Penrose - Complaint No CB7174235 [2013] NZREAA 261 (20 June 2013)

Last Updated: 19 August 2014

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

And

In the Matter of Complaint No: CB7174235

In the Matter of David Penrose

License Number: 10017160

Decision of Complaints Assessment Committee

Dated this 20th day of June 2013

Complaints Assessment Committee: CAC20002

Chairperson: Patrick Waite Deputy Chairperson: Deirdre McNabb Panel Member: Barrie Barnes

Complaints Assessment Committee

Decision finding unsatisfactory conduct

1. The Complaint

1.1. The Complainants have complained to the Real Estate Agents Authority (the Authority) about the conduct of Mr. David Penrose (the Licensee). The Licensee is licensed under the Real Estate Agents Act 2008 (the Act), holds an agent license and is working for Browns Real Estate Limited t/a Sotherbys International Realty (the Agency).

1.2. The Complainants retained the Licensee as his real estate agent when listing his commercial at the property for sale in February 2012.

1.3. The Complaint is about the conduct of the Licensee during the sale of the property.

1.4. The Authority referred the complaint to the Complaints Assessment Committee (the Committee).

Pursuant to section 79(1) of the Act, the Committee considered the complaint on 3 December 2012 and made a decision to inquire into it.

1.5. The Committee invited the Licensee to provide a response to the complaint. This was received from Mr. Penrose in a detailed letter dated 31 January 2013. Further information was provided to the Authority’s Investigator on 27th March 2013.

1.6. Having satisfied itself that it had completed its inquiry into the complaint, the matter was considered by the Committee on 20th May 2013.

1.7. The hearing was conducted on the papers pursuant to section 90(2) of the Act and the Committee made its determination on the basis of the written material before it.

2. Material Facts

2.1. The Complainants retained the Licensee as their real estate agent when listing their commercial property for sale in February 2012.

2.2. The Complainants allege that the Licensee did not provide them a signed agency agreement until July 2012 although the agency agreement was dated 10 April 2012. In addition it is alleged that the Licensee did not provide a CMA when listing the property.

2.3. The Complainants claim that the Licensee, two weeks prior to settlement, spoke to the tenant of

the property and was informed that the tenant was only paying $98,000 in rent instead of $125,000. A dispute between the Complainants and purchasers with regard to rents eventuated. The Complainants allege that this delayed the settlement and caused the Complainants a loss of

$150,000.

2.4. The Committee is satisfied that a full disclosure of all documents relevant to this investigation has taken place. Comment has been sought from all parties relating to the issues under inquiry.

3. Relevant Provisions

3.1. The Committee examined the information supplied by the Complainants in their written complaint to determine whether section 72 or section 73 of the Real Estate Agents Act 2008 (the Act) applied i.e. was there evidence which would indicate that the Licensee could be considered guilty of unsatisfactory conduct (section 72) or misconduct (section 73).

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 of 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.

Section 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 licensee’s fitness to be a licensee.

3.2. Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009

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

6.2 A Licensee must act in good faith and deal fairly with all parties engaged in a transaction.

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.

9.6 Unless authorized by a client, through an agency agreement, a licensee must not offer or

market any land or business, including by putting details on any website or by placing a sign on the property.

10.2 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.

4. Discussion

4.1. Issue 1: Did the Licensee supply a signed Agency Agreement in July 2012 which was dated 10 April

2012?

4.2. The Licensee, in response to the complaint, advised that he has no record of the Complainants emailing him instructions to sell the property in February 2012. However he did receive an email on

10 April 2012 from the Complainants authorizing him to sell the property. In the email the Complainant said that he would take $1.6million and that the Licensee should take this as an authorized general agency at the normal commission rate. An agency agreement was emailed to the Complainants on 27th July 2012 for him to sign and return. This was signed and returned on 30th July

2012.

4.3. The Licensee advises that he dated the agency agreement for 10th April 2012 as that is when the agency commenced. He accepts that an agency agreement was not in place prior to beginning the selling process. The Licensee believes that the time taken to forward the agency agreement to the Complainants was never going to create a problem until a dispute arose over the rental income that was incorrectly represented by the Complainants.

4.4. Issue two: Did the Licensee provide a CMA when listing the property?

4.5. The Complainants allege that they were never given a CMA for the property. They are not familiar with the Queenstown area. As far as values and rentals, this is the only industrial property they have owned in Queenstown.

4.6. The Licensee in response accepts that no CMA was submitted for the property. However he did not believe that the Complainants expected this to be carried out for them – given their previous working and social relationship. He believes this point has only been raised given the dispute over the rental income as being incorrectly misrepresented. He does not agree with the Complainants’ statement that they are not familiar with the Queenstown area as they own a residential home and have substantial interests in other commercial properties.

