Before signing a contract to buy real estate, buyers must make
inquiries about what they are buying. Otherwise, they may lose
their right to complain that they are not getting what they
bargained for. However, this does not mean that sellers (and their
agents) can avoid responsibility to make sure the property is
properly described in the contract, particularly if they are
sophisticated property developers.
The Victorian case of Birch v Robek highlights the need for land
developers to be particularly vigilant about describing the size of
properties to be sold 'off the plan'. A 24-year-old flight
attendant had paid $35,900 as a deposit for an apartment. She was
specifically searching for an apartment with an area over 40m2
internally in order for the bank to lend her 80% of the
The buyer was given a brochure describing the apartment as
having an "internal area" of 40.5m2. The contract
included plans confirming the apartment's area as 40.5m2. The
buyer signed the contract and paid the deposit. Even after
examining the contract thoroughly, she was still satisfied that the
contract matched the brochure's description.
After the apartment had been built, the bank inspected it and
refused to finance to 80% of its value because the living space was
only 32m2. The buyer then terminated the contract and sued to
recover the deposit. There was no suggestion that the developer had
been dishonest in describing the size of the living area or that it
had intended to mislead or deceive the buyer in this or any other
regard. The developer countersued to recover the shortfall between
the original contract price and the amount it was later sold
In the brochure and architectural plans that were attached to
the contract, the size of the apartment was calculated in such a
way as to include spaces which were not technically part of the
"living area" for the bank's purposes. The resulting
discrepancy comprised 8.5m2, or 12% of the total floor space. This
highlights the need for developers to make sure the correct
methodology is applied to calculated floor space when preparing
architectural plans and plans of subdivision.
The Court held that this 12% discrepancy was so significant that
the buyer would not have entered into the contract at all if she
had known the true internal area of the apartment. On this basis,
the Court allowed the buyer to rescind the contract (i.e. treat it
as if it had never existed) and recover the deposit paid under
In its defence, the developer argued that the buyer should have
asked the architect to clarify the areas shown in the plans. The
Court rejected this argument because the areas in the plans were
calculated consistently with both the contract and the brochure.
Also, the buyer had no reason to suspect that the area was not
properly calculated in the plans. She was therefore entitled to
believe that she would receive the described area.
The developer's disclaimer in the brochure did not help its
defence. This standard disclaimer stated that information including
the stated dimensions were not representations by the developer or
its agent, but merely general information. The court found the
measurements in the brochure to be so specific as to override this
The developer also argued that the buyer could not terminate the
contract because she failed to give 14 days' notice as required
by the contract. Ordinarily, this would be a valid argument.
However, the court found this was not an ordinary 'default'
given that the buyer had not received what she had bargained for.
The developer's counterclaim was dismissed.
The Court also found that the brochure was misleading by
representing the apartment as having an internal area of 40.5m2.
This was held to be a breach of the Australian Consumer Law.
The fact that the buyer could successfully make out two separate
causes of action relating to a misrepresentation in a brochure
reinforces how vital it is for land developers to carefully
consider their marketing material before publication.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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