Misleading and deceptive conduct by real estate agent leads to award of damages to buyer in Riparian Plaza dispute

In brief - Advertising representing storage space as a carpark was false and misleading

The Supreme Court of Queensland has held that advertising material related to the 2010 sale of a residential unit in the Riparian complex in Brisbane was misleading and deceptive. In Seirlis v Bengtson & Ors [2013] QSC 240, the buyer was awarded damages and interest by the court on the grounds that the advertised claim regarding the potential use of a basement storage space as a car park was false.

Storage space falsely represented as one of "three secure car spaces located side by side"

Advertising issued by the agent on the seller's instructions claimed that the unit came with "three secure car spaces located side by side". Under the terms of the applicable development approval, however, one of these spaces was designated for storage use only. During pre-contract negotiations the buyer was not told the storage space could not lawfully be used as a car park.

Further, the storage space in question had a concrete plinth restricting its use as a car park. Notwithstanding the terms of the development approval, the agent agreed to remove the concrete plinth from the storage space prior to settlement of the contract, in order for the buyer to use the storage space for car parking.

Buyer claims she suffered loss because decreased parking space reduced value of unit

The contract entered into for the sale of the unit was silent on the issue of car parks. In court the buyer argued that she was induced into entering into the contract on the basis of the agent’s misrepresentation that the storage space could be used for car parking.

The buyer argued that the effect of there being only two car parks capable of lawful use for car parking significantly reduced the value of the unit. The buyer claimed that had she known the storage space was not able to be lawfully used for car parking, she would not have entered into the contract. Consequently, the buyer suffered loss as a result of the agent’s false and deceptive conduct.

Court finds advertising for unit was misleading and deceptive

The seller and the agent argued that they were not liable to the buyer because there had been no representations made to the buyer as to the lawful use of the storage space as a car park. They argued that the buyer did not suffer loss based on the value of the unit.

The court held that the advertising material for the unit referring to three car parks was misleading and deceptive, awarding damages and interest to the buyer.

Importance of recording essential terms of a transaction in the contract

The case highlights the importance of sellers ensuring their agents do not make false or misleading representations regarding properties in advertising material or during pre-contract negotiations. Further, the case highlights the importance of parties recording any such agreements or essential terms of the transaction in the contract.

If any particular issue is important to a party, an appropriate special condition should be negotiated into the relevant document. In this instance, for example, the contract could have been made conditional on the buyer being satisfied that the use of the storage space for car parking purposes was lawful.