Regulate Ads To Protect Buyer

Regulate Ads To Protect Buyer
By Ivy Chang

Flip through newspaper or magazine and you’ll be bombarded by advertisements – picture perfect, too-good-to-be-true products. The advertiser aims to entice, and to do so, advertisements have to attract as many readers’ attention as possible.

Developers employ a number of gimmicks. As a property’s location is valuable when it come to buying, they almost always cash in on this. For example, one advertisement stated that the condominium is located at the high-end Duta area when it’s actually at not-so-up-market Segambut.

Another trick use by both the relatively unknown and the big boys is the claim that the up-and-coming development is “just five minutes from town or city centre”. Sure, if there’s no traffic congestion and you’re Michael Schumacher zooming down the highway.

Yet another gimmick is to state that the property is being developed by some well known developer when in fact it’s one of its subsidiaries. House buyers only discover this isn’t the case when they sign the Sale and Purchase Agreement (SPA).

Recently some investors sued the developer of the Trump Tower Waikiki condo project in Hawaii, the United States, claiming that they were misled into thinking that property mogul Donald Trump was a co-developer when he was merely a licensor who could withdraw the use of his name in the event he terminates his association with the development. The investors are claiming they were misrepresented and are asking for a full refund.

In another case, the Supreme Court of New South Wales, Australia, held that buyers of an off-the-plan property were entitled to rescind their contract and have their deposit refunded because the developer’s realtor had engaged in misleading and deceptive conduct. The inexperienced buyers had relied on baseless representations in advertisements that the value of the said properties would double in five years.

However, in a case from Canberra where the advertisement detailed anticipated supply and demand for Canberra’s Australian Capital Territory hotel/motel accommodation, financial projections, guaranteed leasing and management arrangements, cash flows, expected pre-tax profits, investment returns and likely capital gains, the Supreme Court held that the statement was a “mere puff” and therefore, didn’t constitute misleading or deceptive conduct. This case involved the former Canberra International Hotel.

Here are some real-life gimmick provided by the National House Buyers Association (HBA): Guaranteed five-year return on investment (provided you furnish the unit with not less than RM30,000 on furniture and fittings); only RM98,888 upwards for a three-room condo (this minimum price shown was that of the studio unit as the three-room unit was pegged around RM22X,XXX); and condo living in the city (this refers to three blocks apartments consisting of 600 units with a swimming pool half the size of an Olympics-size pool and two squash courts).

According to HBA honorary-secretary general Chang Kim Loong, such gimmicks usually come with several fine prints at the bottom which, sadly, the house buyers do not read.

“The gimmicks highlighted in the promotion advertisements are attractive and catch the eye of potential buyers. The result is booming sales for the developers at the expense of the homebuyers.”

Chang advised that under the Housing Development (Control and Licensing) Regulations 1989, developers are required to give accurate information and true particulars in the advertisement of their housing schemes. He warned that those in violation of the terms and conditions of their approved permit can be prosecuted for their false advertising and misrepresentation.

“On conviction, the offending developer is liable to be fined not exceeding RM20,000 or jailed not exceeding five years or both,” Chang said.

C.K. Ling, a former legal manager with a developer, said buyers can take legal action against developers for such misleading or false advertisement but winning may not be on the cards.’

“Usually, most buyers make a lot of noise which ultimate comes to nought. Suing costs money and most people can’t afford to take on wealthy developers who can drag the case on for years.”

According to her, the buyer has to show that the advertisement was an offer as opposed to a mere puff or invitation to treat and that a binding obligation was created when the developer made an offer which the buyer accepted unconditionally.

What’s more important is the SPA between the developer and buyer. If these misrepresentations are stated in the agreement, then that’s a different matter.

“The representations must be material. You can’t go to court claiming for damages if the brochure depicts a property painted in pink and you get a blue house instead.

“In the majority of cases involved Sell-Then-Build properties, what you see in the brochures, advertisements or scale models won’t be what you get once you obtain the keys of the property. Buyers should expect that the properties will not look exactly the same as portrayed in glossy pictures,” Ling said.

Another example: One owner complained that when he bought his house, the advertisement showed a lake and that he bought it because of the water feature. A few years down the road, the developer filled it up. He and a few other disgruntled owners have been advised that they are unlikely to win in the event they drag the developer to court.

HBA feels the only way to protect housebuyers is for the authorities to regulate advertisement contents and to prosecute offenders when they breach them.

Source: Property, New Straits Times, September 11, 2009
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