Canberra’s biggest developer Geocon and others are being taken to court over their marketing for the Grand Central Towers in Woden and claims about light rail and rental yields.
The Commissioner for Fair Trading has begun proceedings in the ACT Supreme Court against Geocon and other developers alleging false and misleading conduct.
ACT Fair Trading Commissioner David Snowden said the allegations relate to advertisements and marketing for the Geocon Grand Central Towers development in the Woden Town Centre.
The proceedings relate to alleged contraventions of the Australian Consumer Law (ACL) by Geocon Bowes Street JV Pty Ltd (Geocon), Zapari Property Bowes Street Pty Ltd (Zapari), Bowes Street Developments Pty Ltd (Bowes) and GZ Developments Pty Ltd (GZ).
It is alleged that from March 2018 the companies made a number of false and misleading representations when advertising the development including that Stage 2 of the Canberra Metro Light Rail would stop at, adjacent to or proximate to the Grand Central Towers development, that the travel time from Woden Town Centre to Canberra City on the Canberra Metro Light Rail would be under 10 minutes and that services would run every five minutes.
It is also alleged that the companies said purchasers would be able to rent out a unit in the development at market and obtain a seven per cent gross rental yield from a lessee.
The alleged representations were made on billboards at the development site, in a promotional brochure and video.
Geocon says it will defend the allegations vigorously.
At the time, Stage 2 of the Canberra Metro Light Rail had not been approved by the ACT Government or Commonwealth entities and the route and location of stops had not been finalised.
The estimated travel time between Woden Town Centre and Canberra City on the Canberra Metro Light Rail was 25 to 30 minutes and the frequency of services had not been determined.
It is alleged that a seven per cent gross rental yield was not achievable for all units in the development, a ‘rental guarantee’ was not offered to all purchasers and where it was offered, the guarantee was subject to terms and conditions that were not disclosed on the billboards or the brochure.
It is also alleged that a ‘no reliance term’ contained in the standard form contract for sale was unfair and should be voided under the ACL.
The ‘no reliance term’ requires the parties to agree that they entered into the sale contract without reliance upon any representation, statement or warranty (including sales and marketing material and preliminary art work), other than as set out in the sale contract.
The Commissioner for Fair Trading is seeking declarations, pecuniary penalties, injunctions, an adverse publicity order, an order for a compliance program and costs.
“We allege that the claims in the marketing material for this development were false and misleading for consumers,” Mr Snowden said.
“We know that the purchase of a residential property is one of the largest investments a consumer can make and truth in advertising is critical to inform consumers so they are able to make informed and accurate decisions when purchasing goods and services.
“False and misleading representations undermine the level playing field and disadvantage others in the industry who may be doing the right thing when it comes to their marketing and promotions.”
“This action sends a clear signal that we are actively scanning the market to ensure that representations made to consumers are accurate and not misleading.”
Grand Central Towers is a residential development in Woden with a total of 429 apartments and is expected to be completed around August 2020.
The move surprised Geocon, which questioned how the ACT Labor Government that won an election off the back of telling the public that light rail Stage 2 was going to Woden was now saying Geocon could not advertise this election winning promise.
The company said no complaints had been received from any consumer nor has any evidence been provided by the ACT Government that the light rail won’t come to Woden.
The ACT Government recently applied to the Federal Government for funds to commence works to light rail Stage 2, it said.
“Geocon has a notice of decision from the ACT Government stating that the light rail will be stopping on Callum Street. The DA approval also notes that the road network and subject development will need to accommodate the light rail terminus in the Woden Town Centre,” Geocon’s Nick Georgalis said in a statement.
He said that rents in Canberra continued to skyrocket and Geocon had developed numerous properties in the ACT that were currently achieving rental yields in excess of 7 per cent.
“Furthermore, Geocon also provided rental guarantees to this effect to ensure the committed outcome,” he said.
“Other developers in the ACT, like JW Land and Art Group have provided similar rental yield promises to their projects but the ACT Government chooses not to pursue these developers. Pursuing a giant in the industry like Geocon, gives a false perception to the community that the ACT Government is acting on issues, but the reality is they are deflecting from much greater problems they are experiencing.
“The only claims that are false and misleading are the claims made by the ACT Government in these proceedings and we look forward to holding the Government to account and vigorously defending these matters in the courts.”