4.7. Issue three: The Licensee was not acting in the best interests of the Complainants and the rental income was misrepresented.

4.8. The Complainants allege that the Licensee, two weeks prior to settlement, spoke to the current tenant of the property and was informed that he was only paying $98,000 pa in rent instead of

$125,000 pa. The Licensee had discussions with the current tenant, the Purchaser and their Lawyer. The Licensee never contacted the Complainants to confirm these details. A dispute between the Complainants and the Purchasers with regard to rent eventuated. The Complainants settled but believes that they could have done this from a position of strength if the Licensee had kept them informed.

4.9. The Licensee in response advises that he believed that the Complainants misrepresented the rental income for the property. The Complainants represented to him that the rental for the property was at $125,000 + GST pa but the Licensee received a call from the current tenant at the end of July

2012 advising that the rent was only $98,443+ GST. The Licensee noted that he was required to disclose this shortfall to the purchaser once he became aware of it, which is what he did. He does not believe he has breached his duty to the vendor and/or is responsible for compensating the Complainants for losses which were of their own making.

4.10. The Committee reviewed the series of emails between the Vendor ’s solicitor (Complainant) and the Purchasers’ solicitor in regard to the question of rental being paid by the current tenant and noted that in the end the Complainants accepted that there had been a misrepresentation about the current rent and conceded a reduction in the sale price.

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 Licensee has accepted that the Agency Agreement was not in place prior to his beginning the selling process - a breach of Rule 9.6 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. That rule requires Licensees not to take any steps to market or advertise a property unless they have an agency agreement in place. The Licensee also accepts that he did not provide a CMA to the Complainants - a breach of Rule 10.2.

5.3. In relation to the complaint as to whether the Licensee acted appropriately when he became aware that the rental being paid by the current tenant was different than he had been led to believe and as had been represented to the purchasers, the Committee questions why the Licensee did not contact the Complainants for an explanation. Nevertheless the Committee has concluded that the Licensee acted appropriately in alerting the other parties to the apparent misrepresentation as he is required to do in conformity with. 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. This is further reinforced in relation to Rule 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.

5.4. Accordingly the Committee has determined that under section 89(2)(b) of the Act that it has been proved, on the balance of probabilities, that Mr. David Penrose in regard to the two issues of the agency agreement and the CMA, has engaged in unsatisfactory conduct.

6. Orders

6.1. The Committee will conduct a separate hearing on the papers to decide what orders, if any, should be made under section 93 of the Act.

Section 93 provides:

93 Power of Committee to make orders

(1) If a Committee makes a determination under section 89(2)(b), the Committee may do 1 or more of the following:

(a) make an order censuring or reprimanding the licensee;

(b) order that all or some of the terms of an agreed settlement between the licensee and the complainant are to have effect, by consent, as all or part of a final determination of the complaint;

(c) order that the licensee apologise to the complainant; (d) order that the licensee undergo training or education;

(e) order the licensee to reduce, cancel, or refund fees charged for work where that work is the subject of the complaint;

(f) order the licensee:

(i) to rectify, at his or her or its own expense, any error or omission; or

(ii) where it is not practicable to rectify the error or omission, to take steps to

provide, at his or her or its own expense, relief, in whole or in part, from the consequences of the error or omission;

(g) order the licensee to pay to the Authority a fine not exceeding $10,000 in the case

of an individual or $20,000 in the case of a company;

(h) order the licensee, or the agent for whom the person complained about works, to make his or her business available for inspection or take advice in relation to management from persons specified in the order;

(i) order the licensee to pay the complainant any costs or expenses incurred in respect of the inquiry, investigation, or hearing by the Committee.

(2) An order under this section may be made on and subject to any terms and conditions that the Committee thinks fit.

6.2. The Committee requires the Case Manager to obtain a record of any previous disciplinary decision in respect of the Licensee under either the Real Estate Agents Act 1976 or the Act, if any such decision exists, and provide it to the Committee, the Licensee and the Complainants.

6.3. The Licensee and the Complainants may file submissions on what orders, if any should be made.

The Complainants may file submissions within 10 working days from the date of the decision. These submissions, if any, will then be provided to the Licensee, with a timeframe for filing final submissions.

7. Publication

7.1. One of the Committee’s functions pursuant to section 78(h) of the Act is to publish its decisions.

7.2. The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made.

8. Right of Appeal

8.1. A person affected by a determination of a Complaints Assessment Committee may appeal by way of written notice to the Real Estate Agents Disciplinary Tribunal (the Tribunal) against a determination of the Committee and must do so within 20 working days from the date of the determination.

8.2. The Committee considers that the 20 working day appeal period does not commence until it has finally determined this complaint by deciding what orders should be made, if any.

8.3. 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.

Signed

Patrick Waite

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 20th June 2013