K - Complaint No: CA2788248 [2011] NZREAA 32 (18 February 2011)

Last Updated: 19 August 2012

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

And

In the Matter of Complaint No: CA2788248

_{In the Matter of Ms K (XXXXXXXX) and Coreen Sim (10002485)}

Decision of Complaints Assessment Committee

_{Dated this 18}th _{day of February 2011}

Complaints Assessment Committee: CAC10032

Chairperson: Stuart Rose Deputy Chairperson: Peter Ward Panel Member: David Russell

Complaints Assessment Committee

Decision finding unsatisfactory conduct

1 The Complaint

1.1 Mr B has on 19 February 2010 complained to the Real Estate Agents Authority (―The Authority‖) about the conduct of Ms K and Coreen Sim, both licensees under the Real Estate Agents Act 2008 (―REAA‖) of George Boyes and Company Ltd at Raglan.

1.2 The Complaints Assessment Committee (―The CAC‖) met on 22 April 2010 and determined

to inquire into this matter. A full response was requested from the Licensee.

1.3 The CAC reconsidered this matter on 3 November 2010 and now issues its determination.

1.4 This complaint was originally filed with the Real Estate Institute of New Zealand and transferred to the REAA on 18 February 2010. Mr B gave his written consent to the transfer.

2 Material Facts

2.1 Mr B is the principal of ―company B‖. He acted for purchasers who negotiated to buy a leasehold property at Kawhia. He is concerned at the conduct of the agents who were acting in relation to the sale.

2.2 Mr B advises that a contract for the purchase of the leasehold property arrived at his office on 3 August 2009. He states he was very concerned to find that his clients were signing up to buy the property unconditionally. He rang Ms Sim and left a message asking her to make sure the contract was not signed by the vendors as he wished to check that provision had been made to allow for consent to the assignment of the lease by the landlord. He also wished to establish that the new rental figure payable on renewal would not be an excessive amount. He received no response from Ms Sim.

2.3 On obtaining a title search of the property being sold, Mr B was concerned to find that it was different from that offered and advertised, and that the Vendor did not hold leases to both properties advertised. As a result he cancelled the contract.

2.4 Mr B says he spoke to Ms Sim and says she advised that she’d talked through the contract

with Ms K, her supervisor, and followed her advice in the preparation of the agreement.

2.5 Mr B spoke to Ms K who declined to take responsibility for what Mr B sees as carelessness and negligence in preparation of the agreement. He says Ms K informed him that her agent was at a distance and she, Ms K, could not check the agreement. Mr B claims that Ms K busied herself checking if the lease rental would be $3,000 or less knowing that the contract had no provision to protect his clients should the figure be greater than $3,000. He concludes his complaint by saying that he believes Ms K is not a fit and proper person to manage the Agency and that this matter needs investigation.

2.6 Mr D, the General Manager of George Boyes and Company Ltd responded to the Authority on 28 June 2010. He advises that his company takes such complaints very seriously and that he accepts that technical mistakes were made in the drafting of the sale and purchase agreement and he makes no attempt to argue otherwise.

2.7 He goes on to acknowledge that Ms Sim lacked experience dealing with leasehold property and had discussed the matter with Ms K. Mr D also acknowledges that as a result of these discussions a misunderstanding occurred between Ms K and Ms Sim; Ms K believed her instructions had been understood, and Ms Sim believed she understood the instructions but in fact she hadn’t. This confusion led to shortcomings in the drafting of the sale and purchase agreement.

2.8 Mr D advises that systems have been put in place to ensure that all completed draft sale and purchase agreements prepared by Ms Sim would be sighted and approved by George Boyle and Co’s training manager or, in his absence, a qualified second party. He further advises that Ms Sim has left his employment and the real estate industry due to poor health.

2.9 Mr D also agrees that the purchasers did initially express the wish to buy the property subject to a new lease being entered into and at a ground rental not exceeding $3,000 per annum. He advises that Ms Sim told them that the Maori Trust would not renew their lease prior to the expiry of the existing lease and also that the Trust would give no written guarantee what the ground rental would be when the lease was renewed. However, Ms Sim did relate to the purchasers that she had been told by another leaseholder close by that their property previously rented at $800 per annum had been rent reviewed at just under

$3,000 per annum.

2.10 Mr D says that Ms Sim advised that the purchasers were about to travel overseas and because of that they would not wait for a copy of the sale and purchase agreement and she should fax the document, when completed, to Mr B.

2.11 He believes Mr B’s reference to $12,000 per annum being set for another property’s ground

lease is speculative and not a fair comparison.

