Background
Summary of Council decision:
Two issues were investigated, both of which were Upheld.
Ad description
A brochure for Ballymore, seen on 1 January 2017, promoted a new property development.
The brochure featured a section titled “ESTIMATED SERVICE CHARGE”. Text on the page stated “Townhouses £1.59/ sqft pa”. Further down the page, text stated “Parking - £308 per space per year”.
Issue
The complainant, who had purchased a property on the development and was charged more than the stated estimates, challenged whether the following claims were misleading and could be substantiated:
1. “townhouses £1.59/ sqft pa”; and
2. “parking - £308 per space per year”.
Response
1 & 2. Ballymore Holding Company t/a Ballymore said that it was typical for the service charge to fluctuate in the first few years, especially where the development had phased handover. They said that the £1.59 estimate was based on a draft budget of 2014. They said that as the development had been running, they had reviewed the expenditure and adjusted the estimate for the service charge to £1.89 per square foot. They confirmed that new ads would include the revised figures.
Ballymore said that the service charge cost per square foot was based on a preliminary estimate from knowledge of the development and similar developments prior to completion. They said that the service charge was determined in advance as per the terms of the lease. They explained that the nature of service charge collection required there to be a sufficient cash flow to pay any costs associated with running the development. Based on that, the funds were collected from all residents in advance to ensure payment.
Ballymore said that the estimated car park costs included the staffing for security, yard, administration, management salaries and maintenance of the car park. They said that the list was not exhaustive. They said that car park costs were not included as a “right to park” on the leases across the development. They said the car park costs were split on a straight division of the number of spaces rather than net internal area. They acknowledged that the car park cost had changed since the ad and original budget was issued.
Ballymore provided a copy of the estimated service charge budget, which was split by net internal area. The budget included the costs of the annual running costs for the development with a total townhouse units cost per square foot of £1.89. They also provided a copy of the service charge accounts which included an overview of the service charge expenditure as well as a budget for the year ending September 2018. The budget provided further detail about expenditure for the development including a breakdown for the apportionment of costs which contributed to the overall spends weighted by townhouses and apartments.
Assessment
1 & 2. Upheld
The ASA noted that the claims “Townhouses £1.59 / sqft pa” and “Parking - £308 per space per year” were featured under the heading “ESTIMATED SERVICE CHARGE”. We also noted that the ad did not contain any information about how the estimates were calculated or how they might change over time. In that context, we considered that although consumers would understand that the figures were estimates and may change slightly, they would be based on a robust method of calculation and not change significantly.
Ballymore informed us that after the ad was published, the service charge had been increased for townhouses from £1.59 to £1.89 per square foot. We understood that the increase was due to a change in the calculation method used for the service charge. We considered that this increase (of 19%) was significant and was likely to result in a significant increase in the total amount residents had to pay annually. Furthermore, we noted that the estimated car park cost had changed since the original budget and that the budget did not provide sufficient information about how the estimated car parking fee was calculated.
Because the method of calculation had resulted in significantly different service charge fees than those stated and in absence from the ad of further information about how the estimated fees might change, we concluded that the ad was misleading.
The ad breached CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising), 3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation. (Substantiation) and 3.17 3.17 Price statements must not mislead by omission, undue emphasis or distortion. They must relate to the product featured in the marketing communication. (Prices).
Action
The ad must not appear again in its current form. We told Ballymore to ensure that they based their service charges on robust methods of calculation.
