Recent changes to the Competition and Consumer Act could have serious ramifications for propert developers, since according to Carolina Zandarin Pizarro acting in a way that puts property purchasers at a disadvantage could be against the law
There have been changes to the provisions of the Competition & Consumer Act 2010 (Cth) so that now there is one single general prohibition on engaging in unconscionable conduct in the supply or acquisition of goods or services.
Unconscionable conduct is unfair or unreasonable conduct in business transactions or a statement or action so unreasonable it goes against good conscience. Pressuring, coercing or duping buyers may be unconscionable conduct.
|Carolina Zandarin Pizarro|
In the property development context, acting in a way which puts property purchasers at a disadvantage may be unconscionable conduct.
Given the cost of property and the serious implications for buyers of a bad decision, it is important for property developers to be aware of the need to minimise the risk of unconscionable conduct claims.
What the changes are
- The statutory provisions now apply in the same way to both consumer and business transactions.
- A victim of unconscionable conduct need not be at any special disadvantage eg infirmity, age or difficulty in understanding English.
- The contract terms will be important in considering the conduct, but a court may also consider ongoing behaviour after the contract is entered into. That conduct may be unconscionable even if within the party's rights under the contract.
- An accumulation of minor incidents may amount to unconscionable conduct.
The law does not apply to public companies.
Property developers - what should you do?
Here are seven simple things property developers can do to steer clear of unconscionable conduct claims.
- In your advertising, use simple, uncomplicated language to reduce risks associated with unfair or unreasonable promotions.
- Carry out training for your sales staff and provide them with a written sales manual to train them on how to avoid unconscionable conduct.
- Ensure sales staff explain key terms. Plan registration dates, design guidelines and any rebates should be clearly described and their importance should be emphasised.
- Encourage purchasers to seek independent legal advice as early as possible.
- Avoid high pressure tactics. Make sure that your behaviour cannot be construed as threatening or intimidating. Constant phone calls, emails or simply refusing to take no for an answer are all behaviours that present a risk to your business.
- If you offer vendor finance, carefully review your practices. ASIC recently investigated a Western Sydney property developer which was lending to purchasers with limited knowledge of English. The developer did not make adequate enquiries about the borrowers' financial situation, did not test or verify the financial information provided and also offered finance to borrowers who were recipients of CentreLink benefits. Compensation claims were successful.
- Any material changes to subdivision plans or other contract documents should be given to purchasers as soon as possible, as any failure to disclose such changes properly might be considered unconscionable conduct.
Regardless of how the laws change, the same basic principles continue to apply. Be honest, be fair, be transparent and make sure you remember to try to protect your purchaser's interests as diligently as you protect your own.
Human nature does not change and self interest is difficult to put aside. But by doing whatever you can to look after your purchaser's interests, you will be protecting your business by reducing the risk of an unconscionable conduct claim.
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