Real estate startup Purplebricks to pay $20,000 fine after action by Queensland’s consumer watchdog
Tuesday, March 6, 2018/
Online real estate business Purplebricks will pay a $20,000 penalty after being pulled up by the Office of Fair Trading Queensland over complaints from customers, who claimed the company was engaging in false and misleading conduct because of the way it advertised its fees.
UK-based Purplebricks is a real estate startup that was founded in 2012. It markets itself as an “all inclusive”, flat-fee model that sees agents take care of all marketing, promotion and selling of a property for a standard price. It formally launched into the Australian market in 2016.
Queensland’s consumer watchdog confirmed on Monday that Purplebricks had entered into two enforceable undertakings with the office over allegations it breached Australian Consumer Law and the Property Occupations Act through its actions between 2016 and 2017.
The Office of Fair Trading says that over this period, customers entered into agreements with Purplebricks but “were not made aware of the terms of the fees charged”.
This included concerns that customers were not properly informed that the “fixed fees” they were signing up to for the sale of a property were payable regardless of whether the property actually sold or if the agreement with Purplebricks was cancelled.
The watchdog also found Purplebricks had “failed to fulfil some of its regulatory obligations about the use of appropriate accounts software” and was using a non-Queensland bank account, which can be a breach of the Property Occupations Act in the state.
The enforceable undertakings will stay in force for three years and will involve Purplebricks paying a penalty of $20,000, as well as committing to ensuring all representations made about its fees and additional services are not false or misleading.
Purplebricks has already amended its processes and appointment forms to make fee structures clearer to customers, as well as updating its website and advertising, according to the Office of Fair Trading.
SmartCompany contacted Purplebricks for further comment but did not receive a response prior to publication.
Making fees clear is paramount
When it comes to consumer law for services businesses, there are three key elements that operators should consider when structuring and communicating fees, says LegalVision principal and general counsel Ursula Hogben.
Hogben says services businesses are allowed to charge a fixed fee even if an event, like the sale of a house, doesn’t eventuate, but it’s important companies make this clear to customers.
“If they [the business] have genuinely done certain things, even if the property isn’t sold, then they are allowed to charge a certain fee,” Hobgen says.
However, in order to do this fairly, the business has to explain that a genuine service has been completed to gain that fee; that it has clearly outlined the cost to customers; and that there is “reasonableness” in the level of fixed fee, compared with what the overall fee would be if the service was completed fully.
“There are many many services businesses, and they all have different charging models. Often they have to do preliminary work before the ‘chargable’ event, so it’s not unreasonable to charge fees for that,” Hogben says
However, cases like the Purplebricks enforceable undertaking a reminder to make the terms of any agreement crystal clear to customers, because under Australian Consumer Law, consumers have a right to have these details “fairly disclosed”, Hogben says.