A New York real estate developer is learning the hard way that a few square feet matters. The buyer, perhaps not coincidently a lawyer, says the condo he wanted to buy was missing 109 of the advertised square feet and is taking his dispute to trial next month, as reported by the ABA Journal. Such false advertising is clearly prohibited in California and can lead not only to lawsuits, but can also result in steep civil fines and even jail time.
Under California law, advertisements by real estate licensees who assist clients in buying or leasing property cannot be false or misleading. Bus & P C §§10140, 17500. A violation of the false advertising laws may result in a civil penalty of not more than $2500 for each violation (Bus & P C §17536(a)) and/or imprisonment (not exceeding 6 months in county jail (Bus & P C §17500)).
The law is clear and can be stated quite succinctly: Real estate brokers must be honest and truthful in their advertising.
“Advertising” is broadly defined in the regulations to include “[a]ny written or printed communication, or oral communication made in accordance with a text or outline that has been reduced to written form, which is published for the purpose of inducing persons to purchase or use a product or service.” 10 Cal Code Regs §2705. In addition, Bus & Prof C §17500 provides that it is unlawful to advertise (including on the Internet) any statement concerning real property or services that is untrue or misleading.
There is one exception to the rule: Puffery is distinguishable from actionable misrepresentation. Brokers have incentive to use language that will put the property in the best, most saleable light, and may even have an obligation to its client to do so. Puffery consists of generalized, vague, and unspecific assertions on which a reasonable consumer would not rely. For example, stating “we’re the low-cost commercial real estate experts” is puffery, because a reasonable consumer would not interpret the claim as a factual statement on which he or she could rely. See Cook, Perkiss and Liehe, Inc. v Northern Cal. Collection Serv., Inc. (1990) 911 F2d 242, 246.
Puffery is, and likely always will be, an acceptable and even expected part of the real estate business.
Although there is no bright line test for whether a statement strays from puffery into misrepresentation, a general rule of thumb is that, if specific facts are stated, keep them accurate. For example, a broker who is unsure about the insulation upgrades of the home he is selling shouldn’t misquote the insulation rating, but can describe the home as “the coziest you’ve ever seen!”
For complete coverage of all broker obligations, including those relating to advertising, check out California Real Estate Brokers: Law and Litigation, chap 8.
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