Complaint No CB7134851 [2013] NZREAA 140 (19 July 2013)

Last Updated: 4 May 2014

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

And

In the Matter of Complaint No: CB7134851

In the Matter of Licensee 1

License Number: XXXXXXXX

And

In the Matter of Complaint No: CB7134932

In the Matter of Licensee 2

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 19th day of July 2013

Complaints Assessment Committee: CAC20005

Chairperson: Chris Rogers Deputy Chairperson: Stuart Rose Panel Member: Denise Bovaird

Complaints Assessment Committee

Decision finding unsatisfactory conduct and no further action

1. The Complaint

1.1 The Complainant has complained to the Real Estate Agents Authority (the Authority) about the conduct of Licensee 1 and Licensee 2. Both licensees are licensed under the Real Estate Agents Act

2008 (the Act). Licensee 1 holds an agents license and Licensee 2 holds a salespersons license. At the time of the alleged conduct both licensees were working for the Agency.

1.2 The Complainant maintains that Licensee 1 withheld information from her regarding serious mould and damp problems with the Property.

1.3 The Complainant maintains that Licensee 2 pushed her to offer the asking price for the Property by providing misleading information regarding interest in the Property from 2 other parties.

1.4 The complaint was received by the Authority on 24 October 2012 and referred to a Complaints

Assessment Committee (the Committee). The Committee considered the complaint on 9 November

2012 and received and considered an investigation report on 13 June 2013.

2. Material Facts

2.1 Licensee 1 listed the Property for sale on 5 October 2011. The Property was to be sold at auction on

2 November 2011.

2.2 The Property did not sell at auction and on 2 November 2011 the listing authority was amended to indicate an asking price of $309,000.

2.3 The asking price was further amended on 29 November 2011 to $299,000 and on 30 November

2011 to $289,000 at the request of the vendor.

2.4 In early December 2011, the Complainant and her daughter viewed the Property by attending an open home being conducted by Licensee 2.

2.5 On 5 December 2011 the Complainant signed an agreement to purchase the Property for $289,000, subject to the Complainant’s satisfaction with a Land Information Memorandum (LIM) report and satisfaction with a specialist report to be obtained from a certified builder within 3 working days of acceptance of the offer. The sale and purchase agreements were drafted by Licensee 2.

2.6 Between signing the initial agreement and declaring the contract unconditional, the Complainant met with the existing tenants and made arrangements for them to remain in the Property after settlement.

2.7 The contract was declared unconditional by the Complainant on 14 December 2011 and settlement took place on 1 February 2012.

2.8 In August 2012 the Complainant received correspondence from her tenants advising that a water ingress issue had been identified in the basement area of the Property. The Complainant made contact with the company holding insurance cover over the Property who, after inspecting the

Property, reported back to the Complainant that the apparent water ingress issues were most likely of a long standing nature and therefore any repairs and remedial work required would not be covered by the current insurance policy.

2.9 On 23 September 2012 the Complainant contacted the Licensee 1 with concerns over the apparent non-disclosure of water ingress issues at the time of purchase.

3. Discussion

3.1 The Complainant maintains that the Licensee 1 was aware of mould and damp issues at the Property prior to the Property being put on the market in October 2011 and that he failed to disclose this to the Complainant.

3.2 The Complainant has provided a statement dated 11 September 2012 from the existing tenants of the Property who have been in residence since approximately 1 year prior to the Property being sold. The tenants confirm that when Licensee 1 first viewed the Property in September 2011, the ceilings in the upstairs living area were very obviously black with mould – a condition that had been conveyed to the owner along with a similar mould build up on the drapes.

3.3 The tenants state that just prior to the first open home being conducted in October 2011, the owner commissioned a company to chemically treat the mouldy ceilings, restoring them to an ‘as new’ look. The tenants state that by August/September 2012 the mould had returned.

3.4 Licensee 1 has conceded to ‘photo shopping’ or altering photographs of the upstairs ceilings to show a clean surface, when in fact the ceilings were mouldy at the time.

3.5 The Licensee claims that the Vendor asked Licensee 1 to alter the photos so as to show the Property in the condition it would be when put to the market a short time later.

3.6 The ‘Photoshopped’ photographs were subsequently used on information flyers and other

marketing material distributed by both Licensees.

3.7 The Licensee claims to have accepted the Vendor ’s explanation that mould was only present because the tenants had failed to air the Property adequately and not because of any water ingress issues.

3.8 A copy of the listing authority provided by Licensee 1 shows that the Vendor has failed to declare one way or the other if he believes the Property to be the subject of any underlying defects. However the listing form remains absent of any reference to defects.

3.9 The Licensee claims that, at the time of listing the Property, he carried out an inspection of the Property in ‘a usual and reasonable’ manner, which did not reveal any of the issues raised by the Complainant. The Licensee further points out that, on the advice of Licensee 2, the Complainant commissioned an independent building report that also failed to identify any water ingress issues.

3.10 The Complainant believes that while the Property was being marketed, some items of furniture were purposefully positioned against a wall in the downstairs area of the Property in order to hide apparent damp and mould.

3.11 The Licensee denies any prior knowledge of damp or mould issues in the downstairs area of the Property and further questions whether the tenants of the time would have been a party to hiding damp or mouldy areas in the Property.

3.12 Reports supplied by the Complainant, outlining the remedial works required to rectify the water ingress in the downstairs area of the Property, indicate that the issue had most likely been present for some years but had been concealed by recently applied paint.

3.13 The Committee does not believe that the age, style and general construction of the Property, would have indicated to the Licensee that the Property was one likely to be prone to weather tightness issues.

