Complaint No CB6632246 [2013] NZREAA 16 (28 January 2013)

Last Updated: 16 February 2014

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

And

In the Matter of Complaint No: CB6632246

In the Matter of Licensee 1

Licence Number: XXXXXXXX

And

In the Matter of Complaint No: CB6692528

In the Matter of Licensee 2

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 28th day of January 2013

Complaints Assessment Committee: CAC20002

Chairperson: Patrick Waite Deputy Chairperson: Deirdre McNabb Panel Member: Barrie Barnes

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 The Real Estate Agents Authority (the Authority) received a complaint from the Complainant on

13 April 2012 in regard to Licensee 1. Licensee 1 holds a salesperson’s licence and is working for Agency B (a member of Agency A group of Companies). The Complainant also complained in regard to Licensee 2. Licensee 2 holds a salesperson’s licence and is working for Agency C (also a member of Agency A group of Companies).

1.2 The Complaints are about the conduct of the Licensees in relation to the unsuccessful sale of the business which the Complainant was a director and 25% shareholder in. His specific complaint is that:

a. Licensee 1 “worked for Company A to sell the business when she was supposed to work for Company B.” Company A is the owner of the Property, Company B is the Lessee of the Property.”

b. Licensee 2 “sold the business when the Complainant’s lease had not expired; and, did not

disclose a personal relationship with the new lessees.”

The Complainant has stated that he would like the matter investigated and for the licensees to explain their actions. “Were they misleading in their underhand dealing with Mr A (Director for Company A) and did we miss out on a sale? Do we have a right to the claim of $80,000?”

1.3 The Authority referred the complaint to the Complaints Assessment Committee (the

Committee). Pursuant to section 79(1) of the Act, the Committee considered the complaint on 1

June 2012 and made a decision to inquire into it.

1.4 The Committee invited the Licensees to provide a response to the complaint. Licensee 1 responded on 22 June 2012 and Licensee 2 on 29 June 2012. Each provided evidence to support their responses. Licensee 1 further responded on 19 November 2012 to questions raised by the Authority.

1.5 The Complainant was provided copies of the responses received from the Licensees and his response in regard to that of Licensee 1 was received by the Authority on 14 October 2012 and that of Licensee 2 on 26 November 2012.

1.6 Having satisfied itself that it had completed its inquiry into the complaints, the matter was considered by the Committee on 18 December 2012.

1.7 The hearing was conducted on the papers pursuant to section 90(2) of the Act and the

Committee made its determination on the basis of the written material before it.

2. Material Facts

2.1 The Property is owned by Company A. Mr A is one of two directors and a 60% shareholder in

Company A. The Property was listed with Agency A on 19 January 2012 for sale by tender. At the

time Mr A suggested that it would make sense to market the Property and business together if the Lessee were happy with that. The Complainant agreed to this provided Ms B from Agency D was included to market the Property.

2.2 Company B was the lessee of the Property until 31 March 2012. The Complainant is one of two directors and a 25% shareholder of Company B and he managed the business. The other shareholders are Mr C with 25% and Mr D with a 50% shareholding. The business was listed exclusively with a sale price of $300,000 plus GST with Agency D. The listing ran from 24 January

2011 to either 24 April or 31 May 2011 (the listing agreement has two different dates on it), and then became a general listing.

2.3 The shareholders of Company B signed an Agency A “Business Broking Listing Form” on 19

February 2012, however it was not signed by a representative of Agency A because Licensee 1 states that she did not feel “ it was appropriate to market this business until I had some proper reliable accounting information that would enable me to prepare an appraisal of the business and to responsibly market it.” This listing, which was intended to be in cooperation with Agency D, was a general agency with a listing price of ‘offers over $140,000”.

2.4 On either the 15th or 16th March 2012 the Complainant phoned Licensee 1 to advise her that the business was going to close on 31 March 2012. That day Mr A contacted Licensee 1 to advise that he had ‘done a deal’ with Company B who would surrender the remaining six years of their lease as well as forgive rent and other arrears payable by Company A in exchange for the chattels owned by Company A that were at the premises. On 17 March 2012 Mr A forwarded to Licensee

1 an email from the Complainant agreeing to the above arrangement. The arrangements for this were concluded on 22 March 2012 with the business closing on 31 March 2012.

2.5 The new Lessees signed a ten year lease for the Property on 25 March 2012, the commencement date being 1 April 2012, with two rights of renewal of five years each. They bought the chattels that the Complainant had purchased from Mr A for $80,000 plus GST ($30,000 deposit payable on or before 27 April 2012 and $50,000 payable on or before 31 March 2013). This arrangement included an option exercisable until 1 April 2013 to purchase the land and buildings for $500,000 plus GST (if any).

3. Relevant Provisions

3.1 The Committee examined the information supplied by the Complainant in her written complaint to determine whether section 72 or section 73 of the Real Estate Agents Act 2008 (the Act) applied i.e. was there evidence which would indicate that the Licensee could be considered guilty of unsatisfactory conduct (section 72) or misconduct (section 73).

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) consists of a wilful 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.

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

Rule 5 Standards of professional competence

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

Rule 6 Standards of professional conduct

6.1 An agent must comply with the fiduciary obligations to his or her client arising as an agent.

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

transaction.

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.

