Litt - Complaint No CB7135031 [2013] NZREAA 277 (8 October 2013)

Last Updated: 16 September 2014

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

And

In the Matter of Complaint No: CB7135031

In the Matter of Roger Litt

Licence Number: 10007018

Decision of Complaints Assessment Committee

Dated this 8th day of October 2013

Complaints Assessment Committee: CAC20004

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

Complaints Assessment Committee

Decision finding unsatisfactory conduct

1. The Complaint

1.1 The Complainant is the manager of Agency A. He is licensed under the Real Estate Agents Act 2008 (the Act).

1.2 The Complainant has complained to the Authority about the conduct of Roger Litt, a salesperson licensed under the Act. The Licensee used to be an employee of Agency A, until June 2011. He now works for Lodge Real Estate (Hamilton) Limited.

1.3 The complaint relates to the sale of three separate properties, Property 1 (in September 2010, when the Licensee was still employed by Agency A); Property 2 (both before and after September

2010), and Property 3 (during the period 30 December 2011 through till 30 March 2012).

1.4 In relation to Property 1, the Complainant says that the Licensee acted on an agency agreement and a cancellation notice which had not been signed by both a husband and wife whom the Licensee knew were going through an acrimonious separation. For the reasons set out in this decision, we find the licensee guilty of unsatisfactory conduct in respect of this aspect of the complaint.

1.5 In relation to Property 2, the complaint is that the Licensee submitted an offer to a vendor whom he knew had a sole agency agreement with Agency B. We find the Licensee guilty of unsatisfactory conduct in respect of this aspect of the complaint as well.

1.6 In relation to Property 3, the complaint is that the Licensee introduced the eventual purchaser of the property to the vendor at a time when Agency A had an exclusive agency agreement. The Committee finds this aspect of the complaint not proved.

2. Material Facts

2.1 Property 1 was owned by Mr. S and his then wife, Ms. Q. It was common knowledge that the owners were going through an acrimonious separation.

2.2 The owners had a listing agreement with Agency C, signed by both owners on 16 January 2010.

2.3 The Licensee obtained the signature of Mr. S to an agency agreement with Agency A, on 22

September 2010. He did not obtain a signature from Ms. Q.

2.4 The Licensee says that he knew there were “a few issues” between the couple; and that Ms. Q was living somewhere else, apart from her husband. He says he tried to get hold of her; that he phoned her a number of times; and that he left a message, but never got a reply.

2.5 The agency agreement contained a particular condition (clause 11): “If the person signing this authority is not the sole owner of the property then they hereby absolutely warrant and represent that they have the necessary authority of all owners to make this appointment....”

2.6 Notice of cancellation of Agency C’s agency agreement was signed by Mr. S on 27 September 2010.

The notice records that it was given by Mr. S and Ms. Q. There is a space on the form for signature by Ms. Q. The Licensee did not obtain the signature of Ms. Q to the cancellation notice.

2.7 The Licensee states that Mr. S told him he could sign for his wife.

2.8 He says that he contacted the general manager of Agency A and was told that clause 11 was inserted specifically for that purpose. He says the general manager told him that the clause needed to be initialed by Mr. S.

2.9 The general manager says that clause 11 was intended to indemnify one party against the other; it was never designed to enable a salesperson to shortcut the requirement that both parties to a sale should sign an agency agreement.

2.10 Property 2 was originally listed for sale by Agency A. On 6 April 2011, the vendors entered into a sole agency agreement with Agency B, extending through to 6 July 2011. A copy of the sole agency agreement has been provided to us by the Complainant.

2.11 During the period of Agency B’s sole agency, the Licensee introduced prospective purchasers to the

Property.

2.12 On 6 May 2011, the Licensee had a conversation with Agency A’s general manager, regarding a meeting he had attended with the primary vendor, at which the Licensee was introducing the offer to be submitted by the Licensee’s buyer clients. He told the general manager that he was surprised to find an agent from Agency B, present at the meeting.

2.13 In the Licensee’s presence, the general manager phoned the Agency B agent, and established that

Agency B had an exclusive agency.

