Fundamentals of Real Estate – Fair Trading & Contract Remedies

Task 1: Fair Trading Act 1986 (FTA)

Read the following scenarios and answer the questions that apply to each scenario. You will need to consider which of the following sections have been breached in each scenario (section 9, 12A, or 14). Your answer should identify one section only per scenario.

(Word count guideline: 100 words per scenario)

Scenario 1   

Martin is a salesperson from Bayside Realty. The property he is advertising for sale is located approximately two kilometres from a popular beach and has a small glimpse of the water from the bedroom window. It has two large double bedrooms, one small single bedroom, one main bathroom, a separate toilet, and a single garage. There is additional off-street parking for one small vehicle. Martin’s advertisement reads…

Awesome views and only a two-minute stroll to this popular beach. Ideal family home with 3 double bedrooms, 2 bathrooms and ample parking. With views like this and beachside living desired by many, you need to act now.

Call Martin today to secure your viewing appointment.

a. Which section of the Fair Trading Act (FTA) has Martin breached?
b. Comment on at least two things Martin has written in his advertisement to cause a breach of the FTA.
c. Refer to Rule 6.4 of the REA Code to explain how Martin could have ensured he was not at risk of breaching the FTA.

Scenario 2

Shinead is a new salesperson at Bayside Realty and keen to promote herself within the community. She has sold one property since she began as a new salesperson two months ago. She prepares a flyer and delivers it around the streets near her office. The flyer reads …

If you are looking for an experienced agent with a proven track record, I can help.

Specialising in the Bayside area I am ready to offer you customer service like no other.

When results count, and you want a fast sale at top dollar, I can promise that as well. Let’s get ready set GO!

a. Which section of the Fair Trading Act (FTA) has Shinead breached?

b. Comment on at least two things Shinead has stated in her flyer that could be misleading to a potential client.

c. Refer to Rule 5.2 of the REA Code to explain what Shinead should have been aware of before preparing her flyer.

Scenario 3  

Penny is a salesperson showing a residential section to a buyer. The building covenants and district plan allow for one home to be built on the land, it must be single level and will need its own water supply and septic system to be installed. The power is to the roadside only and will need to be connected from the road to the building site. The buyer is excited about the property and is chatting to Penny about the use of the land and their options for building on it. Their conversation is as follows…

 Buyer: “This looks like a great section. I want to build a 5 bedroom home plus a tiny house for my grandmother to live in. I think building a two-story house would be best to take advantage of those views! There should be just enough room to build on this section. I would need to consider additional costs as well, is there power to the property?

Penny: “Yes, the services such as the electricity are all in place, and those views are fantastic, you can see right out to the Cavali Islands. Your grandmother must be very excited to be coming to live with you.”

a. Which section of the Fair Trading Act (FTA) has Penny breached?

b. Reflect on what Penny ‘has said’ and/or ‘should have said’ to her buyer, and comment on at least two things Penny has done to breach the FTA.

c. Review Rule 6 of the REA Code and identify one rule from this section that Penny has breached while discussing the property with her buyer. Explain how Penny has breached that rule.

Scenario 4 

Kiri is a salesperson advertising a new home she has for sale. The advertising deadline is only two hours away, so Kiri is in a hurry and hasn’t had time to verify the property information given to her by the homeowners. They have told Kiri that the home would make an excellent rental property and could rent for $650 per week. They also tell Kiri that the property is subdividable so a buyer could subdivide the back part of the property off to build another house and rent that out as well. Kiri quickly prepares her advertisement and publishes it in the newspaper to target investor buyers.

Calling all Investors!!!

This is your chance to secure a sound investment. This subdividable property includes the main home that will reach at least $650.00 per week on the rental market. While you are

reaping the rewards of that rental income you can move forward with further development. Build a second house on the back section to either sell or rent out. Don’t delay – view today!

a. Which section of the Fair Trading Act (FTA) has Kiri breached?

b. Comment on two statements Kiri has made in her advertisement and explain how those statements breach the FTA.

c. Refer to Rule 5.1 of the REA Code to explain what Kiri should have done prior to her advertisement being published.

