In brief - Try to protect your purchaser's interests as
diligently as your own
Use plain English, train your staff properly and avoid high
pressure tactics to minimise the risk of unconscionable conduct
What is unconscionable conduct?
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.
In the property development context, acting in a way which puts
property purchasers at a disadvantage may be unconscionable
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
How has the law changed?
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
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
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
Carry out training for your sales staff and provide them with a
written sales manual to train them on how to avoid unconscionable
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
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
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.
The Federal Court decision is likely to encourage the ACCC to maintain unconscionable conduct as an enforcement priority.
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