true and accurate value of the property” and that Mr Perry was “conflicted between his duty to (Mr Fawdry) and his interest under the contract as purchaser”.
- Mr Perry’s conduct was unconscionable and he prioritised his interest in the property over that of his client, which contravenes the Australian Consumer Law by making “false or misleading representations”.
Hutton & Hutton Inner East Real Estate responded to the claim in November 2021 by way of filing a notice of intention to defend. The proceeding is yet to be decided.
False and misleading conduct in real estate
Section 18 of the Australian Consumer Law generally prohibits conduct, in trade or commerce, that is misleading or deceptive or is likely to mislead or deceive. Section 30 of the Australian Consumer Law prohibits false or misleading representations in connection with property transactions. These prohibitions apply to statements, which relate to:
- The nature of the interest in land;
- The price to be paid for land;
- The location of land;
- The characteristics of land;
- The uses for which land may be used or for which it is capable of being used.
What constitutes a ‘representation’
A representation is not limited to a verbal statement, it could also be a statement made in writing or by implication through certain language, or from a plan, drawing, map, or photograph. Silence can also constitute a representation.
‘False’ or ‘misleading’ statement
A false representation is generally a statement that is not true. It is not necessary to prove that the person making the representation knew that the statement was false. Even if the person making the representation believes the statement to be true, if the statement is false, then the person can still be liable.
As for whether a representation is misleading, the entirety of the circumstances will be considered in determining whether a statement was misleading.
Penalties
In addition to being liable for any loss and damage caused to another party, making false or misleading representations about the sale of land and property can lead to penalties being imposed. The greatest penalties that can be imposed if someone is found to have enacted false or misleading conduct include:
- for a corporation breach of the ACL, the more significant of:
- $10 million
- Three times the value of the benefit received
- 10% of annual turnover in the precursory 12 months (in cases where the benefit is not able to be calculated)
- for individual breaches of the ACL, up to $500,000 per breach.
For real estate agents
As a licensed real estate agent, you must not engage in misleading or deceptive conduct with potential buyers or sellers.
Comparably, if a seller delineates how they want to advertise a property on an agent’s appointment form, it would subsequently be considered a false or misleading representation if the agent knows the details, they have provided are incorrect. It is the agent’s responsibility to make the seller aware of the law.
All property agents must check that they have processes and training in place in their agency to prevent misleading claims from being made. If an Office of Fair-Trading officer advises you to make changes to your conduct or processes to comply with the law, it is in your best interests to take that advice.
To reduce the instances of misleading a client, real estate agents are obliged to:
- disclose all information pertinent to the price of the property
- advertise the selling price established on a plausible market appraisal or the price the seller has implied they are likely to accept
- not make untrue claims about the price of the property
- not advertise or underquote a property at a price notably less than the selling price to captivate interest in the property
- not make incorrect claims about the location, characteristics or use of the land.
Conflict of Interest
It will always be a conflict of interest when an agent buys a property from the seller who has listed the property with them. This does not mean it cannot happen. You just need to be very careful about how that is handled and even consider referring them to an alternate agent for advice or obtaining a formal valuation from a registered valuer to take away any argument you have taken advantage of your seller and paid a sale price that was less than what it is worth on the market.
Attwood Marshall Lawyers – experts in resolving disputes that arise from false and misleading conduct
Attwood Marshall Lawyers’ dispute resolution and litigation team are skilled at providing the best possible advice for anyone who has been impacted by another party breaching Australian Consumer Law.
When property disputes arise, we believe in resolving matters of this nature as quickly and effectively as possible to reduce the risk of costly and lengthy litigation evolving and allow all parties involved to move on with their lives.
If you need advice after a claim has been made against you in relation to a property sale or purchase, contact our Commercial Litigation Department Manager, Amanda Heather, at (07) 5506 8245, email aheather@attwoodmarshall.com.au or free call 1800 621 071 to find out where you stand.
If you have any doubt about what you can tell a buyer or what you must disclose to a buyer, please contact our Property & Commercial department, and we will provide you with professional guidance.
We have a dedicated team of property lawyers who can provide clients with pre-signing advice to ensure all parties are aware of their rights and obligations under a contract, and to facilitate the smooth settlement of a property.
If you have buyers, or sellers seeking advice from an experienced property lawyer to ensure their property transaction proceeds without any hiccups, contact our team any time by calling our Property and Commercial Department Manager Jess Kimpton on direct line 07 5506 8214 or email jkimpton@attwoodmarshall.com.au.
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