Marketing materials used to advertise off-the-plan contracts often contain computer generated images, called ‘renders’ to illustrate what the apartment design and space will look like once constructed. There are however potential traps for developers in using these renders. In 2017, two buyers entered into a contract for a premium apartment priced at almost $10million. In deciding to enter the contract, the buyers relied heavily on the marketing materials provided by the developer which included the ‘hero render’ (pictured below), a priority image contained in various marketing materials for the apartments.
Over a year after signing the contract, the buyers were told the free span opening depicted was not achievable, but an opening of 6.4 metres might be achievable. Eight months later, it was revealed to the buyers that the opening would be only 3.4 metres. The buyers no longer wanted to complete the purchase and sought relief from the Court.
The buyers’ argument for rescinding the contract
The buyers argued:
the hero render indicated a free span opening and seamless transition between the internal living areas of the apartment and terrace would exist in their apartment;
the buyers relied upon these representations at the time they entered into the contract to purchase the apartment; and
the buyers would not have entered into the contract had they known the apartment would not be constructed generally in accordance with the image in the render.
The developer’s defence
The developer argued:
the render constituted a mere artist’s impression,
they were entitled to rely on the disclaimer which stated, “the brochure is intended to be a visual aid and does not necessarily depict the finished state of the property or object shown… Purchasers must rely upon their own enquiries… Dimension and specifics are subject to change without notice. Illustrations and photographs are for presentation purposes and are to be regarded as indicative only.”
The disclaimer was on page 96 of the brochure, which the Judge considered was ‘hidden’. The Judge found that where the disparity between the representation and the true construction was distinct, it was necessary for the developer to draw the disclaimers to the buyers' attention in a clear manner.
The Court found that the buyers were likely to suffer loss or damage and therefore the buyers were entitled to rescind the contract, recover the bank guarantee, and seek damages, prejudgment interest and costs of the proceedings.
The developer is appealing aspects of the decision, and a stay of orders has been ordered for the developer to return the bank guarantee to the buyer. Stay tuned for any further updates.
Key Takeaways
This case demonstrates the Court’s increased interest in consumer protection.
Developers are reminded that marketing material for off-the-plan contracts are representations, therefore the marketing material issued to potential purchasers must be as accurate as possible and simply inscribing ‘artist impression’ does not exclude material from being misleading and deceptive.
Disclaimers must be expressed in clear and unambiguous terms and be drawn to the attention of parties that may be adversely impacted by them.
If you are a property developer in the process of preparing your marketing material and presale contracts or a buyer who is looking to purchase a property “off the plan” and want to know how this may impact you, please contact our property team. Our team have extensive experience in acting for both buyers and sellers in off the plan transactions and can assist you with all aspects of the development process.
Matthew Shannon, Director
(07) 3307 4506
mshannon@shandtaylor.com.au
Richard Waring, Director (07) 3307 4545 rwaring@shandtaylor.com.au
Patrick Sherlock, Senior Associate
(07) 3307 4542
psherlock@shandtaylor.com.au