Hocking Stuart, Richmond, should face ‘significant’ fine for underquoting, says Consumer Affairs Victoria

UPDATE: A Hocking Stuart agency busted for underquoting could be hit with fines of up to $750,000, with a court urged to send a strong message to others.

Hocking Stuart faces a hefty penalty for underquoting. Picture: File

A REAL estate agency should be penalised up to $750,000 for underquoting 11 inner-city properties, a court has heard.

Consumer Affairs Victoria told the Federal Court Hocking Stuart, Richmond, should lose its $200,000 in commissions and be fined about $50,000 per property scrutinised.

RELATED: Real estate agent Hocking Stuart admits underquoting Richmond properties

That would bring the total fines to $550,000, if the court accepted the recommendation.

Sitesh Bhojani, for the director of CAV, said the Bridge Rd office had to be stung with a “significant” fine to ensure other agencies would realise underquoting properties “is simply not worth it”.

But as there were “no comparable cases”, it was difficult to determine an appropriate sum, he said: “There is a problem in the marketplace. We are concerned about this behaviour.”

Hocking Stuart admitted to underquoting in court earlier this month, after the consumer watchdog brought 11 charges against its Richmond office relating to the marketing of properties in and around the suburb in 2014 and 2015.

Federal Court Justice John Middleton said he would reserve his judgment as to what penalty the agency would receive, adding “general deterrence ... is important in a case like this”.

Underquoting is difficult to prove, but is considered rife in Melbourne’s booming property market. It gives false hope to homebuyers with budgets well below the real price expected by vendor.

CAV said Hocking Stuart, Richmond, contravened sections 18 and 30 of the Australian Consumer Law.

Mr Bhojani told the court that CAV believed real estate agents at the Richmond office did “not set out to mislead or deceive” homebuyers or break the law, but “to create an illusion of a bargain, or an illusory and fictitious web of marketing”.

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He said one Hocking Stuart, Richmond, agent, Daniel Atsis, told a vendor who had expressed concerns about the advertising of his property via email that “unfortunately there’s a culture of underquoting in Richmond. The price range is used more as a marketing tool than an indication.”

The court heard that another implicated agent, Trent Stewart, wrote to a client: “We want to get the best price for you, and the best way to do that is to create an illusion of a bargain”.

Mr Bhojani said the office director Peter Perrignon, who was present in court, had also sent a written appraisal to the vendors of a two-bedroom cottage at 278 Mary St estimating its value at $850,000-$900,000.

But the property hit the market in July 2014 advertised from $700,000-$770,000, and eventually sold at auction for $955,000, he said.

Mr Bhojani said Mr Perrignon quoted the same range for a property in Kew, telling the sellers in an email: “We have it as $700,000-$770,000 as a starting point, but it has no relevance to what we both think it’s worth.

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“It’s exactly where we started for 278 Mary St, which we sold last week for $955,000.

“So the marketing price has no relevance to the actual price.”

Defence barrister for Hocking Stuart, Tony Nolan QC, did not contest the facts alleged by CAV.

He argued that underquoting was not systematic at Hocking Stuart, Richmond, as while CAV initially investigated 80 properties marketed by the office, it only brought legal action over 11.

Mr Nolan also urged Mr Middleton to consider the Bridge Rd office as a “small business” with just 30 staff, including seven sales agents, and that it had taken measures to ensure the practice would not happen again when determining the penalty.

Hocking Stuart’s head office said in a statement earlier this month that it was doing “everything in (its) power to reduce the risk of this happening again”.

“We have recently run a number of refresher courses in accurate pricing across the entire group and will continue to work with all offices to audit their sales files, ensuring this training has been embedded at all agent levels,” the statement said.

“We take very seriously our responsibility to accurately price our properties.”

CAV said it would not make any comment until the case was finalised.

There are 12 other investigations underway, following CAV inspections, but the watchdog is yet to take legal action against any other agencies.

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