Hockingstuart fined $330,000 for underquoting

Melbourne real estate agency Hockingstuart has been fined $330,000 fine after admitting to underquoting properties advertised for sale.

The punishment was handed down in the Federal Court with Justice John Middleton saying the matter was serious.

“Price is an essential piece of information about the property being offered for sale for prospective buyers,” he said.

“Buyers should be able to rely on correct information to make an informed decision.”

Simon Jovanovic, CEO of hockingstuart advised he takes "very seriously" the need for his franchisees to accurately price properties in marketing.

"Our Richmond office has already implemented a number of changes including establishing a rigorous in-house compliance program to ensure this doesn’t happen again.

"As Justice Middleton referred to in his judgment, this is a substantial penalty for a company the size of hockingstuart Richmond.

"We are disappointed with the severity of the penalty handed down and the example being made of our Richmond office for what is an issue that impacts the real estate industry as a whole," Simon Jovanovic said.

Sitesh Bhojani, for the director of CAV, told the court one Hockingstuart, Richmond, agent, Daniel Atsis, told a vendor who had expressed concerns about the advertising of his property via email that “unfortunately there’s a culture of underquoting in Richmond. The price range is used more as a marketing tool than an indication.”

The court heard that another implicated agent, Trent Stewart, wrote to a client: “We want to get the best price for you, and the best way to do that is to create an illusion of a bargain”.

The agency admitted to misleading and deceiving buyers in 2014 and 2015. It was fined $30,000 for each of the 11 breaches of consumer laws by its Richmond branch associated with houses listed across Richmond and Kew.

“The manipulation of the ‘agent’s estimate of selling price’ for the properties did demonstrate the lengths that Hocking Stuart Richmond went to in creating its enticing (but illusory and misleading) marketing web. There was a conscious decision to engage in the conduct.”.

Victoria Consumer Affairs told the court Hockingstuart misled buyers about 11 properties including 310/59 Coppin Street, Richmond, which sold for $545,000.

The sale of 278 Mary Street, Richmond, for $955,000 in August 2014 was another of the properties investigated. 

Other properties named in the legal action were a two-bedroom apartment in Docker Street, Richmond, which sold for $667,000 and a grand Edwardian in Kew’s Barkers Road, sold for $955,000.

In NSW the major case of alleged underqoting saw the magistrate of Blacktown Local Court dismissing all charges against BresicWhitney Estate Agents Pty Ltd earlier this year.

After a considerably delayed trial, the dismissal came on a technicality concerning the term ‘employee’ in the Property Stock and Business Agents Act 2002 (the Act).

In this case the ‘operating’ arm of the business was the licence holder and undertook the business of a real estate agent.

A subsidiary company ‘employed’ the employees.

As a result the court found the ‘employees’ who made the statements about price, which were less than the estimated selling price in the agency agreement, were not technically employed by the licensed agent.

"This is not the policy intent of the provisions and in his findings the Magistrate acknowledged the likelihood that the business was structured in a way that would insulate it to some degree against liability in the event of such matters," a department spokesperson advised.

The NSW consumer watchdog advised the more serious price discrepancy alleged was at Double Bay, where the publicly published price guidance reputedly did not match the private agency agreement documentation in the office paperwork.

The Murilla apartment at 62/543-545 New South Head Road had a reported price guide of over $1.5 million, but Fair Trading investigations revealed the selling price estimate in the agency agreement at the low end of $1.6 million.

The prosecutions were only the third in a decade. 

Source: Sunday Telegraph