Complaint No C01245 [2013] NZREAA 168 (27 August 2013)

Last Updated: 1 June 2014

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

And

In the Matter of Complaint No: C01245

In the Matter of Licensee

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 27th day of August 2013

Complaints Assessment Committee: CAC20005

Chairperson: Stuart Rose

Deputy Chairperson: Chris Rogers

Panel Member: Denise Bovaird

Complaints Assessment Committee

Decision to take no further action

1. The Complaint and Material Facts

1.1 The Complainants have complained to the Real Estate Agents Authority (the Authority) about the conduct of The Licensee. The Licensee is licensed under the Real Estate Agents Act 2008 (the Act) holds a salespersons license, and works for The Agency.

1.2 The Complainants attended a property auction as prospective purchasers and were concerned that the Licensee actively influenced the bidding process by offering to pay for an increased bid by them. They are concerned that this was an extremely unethical action. They also say that they believe the Licensee used the increased bids to increase the overall sale price of the property. They say that certainly cannot be ethical practice for any real estate agent.

1.6 The complaint was received by the Real Estate Agents Authority (the Authority) on 27 March 2013 and referred to a Complaints Assessment Committee (the Committee). The Committee considered the complaint on 11 April 2013 again on 30 May 2013 and again on 4 July 2013 and now issues its decision in this matter.

2. Relevant Provisions

2.1 The Act establishes a statutory basis for the licensing and hearing of complaints against real estate agents, amongst other things. The Act provides for the setting up of Complaints Assessment Committees to hear the complaints and allegations about licensees. It also establishes a Disciplinary Tribunal to hear complaints at the next level.

Section 3 of the Act sets out the purpose of the Act.

Purpose of Act

(1) The purpose of this act is to promote and protect the interests of consumers in respect of transactions that relate to real estate and to promote public confidence in the performance of real estate agency work.

(2) The act achieves its purpose by –

a) Regulating agents, branch managers, and salespersons:

b) Raising industry standards:

c) Providing accountability through a disciplinary process is independent transparent and effective.

2.2 When the committee considers a complaint it must decide whether it breaches the standards of conduct that are set out in section 72 and 73 of the act and also the Rules of Professional Conduct and Client Care as set out in the Real Estate Agents Act (Professional Conduct and Client Care) Rules

2012.

2.3 The Real Estate Agents Act 2008

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.

2.4 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 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.

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

2.6 The Rules set out the standards 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 exhaustive list, they set minimum standards that licensees must observe and are a reference point for disciplinary decisions.

Examples of the Rules that may be relevant in this complaint are:

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

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.

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.

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.

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. Discussion

3.1 The Complainants maintain that during the auction they were approached by the Licensee who invited them to place a higher bid saying that she would cover the difference between their

previous bid and the new bid they were making. On this basis, the Complainants placed two further bids for the property being auctioned taking the bid price to $2,000.00 more than they wanted to pay. The auction continued and the property ultimately was sold to another bidder who paid

$500.00 more than the Complainants’ last bid. The Complainant alleges the Licensee actively manipulated the property’s price during the auction and that the Licensee’s behaviour was unethical.

3.2 The auction for The Property was held on 14 March 2013. The Complainants had placed a bid of

$675,000 which was then over bid at $675,500. The Licensee approached the Complainants and asked if they wanted to bid higher and they said no. They say The Licensee then said that if they bid an extra $1,000 the Licensee would pay for this. The Complainants increased their bid by $500 to

$676,000 and the other bidder immediately came back at $676,500. The Licensee suggested they increase their bid again on the basis that she would pay the increase and on this basis the Complainants then bid a further $500 to $677,000. This bid was immediately countered with a further $500 bid. The property then sold for $677,500.

4.3 The Licensee, in response, admits that she offered to contribute to the purchase price. She says that she saw the Complainants as a young couple with limited resources and as she had been in their position herself, thought that a “helping hand would mean the world to them”. The Licensee says that she was acting with good intentions and kindness and trying to help the Complainants. She says that she felt that $1,000 was not a significant amount and that it was worth it to help a young couple own a place that they wished to purchase and would result in them being happy customers. The Licensee says that she felt that to add $2,500 on a $677,500 property could hardly

be deemed as “pushing” up the price for the vendors. She denies pushing up the selling price of the vendors and has apologised to the Complainants.

