Buying Houses: Why the Consumer Guarantees Act Doesn't Cover Real Estate
When purchasing a house in New Zealand, buyers often wonder about their rights under consumer protection laws. While the Consumer Guarantees Act 1993 (CGA) provides robust protections for many consumer transactions, it generally does not apply to the sale of real estate. This article explains why the CGA is not applicable to house purchases and outlines the protections available under the Fair Trading Act 1986 (FTA).
The Consumer Guarantees Act 1993: General Principles
The Consumer Guarantees Act 1993 (CGA) provides a set of guarantees to consumers when they acquire goods or services from a supplier in trade. A 'consumer' is defined as a person who acquires goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption, and does not acquire them for the purpose of resupplying them in trade or consuming them in a manufacturing or production process [Source: Consumer Guarantees Act 1993, s 2(1)]. A 'supplier' is a person who is in trade and supplies goods or services to a consumer [Source: Consumer Guarantees Act 1993, s 2(1)].
The CGA sets out guarantees about the quality and fitness for purpose of 'goods' and 'services'. For example:
- Goods must be of acceptable quality, fit for a particular purpose, match their description, and be reasonably priced if no price is specified [Source: Consumer Guarantees Act 1993, ss 6-10].
- Services must be carried out with reasonable care and skill, fit for a particular purpose, completed within a reasonable time, and at a reasonable price if no price is specified [Source: Consumer Guarantees Act 1993, ss 28-30].
Why the CGA Does Not Apply to House Purchases
The primary reason the CGA does not apply to the sale of a house is due to the legal definition of 'goods'. Under the CGA, 'goods' refers to 'personal property of any kind' and includes items attached to or incorporated in any real or personal property [Source: Consumer Guarantees Act 1993, s 2(1)]. However, the purchase of a house typically involves the transfer of 'real property' (land and anything permanently attached to it), not 'personal property'.
While certain fixtures or fittings within a house might individually qualify as 'goods' if they were supplied separately by a supplier in trade (e.g., a faulty new washing machine installed in a new build), the house itself, as an immovable asset (real property), is generally outside the scope of the CGA's definition of 'goods'. Therefore, the statutory guarantees of the CGA regarding acceptable quality or fitness for purpose do not apply to the house structure or land as a whole when it is bought or sold.
The Fair Trading Act 1986: Protection in Real Estate Transactions
While the CGA does not cover the sale of the house itself, the Fair Trading Act 1986 (FTA) provides significant consumer protection in real estate transactions. The FTA aims to protect consumers from misleading and deceptive conduct and unfair trading practices by those acting 'in trade' [Source: Fair Trading Act 1986, s 1A].
Key provisions of the FTA relevant to real estate include:
- Misleading and Deceptive Conduct: Section 9 of the FTA prohibits any person 'in trade' from engaging in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This applies to real estate agents, property developers, and sellers acting in trade.
- False or Misleading Representations: Section 13 specifically prohibits making false or misleading representations about goods or services. In the context of real estate, this could include claims about the nature, characteristics, suitability, quality, or quantity of land; the existence or effect of any condition affecting land; or the price of land [Source: Fair Trading Act 1986, s 13].
Examples of conduct that could breach the FTA in a real estate transaction include:
- A real estate agent falsely advertising property boundaries or the size of a dwelling.
- A developer misrepresenting the zoning or consented use of a property.
- A seller (acting in trade, e.g., a property trader) failing to disclose significant defects or structural issues that they knew about.
If a person is found to have breached the FTA, various remedies may be available, including orders to pay damages to the affected party, vary or cancel contracts, or issue injunctions [Source: Fair Trading Act 1986, s 43]. The Commerce Commission is responsible for enforcing the FTA and can take action against businesses that breach its provisions.
Real Estate Agents' Obligations
Real estate agents, acting in trade, are directly subject to the provisions of the Fair Trading Act 1986 in their dealings with both buyers and sellers. Beyond the FTA, real estate agents also have professional obligations under the Real Estate Agents Act 2008 and its professional conduct and client care rules, which require them to act fairly, ethically, and provide accurate information.
When to Seek Independent Legal Advice
Understanding the complexities of property law and consumer protection legislation is crucial when buying a house. Independent legal advice should be sought by individuals who are considering purchasing or selling property, have questions about their rights and obligations in a real estate transaction, or believe they have been subject to misleading or deceptive conduct. Advice can be obtained from legal professionals or Community Law Centres for free assistance.