4. Discussion

4.1 The shareholders of Company B signed and returned to Agency A a “Business Broking Listing Form’ on 19 February 2012 however it was not signed by a representative from Agency A. The Complainant believes that Agency A had a listing of his business and therefore should have sold the business to the new lessees on behalf of Company B instead of Company A. The Complainant says that as a result of this arrangement Company B has missed out on a sale for $80,000.

4.2 Licensee 1 in response to the complaint has stated that there was never a valid listing agreement between Company B and Agency A. She states that this is because a representative of Agency A had not signed the agreement and the listing had not been loaded into ‘their system’ due the concern of Licensee 1 that she could not market the property with the level of financial information provided by Company B. It appears clear that Licensee 1 made attempts to obtain the additional information she felt was needed to proceed with a listing and marketing of the business. Although she received some of the required information from Ms B, who was the Agency D listing agent and a sister in law of the Complainant, the listing was not completed and this situation continued until mid-March 2012. This lack of signed agreement was ‘never

remedied’ and was overtaken by subsequent events. The Committee noted that, despite not having accepted the listing, Licensee 1 did deal with at least one enquiry about the business during this time.

4.3 Licensee 1 regarded her listing as being effectively negated on 17 March 2012 when she received an email from Mr A, Company A, in which he forwarded an email from the Complainant agreeing to an arrangement whereby the lease would be surrendered and debt forgiven in exchange for Company B taking over Company A chattels that were at the premises. This agreement was signed by all parties on 22 March 2012. From that time she was of the view that Company B “no longer had any business to sell’ and that it was disposed of in a manner that did not involve her. From this point on Licensee 1 ‘felt free to assist Mr A to negotiate a new arrangement with the party introduced by Licensee 2....and I did so.”. It is clear to the Committee that whilst the formalities might not have been completed until 1 April 2012 there was effectively no business to sell after the deal regarding chattels had been struck on 22 March 2012. The Committee considered that Licensee 1 had not clearly conveyed to the Complainant that as far as Agency A were concerned, that proposed listing had not been finalised and they were not going to market the property until it was finalised to their satisfaction.

4.4 From the Complainant’s perspective he was under the impression that Agency A, Company A and the new Lessees were negotiating six weeks before 1 April 2012 but the Committee could not find evidence to support that view. In fact the first conversation that Licensee 2 had with any of the new Lessees appears to have been on 12 March 2012 when she told the new Lessee that the Property was for sale. She emailed him a customer copy of the listing on 17 March 2012 to see if they wanted to take their interest any further.

4.5 Company B agreed in writing to the arrangement with Company A on 22 March 2012 two days before the ‘new lessees’ viewed the Property on 24 March 2012. The viewing on 24 March 2012 was with Licensee 2, and Mr W from Agency A with the Complainant being present. The Complainant is reported to have told the ‘new Lessees’ at that meeting that ‘he was closing the doors on Friday and moving to Australia. That he could not make the business work and good luck to anyone that took it over.” At that time and up to 1 April 2012, it appears, the new Lessees were still interested in purchasing the building and the business but subsequently only purchased the chattels for $80,000 with a deposit of $30,000 and $50,000 payable within 12 months and with an option to purchase the building. They signed a new lease with Company A on 25 March 2012 with the tenancy to commence on 1 April 2012. Commencement was scheduled to take place after Company B’s business ceased trading on 31 March 2012 and simultaneous to Company B signing the surrender of the lease on 1 April 2012. Even on 1 April the new Lessees went over the paperwork for the lease ‘in case they could not finance the land and buildings or their farm didn’t sell”.

4.6 The Complainant appears to believe that Licensee 2 should have disclosed a ‘personal relationship’ with the new Lessees. She has stated to the Authority that the new Lessee is a former client of her as well as a friend; his children and his brother were also involved. Such relationships are not considered to be ‘related person’ relationships and are therefore not required to be disclosed under section 137 of the Real Estate Agents Act 2008.

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 the complaints. 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 taken considerable time to fully review and understand the situation around which the complaint is based. Whilst clearly the Complainant perceives that he has been disadvantaged, the Committee has determined from information supplied by all parties that the Licensees have acted appropriately in their business relationships with the parties associated with the unsuccessful sale of the business. It also concluded that there was no evidence to indicate that the licensees could be considered guilty of unsatisfactory conduct (S72) or misconduct (S73) or in breach of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009. In fact it seems that the Landlord, who possibly could have pursued the Complainant for unpaid rent and the early closing of the business, has allowed the Complainant to leave the lease on what appears to be favourable terms to the Complainant.

5.3 The Committee has accordingly determined under section 89(2)(c) of the Act to take no further action with regard to the complaint or any issue involved in the complaint.

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 the purpose of the Act of 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 any third parties in the publication of its decision.

6.4 The Authority will publish the Committee’s decision after the period for filing an appeal has ended unless an application for an order preventing publication has been made to the Real Estate Agents Disciplinary Tribunal (Tribunal). Such an application can only be made as part of an appeal to that Tribunal. In order to ensure publication of the decision does not take place it is important that you serve a copy of your application on the Authority. Publication of the decision will not take place until the Tribunal has made a decision on the application.

7. Right of Appeal

7.1 A person affected by a determination of a Committee may appeal to the 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 filing an appeal is available by referring to the Guide to Filing an Appeal

at www.justice.govt.nz/tribunals.

Signed

Patrick Waite

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 28th January 2013