2.14 The Licensee told the general manager that he was not prepared to share the commission, because Agency A had not received a cancellation notice from Agency B, cancelling Agency A’s general agency agreement. The general manager told the Licensee that that was irrelevant; now that Agency A knew that Agency B had an exclusive agency agreement.

2.15 The Licensee says that the general manager never asked for a copy of Agency B’s sole agency

agreement, which “seemed a bit strange” to the licensee.

2.16 On 6 May 2011, the Licensee met with the agent from Agency B, and they agreed on a conjunctional arrangement, and that commission would be split equally between the two agencies.

2.17 On 16 June 2011, the vendors entered into a sale and purchase agreement with the prospective purchasers introduced by the licensee. By that time, the Licensee had left Agency A’s employment.

2.18 Initially, the sale and purchase agreement recorded a joint sale by Agency A, and also by Agency B (reflecting the conjunctional agreement that had been agreed).

2.19 The Licensee refused to accept that the sale and purchase agreement should record the conjunctional agreement, and struck out the name of Agency B.

2.20 He says that he did that because he didn’t think Agency B’s agent had anything to do with the contract. Rather, according to the Licensee, he thought Agency B’s agent was representing a building company that wanted to do a house and land package, which his client was not interested in. He says that if he had seen a copy of the sole agency agreement, then he would certainly have recognised it, but Agency B never produced one.

2.21 As a result, the purchasers’ solicitor contacted the general manager and sought an assurance (by letter dated 21 June 2011) that their clients would not be involved as a witness or otherwise in any

commission dispute between Agency A and Agency B. Mr. O advised that their clients had signed the agreement on the basis that Agency A would be paid a full commission; and sought confirmation that Agency A would be paid a full commission from the vendor. The general manager provided that confirmation by phone.

2.22 The vendor’s solicitor also contacted the general manager. He said that the Licensee was insisting Agency A were the named agents, but the vendor’s solicitor was aware that Agency B had an exclusive agency agreement. He also sought formal advice that his client would not become embroiled in a dispute or litigation over commission. The general manager provided a letter to that effect.

2.23 The vendor’s solicitor also sought assurance from the general manager that Agency A would honour the conjunction split: without such assurance, he would not allow his client to sign the agreement. The general manager provided that assurance.

2.24 Ultimately, the whole commission was paid to Agency A; and Agency A paid out Agency B for its share of the commission.

2.25 Agency A listed Property 3 for sale on 30 December 2011. It was an exclusive agency, expiring on

29 or 30 March 2012, at which time it would become a general agency authority appointment until cancelled.

2.26 During the course of the exclusive agency agreement, the Licensee directed a prospective purchaser

(Mr. C) to the Property. He did not purchase the Property.

2.27 Ultimately, the Property was purchased by Mr. E, a neighbour and a developer. By that time, the vendors had entered into an agency agreement with the Licensee’s new employer, Lodge Real Estate (on 31 March 2012).

2.28 The Complainant asserts that the ultimate purchaser may have, or is likely to have, spoken with him about the Property during the period of the Agency A’s sole agency: Mr. E was after all a neighbouring owner.

2.29 The Licensee says that he had previously sold the neighbouring property to Mr. E. Mr. E was a developer. He advised Mr. E that the Property was for sale, and Mr. E asked him to draw up a sale and purchase agreement.

2.30 The vendors have been interviewed. They say that the licensee did not bring a prospective buyer to them at all during the agency period. They say that the licensee never approached them about their property while it was listed with Agency A.

2.31 Mr. E has been interviewed as well. He says he was introduced to the Property by the Licensee. At the time he saw the Property, he did not recall an Agency A sign present. He said he thought he was first contacted by the Licensee when the Agency A listing was about to expire.

2.32 Mr. E made an offer on the Property on 31 March 2012, without needing to view the Property, the same day that Lodge obtained its listing.

2.33 The Licensee is adamant that Mr. E never went to the Property during the course of the Agency A

listing.

2.34 The Committee can deal with the Complainant’s complaint very quickly. He speculates that Mr. E was introduced to the Property during the course of Agency A’s agency agreement. There is no evidence to support that allegation.

