Complaint No CB7023161 [2013] NZREAA 10 (23 January 2013)

Last Updated: 15 February 2014

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

And

In the Matter of Complaint No: CB7023161, CB7023233, CB7023134, CB7023278 and CB7048235

In the Matter of Licensee 1 and Licensee 2 and Licensee 3 and Licensee 4 and Agency 1

Licence Number: XXXXXXXX, XXXXXXXX, XXXXXXXX, XXXXXXXX, XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 23rd day of January 2013

Complaints Assessment Committee: CAC20006

Chairperson: Ann Skelton

Panel Member: Peter McDermott

Complaints Assessment Committee

Decision finding no further action for First, Second, Third and Fourth Licensees and for the Agency

1. The Complaint

1.1. The Complainants have complained to the Real Estate Agents Authority (the Authority) about the conduct of Licensee 1, Licensee 2, Licensee 3, Licensee 4 and Agency 1. All Licensees are licensed under the Real Estate Agents Act 2008 (the Act). Licensee 1 holds a branch manager license, Licensee 2 and Licensee 3 both hold a salespersons license and Licensee 4 holds an agent’s license. All Licensees work for the Agency.

1.2. The complaint relates to the sale of the property and the conduct of one and/or all of the

Licensees which the Complainants assert:

1.2.1. Licensee 1 failed to allow the Complainants to obtain independent advice before signing the final sale and purchase agreement;

1.2.2. Licensee 1 may have taken advantage of one of the Complainant’s inability to understand that he was signing a “final” agreement;

1.2.3. Licensee 2 failed to mention to the purchasers that a multi-offer situation had been declared and failed to mention their offer had been withdrawn;

1.2.4. Licensee 3 may have declared it was a multi-offer situation inappropriately;

1.2.5. Licensees 1 and 5 may have failed to adequately supervise Licensee 3 over the listing of the

Property and the multi-offer situation.

1.3. The complaint was received by the Authority on 20 August 2012 and referred to a Complaints

Assessment Committee (the Committee). The Committee initially considered the complaint on 3

September 2012 and made a decision pursuant to section 79(1) of the Act to inquire into the complaint. After further investigation, the Committee considered further evidence gathered on 26

November 2012.

2. Material Facts

2.1 On 19 April 2012 Licensee 3 conducted a market appraisal for the Property and suggested a selling price range of $290,000 to $320,000. On 15 June 2012 the Complainants also asked another Licensee at another Agency to conduct a market appraisal and he suggested a selling price range of

$300,000 to $320,000.

2.2 Complainant 1 was the sole owner of the Property but, given that he was in the early stages of

Alzheimer’s, he had completed a Power of Attorney in favour of his partner, Complainant 2.

2.3 On 5 July 2012 Complainant 1 entered into a sole agency agreement with Licensee 3 as the listing agent. Complainant 1 signed the listing agreement but Complainant 2 did not. The Complainants disclosed to Licensee 3 during this meeting that Complainant 1 was in the early stages of Alzheimer’s. The Complainants also explained that they wished to release some equity in the Property and if possible, remain in the house as tenants. The Complainants also told Licensee 3 that

they wished to obtain independent financial and legal advice prior to any sale and purchase agreement being signed. The listing agreement detailed that the following chattels were to be included in the sale: steel container, alarm, heat transfer fan and gas hot water.

2.4 On 12 July 2012 Licensee 2 arranged for a viewing of the Property by a prospective purchaser. On

13 July 2012 an offer to purchase the Property for $316,000, with the addition of the BBQ and the option for the Complainants to remain as tenants was received from the Purchasers. This offer was presented to Complainant 2 on 14 July 2012 by Licensee 3. Complainant 2 stated that she was not in a position to make a decision without Complainant 1 (who was away at the time). Licensee 3 advised Licensee 2 that no decision would be made until Complainant 1’s return on 17 July 2012 and also suggested to Licensee 2 that there may be other interest in the Property and it may be that it was a multi-offer situation. On that basis, Licensee 2 requested that Licensee 3 retrieve the Purchaser’s offer from the Complainants, which he did.

