Complaint No C01240 [2013] NZREAA 186 (19 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: C01240

In the Matter of Licensee

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 19th day of September 2013

Complaints Assessment Committee: CAC 20007

Chairperson: Paul Biddington Deputy Chairperson: Ann Skelton Panel Member: Joan Harnett-Kindley

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). The Licensee holds a salespersons licence.

1.2 The complaint is in relation to the Licensee’s conduct in the sale of Property 2. The Complainants allege that they relied on the Licensee’s assurances that there were no potential mining issues in relation to the Property.

1.3 The complaint was received by the Authority on 26 March 2013 and referred to a Complainants

Assessment Committee (the Committee). The Committee initially considered the complaint on 22

April 2013 and made a decision pursuant to section 79(1) of the Act to inquire into the complaint. The Committee gathered further evidence which it considered at its meeting on 24 June 2013.

2. Material Facts

2.1 On 1 July 1999 the Complainants purchased a holiday home at Location B that is about 12

Kilometres from the township (Location A). The Complainants are also licensed real estate

licensees. Mr M holds an agent’s licence and has been an active licensee since 1984 and practices in residential real estate, primarily apartment sales. Mrs M holds a salesperson licence and had done so since 1995. She works in her husband’s company.

2.2 The Licensee first met the Complainants in or around 2007 at the a Golf Club where both were members. In late 2008 the Complainants stated that they mentioned to the Licensee that they were seeking a block of land where they could run horses.

2.3 On 10 December 2008 the Licensee listed a property at Property 1, which the Complainants later viewed with the Licensee.

2.4 In or round May 2009 the Complainants, Ms W and Mr N (as purchasers) signed an agreement for sale and purchase for Property 1. The Licensee stated that he recommended that the parties obtain a solicitor’s approval of the LIM and certificate of title, and insert a due diligence clause. The Complainants and the other parties rejected that advice.

2.5 The Licensee further stated that he then presented the offer to the vendor’s solicitor. It was not accepted. Subsequently, the Complainants themselves presented another offer for the property that the vendors accepted. The Licensee stated that the second agreement was not conditional on the Complainants obtaining or approving a LIM report or undertaking due diligence.

2.6 The Licensee submitted that the Complainants were well aware of the proximity of the mining operation to the Property, but did not express any concern about mining or its impact during negotiations or subsequently. The Licensee stated that the Complainant’s solicitor later advised him that the Complainants had been unable to satisfy the finance condition and the agreement had

been cancelled.

2.7 On 8 January 2010 the Licensee listed Property 2 with a listed price of $635,000 plus GST. The Licensee stated that he contacted the Complainants to advise that Property 2 may be of interest to them. The Complainants were enthusiastic about Property 2 and viewed it on more than one occasion. At the time the Complainants viewed, the Licensee stated that he pointed out the boundaries and advised who the neighbours were, one of which was Company G.

2.8 On or about August 2003, a mining permit was sought on behalf of Company W and Company A.

The fact that the mining permit was being sought was advertised in local papers from October 2003 and advised that the permit holder was carrying out work to locate areas for future mining. Permit X was granted to Company W and Company A on 22 March 2004 (the mining permit).

2.9 On 5 January 2005, Company A and Company W amalgamated with Company M and on the same day that company changed its name to Company G. On or about 14 March 2006 the schedule to the mining permit was replaced with a schedule that included the Property. This information was published in the local newspaper on 4 April 2006.

2.10 On or about 14 January 2010 the Complainants instructed the Licensee to prepare an offer for the vendors for $635,000 including GST. The Licensee stated that he advised the Complainants that they should include due diligence, LIM, title and solicitors approval conditions as further conditions to the agreement. The Complainants did not follow this advice.

2.11 In support of this statement the Licensee provided a spreadsheet of the Licensee’s contracts from March 2009 to April 2011 for sales in which the Licensee had been directly involved. Of the twenty- four contracts, eleven had LIMs, fourteen due diligence clauses, and five solicitor’s approval clauses. The ones that had none were Property 1, the first property in which the Complainants expressed interest. The second was Property 2.