2.12 In relation to Ms Sim not acting in accordance with Mr B’s instructions, Mr D advises that he believes Ms Sim was acting in accordance with instructions given to her by the purchasers. However, Mr D does acknowledge that the legal description wasn’t correct.

2.13 Mr D claims that the purchasers remained in contact with him and were very happy to continue to work with Ms Sim to purchase a property in the area. The purchasers have provided a testimonial letter of support for Ms Sim and indicated they would be happy to re - purchase the property if the doubts raised by Mr B could be resolved in some way.

2.14 Mr B wrote to the Authority on 7 July 2010 concerned that there were no statements from either Ms Sim or Ms K.

2.15 By letter of 19 September 2010 Ms Sim responded to the complaint.

2.16 Ms Sim explains her dealings with the purchasers including informing them that the lease was a perpetual one, that its next renewal was due in 2010 and that the rent could not be renewed until that date. Ms Sim explains she followed the example agreement that Ms K had sent her and that she informed the purchasers that the paperwork would take some time to complete because it needed to be written in triplicate. She advises that the purchasers insisted on signing the copies of the incomplete Agreement because they wanted to progress the transaction before they left New Zealand. Ms Sim says she showed them a copy of the lease. After the exchange with the purchasers Ms Sim contacted the Maori Trustees Offices to find out if there was any further information she needed and what the likely time frame would be in accessing that information. Ms Sim says she was informed that all she had to do was to get the vendors to take a copy of the Agreement to their lawyer and get their lawyer to write them a letter sanctioning the assignment.

2.17 Ms Sim then says she phoned Mr B’s office to inform him that the purchaser was on his way to see him and also to confirm details of the agreement before she completed it. Her call received a recorded answer so she left a message asking Mr B to urgently contact her on her mobile phone. Ms Sim says she waited for probably 45 minutes to hear back from Mr B.

2.18 On returning home Ms Sim advises that her husband told her that Mr B had rung and instructed that Ms Sim was not to present the offer to the Vendors. Ms Sim phoned Ms K at her office and asked what she should do, and says she was told ―it was up to her whether she ignored the message and continued with the transaction or whether she put everything on hold and faxed it through to Mr B‖, however, Ms K said she didn’t see why Mr B should get involved if the purchasers were happy with the property and their offer. Ms Sim advises she was confused but elected to fax the offer to the vendors. The offer was accepted by the vendors and confirmed this by returning a signed copy of the sale and purchase agreement.

2.19 Ms Sim advises that the next morning she received a very angry phone call from Mr B. She goes on to say that Ms K phoned her to say that she had talked to the Maori Trustees Office who had said there was no problem with the lease or the rent reviews.

2.20 By letter of 24 September 2010 Ms K wrote to the Authority with her response to the complaint from Mr B. She confirms Mr D’s written response as a true record of her understanding of the complaint. Speaking as Branch Manager she believes she fulfilled her obligations in a proper manner in relation to this matter and that when Ms Sim sought her guidance, as she should have regarding the contract, particularly because it was lease -hold land, ―I discussed the matter with her fully and explained that it would need to be subject to the approval of the Lessor, being the Maori Trust.‖ Further to this she sent (Ms Sim) a copy of a previous agreement to guide her in drawing up the contract.

2.21 Ms K goes on to say ―...As to her error regarding her description of the title of the Agreement it was just that, an error. I however, believed, and still do, from all I had seen of the advertising and my conversations with Ms Sim, regarding the property that she had clearly understood what the subject property was comprised of, its identity and its size.‖

―That she went on to admit the inclusion of the clause regarding the Agreement requiring lessor’s approval, I do not know the answer as to why, other than my understanding from talking to her that she was perhaps pressured a little by the buyers being in such a rush.‖

2.22 ―Without seeking to minimise the importance of these matters, they were issues which in my opinion could have been rectified and or dealt with more simply by Mr B in consultation with Ms Sim and or myself and the respective parties.‖

2.23 Ms K encloses a letter of testimony which was provided to her unsolicited by the Vendor.

The CAC notes that in this letter the Vendor endorses Ms K’s actions and feels that the complaint is a ―storm in a tea cup‖.

2.24 Ms K concludes by note that she has been in the Real Estate Industry for some 22 years and has had no issues with regulatory bodies and holds the necessary qualifications to hold a Branch Manager status. The Authority also has a letter dated 14 August to the Real Estate Institute of New Zealand from the Vendor’s Solicitors. In that letter they say that Ms Sim was advised about the special requirements of the sale because it involved the Maori leasehold land. When the Agreement was presented to their clients for signing Ms Sim assured them that ―everything was fine‖ and on that basis the clients signed the Agreement. It was an unconditional agreement.