2.5 Complainant 2 submitted that she felt under extreme pressure at this time. Complainant 1 had gone away for a few days and they were both feeling very stressed about the speed at which the offer was presented. Complainant 2 submitted that whilst Licensee 3 was at the Property presenting the offer his phone was constantly beeping with messages from Licensee 2. Complainant 2’s evidence was that Licensee 2 was putting pressure on Licensee 3 that resulted in pressure on her. Furthermore, Licensee 3 informed her that Licensee 2 did not like the way that Complainant 2 had been so involved with showing the Purchasers around the Property and had asked Licensee 3 to inform Complainant 2 to refrain from doing that in the future. Complainant 2 submitted that she felt Licensee 2 was pushing Licensee 3 around and putting pressure on her to make a decision about the offer in the absence of Complainant 1. Complainant 2 informed Licensee

3 that she did not want Licensee 2 to come onto the Property again. Complainant 2 also provided evidence of other pressures she was under at this time due to Complainant 1’s illness and their work commitments.

2.6 On the afternoon of 14 July 2012 Licensee 3 arranged for other interested parties to view the

Property.

2.7 On 15 July 2012 the Purchasers withdrew their offer and advised that they would make an offer under the multi-offer process.

2.8 On 17 July 2012 Licensee 3 contacted Complainant 2 and arranged for the multi-offers to be presented on Thursday 19 July 2012 at 2.30pm. However, by 19 July the other interested parties had withdrawn their interest. At 2.20pm that day, the Purchasers submitted their offer of $316,000 with the addition of the BBQ as a chattel and the removal of two gas bottles as these were not actually the property of the Complainants but were leased. In the absence of Licensee 3 (as he was due at another appointment), Licensee 1 presented the offer.

2.9 The Complainants tabled a Quotable Value report at that meeting that recommended a sale price of

$316,000. Their banker had provided this report to them during a meeting they had when they first listed the Property. The Complainants counter-signed the offer to $320,000 and reduced the weekly rental from $370 to $350. The Purchasers accepted this counter-offer and initialed the sale and purchase agreement. Licensee 3 returned to the Complainants to have the agreement signed. The agreement was initialed by both Complainant 2 and Complainant 1. Complainant 2’s evidence is that they did not understand that this initialing of the document would mean it was the final agreement to sell and that Licensee 1 failed to let them have the opportunity to seek further advice. Contrary to this evidence, Licensee 1 stated that he explained this was final acceptance of the Purchaser’s counter-offer and spent some time explaining this.

2.10 On the morning of 20 July 2012 Licensee 3 visited the Complainants to provide a copy of the signed agreement and to arrange a viewing for the Purchasers. At this meeting Complainant 2 expressed

that she was not happy with the sale process. Later that afternoon, Licensee 3 returned and discussed Complainant 1’s concerns, particularly about the chattels. Complainant 2 was not present at that meeting.

2.11 On 21 July 2012 the Complainants wrote to the Agency expressing their concern with the sale process. This was followed by an email of 26 July 2012.

2.12 On 26 July 2012 Complainant 2 told Licensee 1 that she did not have power of attorney and that Complainant 1 was to be examined by his doctor to determine if he was medically fit to make decisions. Licensee 1 submitted that he then phoned the Complainants’ legal adviser who confirmed that Complainant 2 did have legal power of attorney. As to the comment from Complainant 2 that Complainant 1 did not have mental capacity, her email also stated “...we did have an appointment with [Complainant 1’s] GP this morning – we did talk about this.... [Complainant 1] is capable of making decisions/I help [Complainant 1] by asking advisers to assist us...”.

2.13 The Complainants raised the issue that they were not aware at the signing of the counter-offer that this was final acceptance of the Purchaser’s offer and point to the fact that Complainant 1 only used his initial not his full signature as support of this submission. Complainant 1’s initial was provided to the Committee on the listing agreement/agency form, the sale and purchase agreement and the complaint form filed with the Authority. Licensee 1 also submitted that his understanding from the Complainants was that if they achieved a sale price over the QV report valuation of $316,000 plus a below market rental then they did not need to confer further with their advisers and that they were very happy with an offer at that level.

2.14 Licensee 4 met with the Complainants on 29 July 2012 regarding their concerns and followed this up with a letter dated 30 July 2012. The follow-up letter addressed all issues that had been raised and concluded with an offer from the Agency to reduce the agency’s commission by $3,000. The Complainants’ submission was that this meeting should not have taken place as they felt Licensee 4 was not interested in their concerns.

