Property developers relying on artist impressions and marketing materials to sell off-the-plan developments, may find themselves in hot water after a recent decision in the Federal Court.
The decision in Ripani v Century Legend  FCA 242 raises concerns for a developer’s liability in their marketing materials being a ‘misrepresentation’ under Australian Consumer Law (‘ACL’). The case has also highlighted the ineffectiveness of developers trying to rely on disclaimer or exclusion clauses to mitigate their liability to purchasers.
Key issue: Misrepresentation
A developer entered into a off-the-plan contract of sale with a purchaser for a luxury apartment in Melbourne. The marketing materials and artist impressions depicted a large free spanning opening between the inside and outside living areas. However, the developer was aware that the design was incapable of being delivered due to structural constraints.
The purchaser claimed that the marketing material relied upon to sell the apartment was a misrepresentation and deceptive under the ACL. The developer sought to rely on the exclusion clauses contained within the marketing material, to protect it from the purchaser’s claim.
The Court found that the purchaser was misled by the marketing materials provided, as it would not have entered into the contract if they did not believe the apartment was to be constructed as illustrated. This resulted in the court ordering the rescission of the contract of sale.
What does this means for developers?
Developers must be aware of ACL implications when they are marketing and selling off-the-plan and must ensure:
- marketing materials don’t contain features or representations that are likely to mislead or deceive;
- if a development contains bespoke or visual representations used to entice consumers, be satisfied that these designs are structurally achievable before being marketed; and
- if relying on disclaimer or exclusion clauses, specifically alert consumers to any potential inaccuracies.