3.14 Whilst the Committee finds the alteration of photographs to be misleading and obviously unsatisfactory, it would seem that Licensee 1 was not aware of any damp, mould or water ingress issues regarding the downstairs area of the Property which, based on the reports supplied, have become the main focus of remedial work for the Complainant.

3.15 The Complainant believes that Licensee 2 misled her into believing that two other parties were interested in purchasing the Property thereby pressuring her into making an offer at the asking price.

3.16 The Complainant has produced a statement from the existing tenants of the Property claiming to have been present while Licensee 2 conducted an open home at the Property during which Licensee 2 claimed, in later advice to the Complainant, to have identified other interested parties. The tenants do not believe any other interested parties were identified by Licensee 2.

3.17 Licensee 2 maintains that whilst attending an open home at the Property, the Complainant expressed an interest in purchasing the Property and agreed to meet with Licensee 2 at around 3.30 pm that afternoon to discuss the matter further. Licensee 2 maintains that the Complainant wished to be informed if any other interest was forthcoming in the meantime.

3.18 Licensee 2 maintains that, some time after the Complainant had departed; another party attended the same open home and expressed interest in buying the Property. Licensee 2 also maintains that at about the same time he was alerted to a colleague having interest from a so far unidentified party.

3.19 Licensee 2 maintains that whilst attending the Complainant’s home later that evening to discuss a proposed offer, he did mention that two other parties had indicated an interest in buying the Property and that if the Complainant wanted to avoid competition in securing the Property it would be in her interest to offer what he considered to be an already very attractive asking price. Licensee

2 has denied putting any undue pressure on the Complainant.

3.20 Licensee 2 did not have offers to buy the Property in writing from any other parties, although it is reasonable to accept that other parties had expressed interest. The Complainant was not asked to sign a multi offer form or remove conditions of the contract inserted for her protection. It seems that the conduct of Licensee 2 was consistent with a Licensee acting on behalf of his client whilst exercising a reasonable duty of care to the Complainant.

4. Relevant Provisions

4.1 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). 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. 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.

4.2 Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 (the Rules).

5.1 A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.

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.

6.5 A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Further, where it appears likely, on the basis of the licensee’s knowledge and experience of the real estate market1, that land may be subject to hidden or underlying defects, the licensee must either–

(a) obtain confirmation from the client that the land in question is not subject to defect; or

(b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.

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.

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

5. Decision

5.1 After conducting an inquiry into the complaint, pursuant to section 89(1) of the Real Estate Agents Act 2008 (the Act), 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 Act that is has been proved, on the balance of probabilities that Licensee 1, has engaged in unsatisfactory conduct.

5.3 Licensee 1 failed to disclose information that in fairness should have been disclosed; namely awareness of a clear and apparent damp and mould issue with the upstairs ceiling area of the Property.

5.4 Licensee 1 created and distributed misleading advertising material regarding the condition of the

Property; namely altered photographs of the upstairs ceiling area.

5.5 The Committee has determined under section 89(2)(c) of the Act to take no further action in regard to the conduct of Licensee 2.

6. Orders

6.1 The Committee will conduct a separate hearing on the papers to decide what orders, if any, should be made under section 93 of the Act.

Section 93 provides:

93 Power of Committee to make orders

(1) If a Committee makes a determination under section 89(2)(b), the Committee may do 1 or more of the following:

(a) make an order censuring or reprimanding the licensee;

(b) order that all or some of the terms of an agreed settlement between the licensee and the complainant are to have effect, by consent, as all or part of a final determination of the complaint;

(c) order that the licensee apologise to the complainant; (d) order that the licensee undergo training or education;

(e) order the licensee to reduce, cancel, or refund fees charged for work where that work is the subject of the complaint;

(f) order the licensee:

(i) to rectify, at his or her or its own expense, any error or omission; or

(ii) where it is not practicable to rectify the error or omission, to take steps to provide, at his or her or its own expense, relief, in whole or in part, from the consequences of the error or omission;

(g) order the licensee to pay to the Authority a fine not exceeding $10,000 in the case of an individual or $20,000 in the case of a company;

(h) order the licensee, or the agent for whom the person complained about works, to make his or her business available for inspection or take advice in relation to management from persons specified in the order;

(i) order the licensee to pay the complainant any costs or expenses incurred in respect

of the inquiry, investigation, or hearing by the Committee.

(2) An order under this section may be made on and subject to any terms and conditions that the Committee thinks fit.

6.1. The Committee requires the Case Manager to obtain a record of any previous disciplinary decision in respect of the Licensee under either the Real Estate Agents Act 1976 or the Act, if any such decision exists, and provide it to the Committee.

6.2. The Licensee and the Complainant may file submissions on what orders, if any should be made. The Complainant may file submissions within 10 working days from the date of the decision. These submissions, if any, will then be provided to the Licensee, with a timeframe for filing final submissions.

7. Publication

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

7.2 The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made.

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 Real Estate Agents Disciplinary Tribunal (the Tribunal) against a determination of the Committee and must do so within 20 working days from the date of the determination.

8.2 The Committee has yet to finally determine this complaint because the parties are being given an opportunity to make submissions on orders before the Committee determines what orders should be made, if any.

8.3 The Committee considers that the 20 working day appeal period does not commence until it has finally determined this complaint by deciding what orders should be made, if any.

8.4 Appeal is by way of written notice to the Tribunal. Further information on filing an appeal is available by referring to the Guide to Filing an Appeal at www.justice.govt.nz/tribunals.

Signed

Chris Rogers

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 19 July 2013