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Commission Crack Down On Claims About Real Estate

Media Release

Issued 12 December 2000/133

Commission Crack Down On Claims About Real Estate: "The Professionals" Orewa Property Shop Pleads Guilty

The Commerce Commission stepped up its action against false or misleading claims about real estate, with the conviction today of Orewa Property Shop Limited, trading as The Professionals.

Commission Chair John Belgrave said that the Commission is disappointed with what it believes are continuing breaches of the Fair Trading Act by real estate agents.

"We have put a lot of time and effort into educating the industry about the Act," Mr Belgrave said. "Compliance does not seem to have improved and we will now use court action to reinforce our messages.

"This case illustrates a common problem, the misleading use of photos," he said.

The Professionals advertised three properties using photographs of Orewa Beach and Red Beach. Inset in each beach photograph was a smaller picture of the property for sale. However, none of the properties front onto a beach and none of the beach views depicted can be seen from these properties.

The house described as a "beachside townhouse" is separated from Orewa Beach by State Highway 1 and a reserve, though it does have some view of the Beach. The property "within a few metres of the glorious shores of Red Beach" is really 300 metres from that Beach-the Beach is visible from the end of the road. The house from which people could "watch the waves of glorious Red Beach from the lounge window" has some view of the beach, but not the view shown in the photographs.

A Director of the company took all the photographs and decided how they were to be used. When interviewed by a Commission Investigator, he said that the photographs were intended to show that the properties were near beaches and to represent a lifestyle.

Today in the North Shore District Court, the company pleaded guilty to breaching the Act.

Judge Barbara Morris said that the Commission's submission for fines totalling $9,000 was appropriate. However, she said that in setting fines she had to take into account the company's difficult financial circumstances and its ability to pay fines. For these reasons, she said that she would impose a total fine of $3,600.

"This was not a case of carelessness," Mr Belgrave said. "The Professionals chose to use attractive photographs of beach views that were simply not attainable from the properties. This was a conscious decision, designed to entice interest in these properties."

Courts have ruled in many cases in other industries that it is a breach of the Act to use misleading advertising to entice consumers to a business and then, only after they are at the business, to reveal the truth.

"For the vast majority of consumers, their house is the biggest purchase they will ever make," Mr Belgrave said. "Agents' false or misleading claims can cause significant detriment to consumers.

"This is also a highly competitive industry, and agents who do business fairly should not be disadvantaged by those who use deceptive tactics.

"For those reasons we will continue to take enforcement action in this industry until compliance improves."

Background

The education carried out by the Commission has been meetings with the Real Estate Institute, information distributed through trade publications, producing a free guide to the Act, seminars for real estate agents and warnings and settlements.

During the last year (12 months to December 11) the Commission received 120 complaints and enquiries about real estate issues. Many of these resulted in warnings and settlements. The main problems were:

* false or misleading descriptions of properties, and * false or misleading claims about prices.

However, despite the Commission's education efforts, the rate of complaints has not decreased and the Commission now intends to take court actions instead. It currently has six investigations under way and more will be undertaken. Depending on the evidence found, some of these investigations could end in court action.

Media contact: Fair Trading Manager Ross McPherson Phone work (04) 498 0909, cellphone 025 732 960, home (04) 232 6004

Senior Advisor Communications Vincent Cholewa Phone work (04) 498 0920, home (04) 477 0039

Commission media releases can be viewed on its web site www.comcom.govt.nz

Regards Leo van Schyndel Records Officer Corporate Services Direct dial : (04) 498-0929 E-mail : leo.vanschyndel@comcom.govt.nz


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