2.25 By letter of 14 August the solicitors acting for the Vendors in this transaction responded to the complaint. Significant extracts of the response follow.

―Our office was not consulted prior to the Agreement being prepared and signed. The first knowledge we had of the Agreement was when a fully signed Agreement was faxed to our office by our clients. That Agreement was badly drawn up and referred to land that was not leased by our client and contained no provision for the Maori Trustee requirement. The Agreement was promptly cancelled by the Purchaser’s solicitor once he became aware that the Agreement was faulty”.

2.26 “Our clients acknowledge the agent they were dealing with was Coreen Sim not Ms K, however they understand that Ms Sim was an inexperienced agent and therefore they would have expected that Ms K would have maintained a large degree of supervision and assistance for Ms Sim especially in a matter such as this where Ms Sim has acknowledged that she had some difficulty over the contract. As manager of the Agency Ms K was ultimately responsible for the conduct of her staff.

2.27 “As a result of Ms Sim’s incompetence our clients lost their sale. In addition, this matter has caused our clients to incur unnecessary legal fees as we’ve tried to sort the whole mess out.”

2.28 “At the very least we believe our client’s legal costs should be reimbursed by Ms K’s agency.”

3 Relevant Provisions

3.1 Real Estate Agents Act 2008

Section 72 Unsatisfactory conduct

For the purposes of this Act, a licensee is guilty of unsatisfactory conduct if the licensee carries out real estate agency work that –

(a) falls short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee; or

(b) contravenes a provision of this Act or of any regulations of rules made under this

Act; or

(c) is incompetent or negligent; or

(d) would reasonably be regarded by agents of good standing as being unacceptable.

Section 73 Misconduct

For the purposes of this Act, a licensee is guilty of misconduct if the licensee’s conduct –

(a) would reasonably be regarded by agents of good standing, or reasonable members of the public, as disgraceful; or

(b) constitutes seriously incompetent or seriously negligent real estate agency work; or

(c) one consists of a willful or reckless contravention of –

(i) this Act; or

(ii) other Acts that apply to the conduct of licensees; or

(iii) regulations or rules made under this Act; or

(d) constitutes an offence that reflects adversely on the licensee’s fitness to be a licensee.

3.2 Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009

Rule 6 Standards of professional conduct

6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

6.3 A licensee must not engage in any conduct likely to bring the industry into disrepute.

3.3 Section 172 Allegations about conduct before commencement of this section provides that

(1) A Complaints Assessment Committee may consider a complaint, and the Tribunal may hear a charge, against a licensee or a former licensee in respect of conduct alleged to have occurred before the commencement of this section but only if the Committee or the Tribunal is satisfied that,—

(a) at the time of the occurrence of the conduct, the licensee or former licensee was licensed or approved under the Real Estate Agents Act

1976 and could have been complained about or charged under that

Act in respect of that conduct; and

(b) the licensee or former licensee has not been dealt with under the

_{Real Estate Agents Act 1976 in respect of that conduct.}

(2) If, after investigating a complaint or hearing a charge of the kind referred to in subsection (1), the Committee or Tribunal finds the licensee or former licensee guilty of unsatisfactory conduct or of misconduct in respect of conduct that occurred before the commencement of this section, the Committee or the Tribunal may not make, in respect of that person and in respect of that conduct, any order in the nature of a penalty that could not have been made against that person at the time when the conduct occurred.

4 Discussion

4.1 The REAA came into force on 17 November 2009. Events such as this that occurred prior to that date are restricted to penalties and sanctions available under the old legislation and events from that date are covered by the new Act. The timing is important because the CAC’s powers under the new Act are considerably greater than under the old Act.

4.2 In considering the position under section 172 of the REAA there is a three step process.

Firstly, the question needs to be asked as to whether the Licensee could have been complained about or charged under the 1976 Act in respect of the conduct. The breadth of conduct that could be complained about under the 1976 Act was extremely wide. As an example, Rule 13.1 of the Code of Ethics provided that members should always act in accordance with good agency practices and conduct themselves in a manner that reflects well on the Institute, its members and the Real Estate Profession. And Rule 13.13 provides

―a member must be fair and just to all parties in negotiations and in the preparation and execution of all forms of agreements, and protect the public against unethical practices in connection with real estate transactions.‖ The CAC believes these rules are wide enough to cover the subject matter of the current complaint and that therefore the Licensee could have been complained about or charged under the 1976 Act.

4.3 The second step is to decide whether the conduct amounts to unsatisfactory con duct or misconduct in terms of section 72 and or 73 of the REAA.