4.4 The Complainants, in response to the Licensee’s comments, said that they appreciate the Licensee acted with good intentions. Their main concern is that the Licensee’s actions during the auction were not carried out appropriately and made the Complainants feel uncomfortable. They also believe that the Licensee’s actions created an unfair outcome.

4.5 The Licensee said that her actions happened as a spur of the moment decision and because of this any form of written disclosure was not considered. She also says that as agent for the Vendors they have achieved the best possible price and he was very happy.

4.6 The Licensee goes on to say that she also had a duty of care to the purchasers (the Complainants) and believes that in no way did she act outside her duties to them. In her view, the auction was run in accordance with best practice. The highest bidder for the property at the auction was the eventual buyer and as far as she is concerned the auction was conducted in a way that was “fair and square”.

4.7 The Customer Relations Manager for the Agency has written to the Authority regarding this matter.

His comments were also made in relation to an inquiry from the Committee to the Agency as to whether the Complainants were aware that the Licensee would gain a financial benefit from the sale if the Complainants were successful at the auction and also as to what the Agency’s policy was regarding this type of behaviour at auctions.

4.8 The Customer Relations Manager for the Agency advises that the Licensee did not disclose to the

Complaints that she would get a share of selling commission if the Complainants were successful

bidders at the auction. He provided us with a breakdown of the Licensee’s commission which shows

that it would have resulted in a net gain to the Licensee of around $1,000 (net )if the Complaints had been the successful bidders.

4.9 The Customer Relations Manager for the Agency wrote to the CAC:

“..... from a company perspective our policy is that we do not discount our commission. We hold the view that we are already able to offer vendors rates that are in general below or at a similar level to our competitors and that we are able to continue to offer the same fair package to all Vendors.

There are however occasions when the salesperson may make the decision that they will forfeit some of their own commission in order to bring about a settlement. This might be where the vendor and purchaser have reached the point in negotiations where they are not able to move to meet the gap; where the vendor has removed a chattel or fixture from the property that the purchaser expected to be included; or where a vendor is unable to fund the advertising and promotion. While we do not approve this as a general practice, we do understand that it does occur from time to time and that in some transactions it is necessary to enable the sale to proceed.

The disclosures made at auction are generic when relating to the sale process and include compliance aspects, the way in which the auction will be conducted, and the company policy that vendor bidding is not part of that process; the disclosures are specific in regard to the particular property being auctioned.”

4.10 We have taken some time to consider this matter because of its nature. We accept The Customer Relations Manager‘s comments that from time to time agents do discount their commission in order to achieve a sale. What we have had to consider in this case is whether this practice is

suitable or acceptable in the auction situation and we have some concerns about that. Auctions are by their nature more stressful. Things happen faster, the participants can feel under extreme pressure and feel that their decision making ability is compromised because of these factors.

4.11 We believe that the Licensee’s offer occurring as it did in the middle of the auction was perhaps not entirely appropriate or sensitive and did not take into account the Complainants’ discomfort as this happened at a stressful time during the proceedings, but note the Licensee’s regret at how they were affected and that her intentions were to help her clients.

4.12 Licensees owe an overriding duty to the vendors of properties to achieve the best they can for them and that is certainly what happened on this occasion. The Vendor of the property could not say that they were disadvantaged. The Vendor of the property in fact received an advantage because of the Licensee’s actions and we find no fault with that. We have considered whether the Licensee’s

actions were potentially unfair to other prospective purchasers at the auction and our conclusion is that they were potentially unfair. Notwithstanding that, we do not believe we need to have an adverse finding in this particular case.

4.13 In considering what happened at this auction, we have some concerns around what would happen

if this practice was to become more widespread and reserve the right to find unsatisfactory conduct for this in future occasions if the circumstances merit such a finding. In this particular instance,

after full examination and consideration of the rules we do not find any fault with the Licensee’s behaviour and as a result of that finding have decided to take no further action in relation to this matter.

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)(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 Licensee 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.

7. Right of Appeal

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

7.2 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 and should include a copy of this Decision.

Signed

Stuart Rose

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 27 August 2013