Complaint No CB7044374 [2013] NZREAA 181 (13 September 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: CB7044374

In the Matter of Licensee

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 13th day of September 2013

Complaints Assessment Committee: CAC20008

Chairperson: Graham Rossiter

Deputy Chairperson: Ellen Ryan

Panel Member: Joan Harnett-K indley

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

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). She holds a Salesperson’s Licence and worked for The Agency in Location A at the time of the events described occurred.

1.2 The Complainants submitted an offer on a property in respect of which the Licensee was the acting salesperson. They say the Licensee failed to disclose an alleged ‘geotechnical’ problem with the land. It is contended that they have incurred expenses in the due diligence relating to their intended purchase of the subject property, as well as emotional distress “as a result of not purchasing the property” because of the geotechnical issue.

2. Material Facts

2.1 The Complainants signed an agreement for the purchase of the subject property on 22 February

2012. The agreement was subject to, and conditional on, the Complainants being satisfied with a geotechnical report on the property.

2.2 About a week before the contract was to be confirmed as unconditional, a family member suggested to the Complainants there had been a “large slope failure” on this land. The Complainants arranged a geotechnical report which was received one day prior to the date on which the contract was to be confirmed. On 22 March the contract was cancelled.

2.3 On 15 April, it was suggested to the Complainants, at an open home they attended with respect to another property, that the Licensee definitely knew that there was a geotechnical problem with this land but had not disclosed that information to them.

2.4 The complaint was received by the Authority just over four months later on 23 August 2012.

3. Relevant Provisions

3.1 The relevant law is the definition of ‘unsatisfactory conduct’ in section 72 of the Real Estate

Agents Act 2008 (the Act).

3.2 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 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 In addition, consideration is required of Rules 6.4 and 6.5 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009. Rule 6.4 states that “a licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law of fairness be provided to a customer or client.” Rule 6.5 provides that “a licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer.”

4. Discussion

4.1 This complaint concerns the alleged failure by the Licensee to disclose a ‘defect’ in a property to a customer. This is in breach of rules 6.4 and 6.5. The relative principles to be applied are now reasonably well established. The questions to be asked by a committee in a case such as this are: a) was there a ‘defect’ b) did the agent actually know about it, and c) if he/she did not have actual knowledge of the defect, should he/she have done by the exercise of reasonable diligence? A related aspect of the obligation not to mislead is the duty of care and diligence, which is owed to a purchaser-customer as well as a vendor-client.

4.2 The questions posed in paragraph 4.1 above are obviously linked. A ‘defect’ in land is a problem or issue that, by its nature, ought to be disclosed by a licensee because it would be material, in that it might matter to or be seen as important by a customer. In this particular case, whether there was a ‘defect’ could be a matter of debate or argument in its own right. However, we are prepared to proceed on the basis that there was an actual or potential problem with this land, such that if the Licensee was, or should have, been aware of it, required disclosure.

4.3 The information the vendors received from the local body staff throughout 2011 and 2012 was to the effect that all applicable subdivision requirements had historically been met. There were no ‘defects’ of any kind noted on the council documents. In 2007, a geotechnical survey was carried out on the subject property. This showed the presence of a ‘slip.’ The survey report was provided to the then owner (not the current Vendors), but not the council. The Vendors for whom the Licensee acted were not aware of the 2007 survey until after the Complainants cancelled their contract.

4.4 It is clear from the Licensee’s response to the complaint that she had no actual knowledge of a

‘slip’ or other geotechnical issue. We accept her evidence and have no reason not to do so. The Complainants have not provided us with any evidence of the Licensee having knowledge of a geotechnical problem with this land.

4.5 As regards whether the Licensee should have known there was a problematic geotechnical history; as a starting point, the Vendors, as stated, had no knowledge of this.

4.6 Secondly, it is clear that even if the Licensee had undertaken a personal inspection of every council document of relevance that would have told her precisely nothing. One of the Complainants is a quantity surveyor with allegedly 20 years’ relevant industry experience and neither he nor his architect understood there might be a problem until a family member, apparently, suggested there could be.

4.7 The firm that carried out the 2007 survey states that the fact that there had been a slip on this land would be noticeable to someone with a trained eye but not a lay person. This Licensee is a

4.8 The suggestion that the Licensee should have been aware of the ‘defect’ in this land and disclosed it would involve the imposition of a quite impossible standard on any real estate agent. This complaint fails by quite a substantial margin. No further action will be taken in 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 to 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 Complainants (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 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

Signed

Graham Rossiter

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 13 September 2013