Scenario 5  

Harpinder is promoting a property for sale in Bayside. His clients have instructed him to advertise the home for sale at $950,000. Harpinder is in the office when a potential customer comes in. The customer is named Betty and asks Harpinder if he has any property for sale in Bayside. Betty explains to Harpinder that her budget to buy another home is $850,000 maximum. Harpinder states to Betty…

“I have a property that is new to the market and would be perfect for you. I have an open home scheduled for this Saturday, why don’t you come along”.

Betty visits the open home and loves the property. She tells Harpinder she would like to make an offer on the home for $840,000. Harpinder replies to Betty “Oh dear that is a very low offer, the sellers are looking for offers closer to $950,000”.

a. Which section of the Fair Trading Act (FTA) has Harpinder breached?

b. Explain how Harpinder has breached the section of the FTA noted in your answer to (a).

c. Identify one rule from the REA Code that Harpinder has breached in relation to price expectation.

Task 2: Puffery Or Misleading Advertising? 

Read the following four advertisements to distinguish if the salesperson has used ‘puffery’ or ‘misleading statements’ in their advertisement. Answer the questions that apply to each.

(Word count guideline: 30 words per advertisement)

Advertisement 1

Frank has just listed a new house for sale and has written his copy for the agency website. It is a lovely little house in a desirable suburb. It’s very well priced because the sellers are keen to sell as they are moving to another city. Franks’ advertisement is below.

Be quick this could be the buy of the Century!

Don’t delay in viewing this romantic charming little cottage with 3 bedrooms and 2 living spaces in the best location in town. You will love the quaint English country garden, you never know you might even see some fairies!

Call me now to arrange an urgent appointment to view.

a. Is the above advertisement ‘Puffery’ or ‘Misleading’ advertising?

b. Explain why you have chosen ‘Puffery’ or ‘Misleading’ and include an example from the advertisement to support your explanation.

c. If you chose ‘Misleading’ in (a), identify which section of the Fair Trading Act (FTA) may have been breached.

Advertisement 2

Maria is out with a photographer, photographing her new listing so she can create the advertising for Saturday’s newspaper. The house is in a picturesque location in the mountains around 15 kilometres from a popular ski field. She asks the photographer to drive up to the ski field and take some photos of families enjoying themselves in the snow to use in her advertising. Maria’s advertisement is below and includes a photo of the ski field.

Alpine living at its best!

Imagine how much fun your family could have living beside this fabulous ski field.

Dust off your skis or board and you will be on the slopes in a couple of minutes.  Ideal for families with young children, this 4 bedroom alpine home will meet all the needs of a growing family for years to come.

Call for an appointment to view and don’t forget to bring your skis!

a. Is the above advertisement ‘Puffery’ or ‘Misleading’ advertising?

b. Explain why you have chosen ‘Puffery’ or ‘Misleading’ and include an example from the advertisement to support your explanation.

c. If you chose ‘Misleading’ in (a), identify which section of the Fair Trading Act (FTA) may have been breached.

Advertisement 3

Mason has returned to the office after listing a new property in the country. The property includes a market garden that grows tomatoes and sells them direct to buyers at the gate. It has been quite a successful business producing income of around $30,000 per year. The seller has told him that a new owner might be able to increase production and income to $50,000 per year if they invested in some new machinery. Mason designs a marketing flyer to give to potential buyers when they view the property.

Invest in a property that will grow your wealth.
Profitable market garden growing tomatoes, with a garden to gate stall.
Returns on investment are strong with income around $50,000.
An ideal property for a buyer wanting a large farm style house who has green fingers.   Don’t delay this listing is ripe for picking.

a. Is the above advertisement ‘Puffery’ or ‘Misleading’ advertising?

b. Explain why you have chosen ‘Puffery’ or ‘Misleading’ and include an example from the advertisement to support your explanation.

c. If you chose ‘Misleading’ in (a), identify which section of the Fair Trading Act (FTA) may have been breached.

Advertisement 4

Sarita is writing a radio advertisement to promote herself with the intention that sellers will want to sell their properties through her. She wants to get the message across to the sellers that she works really hard to find buyers and sell the properties that she lists for sale. Sarita has written the following script.

