Floor plan

Marketing Off-Plan Apartments: Lessons from Ripani v Century Legend

The Federal Court has issued a ruling that could have a significant impact on how developers are able to market apartments sold on an “off-plan” basis.

Key takeaways from the case: Ripani v Century Legend Pty Ltd [2022] CIF 242

  1. Developers should ensure that marketing materials given to potential buyers of off-plan apartments are accurate. Inaccuracies could constitute a misleading and misleading representation that would entitle a buyer to rescind a contract of sale.
  2. Disclaimers in a sales contract may not be effective in remedying misleading and misleading representations made in marketing materials.
  3. General disclaimers regarding the adequacy or accuracy of information in marketing materials may not prevent such materials from being found to be misleading and misleading.
  4. Registration ‘artist impression‘ on an image used in marketing materials does not prevent that image from being misleading and misleading.

context

In 2017, Mr and Mrs Ripani (Ripanis), entered into a contract with the developer, Century Legend Pty Ltd (legend of the century), to buy a premium apartment in Melbourne’s CBD off-plan. Under the terms of the sale agreement, the Ripanis agreed to pay A$9.58 million subject to the finalization of a satisfactory floor plan.

In deciding to enter into the contract, the Ripanis relied heavily on the marketing materials provided by Century Legend. These materials were important to generate sales, as the apartments in question were not yet built. These included a hard-bound booklet containing various computer-generated images known as “renders” (the Brochure). The renderings were used to illustrate what the building would look like, and its various aspects, once built.

The brochure included the render below (Image: RotheLowman (accessible at http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2022/242.html)) which draws a large free span opening between the interior of the living rooms and the exterior terrace of the apartment purchased by the Ripanis.

Despite extensive use of this rendering throughout its marketing campaign, Century Legend was aware that it would be impossible to build the Ripanis’ apartment in a way that reasonably resembled the rendering. In particular, architect Rothe Lowman had advised Century Legend that the eight meter clear span depicted could not be constructed due to development and structural requirements and would likely need to be closer to three metres.

The Ripanis filed a lawsuit against Century Legend in federal court alleging that Century Legend engaged in deceptive and deceptive conduct. The Ripanis sought redress (including cancellation of the contract of sale) under Australian consumer law and in equity.

Century Legend disputed the Ripanis’ claims on a number of bases. These bases were in particular the existence of exclusion clauses in the sales contract, the inclusion of the words “artist impression‘ on rendering and a disclaimer included in the brochure.

Decision

Judge Anastassiou found that the renders provided to the Ripanis were misleading and misleading and violated Section 18 of the ACL.

His Honor, after reviewing the evidence presented by the Ripanis and Century Legend, concluded:

  1. the rendering represented that there would be a clear span opening and a seamless transition between the internal living areas of the apartment and the terrace;
  2. the Ripanis relied on the representation conveyed by the rendering at the time they entered into the contract of sale; and
  3. the Ripanis would not have entered into the contract if they had not believed at the time that the apartment would be built in accordance with the plaster.

In responding to each of the defenses raised by Century Legend, the Court held as follows:

  1. Disclaimer: as it is well accepted that the exclusion clauses are ineffective in excluding the operation of the ACL, Century Legend advanced the novel argument that the clauses had the effect that no representations were made to the Ripanis. The disclaimers, which applied to both pre-contractual information and all statements made by Century Legend, were characterized by the court as “boilerplate” and found to have no remedial or curative effect on the misleading impression created by rendering. It was ultimately because the disclaimers weren’t worded in a way that would make the Ripanis aware that the rendering wasn’t an accurate representation of what their apartment would look like when built. In reaching this conclusion, it was noted that the exclusion clause contained an acknowledgment that the Ripanis had entered into the contract following an inspection of the apartment to be built.
  2. Artist impression: in the context of a sale in the future state of completion where the coatings are a proxy for inspection, the inscription of the mention “artist’s impression” on the coatings did not have the effect of remedying to the misleading representation conveyed by the coating.
  3. Warning: the disclaimer, located towards the end of the brochure and without any particular highlighting, was described as vague, ambiguous and meaningless.

In light of this, and not having specifically come to the attention of the Ripanis (i.e. “this don’t expect potential buyers, like the Ripanis, to study a glossy marketing brochure by heeding the fine print of a disclaimer on the back of the brochure”), the disclaimer failed to remedy the misleading and misleading representation conveyed by the rendering.

Accordingly, the Ripanis were entitled to terminate the contract under Sections 237 and/or 243 of the ACL and recover their losses from Century Legend. This included recovering interest and bank charges they had paid under a bank guarantee provided to the promoter.

A focus on consumer protection

It is instructive to compare some of the findings of this case with the situation in New South Wales. In 2019, off-plan marketing was redesigned by implementing changes to the Transfer of Property Act 1919 (NSW).

Under this regime, the developer must serve a notice of variation if there is a change in a material detail that adversely affects the use and enjoyment of the lot. If the buyer would not have entered into the contract had he been aware of the inaccuracy and would be materially harmed by the change, the buyer can either withdraw from the contract or claim compensation.

Importantly, the legislation allows the buyer to terminate without giving reasons, and it is no longer necessary to initiate proceedings in the Supreme Court to terminate contracts for such changes. Liability shifted to the promoter, who would have to incur costs to bring an action against a buyer if he considered that a buyer had no right to rescind.

To date, this legislation has yet to be tested by the courts, as the market evolves, there will likely be cases that arise.