In January this year, Purplebricks real estate changed its appointment forms, websites and advertising, to make clear that consumers must pay the ‘fixed fee’ regardless of whether Purplebricks are successful in selling the property and that extra fees are payable for additional services.
Now we know why.
On 5 March 2018, the Queensland Government announced that Purplebricks had entered into enforceable undertakings with the Office of Fair Trading (the OFT) for alleged breaches of the Australian Consumer Law and the Property Occupations Act 2014.
The details are as follows.
The breaches of the Australian Consumer Law
Purplebricks is a real estate agency which provides real estate products and services for a fixed fee. Consumers appoint it to sell their property using an on-line form, a ‘Service Agreement’. Purplebricks provides the services using real estate agents and sales persons employed by or contacted to it.
Complaints were made to the OFT by consumers that the Purplebricks website and advertising were misleading because:
- Consumers were not made aware in advertisements that the fixed fees were payable regardless of whether a property was sold. They needed to read the ‘Service Agreement’ on the website to find this obligation.
- Consumers were ‘tied in’ to pay the ‘fixed fee’ for the services because the agency appointment agreement was not transparent (the approved form in Queensland – Form 6 Appointment of a Real Estate Agent, was not followed).
- Consumers were not told in the Agreement or on the website that the additional fee paid for open viewings on the ‘Accompanied Viewings’ option was for a limited number of inspections.
- Consumers were charged additional fees for ‘Marketing Reviews’ to advise on future marketing strategy for the property and for ‘Marketing Upgrades’ to purchase a listing upgrade to the standard listing on www.realestate.com.au and www.domain.com.au when the impression given was that they were all included in the ‘low fixed fee’.
- Some ‘Local Property Experts’ in Queensland did not hold full real estate licences, only salespersons certificates.
These representations contravened contravened section 151(1)(g) of the Australian Consumer Law which states:
A person commits an offence if the person … makes a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits
Purplebricks undertook to ensure that for the next three years all representations it makes, particularly those concerning fees, additional services and real estate licensing approval, will not be false or misleading; and to pay a penalty of $10,000.
The Office of Fair Trading acknowledged that Purplebricks had amended their appointment forms and processes to ensure consumers were made aware of the terms of their fixed fee charges and had amended their website and advertising to ensure consumers were not misled.
The breaches of the Property Occupations Act 2014 (Qld)
Purplebricks is a licenced real estate agent corporation in Queensland.
The Office of Fair Trading investigated the business and found that Purplebricks had contravened the Property Occupations Act.
- To ensure that the software used to keep books, accounts and records is not to allow deletion of trust ledger accounts which did not have a zero balance; must record amendments to records as separate transactions and record information in chronological sequence (the Microsoft Excel Spreadsheet software program used was not suitable!).
- To ensure that amounts received are to be paid into the trust account in Queensland the first business day after receiving an amount (the payments were made into a bank account in Victoria).
- To keep a copy of the licensee’s licence at each place of business.
- To notify when a change occurs in the licensee’s circumstances (e.g. a substituted licensee).
- To notify the opening of a place of business within 14 days.
- To pay $10,000 to the Office of Fair Trading.
Purplebricks launched in Australia in September 2016. This action taken by the Office of Fair Trading in Queensland is the first time that an Australian Government Authority has found that Purplebricks has failed to comply with the law in its business practices.
Its failure was twofold.
- First, it failed to properly disclose that its fixed fee was payable regardless of whether the property was sold, and that its fee was not fixed because fees were payable for ‘extra options’, particularly viewings and marketing options.
- Second, it failed to comply with legal requirements for holding a real estate agents licence.
There was no issue taken with the charging of a fixed fee, as opposed to an agent’s commission calculated as a percentage of the sale price.
The undertakings given are enforceable undertakings. As such, court action can be commenced for breaching a term or condition of the undertaking, as well as orders obtained from the court to enforce the original undertaking.
For further information, click on:
Queensland Government media release – National real estate agency enters into enforceable undertaking
Our firm’s prior article – Does Purplebricks (an online agent) threaten traditional real estate agents in Australia?
Note: The enforceable undertakings are not available online but are available for purchase over the counter at Queensland Government Service Centres. They have been accessed to prepare this article.
Marketing Commentary by Michael Field, EvettField Partners – www.evettfield.com
Marketers often get a bad rap, and in many cases, it is well deserved. It is a common myth that the role of marketing is to entice as many customers as possible to buy your product or service, without too much concern for the customer’s needs, or the suitability of your product or service for their requirements.
Winning customers at the expense of business reputation is never a good practice.
Great marketers see their role as being ‘guardian of the customer’ and ‘steward of the brand’. This approach to marketing is not only the morally correct way to operate your business, but in most circumstances it will also protect your business reputation if you ensure that you are legally compliant and do not fall foul of consumer protection laws.
The recent announcement that Purplebricks has entered into enforceable undertakings with the Office of Fair Trading for alleged breaches of the Australian Consumer Law and the Property Occupations Act 2014 demonstrates that Purplebricks risked their business reputation by not being compliant with the law.
Purplebricks have now corrected their appointment forms, websites and advertising, to make them compliant, to prevent ongoing damage to their business reputation.