C - Complaint No CA3303084 [2010] NZREAA 113 (20 September 2010)

Last Updated: 4 August 2012

In the Matter of Part 4 of the Real Estate Agents Act 2008

And

In the Matter of Complaint No CA3303084

In the Matter of Mr C

_{Licence No XXXXXXXX}

Determination of Complaints Assessment Committee

_{Dated this 20}th _{day of September 2010}

Complaints Assessment Committee: CAC No: 10024

Chairperson: Jo Hughson Deputy Chairperson: David Barker Panel Member: David Russell

Complaints Assessment Committee - Decision to take no further action

1 Licensee Background

1.1 The Licensee, Mr C (“the Licensee”), holds an agent’s licence and works for UVW (trading as XYZ) in “city”.

1.2 The Licensee is experienced in commercial sales and leasing and is a Director of XYZ in

“city”.

2 Complaint

2.1 The complainant, Mr S (“the complainant”), alleged he felt pressured and bullied by the Licensee “to put in an unconditional contract” for a property in March 2010. The property is a storage facility with 76 units on site and with potential for further development on the currently undeveloped portion of land.

2.2 The complainant maintained the Licensee was “well aware before even viewing the property with him that we were not interested in getting into a multi offer situation due to solicitor fees” and that was why he had not put a tender in for the property during the tender process.

2.3 The complainant stated the Licensee had contacted him shortly before 4pm on Friday, 19

March 2010, the closing date for tenders, to advise that only one tender had been submitted and that tender was the subject of a sunset clause which was due to expire at

4pm and which the vendor was not prepared to sign.

2.4 The complainant stated that subsequently he collected an Information Memorandum from the Licensee, read it over the weekend and then believing he was the only interested party by that time, decided to view the property on Monday, 22 March 2010. The complainant stated he told the Licensee in advance of viewing the property that he had checked on some quotes for work to be completed on the site and after talking to the contractors who had completed stage one, believed the prices quoted were “on the light side”. The complainant alleged the Licensee told him he knew someone who could complete the work

“thousands of dollars cheaper” and that he would bring that person to the property when the complainant viewed it on the Monday. There is no suggestion the complainant was told of that person’s name at that time.

2.5 The complainant stated that Mr H attended the viewing with the Licensee on Monday, 22

March 2010. The complainant alleged Mr H “also has an association with [XYZ] (which we feel was unethical)” and that Mr H advised that the contractors who had completed stage one were owed money and were in the process of trying to recover their costs on stage two.

2.6 The complainant stated he later phoned the contractors and was advised by them that no money was outstanding.

2.7 The complainant alleged the Licensee spoke to him about how much money ABC was owed by the vendor. He maintained the Licensee told him he was dealing with ABC on a daily basis and that they “would be pressuring the Vendor to sign the agreement.” Further, the complainant maintained the Licensee told him he was the only party prepared to submit an offer and it was on that basis he asked the Licensee to send an agreement to his solicitor for approval before any offer could be presented to the vendor. The complainant stated “once again [the Licensee] was pressuring us for an unconditional contract which we were not prepared to do.”

2.8 The complainant stated that on the Tuesday morning, 23 March 2010, his solicitor approved his offer which was then forwarded to the Licensee. At that point the Licensee is alleged to have advised the complainant that “for the agreement to work he required an unconditional offer as there was already another offer in which [sic] had been represented Monday morning.” The complainant maintained that if he had known about the other offer he would not have pursued the matter any further “as [the Licensee] knew we weren’t interested in Multi Offer situations.”

2.9 The complainant also expressed concern about the Licensee’s “unethical behaviour

towards Vendors [sic] privileged information to prospected [sic] buyers”.

2.10 The complaint was supported by a copy of the complainant’s solicitors’ invoice dated 30

March 2010 (in the sum of $219.38 including GST) for their attendances in respect of advising on the complainant’s offer.

Information and Material Considered

2.11 The Real Estate Agents Authority (“the Authority”) received Mr S’s complaint against the

Licensee on 8 April 2010.

2.12 The Authority referred the complaint to the Complaints Assessment Committee. Pursuant to section 79(1) of the REAA, on 19 May 2010 the Committee considered the complaint under section 79 and determined to inquire into it.

2.13 The Committee invited the Licensee to provide a written response to the complaint and this was received on or around 9 July 2010.

2.14 The Licensee’s response was provided on a “without prejudice to indemnity” basis. The response was detailed and comprehensive and was signed as also having been read and approved by the vendor and Mr H “as a true and correct account of the listing of the property and the dealings with [the complainant]”.

2.15 The Licensee traced the background to the listing of the property in some detail but in summary explained that he had been contacted by the vendor to market the property at a time when the vendor had overcapitalised the property with a first mortgage to ABC for

$1,950,000 and a second mortgage to the original owner of the property of $150,000. The Licensee explained the vendor could not obtain finance to develop the property further and ABC was seeking for their loan to be repaid. The Licensee advised he received authority from the vendor to talk directly with ABC and he sent copies of his weekly reports to ABC.