4.4 The third step, if required, is to examine the orders that could have been made against the Licensee under the 1976 Act as the remedies available to the CAC are limited to those orders.

4.5 In this case the CAC has fully reviewed the complaint, and the responses including f urther comments from all the parties.

4.6 Having received written responses from the Licensees and having satisfied itself that it had completed its inquiry into the complaint, the CAC conducted a hearing with regard to the complaint under section 89 (1) of the REAA.

4.7 The hearing was conducted on the papers pursuant to section 90 of the REAA. Pursuant to section 90 (2) the CAC made its determination on the basis of the written material before it.

4.8 The issue therefore for the CAC to decide is whether the conduct of Ms K or Ms Sim amounts to unsatisfactory conduct or misconduct in terms of the REAA. The CAC has carefully considered the detailed submissions of all parties and deliberated before making its decision.

4.9 The CAC finds that Ms Sim’s drafting of the agreement and understanding of what was required contractually did not reach the required standard of a reasonably competent licensee on this occasion. We are also concerned that there was a deliberate decision by Ms Sim, to an extent supported by her supervisor, to ignore an instruction from the purchasers’ solicitor and to proceed to present an offer to purchase This raises the unprofessional spectre of licensees rushing to get people ―signed up‖, and opens them to the accusation of acting to advance their own interests and not those of their clients. The CAC’s view is that while this conduct is unsatisfactory it fails to reach the threshold of misconduct required to be a breach of section 73 of the REAA.

5 Decision

5.1 After conducting an inquiry into the complaint, pursuant to section 89(1) of the REAA, the Committee held a hearing with regard to that complaint. In accordance with section 90(1) of the Act, the Committee conducted the hearing on the papers, and pursuant to section

90(2) the Committee’s determination was made on the basis of the written material before

it.

5.2 The Committee has determined under section 89(2)(b) of the REAA that is has been proved, on the balance of probabilities, that Ms Sim has engaged in unsatisfactory conduct.

5.3 After full consideration of all available material the CAC finds on the evidence presented to it that Ms Sim is guilty of unsatisfactory conduct as that term is defined in section 72 (a) and (c) of the REAA in that she failed to display the required level of skill and competence in relation to the drawing up of the Agreement for Sale and Purchase, and that she failed to comply with a direct instruction from the Purchaser’s Solicitor acting as the purchasers agent regarding presentation of the contract.

5.4 In relation to the complaint against Ms K, the CAC does not believe there is sufficient evidence to find that she engaged in unsatisfactory conduct and therefore the complaint against her is dismissed in terms of section 89 (2) and (c).

6 Orders

6.1 Having determined under section 89 (2) (b) of the REAA it has been proved to the required standard that Ms Sim has engaged in unsatisfactory conduct, the CAC has the power by virtue of section 172 (2) to make any order in the nature of penalty that could have been made against Ms Sim at the time when the conduct occurred.

6.2 As the conduct occurred prior to the REAA coming into force on 17 November 2009 only the orders available under the Real Estate Agents Act 1976 (now repealed) may be made. The powers to make orders are conferred on the CAC under section 93 of the REAA are not available.

6.3 On that basis the CAC is satisfied that no orders in the nature of a penalty could have been made against Ms Sim in relation to the conduct the subject of the complaint, at the time the conduct occurred being August 2009. The effect of this is that the CAC is prevented from making any orders against Ms Sim by virtue of the operation of section 172 (2) of the REAA. Notwithstanding this the CACis of a view that due to the fact that Ms Sim has left the industry, and the fact that this whole process has no doubt had a salutary effect on her, a censure would have been the only penalty the CAC would have imposed under all the circumstances.

7 Publication

7.1 One of the CAC’s functions pursuant to section 78(h) of the REAA is to publish its decisions.

7.2 Publication gives effect the purpose of the REAA of ensuring that the disciplinary process remains transparent, independent and effective. The CAC also regards publication of this decision as desirable for the purposes of setting standards and that it is in the public interest that the decision be published.

7.3 The CAC directs publication of its decision, but omitting the names and identifying details of the complainant (including the address of the property), and any third parties in the publication of its decision.

8 Right of Appeal

8.1 A person affected by a determination of a Complaints Assessment Committee may appeal by way of written notice to the Disciplinary Tribunal against a determina tion of the Committee and must do so within 20 working days from the date of the determination.

8.2 Appeal is by way of written notice to the Tribunal. Further information on lodging an appeal is available by referring to the Guide to Lodging an Appeal at

_{www.justice.govt.nz/tribunals.}

Signed

Stuart Rose

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 18 February 2011