“Are you wanting a real estate salesperson who will work really hard to sell your property?  Look no further than Sarita, she will leave “no stone unturned” in her search for the ultimate buyer for your home. Sarita is the best in the business, so get your home sold today, call Sarita now”.

a. Is the above advertisement ‘Puffery’ or ‘Misleading’ advertising?

b. Explain why you have chosen ‘Puffery’ or ‘Misleading’ and include an example from the advertisement to support your explanation.

c. If you chose ‘Misleading’ in (a), identify which section of the Fair Trading Act (FTA) may have been breached.

Task 3:  Contract And Commercial Law Act 2017 (CCLA)

The following scenarios relate to customers (buyers) seeking a remedy under the Contract and Commercial Law Act 2017 (CCLA).

Read the following scenarios and answer the questions that relate to each scenario.

Scenario 1

Danny has recently purchased a home from Richard, a salesperson at Bayside Agency. When Danny first viewed the property, he explained to Richard that he was wanting a home that he could also use for his physiotherapy business. The main road position looked perfect for Danny to install large advertising signs, there was parking space for his clients at the property, and room to build a separate office beside the main house.

Danny had discussed all his future plans and intentions for the property with Richard, and Richard had assured Danny this would be the perfect place for his business. Based on Richard’s comments Danny purchased the property.

Three months after Danny had moved into his new home he started to organise his business. While talking to his builder, Danny found out that he would have to apply to the local council for a building permit. He also found out that the zoning of this property meant he was not permitted to run a business from the location, nor was he able to install advertising signs on the road frontage.

Danny was extremely upset when he realised this was not the perfect property for running his home-based physiotherapy business, and he would now have to rent an alternative office space away from his home to operate his physiotherapy business. He immediately made a complaint to the Bayside Agency and started proceedings through his Lawyer to seek a remedy under the Contract and Commercial Law Act.

a. Name the remedy Danny can seek under the Contract and Commercial Law Act 2017 (CCLA) and identify which section of the CCLA that relates to that remedy.

b. What has Richard done wrong that has caused Danny to make a complaint and seek a remedy?

Scenario 2   

Gerome and Kyla were visiting a home for sale. The salesperson, Yihong, had prepared information packs on the property for the buyers to take away. Gerome and Kyla take one of the packs when they leave the open home. Within the information pack it stated the following.

Ø Ample space for growing fruit and vegetables with two paddocks and a glasshouse. Ø In zone for popular Bayside College

Based on this information, Gerome and Kyla go ahead and sign a contract to purchase the property which is accepted and signed by the clients (sellers). Gerome and Kyla are particularly excited that it has two paddocks and a glasshouse. They will be able to grow vegetables and flowers to sell at the gate. They are also attracted to this property as it is in zone for Bayside College which is a very popular school that they want their children to attend.

One week before Gerome and Kyla are set to move into their new home, they go for a walk past the property and stop to chat with the neighbours. During this conversation they realise that the front paddock and glasshouse belong to the neighbours. They also find out that the property is not in zone for Bayside College.

Gerome and Kyla are very disappointed to hear this as the property will no longer meet their requirements.

a. What remedy should Gerome and Kyla seek under the Contract and Commercial Law Act 2017 (CCLA)? Identify which section of the CCLA that relates to that remedy.

b. Yihong did not ensure the property information was accurate and this led to extremely disappointed buyers. Identify one rule from the REA Code that Yihong has breached.

(Word count guideline: 20 words)

Scenario 3

Hudson is a customer looking to buy a home that is going to be sold by Auction. The property is being marketed by a salesperson named Dante. During the property viewing Hudson asks Dante if the home has any issues in terms of the building structure, building compliance, or any weathertightness issues. Dante replies to Hudson with the following comment…

“There are no issues with this lovely home, it is in excellent condition and has been well maintained”.

Hudson is pleased to hear this as he really likes the home and decides to get a Registered

Valuation on the property before Auction Day. Hudson had to pay $1200 to have the Registered Valuation prepared but wanted to get the valuation so he had an idea of the home’s market value before bidding at the auction.

Before Auction Day, Dante rings Hudson to let him know that he has been reviewing some documents on the property and realises that he was wrong about the property. He had told Hudson it had no issues, but he had not told Hudson that the house wasn’t consented and will need some major renovation work to be compliant with the local council building requirements.

