Cowsill - Complaint No C01838 [2013] NZREAA 270 (9 December 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: C01838

In the Matter of Virginia Cowsill

Licence Number: 10007753

and

Licensee 2

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 9th day of December 2013

Complaints Assessment Committee: CAC20004

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

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 Virginia Coswill (Licensee 1) and Licensee 2. Both licensees are licensed under the Real Estate Agents Act 2008 (the Act), and work for Barfoot & Thompson.

1.2 The complaint in respect to Licensee 1 relates to her conduct in respect to the auction of the Complainant’s property (the Property) — in particular the failure of Licensee 1 to include in sale and purchase agreements prepared after auction an “as is where is” clause which had been inserted in the auction terms.

1.3 In respect to Licensee 2, the complaint is that he failed to listen to the Complainant’s complaint in respect to Licensee 1 and to follow up in accordance with Barfoot & Thompson’s complaints procedure.

2. Material Facts

2.1 The Complainant met with Licensee 1 on 28 February 2013 at his Property to discuss the listing of the Property for sale.

2.2 It was agreed that the Property would be sold by auction. The Complainant disclosed to Licensee 1 that neither the garage nor the WC in the third bedroom had a code of compliance certificate. The Complainant and Licensee 1 decided that the Property would be placed on the market on an “as is, where is” basis.

2.3 A clause approved by the Complainant’s solicitor was specifically inserted in the auction terms stating:

“The purchaser acknowledges that they have been made aware that certain aspects of the property, namely the third toilet may not comply with the current building code and/or that no code of compliance certificate has been issued in respect to the third toilet. Accordingly, the vendors give no warranty as to the same and as from the date of this agreement the vendors shall be under no obligation to the purchaser to achieve compliance or procure a code compliance certificate nor liable for any expense, loss or liability suffered by that purchaser in relation to such noncompliance and the purchaser agrees they are purchasing the property on an as is where is basis.”

2.4 The Property was owned by the Complainant and his brother who resided in the Property. During the marketing campaign Licensee 1 largely dealt with the Complainant’s brother, leaving him information about numbers that had attended the open homes and prospective purchasers’ feedback in respect to the Property. Licensee 1 assumed that the brothers were close and that the Complainant’s brother would be passing the feedback on to the Complainant.

2.5 The feedback from prospective purchasers was that the failure of the Property to have a code of compliance certificate was an extremely limiting factor as banks were clamping down on lending on properties that did not have code of compliance certificates.

2.6 On 15 March 2013 the Complainant received from Licensee 1 particulars of auction for another property. Licensee 1 apologised to the Complainant for the mistake in sending the wrong auction particulars.

2.7 At some time prior to the auction, Licensee 1 was contacted by the Complainant’s brother requesting a key to the garage. The Complainant’s brother advised that he had arranged for Council to inspect the garage with a view to obtaining the code of compliance in respect to the garage.

2.8 Based on that information Licensee 1 the next day amended Barfoot & and Thompson’s listing records to show that the code of compliance in respect to the garage would be available prior to settlement. Unfortunately, this amendment was made without consultation with the Complainant.

2.9 On 27 March 2013 the auction was held. No bids were received for the Property and it was accordingly passed in.

2.10 Post-auction the Complainant received an offer from another licensee which included a clause requiring the vendors to provide a code of compliance for the garage at the date of settlement. The Complainant was surprised to see the clause, but counter-signed the sale and purchase agreement at a price where he would be happy to obtain the code of compliance for the garage. The Complainant commented to Licensee 1 that the auction terms for the Property that he had agreed to was that the Property was to be sold as on an “as is, where is” basis. Licensee 1 advised the Complainant that she would check this matter out. The Complainant's counter-offer was not accepted.

2.11 A few days later a second offer was received on the Property from a licensee at another office.

Clause 19 of the agreement stated:

“The vendors warrant that the code of compliance certificate will be issued prior to settlement date for the garage being built on the front of the property.”

It also included clause 20 which stated:

“The purchaser is aware that the third toilet does not have a permit from the local authority when it was built.”

During negotiations on this agreement a further offer was made on the Property making it now a multi-offer situation.

2.12 On 5 April 2013 as a result of the second offer from the other office creating the multi-offer situation, the Complainant attended Barfoot & Thompson to discuss both offers.

2.13 The second offer from the other office was unconditional and the Complainant accepted the offer.

The Complainant however requested that the clause requiring the vendor to obtain the code of compliance in respect to the garage be excluded from the sale and purchase agreement. The Complainant was advised the internal listing stated that the garage would be certified before settlement.

2.14 The Complainant advised Licensee 1 and Licensee 2 that the removal of the “as is, where is” clause was not authorised by either himself or the Complainant’s brother. The Complainant acknowledges agreeing to have the garage inspected by the Council, but he did not agree to obtaining a code of compliance certificate for the garage.

2.15 Licensee 2, after finalising the multi-offer situation for the Property with the Complainant, met with the Complainant and Licensee 1 to attempt to resolve the Complainant's complaints and concerns in respect to Licensee 1’s performance. The result of the meeting was that the Complainant continued to be dissatisfied with the performance of both Licensee 1 and Licensee 2 but accepted from Licensee 2, as a goodwill gesture, the sum of $500.00.

