Leaders Real (1987) Estate Limited, trading as RE/MAX Leaders,Wellington - Complaint No C00951 [2013] NZREAA 268 (1 November 2013)

Last Updated: 13 September 2014

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

And

In the Matter of Complaint No: C00951

In the Matter of Leaders Real (1987) Estate Limited, trading as RE/MAX Leaders

Wellington

Licence Number: 10021135

Decision of Complaints Assessment Committee

Dated this 1st day of November 2013

Complaints Assessment Committee: CAC20008

Chairperson: Ellen Ryan

Deputy Chairperson: Graham Rossiter

Panel Member: Joan Harnett-Kindley

Complaints Assessment Committee

Decision finding unsatisfactory conduct

1. The Complaint

1.1 The Complainant has complained to the Real Estate Agents Authority (the Authority) about the conduct of Leaders Real Estate (1987) Limited (the Agency). The Agency trades as RE/MAX Leaders Wellington.

1.2 The complaint alleges the listing agreement by RE/MAX Leaders Wellington allows for a compulsory extension of the agency period for another 30 days and can run longer if not cancelled in writing by the Vendor. The Complainant says this “extension effectively continues the...sole agency for a period of longer than 90 days and therefore imposes conditions that are ‘not reasonably necessary to protect the interests of the agent’.” He further states that imposing such conditions are “onerous and unnecessarily harsh...and contravenes Clause 9.12 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009.”

2. Material Facts

2.1 The listing agreement of the Agency states the term of the sole and exclusive agency to be 90 days.

The Complainant refers to clause 1 A.4 of the Licensee’s listing agreement under the heading Sole & Exclusive Agency which states:

If the Property is not sold by the expiry of the term of this Sole & Exclusive Agency, then unless a renewal of the Sole & Exclusive Agency is agreed for a further term, the Agent is from such expiry appointed by the Vendor as a general & non exclusive agent on the commission basis as set out in clause 2 for a General Agency and otherwise on the terms for a General Agency set out in clause 1 B except for the different commencement date.

2.2 Clause 1 B is under the heading General Agency which states:

The Agent is appointed by the Vendor as Agent for the sale of the Property from the date of this Agency Contract until this agency is cancelled by notice in writing to the Agent, which notice may become effective not earlier than midnight on the 30th day after delivery of the notice, but this appointment does not authorise the Agent to sign an agreement for the sale of the Property.

2.3 The above terms of the listing agreement allows the Agency upon expiration of the agency term to automatically obtain an extension of the agency term with the Vendor if the sole agency is not renewed. Although the Vendor may cancel by notice in writing a further extension of the agency term, such cancellation will not take effect until 30 days after the notice has been served on the Agency. The Complainant states that this is restrictive and prevents the Vendor from entering into a sole agency agreement with another agent for at least 30 days. Further, there is no reference to statutory rights under section 131 of the Real Estate Agents Act 2008. The Complainant has also referred to the decision of the Real Estate Agents Disciplinary Tribunal of which he was a party David Graves v. REAA and Nicholas Langdon [2012] NZREADT 66 to support that these provisions are “not reasonably necessary to protect the interests of the agent” breaching Rule 9.2 of the Conduct Rules.

2.4 The Agency in response states that there is no substance to the allegations made by the Complainant that the listing agreement is “unnecessarily onerous and harsh in its terms” or in contravention of Rule 9.12 and that the sole agency period does not go beyond 90 days under the listing agreement. They explain that once the 90 day period has expired, a general agency may start and the Vendor may also enter into other general agency agreements with other agents with no restrictions to access to the property or marketing. They state the 30 day notice period for cancellation of the agency agreement has been an accepted industry practice due to commercial and practical concerns to allow agents to be able to comply with obligations under the Act.

2.5 The following have been listed as relevant:

(i) the need to have continued agent access to a property for the purposes of facilitating satisfaction of conditions in an existing sale and purchase contract.

(ii) the need for proper marketing planning and forward bookings of advertising media; (iii) the need to allow for potential buyer deliberations and time to fulfill the agent’s

obligations to customers required under the Code and to treat them fairly;

(iv) the need to complete due diligence process for an introduced buyer including third party timing and delays in obtaining satisfactory response to required information, e.g. LIM reports and specialist provision for building reports. Further, a Vendor can negotiate this cancellation time period with the agent prior to the listing agreement being signed or taking legal advice.

2.5 The Agency says the listing agreement does not address section 131 of the Act as it does not apply as the Agency’s sole agency agreements do not go beyond 90 days which is a pre-requisite for this section to apply. The Agency states the listing agreement is not intended to contradict section 131 of the Act and distinguishes the Graves agency contract “which prevents a client from, at any time during the sole agency period, giving notice to the Agent that the client does not intend to renew the sole agency and cancels the pending general agency.”

