ASA Adjudication on Pure Real Estate Consultancy Fze

Ad

Ad An ad on Geo TV said “Properties Dubai and Pure Real Estate present a luxury island hotel investment. Blu Mirage, from just £49,000, enjoy your 5 star hotel apartment four weeks of the year and earn as much as £25,000 per annum. Your investment is secure in Escrow. Guaranteed returns of 36% in three years … Call 08000 xxx xxx to find out how you can earn £25,000 per annum.” On-screen text stated: “Fully furnished 5 star hotel-serviced apartments FROM £49,000 HOTEL SERVICED APARTMENTS Rental return up to £20,000 p.a Capital growth up to £5,000 p.a INVESTMENT SECURITY Escrow Account Rental Guarantee 12% p.a for 3 years 100% freehold ownership … Invest £49,000 Earn £25,000 p.a 100% Freehold Ownership CALL US 08000 xxx xxx www.propertiesdubai.com terms and conditions apply. www.propertiesdubai.com

Issue

Monitoring staff challenged whether:

1.  the ad offered an investment opportunity for an unregulated product;

2.  the earnings, rental return and capital growth could be substantiated;

3.  the disclaimer "terms and conditions apply" was legible;

and whether the ad should have made clear that:

4.  ownership of the freehold apartment had significant conditions attached to it;

5. the apartments had not been built and were not scheduled for completion until 2010;

6. buyers were not guaranteed four weeks occupation in their or any other apartment in the complex.

BCAP TV Code

Response

Geo TV stated that the ad was being broadcast on other channels.  

1. Geo TV asserted that, because the property had a contractual guaranteed minimum return, advertising the offer as an investment opportunity was acceptable.

2. GEO TV submitted information that stated the projected return on the investment and a copy of the standard agreement with investors.  Clause 12.2 of Annex 1 to the Sale and Purchase Agreement stated "the Operator agrees to guarantee the Owner a 12% return on investments for the first three years ...".  They said their rental projections were consistent with returns from other five star hotels operating in Ras Al Khaimah.  They provided information on market values for apparently similar apartments in Dubai and the latters 2004 prices and yearly rental rates. They said they expected a similar performance at Ras Al Khaimah.  They explained that "opinions, trends, anticipation, luck are a number of the words used to describe the contributory factors required for success in the property market.  It is not possible to apply a scientific formula to predict the amount of profit (if any) that will be obtained from a given investment location ... the UAE market has seen unprecedented growth over the last eight years and is showing no signs of slowing down."  They submitted links to several website articles, from 2005 to 2008, that outlined the opportunities of investing in the U.A.E.

3., 4., 5. & 6.  GEO TV did not comment.

Assessment

1. Upheld

The ASA considered that the ad presented buying the apartment as an investment opportunity. We noted the Note to rule 9.5 (c) stated that Any advertising which implies that, for example, a collectors item or some other unregulated product or service could have investment potential would normally be unacceptable. ("investment" is used in its colloquial sense in this note.)".  We understood that the Financial Services Authority did not regulate the investment.  We considered that the ad claimed the apartment had investment potential and so breached the code.

The ad breached CAP (Broadcast) TV Advertising Standards Code rule 9.5 (c)   Unacceptable categories.

2.  Upheld

We understood that the apartments were not due to be finished until 2010. We considered that the global property market might be significantly different by then.  We noted the large number of resorts being built in the UAE  We also noted that the rental and property valuations that GEO TV submitted were based on apartments in Dubai whereas the Blu Mirage development was in Ras Al Khaimah, some 50 minutes away from Dubai by car.  We considered that the advertisers rental and capital growth projections did not constitute objective evidence to substantiate the claims "Earn as much as £25,000 per annum.  Rental return up to £20,000 p.a, Capital growth up to £5,000 p.a, investment security, Invest £49,000 Earn £25,000 p.a".  We considered that the advertisers had not substantiated the advertised investment returns.

The ad breached CAP (Broadcast) TV Advertising Standards Code rule 5.2.1 (Evidence).

3. Upheld

We considered that the disclaimer "terms and conditions apply" was too small to be legible.

The ad breached CAP (Broadcast) TV Advertising Standards Code rule 5.4.2. (a) (Superimposed text).

4.  Upheld

We noted the ad referred to "100% freehold ownership" whereas the contract stated that the owner was not permitted to terminate the Agreement for five years and, if he did, he would be pursued for punitive damages through the courts. Furthermore, if he terminated the Agreement in less than ten years, the owner would be liable to pay the 40% share of the net operating profit for each remaining balance year of the Agreement term and all service and maintenance charges previously paid by the Operator.  We considered that those conditions were significant restrictions on what viewers might understand from the offered "100% freehold ownership".

We considered that significant conditions related to the sale of the property in the contract. The Agreement stated that the owner had to obtain the Operators authorisation to sell the apartment.  Furthermore, the owner had to ensure that the new buyer accepted the provisions of the Agreement; if the owner did not, the sale would be declared null and void and the Operator would be entitled to levy a penalty and might seek legal remedy.  Also, until the new owner confirmed acceptance of the terms and conditions, the buyer would continue to be jointly and severally liable with his successor.  We considered that that was a significant condition and that the ad should have made viewers aware of it.  We concluded that the ad was misleading.

The ad breached CAP (Broadcast) TV Advertising Standards Code rule 5.1 (Misleading advertising).

5. Upheld

We understood that the apartments had not been built and were not scheduled for completion until 2010.  We considered that that was a significant condition and that the ad should have made viewers aware of it.  We concluded that the ad was misleading.

The ad breached CAP (Broadcast) TV Advertising Standards Code rule 5.1 (Misleading advertising)

6. Upheld

We understood that buyers were not guaranteed four weeks occupation in their or any other apartment in the complex.  We considered that that was a significant condition and that the ad should have made viewers aware of it.  We concluded that the ad was misleading.

The ad breached CAP (Broadcast) TV Advertising Standards Code rule 5.1 (Misleading advertising).

Action

We concluded that the ad must not be broadcast again in its current form and that the product should not be advertised without adequate substantiation for the claims made for it.

Adjudication of the ASA Council (Broadcast)