2.15 On 11 October 2012 the Investigator for the Authority interviewed the Complainants’ Solicitor and Legal Executive respectively. The Complainant’s Solicitor stated he had never met Complainant 1 but confirmed that his office had prepared mutual powers of attorney for both Complainants. The Legal Executive confirmed that the Complainants visited her the day before the agreement went unconditional, 26 July 2012, and confirmed that during that discussion she had no reason to suspect that there were any issues with Complainant 1’s mental capacity. The Legal Executive believed he understood he was selling his house at the stated price. During this meeting she asked the Complainants if they wished to continue with the sale, which they confirmed they did but they stated that they had issues with the process. Complainant 2 stated that she had signed the sale and purchase agreement but was unsure that she could as power of attorney. The Legal Executive told the Invesitgator that she had confirmed to Complainant 2 that she could validly sign the agreement as power of attorney. The Legal Executive confirmed that Complainant 2 phoned her on 2 August

2012 advising that she was unhappy with the price but did not want to get out of the deal. The

Committee was provided with a copy of the signed power of attorney dated 7 July 2010.

2.16 The Committee was provided with a copy of the appraisal on the Property completed the second Agency and Licensee of that Agency. The second Agency’s Licensee submitted in evidence that when he saw the Property listed by Agency 1, he contacted the Complainants who advised him that they had received a “fantastic offer” whereby they could rent the Property back from the Purchaser. This Licensee also gave evidence that in his opinion the Property was not undersold at $320,000 and that this was at the upper end of his appraisal range.

2.17 Evidence was also provided to the Committee from the Complainants’ banker (the Banker). The

Banker confirmed there was no pressure from the bank for the Complainants to sell the Property. The Banker recalled that the Complainants visited him after listing the Property with Agency 1 and they had wanted to run any agreement past the Banker, but that he advised it was better to involve their legal advisors. The Banker confirmed that he was happy to provide input into an appropriate sale price and on that basis provided the Complainants with a QV report dated 9 July 2012 for the Property, with an estimated value of $316,000.

2.18 The Committee was also provided with evidence from the Complainants’ accountant (the Accountant). The Accountant explained that he met with Complainant 1 when he started to become ill to discuss options and that selling the Property was one option available. The Accountant confirmed that Complainant 1’s business assets were sold in January 2012 but a shortfall was left with the bank. This shortfall was covered from the proceeds of the sale of the Property, which according to the Accountant, meant there were insufficient funds to resolve Complainant 1’s matrimonial dispute.

2.19 In relation to the supervision of Licensee 3, the evidence from Licensees 1, 2 and 4, who were all more experienced than Licensee 3, sets out how they were all at various stages of the sales process supporting or advising Licensee 3. Licensee 1, as branch manager, took the final offer to present to the Complainants as initially it was thought it may be a multi-offer situation and the Agency’s policy is that a branch manager presents these offers. The Committee was also presented with evidence of how Licensee 1 involved Licensee 4 once it became clear to Licensee 1 that the Complainants were not happy dealing with him. At that point, Licensee 4 met with the Complainants directly.

3. Relevant Provisions

3.1 A complaint can only be made in relation to alleged unsatisfactory conduct (section 72 of the Act)

or alleged misconduct (section 73 of the Act).

3.2 Section 72 of the Act provides:

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 or 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.

3.3 Section 73 of the Act provides:

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) 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 for which the licensee has been convicted, being an offence that reflects

adversely on the licensee’s fitness to be a licensee.

3.4 The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 (the Rules) set out the standard of conduct and client care that agents, branch managers or salespersons (licensees) are required to meet when carrying out real estate agency work and dealing with clients. Whilst these rules are not meant to be an exhaustive list, they set minimum standards that licensees must observe and a reference point for discipline.

3.5 In relation to this complaint the following Rules may apply:

Rule 6.4: A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or fairness be provided to a customer or client.

Rule 9.1: A licensee must act in the best interests of a client and act in accordance with the client’s

instructions unless to do so would be contrary to law.

Rule 9.2: A licensee must not engage in any conduct that would put a client, prospective client or customer under undue or unfair pressure.

Rule 9.3: A licensee must not take advantage of a client’s, prospective client’s or customer’s

inability to understand relevant documents, where such inability is reasonably apparent.

3.6 Section 50 of the Act provides

50 Salespersons must be supervised

(1) A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.