2.16 The Licensee provided information in relation to the marketing campaign he undertook for the vendor from February 2010 to the closing date for sale by private treat y of 4pm Thursday, 18 March 2010. The Licensee stated the vendor was at all times happy for him to provide details of his financial situation and the amounts owning to mortgagees during the

marketing campaign “as it would at least give buyers an idea of the minimum required to clear the current mortgages”.

2.17 The Licensee stated the complainant had first enquired about the property in March 2010 and had been sent a full information pack and visited the property and talked directly to the vendor. The Licensee stated the complainant had advised he would wait until after the closing date for tenders before deciding whether to make an offer.

2.18 The Licensee stated that three offers were received in the tender process, none of which were considered entirely acceptable to the vendor. On the day the Licensee presented the offers to the vendor (Friday, 19 March 2010) the vendor instructed him to contact the complainant to see where his interest lay and to ask whether he was interested in submitting an offer for $2.2 million. The Licensee stated he told the complainant there was a degree of urgency in knowing his interest because the highest of the three offers received would expire at 4pm that day if not accepted by the vendor. The complainant is stated to have advised he was happy with $2.2 million but he would need to seek advice from his solicitor, inspect the site and get a better feel for the future development costs. Subsequently the Licensee stated he contacted the complainant and advised him the vendor had decided not to accept the highest offer referred to above and the vendor would wait until he [the complainant] had inspected the property on Monday “as the vendor was happy with his price.”

2.19 In relation to the complainant’s site visit which was arranged for the Monday the Licensee maintained;

• he organised this on the Sunday night;

• he asked the complainant if he wanted “a project Manager, [Mr H] of [DEF], who had done some work on the developing costs for another purchaser” to come to the meeting;

• the complainant “said he would be happy with this and to bring [Mr H] along.”

2.20 The Licensee explained that Mr H is also a property manager for LMN which is partially owned by XYZ NZ and that XYZ “city” has no financial interest in LMN.

2.21 In relation to the site visit the Licensee stated:

• He advised the complainant and his wife that Mr H was “there in his capacity as [DEF], not as [LMN]”;

• The complainant stated he would consider using Mr H if he purchased the site and an hourly rate was discussed;

• Mr H told the complainant his opinion was there could be some savings on the costs quoted by the vendor in the Information Memorandum, but indicated to the complainant that further work was required to firm up his prices;

• He admitted advising the complainant that ABC held a considerable mortgage on the property and were pushing for it to be sold; he stated this information “was consistent with all communications to all buyers in the sale process” and was given with the vendor’s consent.

2.22 The Licensee stated that on the Monday afternoon following the site visit the complainant advised he was only happy to pay $2 million for the property with a five day due diligence condition. The Licensee stated he told the complainant that would “most probably not be enough, as it was less that the previous [lapsed] offer, but suggested that if he made it unconditional it may be considered more favourably.” However the Licensee was instructed by the complainant to present a conditional offer only.

2.23 The Licensee then explained the circumstances surrounding the representation of the original offer on the Monday. He referred to having been contacted by another agent who indicated the first offerors were now prepared to consider a counter offer from the vendor at

$2.12 million with five days due diligence. He stated that the vendor told him he would not consider this until he had seen the offer from the complainant the following day.

2.24 The Licensee communicated details of the complainant’s offer to the vendor the following day. Before doing so he stated he contacted the complainant and advised him his offer was unlikely to be acceptable to the vendor because of the price. Then the complainant “became very agitated and stated that I had mislead him about there being another offer and that he would withdraw his offer. Before I could explain that I was meaning the original offer which expired on the previous Friday, he hung up on me.”

2.25 The Licensee stated the complainant then spoke directly with the vendor and was advised to make an offer otherwise he would miss out. The vendor subsequently instructed the Licensee to step away from the complainant for a few days before talking to him again but that his offer of $2 million would not be acceptable in any event.

2.26 The Licensee explained that the vendor then “chose to negotiate with the previous purchaser from this point onward...” and an agreement for sale and purcha se was entered into on Sunday, 28 March 2010. The Licensee advised that he was instructed by the vendor to contact the complainant before the agreement was signed on that Sunday, to see if he had any further interest and to give him a last chance to submit an offer. The Licensee was advised by the complainant at that time that he would be making a complaint about his conduct alleging “non disclosure of the other offer.” The Licensee stated he tried to explain to the complainant that at the time his offer was presented there was in fact no other formal offer on the table; and that when he had referred to there being another offer when he spoke to the complainant on the Tuesday, that was a reference to the original offeror’s indication to the vendor that he would now consider a counter-offer/proposal (but there was no formal offer at that time).

