Fuduxin Developer and Constructor Co., Ltd & Sinyi Real Estate Corporation

Case:

Key Words:

housing project, advertising, zoning, public facilities, mezzanine

Reference:

Fair Trade Commission Decision of March 3, 2010 (the 956th Commissioners' Meeting); Disposition Kung Ch'u Tzu No.099025

Industry:

Construction Businesses (4100)

Relevant Laws:

Section 1 of Article 21 of the Fair Trade Law

Summary:

1. FTC was informed that the units of the "Zuigaofeng" housing project "Fuduxin Developer and Constructor Co., Ltd. (hereinafter referred to as Fuduxin Inc.) and Sinyi Real Estate Corporation (hereinafter referred to as Sinyi Corp.) marketed had been licensed as to be offices, yet the language and images used in the advertisements were for residential purposes and the sample unit was also furnished as a residence. In addition, the space for the balconies was indicated in the advertisements as interior space, the various public facilities displayed were illegal construction, and the mezzanine design advertised had not been approved by the competent authority. The conduct was suspected of violation of Article 21 of the Fair Trade Law.
2. Findings of the FTC after investigation:
1. Fuduxin Inc. was responsible for constructing the units of the project and Sinyi Corp. was contracted to market the units. Sinyi Corp. was responsible for the advertising and marketing as well as the corresponding expenses. The more units and parking spaces Sinyi Corps sold, the bigger its profits.
2. The layouts of the units as well as the floor plan of the sample unit and the arrangement were unmistakably for residential purposes. In the advertisements and fliers, the units of the project were boasted as upscale residences with 3.8-meter tall interior space that no one would build anything like this…etc. Emphasis was made on a number of living and parent-child activity facilities and safety measures. The layouts showed the space for balconies as part of the interior, while the landscape design on the ground level and the VIP design in basement level 1 included various public facilities that were displayed in photos or synthesized 3D images in the advertisements. The sample unit included mezzanine design. However, the land use zoning indicated in the construction license was Type 2 commercial zone. In other words, the 2nd floor to the 20th floor had been approved for office space. Only the 21st and 22nd floors were for residences. The ground level was for shops, statutory vacant lots, or passageways, whereas basement level 1 was for parking and the mezzanine had never been ratified. According to Taipei County Government, the change of the originally approved "office space" of the project to "residential" purposes and the public facilities on the ground level and basement level 1 were in violation of paragraph 2 of Article 73 of the Building Act. People who purchased these units would have to face penalty fines, suspension of use, restoration to meet regulations, and compulsory dismantlement. The modification of the balconies into interior space and the mezzanine construction to increase floor space would be illegal and would be dismantled by the Building Violations Removal Corps of Taipei County Government.
3. Grounds for Disposition:
   1. Fuduxin Inc. was responsible for constructing the units of the project and Sinyi Corp. was contracted to market the units. Both parties were gainfully rewarded from the marketing advertisements for the units of the "Zuigaofeng" housing project. Therefore, both Fuduxin Inc. and Sinyi Corp. were deemed advertisers in this case.
   2. The change made from the 2nd floor to the 20th floor to turn them into residences was in violation of Paragraph 2 of Article 73 of the Building Act and people purchasing the units would face penalty fines, suspension of use, etc. The contents of the advertisements were inconsistent with the original approved uses.
   3. The modification of the balconies into interior space to increase floor space was illegal and could be dismantled by the competent authority. The layouts were inconsistent with the original approved uses.
   4. The ground level had been approved to be for "shops, statutory vacant lots, or passageways" and basement level 1 for parking. The display of various public facilities in the advertisements failed to comply with the approved blueprints and was in violation of Paragraph 2 of Article 73 of the Building Act. The contents of the advertisements were inconsistent with the original approved uses.
   5. The mezzanine design had not been approved. The mezzanine construction to increase floor space without approval was illegal. The sample unit and the contents of the advertisements were inconsistent with the original approved uses.
   6. All the abovementioned floor plans, landscape design on the ground level, VIP design on basement level 1, furnishing of the sample unit, and contents of the advertisements and fliers were inconsistent with the original approved uses. The differences were untrue and misleading and thus difficult for the general public to accept. They could lead to misconceptions or wrong decisions made by consumers. The conduct was in violation of Paragraph 1 of Article 21 of the Fair Trade Law. FTC therefore fined Fuduxin Inc. 2 million NTD and Sinyi Corp. 1 million NTD.

Summarized by: Huang,Li-Ming Supervised by: Chi, Hsueh-Li

Appendix:
Fuduxin Developer and Constructor Co., Ltd.'s Unified Business No.: 27323502
Sinyi Real Estate Corporation's Unified Business No.: 22354940