(2) In this section properly supervised and managed means that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure –

(a) that the work is performed competently; and

(b) that the work complies with the requirements of this Act.

4. Discussion

Failure to allow independent advice

4.1 The Committee finds that there is insufficient evidence to support the allegation that Licensee 1 and/or Licensee 3 failed to allow the Complainants the opportunity to obtain independent advice prior to signing the sale and purchase agreement. The Committee accepts Licensee 1 and 3’s evidence that the Complainants indicated that they were happy with the level of the offer as it was above the level of the QV amount and the weekly rental agreed to was less than market rent and, on that basis, it was their understanding that further advice from advisors was unnecessary. Further, the evidence from Licensee 1 was that the Complainants seemed very happy with the increased offer and signed it willingly. On the balance of probabilities, the Committee prefers the evidence of Licensees 1 and 3 and accepts that at the time of signing, the Complainants inferred that if the offer was over and above the QV report valuation, they would be happy to accept that outright. None of the Licensees dispute that the Complainants had indicated at the listing agreement stage that they wanted input from other advisors, it was just that they thought with the tabling of the QV Report and the level of the offer, that the Complainants had already sought that input. The Committee does not dispute the evidence from the Complainants’ that this was a stressful time but the Committee does not find evidence, on the balance of probabilities that the Licensees failed to give or prevent the Complainants getting further advice.

Li censee took advantag e of C om pl ai nant ’s abi l i ty to understand “fi nal ” ag ree m ent

4.2 There is some evidence from the Complainants that they believed that what they signed was not final acceptance of the Purchaser’s offer but instead they initialed the offer, allowing them time to seek further input. The evidence provided to the Committee did not show any difference between the vendor’s full signature and his initials and on that basis the Committee does not find any evidence to support the contention that the Complainants were putting the offer ‘on hold’. In terms of the inference by the Complainants that Complainant 1 did not have the mental capacity to understand that this was final acceptance of the Purchaser’s offer, no credible evidence was provided by the Complainants to support this allegation.

Multi-offer situation

4.3 The Committee has reviewed the evidence surrounding the multi-offer situation. The Committee’s view is that there was sufficient reason for Licensee 3 to believe there may be other offers put forward on the Property and he believed he was following the correct procedure by informing Licensee 2 of this. The Authority did not receive a complaint from either Licensee 2 or the Purchasers in relation to this issue. As it turned out, any other interest in the Property was withdrawn by the final date to present offers and the multi-offer situation dissipated. The Committee finds that Licensee 3 acted prudently and was in no way using the situation to induce further pressure.

Failure to provide proper supervision

4.4 The Committee does not find any evidence to support this part of the complaint. Licensee 3 kept Licensee 1 informed of the potential multi-offer situation, as well as Licensee 2. The Committee did not see any irregularities in the formal documentation relating to the transaction. The Committee also notes that once Licensee 1 realised that the Complainants were not happy with his conduct, he immediately involved Licensee 4 to handle the dispute. The Committee does not find any deficiencies in the supervision by the Agency and Licensee 1.

5 Decision

5.1 The Committee met to consider the complaints and pursuant to section 79(2)(e) determined to inquire into it. Pursuant to section 80(2) the Committee has, at its discretion, decided to take no further action with regard to the complaints against Licensee 1, Licensee 2, Licensee 3, Licensee 4 or the Agency because in the course of the investigation of the complaint, it appears to the Committee that, having regard to all the circumstances of the case, any further action is unnecessary or inappropriate.

6 Publication

6.1 One of the Committee’s functions pursuant to section 78(h) of the Act is to publish its decisions.

6.2 Publication gives effect to the purpose of the Act by ensuring that the disciplinary process remains transparent, independent and effective. The Committee 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.

6.3 The Committee directs publication of its decision, but omitting the names and identifying details of the Complainant (including the address of the property), the Licensees and their company, and any third parties in the publication of its decision.

6.4 The Authority will publish the Committee’s decision after the appeal period has ended. Any

application for an order preventing publication must be made to the Disciplinary Tribunal.

7 Right of Appeal

7.1 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 after the date of this notice.

7.2 Appeal is by way of written notice to the Tribunal. You should include a copy of this Notice with your

Appeal.

7.3 Further information on lodging an appeal is available by referring to the Guide to Lodging an

Appeal at www.justice.govt.nz/tribunals.

Signed

Ann Skelton

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 23 January 2013