Hudson is very upset to hear this news. He is not interested in purchasing a home that does not have Council consent and is upset that he has wasted his money on the Registered Valuation. Hudson will be seeking a claim for his loss of money.

a. Explain why Hudson will not be able to seek a claim under the Contract and Commercial Law Act 2017.

b. Identify two other ways Hudson could seek compensation for the loss of money.

Experts Answer on Above Real Estate/Property Law Assignment

Task 1 – fair trading Act 1986

Scenario 1
a) section 14 is breached as evidence from false representation and misleading conduct in respect to land,
b) the two misleading statements are a two minutes stroll to this popular beach, and 3 double bed rooms, 2 bathrooms because the property has two double bedrooms, one single bedroom and one bathroom and the separate toilet.
c) Rule 6.4 the actual features of the properties should need to be critically evaluated, and rule 6.4 prohibits a licensee from misleading customers and with holding any information that should be provided.
Scenario 2
The section 9 is breached which is misleading and deceptive conduct.
The two misleading statements are experienced agents with a proven track record, as Shinead is not that experienced sales person as having only two months of experience and sold only one property. The second misleading statement is a fast sale at top dollar, as it is not possible to guarantee a fast sale or a particular sale price.
Rule 4.2 states that having a sound knowledge about FTA, REA rules and other legislation in relation to real estate work is important and Shinead should have ensured this before producing the flyer.
Scenario 3
The section breached is section 14 and the two important breaches are the saying that “the services such as the electricity are all in place” when electricity is only available only at the roadside, and the second misleading statement is connecting the buyers proposed two storey home and tiny house, when the covenants only permit one single level home. Rule 6.4 is breached by providing false information and failing to provide information when the buyer should have been provided that.
Scenario 4
Section 12A is breached which is unsubstantiated representation. The Representation makes should be on reasonable ground and at proper time when they are made. But the two misleading statements are “will reach at least %650 per week on the rental market” when the rental figure is not verified, and secondly “this subdividable property/ build a second house on the back section” when it is not properly checked whether subdivision is allowed legally. Rule 5.1 is breached as a proper verification should have been done about the rental and sub-division claims before publishing them.
Scenario 5
The section breached is section 14. The misleading statements are in relation to the price payable for land, and the rule 9.4 states that a licensee must not mislead customers about the clients price expectation.

Task 2 – Puffery or misleading advertisement

The advertisement 1 is puffery because statements such as buy of the century are all promotional exaggerations then factual claims about the property. Advertisement 2 is Misleading because the property is approximately 15 km from the ski field, and still the advertisement says that buyers will be living beside this fabulous Ski field. The advertisement 2 is again a misleading advertisement because the actual market Garden is only generating $30000 per year but the advertisement claims income of around $50000. Advertisement 4 is puffery because the claims like best in the business and leave no stone unturned are subjective promotional claims rather than an objective measurable fact.

Task 3 – contract and commercial law act 2017

In scenario 1, the remedy available is damages for misrepresentation as per section 35 CCLA which provides for damages when a party was induced to enter a contract by misrepresentation. In scenario 2, the remedy available is cancellation of the contract as per section 37 CCLA, and the cancellation is allowed on the ground that a party was induced to enter a contract by misrepresentation, subject to the statutory requirement. As per scenario 3, Hudson cannot claim under CCLA because section 35 provides damages where a party to a contract has been induced to enter the contract by misrepresentation, but in the given case, the problem was discovered before the option and before entering a sale contract, and as a result, the contractual misrepresentation remedy is not available

Want Detailed Answers with References?

The analysis of New Zealand real estate scenarios under the fair trading act and CCLA, along with misleading advertisement, REA rules, misrepresentation and remedies above revealed important findings across different scenarios. With our New Zealand law experts, you can get assistance with assignments involving application of laws and regulations and act to real estate case study scenarios. Simply visit our assignment help New Zealand page to get a professional law expert for your assignment. Also browse the solved answers from Open Polytechnic as included by our experts or complete samples of law assignment to understand our experts ability to write law tasks for students.