Complaint No C01770 [2013] NZREAA 240 (19 November 2013)

Last Updated: 20 July 2014

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

And

In the Matter of Complaint No: C01770

In the Matter of Licensee

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 19th day of November 2013

Complaints Assessment Committee: CAC20004

Chairperson: Michael Vallant Deputy Chairperson: Paul Morten Panel Member: David Russell

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 licenced under the Real Estate Agents Act 2008 (the Act). He holds a salesperson's licence and works for the Agency.

1.2 It is alleged by the Complainants that during the purchase of a lifestyle block (the Property), the

Licensee made a serious misrepresentation in respect to the availability of water to the Property.

2. Material Facts

2.1 In January 2013 the Complainants viewed the Property with the Licensee. It was the Complainant’s intention to run stock on the Property. At the time of inspecting the Property, the Complainants asked the Licensee about the availability of water to the stock paddocks on the Property. The Licensee told the Complainants that there was a gentleman's agreement with the neighbouring property, which provided water to the stock paddocks. The Licensee stressed it was a gentleman’s agreement not a legal easement.

2.2 The Licensee had sold the Property on two previous occasions, originally to Mr and Mrs E and then to the present Vendors, who had purchased the Property in March 2011.

2.3 The Complainants entered into a sale and purchase agreement (the Agreement) on 3 February

2013. The Agreement was made subject to a LIM report, a building report and solicitor’s

approval. The Agreement was subsequently declared unconditional on 18 February 2013.

2.4 A pre-settlement inspection of the Property took place shortly before settlement at which the Vendors and the Complainants were present. The Complainants checked the water pressure at the outside tap and found there was good pressure. It subsequently was found that this was connected to the house supply, which came from a tank. The Complainants asked the Vendors why there was no water in the troughs. They replied that this was due to the water supply being temporarily disconnected due to the drought.

2.5 Settlement occurred on 8 March 2013.

2.6 A few days after settlement in March 2013 the Complainants contacted the Licensee stating there was no water in the paddock taps. The Licensee referred the Complainants to their neighbour. The sharemilker running the neighbouring property advised the Complainants that there had been a gentleman’s agreement in place but that it had been defunct for some time.

2.7 The Complainants have now had to install a second water tank to rectify the situation at a cost of

$9,253.21.

3. Relevant Provisions

3.1 The Complaints Assessment Committee (the Committee) considers the following provisions are relevant to this complaint:

3.2 Pursuant to section 72 of the Act unsatisfactory conduct is defined as:

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 Pursuant to the Real Estate Agents Act (Professional Conduct and Client Care Rules) 2009:

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 At the outset the Committee notes that the onus of establishing a complaint, on the balance of probabilities, is borne by the complainant Hodgson v CAC & Arnold [2011]NZREADT 03.

4.2 The Investigator assisting the Committee in this matter has spoken to both of the previous owners of the Property. Mr and Mrs E advised that when they purchased the Property there was a gentleman's agreement in place to draw water from the farm next door. At that time the farm was owned by a Mr F. Mr and Mrs E understood they had a gentlemen's agreement which could be broken at any point. Further, it was Mr and Mrs E who installed the tank to have the house supplied with water coming from roof rainwater. This arrangement was installed when Mr and Mrs E discovered that the water being supplied by the farm had chemicals added to prevent bloat.

4.3 Mr and Mrs E had also spoken to the new owner of the neighbouring farm, Mr C, who acknowledged that water was being drawn from his property. However, he did not mind as the amount was negligible. Mr C in discussing this matter with the Investigator denies any knowledge of the agreement and points out to the Investigator, as it is a gentleman's agreement he is under no obligation to honour it. The discussion between Mr and Mrs E and Mr C took place in 2007 and given the passage of time, Mr C may have simply forgotten the conversation.

4.4 The Vendors advised that when they purchased the Property they were aware of the gentlemen's agreement and never approached Mr C themselves. They had water in the troughs and outside the house. On several occasions they pointed out that the water got turned off, however it was only for a day or two and only a couple of times.

4.5 The Vendors had not been running stock on the Property for some time prior to settlement and had leased the land out for grazing and accordingly had no need to check on the water supply.

4.6 At the time of the pre-settlement inspection, the Vendor told the Complainants that the water was not coming from the neighbouring farm at the present time due to the drought and the house supply was low and would probably need a tanker in the near future.

4.7 The Complainants appear to have accepted what they have been told by the Vendor and did not make any further enquiry on their own behalf.

4.8 Throughout the whole purchase process, and even before the Complainants entered into the Agreement, they do not appear to have taken any steps to request information on volumes of water, flow rates, the source of water from the dairy farm or even to verify the existence or validity of the gentlemen's agreement. Once the Licensee had told them of the existence of the gentleman’s agreement, the Committee’s view is that the onus then falls on the Complainants to make their own investigation as to the gentlemen agreement's existence or otherwise. It is the essence of such an agreement that it is not a legally binding arrangement and can be terminated at any time by the party providing the benefit of the agreement.

4.9 The Licensee also points out in his response that during a telephone conversation with the Complainant in January 2013, and prior to the Complainants making an offer, the Complainant speaking in the background said “What about the easement for the water”. The Complainant’s response to him was “You know it is not an easement, it's a gentleman's agreement .You have to go and look at the paddocks yourself”. The Committee notes that this statement is not challenged by the Complainants.

4.10 The allegation by the Complainants is that the Licensee made a misrepresentation in relation to the water supply from the adjoining farm.

4.11 The evidence before the Committee makes it quite clear that the Licensee conveyed to the

Complainants that there was a gentleman's agreement in respect to the water supply.

4.12 The Complainants had ample time to make their own enquiry as to the validity of the gentlemen's agreement, prior to entering into the Agreement, and even during the conditional phase of the Agreement. They appear to have taken absolutely no steps whatsoever to make enquiries of the neighbouring farmer or even through their own lawyer as to the status of water supply agreement.

4.13 This is not a case where the duty of utmost good faith now imposed on agents meant that the Licensee had to do more than explain to the complainants that the availability of water in the paddock was dependent on the gentlemen’s agreement, rather than an easement.

4.14 The evidence shows that the Complainants understood that there was no water easement. We infer that they knew the difference between a water easement and a gentleman's agreement. A gentleman’s agreement is legally unenforceable. It was up to the Complainants to ensure that the gentlemen's agreement would satisfy their needs once they purchased the property. The Complainants failed to do so and the Committee considers that they must accept the consequences of this failure.

4.15 The Complainants had not established any misrepresentation by the Licensee. There is no information that the Licensee has withheld. The Committee therefore finds that the Complainants have not proved, on the balance of probabilities that the Licensee engaged in unsatisfactory conduct.

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.

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

Michael Vallant

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 19 November 2013