2.27 The complainant was invited to comment on the Licensee’s response. Comments were received from the complainant on 2 August 2010. The salient points can be summarised as:

• His main complaint is that the Licensee with Mr H had applied pressure for a cash unconditional offer for a property worth in excess of $2 million;

• Mr H had been present at the site visit for one reason only “to convince us that the

costing in the memorandum” could be done significantly cheaper;

• Mr H’s name was only mentioned when he had expressed concerns about the development costs and he was recommended by the Licensee as a project manager; asking Mr H “about his costs was being polite and making conversation”;

• The Licensee was well aware he did not want to “spend money on Solicitors” and “If [the Licensee] had rung us on the Monday evening when he says he was contacted from the original buyer to represent his offer we could have cancelled our solicitor and occurred [sic] no costs”; and

• “the offer with the sunset clause for 4pm Friday which the vendor wouldn’t sign is the offer we weren’t prepared to go against, because [Mr R] who had that offer in, would be the contractor we would have employed to do the building work had he not purchased

this property and we had. As it turns out [Mr R] lifted his price and presented his offer he thinks the following Wednesday, went for two or three extensions then pulled out believing also that the development costs were too much risk.”

3 Hearing

3.1 Having received the Licensee’s written response to the complaint and the other information described above, and having satisfied itself that it had completed its inquiry into the complaint, on 12 August 2010 the Complaints Assessment Committee conducted a hearing with regard to the complaint, under section 89(1) of the REAA.

3.2 The hearing was conducted on the papers pursuant to section 90 of the REAA. In accordance with section 90(2) the Committee made its determination on the ba sis of the written material before it as referred to above.

4 Complaints Assessment Committee Determination and Reasons

4.1 The Committee has made a determination under section 89(2)(c) of the REAA to take no further action with regard to the complaint or any issue involved in the complaint.

4.2 The Committee is of the view it is not necessary to take the complaint or any issue involved in the complaint any further.

4.3 The Committee is not satisfied that it has been proven that there has been any unsatisfactory conduct on the part of the Licensee, as that term is defined in section 72 of the REAA.

4.4 The Committee is satisfied the allegation relating to the Licensee’s disclosure of personal financial information pertaining to the vendor is without foundation. It is cle ar the Licensee at all times acted under the instructions or with the authority of the vendor to disclose information of the nature disclosed to the complainant (relating to loans and mortgages on the property and the vendor’s financial position generally).

4.5 In respect of the allegation that the Licensee and Mr H had pressured him to submit an unconditional offer, the Committee is satisfied there was pressure exerted on the complainant as alleged. However the Committee does not accept that in the circumstan ces of this case, such conduct can reasonably be considered to be “unsatisfactory conduct” for the purposes of section 72. The Committee is satisfied the Licensee was acting in accordance with his client’s instructions and as part of that was required to g ive the complainant a final opportunity for him to submit an offer before the vendor proceeded to negotiate directly with the original offeror. The Committee considers that the events disclosed in this case are consistent with the “rough and tumble” of buying property generally and, having conducted its enquiry, is satisfied there was no unsatisfactory conduct on the part of the Licensee relating to the manner in which he dealt with the complainant in this process.

4.6 The Committee does not consider the Licensee acted unsatisfactorily by not contacting the complainant on the Monday night to inform him that the original offeror had that day indicated a preparedness to consider a counter-offer from the vendor. The Committee is satisfied there was no formal offer on the table at that time and therefore the Licensee was under no professional obligation to alert the complainant to this renewed interest from the original offeror.

4.7 The Committee does not consider the Licensee conducted himself unsatisfactorily (and/or unethically as alleged) by allowing Mr H to be present and involved in discussions on the day of the complainant’s site visit on 22 March 2010. The Committee is not satisfied there was any actual conflict of interest in Mr H’s involvement in this case. In any event, the Committee does not consider it necessary to take this issue any further.

4.8 In summary, for the above reasons, the Committee has determined that it will take no further action with regard to the complaint or any issue involved in the complaint.

5 Publication

5.1 One of the functions of the Complaints Assessment Committee is to publish its decisions

(section 78(h)).

5.2 The Committee has determined that this decision should be published in the interests of ensuring the disciplinary process remains transparent, independent and effective; and for the purposes of standard setting.

5.3 The Committee hereby authorises the Authority to publish the decision by whichever means it considers appropriate, but omitting the names and identifying details of the complainant (including the address of the property), the licensee (including the name of his employer) and any third parties in the publication of its decision. The description of the property given in paragraph 2.1 may be published.

6 Right of Appeal

6.1 A person affected by a determination of a Committee may appeal to the Disciplinary Tribunal against a determination of the Committee within 20 working days of the date of this notice.

6.2 Appeal is by way of written notice to the Tribunal. You should include a copy of t his Notice with your Appeal.

6.3 Further information on lodging an appeal is available by referring to the Guide to Lodging an Appeal at www.justice.govt.nz/tribunals.

Signed

Jo Hughson

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 20 September 2010