6 October 2017

The Building Commission recently informed the building industry about concerns regarding representations made in advertisements by builders in relation to house and land packages.

Consumer Protection believes that information may be of interest to real estate practitioners because house and land packages are also advertised and marketed by the real estate industry. Whether you are a builder, real estate agent, or you act as a sales representative for a builder or for a licensed real estate agency the provisions detailed in this bulletin apply and you are encouraged to refresh your understanding and adjust your practices where necessary.  

A summary of the information is provided below.

Truth in advertising

Consumer Protection continues to receive a number of complaints about the representations builders make in their marketing material.  The issues relate to house and land packages, often where the builder does not own the land. 

As you would be aware, prosecution action can be taken against builders or others who publish false or misleading advertisements. The seriousness of these matters is reflected in the maximum penalty available under the Australian Consumer Law (ACL) of $220,000 applicable to an individual and $1,100,000 for a body corporate.

The recent spike in complaints has identified a number of misleading advertisements and a number of these matters have met the threshold for investigation.

The following examples reflect elements of potentially misleading advertising Consumer Protection has examined in the past.

Land Ownership

A builder advertised a block of land they did not own (as part of a house and land package) without the authority of the owner. This involved a builder using the address of a vacant block they did not own in a particular suburb to leverage the marketing of their product. Such advertising is often placed on real estate websites such as realestate.com.au.

Only a person who owns a block of land is entitled to sell it; otherwise it must be sold by someone who is legally authorised to do so (such as a licensed real estate agent appointed by the owner). 

The ACL requires the person promoting the sale of the land to have approval to sell the land.

Availability of land

Consumer Protection has seen cases where builders have advertised a house and land package where the land has already been sold.  Builders should only advertise house and land packages where the land is currently available.

Advertisements should be reviewed to ensure the packages are based on land that is currently available.

Pictured elevation

Builders have published photographs of the front elevation of a house in advertisements but the advertised price does not reflect the cost of the home as pictured.

Photographs of this type in a builder’s marketing material must disclose the relevant details regarding the featured elevation and price. Builders should avoid using fine print disclaimers as they will not negate the issue if the overall impression of the advertisement is misleading.

Featured elevations should also be relevant to the particular block of land being advertised with the house. As an example, the advertisement should not feature a 17m house frontage in an advertisement if the block has a 12m frontage. While this is a simplistic example, advertisers need to think about what they are trying to achieve. That is, to sell a genuine house and land package product.

Pricing

Setting prices in house and land packages without providing for fluctuations at different locations will have an obvious effect on the cost of site works and variations. If builders are enticing potential customers on the basis of what they see as an affordable proposition, they should be able to deliver on that proposition.

Advertisements should disclose reasonable price estimates and be qualified if there are known variables.

General information for sales representatives

• A sales representative should only be employed by a builder to promote and sell house and land packages if the builder owns the land being sold. A sales representative who engages with others to sell their land may need to be operating under the guidance and control of a real estate agent if they sell land a builder does not own.
• All sales representatives have a responsibility for disclosure.  Sales representatives should always disclose to prospective buyers any and all commissions, fees or benefits they receive from sources other than their direct employment with their agent. The customer they are dealing with needs to know who they are acting on behalf of and of course there are consequences for failing to do so.

For more information, please contact Consumer Protection on 1300 30 40 54 or email or read more information about the ACL on our website.