Render v Reality: Avoiding Legal Quagmires

We’ve all seen them. The renders of developments with a Lamborghini out front, Italian marble kitchen counters and Mario Bellini sofas, and cladding and structural articulations that would give an engineer a heart attack. But renders have put developers in hot water in recent years, and as off-the-plan strategies evolve and renders become more sophisticated, potentially even enabled by artificial intelligence, it’s more important than ever to be transparent and know the legal pitfalls when marketing homes. Legally speaking In 2022, JQZ found itself in the spotlight when buyers of a $1.5-million apartment at its “Prime” 101 Waterloo Road project took the developer to the NSW Supreme Court, alleging that the completed unit was different from that marketed. Structural columns were installed on the balcony and living areas, with an air-conditioning unit that blew hot air on to the balcony, none of which were present in the display suite or in the floor plans, they said. The court ordered JQZ to repay to the Lonergans their deposit plus interest, rejecting the developer’s claims that the issues were a result of the buyer’s own negligence. ▲ Keighran Legal managing director Duane Keighran. Agents and developers have a statutory-imposed obligation to ensure that the marketing materials given to potential buyers of off-the-plan apartments are accurate, says law firm Keighran Legal managing director Duane Keighran. “A failure to do so could constitute a misleading and deceptive representation that would enable a purchaser to rescind a contract of sale,” Keighran says. “[Although] in some cases, it is extremely difficult to avoid misleading or deceptive conduct.” With the JQZ case, for instance, at the time the buyers inspected the display unit in 2019, JQZ had not yet commissioned structural engineering drawings for the development application, and did not know that columns would have to be built in rooms. “However, Justice McHugh inferred that JQZ, as an experienced developer, must have been aware that the display suite and floor plan explicitly did not depict the structural columns [and that] the design was likely to require installation of structural columns in the living areas,” Keighran says. ▲ JQZ ’ s Waterloo Road project. Courts do understand the need for changes, such as material finishes and small layout changes. This was the case in 2020, when a buyer objected in court to changes made when developer Bennelong sold its Encore project in Rushcutters Bay to TFM in 2017. The buyer took the developer to court as the change of ownership also reduced a buyer’s expected two carparking spaces to one, but the judge ruled in the developer’s favour. Developers can be held to the display suites, marketing materials and verbal representations of the development. “If the purchaser relies on those representations and the final product is different enough to have impacted a purchaser’s decision to enter into the contract, should the real product be materially different then it is likely that it is found to be misleading and deceptive conduct,” Keighran says. Cutting costs Operating on the coal face of renders and marketing materials is founder of Melbourne’s Forge Studio Alex Livermore. “Town planning renders provide urban context and help sell that story and get that building built,” Livermore says. “But then it comes down to marketing, where the architect will send us the CAD files, material finishes and we will design based on that. “And development is changing, especially in Melbourne, after a tough two years there’s no excuse, you need those materials to convey that story and get those price points.” ▲ Director of Melbourne’s Forge Studio Alex Livermore. But rising costs are often hitting projects where they need the most help. “Especially in off-the-plan, developers are constantly trying to cut costs, and architects can have massive visions, so when it comes down to floor plans and materials used, that’s when the changes are made. “Good developers will adjust the renders and pay for them, but things like 3D visualisations are expensive, and very rarely do they come back for more,” Livermore says. “Amendments to renders aren’t expensive, the hard part is building them in the first place, but by then though the marketing collateral is printed, so it’s always a money discussion. “The question I would pose is, would you rather spend some time and money to update your marketing or end up like these developers?” Best practice Developers should be cautious about representations made in their marketing prior to finalising the built aspects of their developments, says Keighran. JQZ relied on a contractual provision that the purchaser acknowledged that the display suite was not an exact replica of the unit but instead indicative of the “general style, quality and finish” of the units in the project, but this was not enough for the courts. “The judge also held that a statement that the floor plan was “for marketing purposes only” did not remove the misleading or deceptive effect, as JQZ likely knew that structural columns would likely be required,” Keighran says. ▲ JD Property also faced court over allegedly misleading buyers of a $9.6 million apartment at Victoriana in Melbourne. “[They] should have provided a substantial warning to all purchasers that there was a risk that structural columns may have to be constructed in the units, and that the display unit was not representative at all.” Exclusion clauses and general disclaimers are not always effective at remedying misleading and deceptive representations depicted in marketing materials, Keighran says, however, if drafted correctly may afford some protection. “Developers should ensure that all written and oral representations and statements are accurately disclosed to a buyer in the contract of sale.” ▲ Forge Studios has worked with Carr Architecture for 3D visualisations for Abadeen Group ’ s Grandview project. That much of the evidence in the JQZ case was related to representations by agents means that “coordination between developer and agent is a necessity”, Keighran says. “In these high-volume off-the-plan apartment projects, it is important that the agent understands key project details such as finishes, features and unique selling points, as well as what is DA-approved and what is not.” Livermore says all visualisations have disclaimers on them, and most marketing brochures say they are subject to change. “Materials can change throughout the process, and developers and the sales team should be transparent. If a benchtop is changed from being granite to porcelain, it’s so important to communicate that.” This communication will be more important as studios and designers look more to artificial intelligence to complete renders, he says, although the rendering technology isn’t quite there yet. “Having fly-throughs and renders gives the development that context, it’s important and not going anywhere, but it will get cheaper with AI,” he says. “But however it ’ s done, it’s important for any buyer to see an accurate representation of what they’re buying.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more. -->

Render v Reality: Avoiding Legal Quagmires

Legally speaking

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