2.35 The Complainant bears the onus of establishing a complaint, on the balance of probabilities: Hodgson v CAC & Arnold [2011] NZREADT 03. Absent firm evidence, the Committee concludes that the Complainant has failed to establish that the Licensee’s conduct in relation to this aspect of the complaint constitutes “unsatisfactory conduct” under the Act.

3. Relevant Provisions

3.1 Section 72 of the Act defines what constitutes "unsatisfactory conduct". It provides as follows:

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.

3.2 Relevant rules from the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 (the Rules) are as follows:

Rule 5.1 A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.

Rule 5.2 A licensee must have a sound knowledge of the Act, regulations made pursuant to pursuant to the Act, rules issued by the Authority (including these rules) and other legislation relevant to real estate agency work.

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.

Rule 9.2 A licensee must not engage in any conduct that would put a client, prospective client or customer under undue or unfair pressure.

Rule 9.10 A licensee must not submit an agency agreement or a sale and purchase agreement or other contractual document to any person for signature unless all material particulars have been inserted into or attached to the document.

Rule 9.11 A licensee must not invite a prospective client to sign a sole agency agreement without informing the prospective client that if he or she enters into or has already entered into other agency agreements, he or she could be liable to pay full commission to more than 1 agent in the event that a transaction is concluded.

4. Discussion

4.1 The Licensee knew that the owners of Property 1 were undergoing a separation. He knew that the couple was no longer living together.

4.2 The Licensee admits that he tried to contact Ms. Q on a number of occasions, and even left a

message for her, but he never heard from her. We infer from that that he knew full well that Mr. S

and Ms. Q would both need to sign any new agency agreement, and also the cancellation notice.

4.3 We note that the cancellation notice expressly has a space on it for Ms. Q to sign.

4.4 Given his knowledge of the facts, the Licensee’s conduct in failing to get Ms. Q to sign both documents shows a lack of skill, care, competence and diligence, and accordingly is a breach of Rule

5.1 of the Rules.

4.5 We do not accept the Licensee’s assertion that clause 11 of the agency agreement meant that he could accept Mr. S’s statement that he was authorised by Ms. Q to sign the agency agreement on her behalf, in light of his knowledge of the couple’s separation.

4.6 The Licensee’s conduct is therefore a breach of section 72(b) of the Act.

4.7 The Committee considers that a competent real estate agent would know that it is essential to obtain the signature of both owners of a property on an agency agreement, particularly in a situation such as this. The Committee considers this conduct is also a breach of section 72(a) and (d) of the Act.

4.8 As to Property 2, it is beyond dispute that Agency B held a sole agency agreement, commencing 6

April 2011 and expiring 6 July 2011. Despite the fact that Agency B had not revoked Agency A’s general agency agreement, that sole agency agreement was valid, and contractually entitled Agency B to claim commission from its client in respect of a sale concluded during the term of its sole agency agreement.

4.9 Agency A concluded a conjunctional agreement with Agency B based on that sole agency agreement, which meant that when Agency A’s clients entered into a sale and purchase agreement with Agency B’s vendor client, the commission on sale was to be evenly split between the two agencies.

4.10 The Committee considers that it was wholly inappropriate for the Licensee, once that agreement had been negotiated between the two agencies, to strike out Agency B’s name as agent from the sale and purchase agreement.

4.11 At that stage, the vendor was the client of both agencies. Had the sale and purchase agreement proceeded, without intervention of both the purchasers’ and the vendor’s solicitors, the Licensee’s vendor client would have been exposed to the risk of a full commission claim from both agencies.

4.12 The Committee does not consider that the Licensee was acting in the best interests of his vendor client by exposing his client to that potential risk. That is a breach of rule 9.1 of the Rules.

4.13 In addition, the Committee considers that by striking out Agency B’s name, he was subjecting his vendor client to undue or unfair pressure.

4.14 In the circumstances, the Committee considers that the conduct of the Licensee is therefore in breach of section 72(b) of the Act. The Committee also considers it is also a breach of section 72 (a) and (d).

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 the licensee 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 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 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

Paul Morten

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 8 October 2013