3. Relevant Provisions

3.1 The Complaints Assessment Committee (“the Committee”) believes the relevant provisions to this

complaint are as follows:

3.2 Pursuant to section 72 of the Real Estate Agents Act 2008 (“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:

6.1 An agent must comply with the fiduciary obligations to his or her client arising as an agent.

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

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.

4. Discussion

4.1 The Property is owned by the Complainant and the Complainant’s brother. Licensee 1 received initial instructions to sell the property from the Complainant. Licensee 1 assumed that the brothers were close and talking to each other. It would appear from Licensee 1’s evidence that she assumed if she told one of the brothers, then both brothers would be aware of what she had advised one brother. That assumption is incorrect legally and is obviously dangerous from a practical prospective.

4.2 Where there are two owners of a property, they both have equal rights and entitlements and need to be making decisions in respect to the property jointly. There are situations where one owner can make decisions on behalf of both owners. Where this situation arises, there must be a written authority provided by both owners to the third party directing that they have jointly appointed one owner to make decisions in respect to the property.

4.3 In the matter of this Property there was no such written authority given by either brother to the other. To compound the situation, Licensee 1 commenced dealing with the Complainant and then started dealing primarily with the Complainant’s brother, assuming the brothers were communicating with each other. This situation appears to have arisen primarily as a matter of

convenience, as the Complainant’s brother was residing in the Property. Licensee 1 failed to advise either brother of the way she intended to deal with the brothers and simply assumed that if she spoke to one brother then the other brother would become aware of the situation.

4.4 Licensee 1 failed to appreciate that there were two owners of the Property and that she needed either joint instructions from both owners or she needed to clarify with the owners whether one had authority to act on behalf of both. If Licensee 1 had taken any of these steps the situation that arose would not have taken place.

4.5 To compound the matter Licensee 1 made assumptions which were clearly wrong. It is quite clear to the Committee from the evidence that the brothers were not close and certainly had different views as to how the issues in respect to the non-complying parts of the Property should be dealt with.

4.6 Even when Licensee 1 received the request from the Complainant’s brother for the garage key to obtain access for a Council inspection, she assumed that a code of compliance for the garage would then be forthcoming.

4.7 From the evidence before the Committee this was never the Complainant's intention. It would appear he knew nothing about the request or his brother’s intentions. Even the Complainant brother's evidence is not absolute that following the inspection he would undertake the work necessary to obtain code compliance.

4.8 The Committee also notes that simply obtaining a Council inspection does not mean that a code of compliance will be forthcoming. Again, there is no evidence from Licensee 1 of any attempt to contact the Complainant’s brother after the inspection to see what the Council requirements were and whether it was his intention to undertake the work.

4.9 Licensee 1 failed to recognise that she had two clients in this matter namely both brothers. She failed to obtain joint instructions from both of the clients. She failed to obtain written authority from both that one brother had authority to deal with the Property on behalf of both.

4.10 The Committee considers that this conduct falls short of the standard that a reasonable member of the public was entitled to expect from a reasonably competent licensee. That is a breach of section

72(a) of the Act. In addition, the Committee finds that this conduct would reasonably be regarded by agents of good standard as being unacceptable, a breach of section 72(d) of the Act.

4.11 We now turn to consider the complaint that Licensee 2 failed to follow Barfoot & Thompson’s

dispute procedure, failed to give him a fair hearing and accepted Licensee 1’s version of events.

4.12 The evidence from Licensee 2 is that when he met with the Complainant in regard to the multi- party offer he suggested, quite rightly in the Committee’s view, that they resolve the multi-party offer and then deal with the Complainant’s complaint in respect of Licensee 1.

4.13 This appears to have happened and after the multi-offer situation was resolved, Licensee 2 listened to the Complainant, contacted Licensee 1 to clarify certain matters, obtained documentary evidence from Barfoot and & Thompson (namely the electronic listing) and then discussed the matter with the Complainant.

4.14 In Licensee 2's opinion, the explanations given by the Licensee 1 were acceptable and he felt in the circumstances that no further action was required. Notwithstanding this Licensee 2 made an ex- gratia payment to the Complainant of $500.00.

4.15 It is not for the Committee to decide whether or not Licensee 2’s decision was correct. It is for the Committee to decide whether Licensee 2 followed the process that he is required to follow under Barfoot & Thompson’s internal requirements and also under the Act.

4.16 In his evidence Licensee 2 said that the meeting between himself and the Complainant lasted some three hours, he sought clarification from Licensee 1 and he obtained documentary evidence. In the Committee's view these steps are more than adequate to meet his obligations to investigate the complaint and to give the Complainant a fair hearing.

4.17 It is a complainant’s obligation to establish a complaint on the balance of probabilities: Hodgson v

CAC & Arnold [2011] NZREADT 03.

4.18 The Committee finds that Licensee 2 has in the circumstances met his obligations in respect to the complaint procedure both under Barfoot & Thompson’s requirements and the Act. Accordingly the complaint is dismissed.

5. Decision

5.1 After conducting an inquiry into the complaint, pursuant to section 89(1) of 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 Virigina Cowsill has engaged in unsatisfactory conduct.

5.3 The Committee has determined under section 89(2)(c) of the Act to take no further action with regard to the complaint against Licensee 2.

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:

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

(iii) 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 Licensee 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 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 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 For a finding of unsatisfactory conduct, 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 For a finding of no further action, 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.

8.5 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

Michael Vallant

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 9 December 2013