2.12 The Licensee stated that he did not give the Complainants a copy of the title as it was not industry practice at the time. The Property had a mining interest registered on the title in May 1999. The Licensee further stated that he understood the Complainants had lived part time at Location B and were themselves experienced real estate agents and owned their own real estate company.

2.13 The Complainants alleged that during their discussion about Property 2 they asked the Licensee whether there were any potential mining issues related to Property 2. The Complainants further allege that the Licensee assured them there were no potential mining issues with Property 2.

2.14 The Licensee stated that the Complainants did not ask if there were any potential mining issues, or ask about mining at all and he did not advise them that there were no potential mining issues in relation to the Property.

2.15 Accordingly, the Licensee prepared an unconditional sale and purchase agreement. This was signed by the Complainants and presented to the vendors. On 4 February 2010 a final price of $660,000 was agreed for Property 2 and was finalized on 30 July 2010.

2.16 In August 2011 Company G announced plans to seek consent to conduct underground mining in Location A. In June 2012 Company G lodged a Resource Consent to conduct underground mining. In April 2013 Resource Consent was granted to conduct mining under residential property in Location A. Property 2 is not included in that consent.

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 purpose 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 regulation 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 licensees 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 are a reference point for discipline.

3.5 In relation to this complaint the following Rule(s) may apply:

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

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.

4. Discussion

4.1 The Complainants had owned a property at Location B since 1999. They may not have lived at the property full time, but nevertheless they would have been aware that Location A was a mining town situated 12km from their property. The Committee is of the view that although they did not live in the township of Location A, they would have known or should have known about the mining company and their mining permit. The mining company’s activities were published in the local

paper and were available on their web site.

4.2 Furthermore, the Complainants were real estate licensees and were very experienced in transacting real estate, having negotiated a previous offer to purchase a property in Location A in 2008. The Complainants would have had access to title checks, previous sales records and could reasonably be expected to know Location A is a mining town and this could affect properties.

4.3 The Committee is of the view that the Licensee did advise the Complainants to include LIM, title, due diligence and solicitor’s clauses in their offer to purchase the Property (the Complainants have not denied this in their evidence), and after being so advised, the Complainants chose to present an unconditional offer.

4.4 The Complainants allege that they asked the Licensee whether there were any mining issues in relation to the Property and that the Licensee assured them there were none. The Licensee stated that the Complainants never asked about any mining issues, or mining at all in relation to the Property and he never gave any assurances. Both the Complainants and the Licensee have a different version of events in this part of the complaint.

4.5 Because the Complainants had previously endeavored to purchase property unconditionally in Location A, the Committee is of the view that the Complainants were confident to purchase Property 2 in the same manner. On that basis the Committee prefers the evidence of the Licensee and on the balance of probabilities finds that the Complainants did not inquire about mining issues in relation to the Property and that the Licensee did not give any assurances.

4.6 Accordingly, the Committee finds that the Licensee has not breached the Act or the Rules in this part of the Complaint.

4.7 In relation to the Licensee not providing the Complainants with a copy of the title with the mining interest registered on it in May 1999, the Committee accepts that at the time the sale was being discussed in January 2010, there was no obligation on the Licensee to give the Complainants a copy of the title, and furthermore, the Complainants were very experienced Licensees and would have been able to access a copy.

4.8 Whilst the Real Estate Agents Disciplinary Tribunal has over recent times placed more emphasis on the understanding and the explaining of titles by licensees, this was not the practice at the time of the conduct.

4.9 Accordingly, the Committee finds that the Licensee has not breached the Act or the Rules in this part of the complaint.

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 complainant (including the address of the property), the licensee and any third parties in the publication of its decision.

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

Paul Biddington

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 19 September 2013