2.6 As to the listing agreement being restrictive in its terms including precluding the client from entering into a sole agency agreement with another agency for at least 30 days, the Agency says this is incorrect. They says the client can enter into a sole agency agreement with another agency as long as the new sole agency does not start until the 90 days period has expired and the 30 days notice period to cancel the general agency has expired. Effectively, if the notice is given 30 days prior to the sole agency period expiring then both will expire at the same time and the contractual relationship will terminate completely between the client and the Agency.

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 and 2012 also apply.

The following is relevant: Rule 9.12 that ‘an agent must not impose conditions on a client through an agency agreement that are not reasonably necessary to protect the interests of the agent.’

4. Discussion

4.1 There are two conditions to be met before clause 1 A.4 becomes effective:

1. the property has not been sold by the expiration of the 90 days sole agency period, and

2. no renewal of the sole agency for a further term.

4.2 Once these conditions exist the Agency automatically (without the need for a decision or action from the client) becomes appointed as a general agent for the client. The client may cancel this general agency under clause 1 B.1 by giving written notice to the Agency which will become effective 30 days after delivery of the notice, resulting in the client being bound to a general agency for 30 days after the 90 days sole agency period.

4.3 The effect of this 30 days notice period is restrictive as it would prohibit the client from entering into a sole agency with another agency and, in our view, is in breach of Rule 9.12 which provides “that an agent must not impose conditions on a client through an agency agreement that are not reasonably necessary to protect the interests of the agent.”

4.4 This is the same view reached by the Real Estate Agents Disciplinary Tribunal in the case of David Graves v. Real Estate Agents Authority, Nicholas Langdon [2012] NZREADT 66, whereby the Tribunal in their findings stated at paragraph 36 “We consider that the prohibition on Vendors from entering into a sole agency agreement with another agency for a 30 day period, even after the end of the Borders sole agency agreement, will usually be contrary to Rule 9.12. That rule prohibits agents from imposing conditions on a client that are “not reasonably necessary” to protect the interests o f the agent. We also consider that, in this case, the prohibition is contrary to Rule 9.12.”

4.5 The Tribunal further states at paragraph 52; “We consider that the clause breaches section 131 of the Act because it adds a gloss to termination of a sole agency, namely, that there be a new minimum of a 15 day general agency period. We consider that, under s. 131, a customer/consumer must be able to completely terminate his or her relationship with the Licensee after 90 days of a sole agency agreement unless the customer/consumer decides otherwise.”

4.6 In line with the principles in Graves v. REAA, Nicholas Langdon, as stated above, we are satisfied that the Agency’s listing agreement by allowing for an automatic general agency period to run from the expiry of the 90 days sole agency (provided the property has not been sold and the sole agency has not been renewed) due to the cancellation notice not taking effect for 30 days would amount to unsatisfactory conduct, being a condition that is not reasonably necessary to protect the interest of an agent within the meaning of Rule 9.12. Effectively, the client, under these circumstances, would not be able to completely terminate his or her relationship with the Licensee at the end of the 90 days sole agency period as they are bound to a general agency period of 30 days and are precluded from entering into a sole agency with another agent.

4.7 For these reasons we find unsatisfactory conduct has been proven against the Licensee.

4.8 We have noted the Agency’s point that the Graves agency contract can be distinguished as it “prevents a client from, at any time during the sole agency period, giving notice to the agent that the client does not intend to renew the sole agency and cancels the pending general agency.” However, in reviewing the Agency’s listing agreement we do not find any reference to a client being

able to give notice to the Agency during the sole agency period of his or her intention not to renew the sole agency and/or give notice to cancel a pending general agency. It is our view that under clause 1 A.4 of the Agency listing agreement a client cannot give notice of a cancellation of the general agency until that general agency becomes effective, which it will not do so unless the following conditions arise: the property has not been sold at the end of the sole agency period and the sole agency is not renewed.

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)(b) of the Act that is has been proved, on the balance of probabilities, that Leaders Real Estate, trading as RE/MAX Leaders Wellington 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.

6.3 The Agency and the Complainant may file submissions on what orders, if any should be made. The Complainant may file submissions within 10 working days from the date of the decision. These submissions, if any, will then be provided to the Agency, 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 has yet to finally determine this complaint because the parties are being given an opportunity to make submissions on orders before the Committee determines what orders should be made, if any.

8.3 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.

8.4 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

Ellen Ryan

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 1 November 2013