Complaint No C00870 [2013] NZREAA 251 (26 November 2013)

Last Updated: 3 August 2014

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

And

In the Matter of Complaint No: C00870

In the Matter of Licensee 1

Licence Number: XXXXXXXX

Licensee 2

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 26th day of November 2013

Complaints Assessment Committee: CAC20008

Chairperson: Ellen Ryan

Deputy Chairperson: Graham Rossiter

Panel Member: Joan Harnett-Kindley

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 The Complainant has complained to the Real Estate Agents Authority (the Authority) about the conduct of Licensee 1 and Licensee 2, the latter being the principal. The Licensees are licensed under the Real Estate Agents Act 2008 (the Act) and both hold an agent licence. They work for the Agency.

1.2 A property (the Property) of the Estate of the Complainant’s late Aunt was listed for sale with Licensee 1. The Complainant wished to purchase this Property. She alleges the appraisal of the Property prepared by Licensee 1 was misleading as it did not reflect the current market conditions. She advises that he overvalued the Property which led to a family dispute as to what price the Complainant should purchase the Property from the Estate.

2. Material Facts

2.1 The Property of the Complainant’s late Aunt’s Estate was listed with Licensee 1 to sell. It was the Complainant’s desire to purchase this Property from her Aunt’s Estate. There are two executors of the Estate; the Complainant and her cousin who are also beneficiaries of the Estate.

2.2 There were two independent valuations for the property, one for $200,000.00 and the other at

$227,000.00. The Complainant’s cousin requested an appraisal of the property from Licensee 1. An appraisal of the property was prepared by Licensee 1 dated 17 September 2012 at a value of

$255,000.00 to $265,000.00, which was questioned by the Complainant. Licensee 1 then reviewed his appraisal and reduced it to a value of $250,000.00 to $260,000.00.

2.3 The Complainant alleges the appraisal was misleading as Licensee 1 did not use comparable properties in similar locations and that it therefore did not reflect the current market conditions. She says the appraisal did not include properties comparable to the Estate’s Property in terms of age and he did not refer to a neighbouring property (a larger property), which sold for

$245,000.00 in July 2012, and three other properties nearby that sold for $228,000.00,

$229,500.00 and $235,000.00 respectively. The Complainant alleges these factors indicate that Licensee 1’s appraisal was a significant over-representation of the market value of the Property and this has led to a bitter family dispute as to what price she should purchase the Property from the Estate.

2.4 The Complainant also alleges poor communication by Licensee 1 and that he pressured her to vacate the Property as he had formed the view that she was obstructing the sale process. Her co-executor filed High Court proceedings against her which she believes is based on Licensee 1’s view that the Complainant was obstructing the sale process.

2.5 In response Licensee 1 states he was asked by the Estate to give his opinion of the market value of the Property to enable them to negotiate a sale with a co-executor, the Complainant. He was aware of the existence of a valuation of the Property for $227,000.00, prepared by a registered valuer, dated 10 July 2012. He advised the first step he took was to inspect the Property, at

which time he was accompanied by Licensee 2, his wife. He then searched Property Guru’s comparative market analysis (CMA) function for comparable properties and also looked at the comparable properties used in the registered valuation. He sent a copy of the comparable properties to the Estate solicitors.

2.6 The Complainant also obtained a registered valuation dated 12 October 2012 which valued the property at $200,000.00. Licensee 1 was then asked by the Estate solicitors to re-visit his initial analysis of the Property.

2.7 Licensee 1 submitted a response dated 21 November 2012 to the Estate solicitors. He did consider the property next door to the Estate Property and states that there is a restrictive covenant on the title “limiting it to no more than a one storied dwelling house and garage.” Further, the listing of this property in a recent sale stated it to be 230sqm which, apparently, it is not. He submitted that the other three properties, which sold for $228,000.00, $229,500.00 and

$235,500.00 respectively, are all inferior as to sun, access, development potential and therefore

land value. Neither were they appealing in style compared to the Estate Property, and had less potential. He also considered the registered valuation of the Estate Property of $227,000.00. According to Licensee 1, the valuer had not considered the value of garaging versus no garaging in the appeal of the Property. Licensee 1 also referred to page three of the registered valuation which states that he (the valuer) had not allowed for development potential. On this basis Licensee 1 revised his range of price from $250,000.00 to $260,000.00. The Estate then offered the Complainant to meet a sale price between the highest valuation and the low end of Licensee

1’s appraisal. However, she would not accept it. A decision was then made to test the market and Licensee 1 was instructed by the Estate on 20 December 2012 to obtain keys to the Property and suggest a sale process.

2.8 As to the Complainant’s issue regarding Licensee 1 viewing her as obstructing the sale process and that she should vacate the Property, culminating in High Court proceedings filed against her by the co-executor, Licensee 1 states these issues relate to Estate and family matters and that it would not be appropriate for him to comment. He would inform the Estate solicitors of this information.

2.9 Licensee 2, the principal of the Agency, states that she had a minor involvement in this matter.

She only visited the Property with Licensee 1 for the initial viewing. It was Licensee 1 who dealt

with the vendor (Estate) and the lawyers.

3. Relevant Provisions

3.1 The relevant law is section 72 of the Real Estate Agents Act 2008 (the Act) as to the definition of unsatisfactory conduct.

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 The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 also apply and the following is relevant: Rule 9.5 ‘An appraisal of land or a business must – (a) be provided in writing to a client by a licensee; and (b) realistically reflect current market conditions; and (c) be supported by comparable information on sales of similar land in similar locations or businesses.’ and Rule 5.1 ‘A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.’

4. Discussion

4.1 We have considered the property appraisal of Licensee 1 in light of Rule 9.5, which requires that the appraisal must realistically reflect current market conditions and be supported by comparable information on sale of similar land in similar locations. We note that the appraisal did provide an array of comparable recent sales of properties in the area, as well as comparable properties for sale in the area, to come to a value of $255,000.00 to $265,000.00 for the Property. We find from the information of comparable recent sales of similar land in the area that the value arrived at by Licensee One would not be unreasonable to reflect current market conditions.

4.2 On the request of the Estate Licensee 1 did review his appraisal and after considering the concerns raised he reduced the value to a range of $250,000.00 to $260,000.00.

4.3 With regard to the issues raised by the Complainant relating to the neighbouring property, we find Licensee 1 has distinguished this property from the Estate Property given it has a restrictive covenant limiting development and that it was less than 230sqm. The other three properties were also distinguished as being inferior in quality, access, style and development potential compared to the Estate property.

4.4 As to the registered valuation for $227,000.00, this was also distinguished by Licensee 1 given the value of a garage and the development potential was not considered by the valuer. For these reasons we are not persuaded that the appraisal by Licensee 1 did not meet the requirements of Rule 9.5. Accordingly we find no wrongdoing or breach of any of the Rules or provisions of the Act by Licensee 1.

4.5 The allegations regarding poor communication by Licensee 1 and of pressuring the Complainant to vacate the Property as she was obstructing the sale process we cannot accept given the written submission to the Authority by the co-executor of the Estate, which gives a conflicting account to these allegations. In brief, the co-executor dismisses any wrong doing on the part of Licensee 1 who, in her view, acted professionally in marketing and selling the Property. Rather, it was the Complainant who refused to hand over the keys of the Property to the Estate lawyers and thwarted marketing by not answering her phone, delaying responses to emails and denying purchasers timely access to the Property.

4.6 In regard to Licensee 2, we find no wrong doing on her part. The appraisal was prepared by

Licensee 1; she had no involvement in the sale process.

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 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

Ellen Ryan

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 26 November 2013