Complaint No CB7161527 [2013] NZREAA 281 (11 July 2013)

Last Updated: 16 September 2014

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

And

In the Matter of Complaint No: CB7161527

In the Matter of Licensee

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 11th day of July 2013

Complaints Assessment Committee: CAC20003

Chairperson: Marina Neylon Deputy Chairperson: Alison Wallis Panel Member: John Auld

Complaints Assessment Committee

Decision finding unsatisfactory conduct

1. The Complaint

1.1. This is a complaint made by the Complainant against the Licensee. The Licensee is licensed salesperson under the Real Estate Agents Act 2008 (the Act) working for the Company/Agent Licensee.

1.2. The complaint concerns the conduct of the Licensee in regard to the sale of the Complainant’s

property (the Property). Specifically the complaint alleges that:

i) The Licensee failed to gain the best price for the Property because she wished to purchase it herself.

ii) The Licensee presented the offer and the consent form (Form 2) to the Complainant, acting both as both Purchaser and as agent for the Complainant. The Complainant states that this is a conflict of interest, and that the offer should have been completed by another agent licensee.

iii) The Complainant did not have an opportunity to seek independent advice.

iv) The Licensee bullied the Complainant and sent inappropriate text messages even after being requested to stop contacting the Complainant by her Lawyer.

2. Material Facts

2.1. The Complainant listed the Property for sale with Mr J and Mrs J of the Agency in February 2012.

The Property was appraised as being worth between $385,000 and $410,000.

2.2. The Licensee was contacted by the Complainant’s mother (Mrs T) on 29 June 2012 to ask if she would sell the Property for the Complainant. The Licensee had worked for the family previously and sold 2 properties for them around 2002. Mrs T informed the Licensee that the Property had been for sale for 4 months with 47 groups of Buyers through and no offers; that the joint owner of the Property, was serving home detention sentence at another address and that the Complainant had made an offer on another property and was keen to move on.

2.3. The Licensee contacted the Complainant on 2 July and the Property was listed on a sole agency contract on 3 July 2012 for $389,000. The same day the Licensee made enquiries with the rental division of the Company to see if the Property would be a suitable investment for her own use.

2.4. The Licensee states that she checked with her Manager and was told it was ok to talk to their client on her own about her intended purchase and that there was no legal requirement to have another agent present her offer. Later that day, she presented the offer to the Complainant. The offer was for $382,000 and conditional on a Builders report, finance, LIM and also contained an escape clause in favour of the Complainant (Vendor).

2.5. The Complainant counter offered at $383,500 and signed the Form 2 consent to allow an agent or related person to purchase the Property. The consent required the Licensee to provide an independent valuation within 14 days. If the valuation was higher than the Licensee’s offer the Complainant had a right to cancel the agreement. During negotiations the Complainant informed the Licensee that the property she wished to purchase next had just had the escape clause

activated. This meant that the Complainant was under pressure to confirm her own sale quickly.

2.6. The Licensee states that she did not pressure the Complainant but it is clear that there was time pressure on the Complainant. The Licensee left the Complainant so that she could discuss the offer with her husband and obtain his signature.

2.7. The independent valuation was completed on 9 July 2012 by Valuers. The valuation recommended a market price of $380,000.

2.8. The Builder’s inspection was also undertaken around 9 July. The Licensee states that the Builder “walked through the property with me” and no written report was made at that time. The Builder verbally indicated several matters of concern. The Licensee states that she discussed these issues with the Complainant who then sent a text offering to reduce the purchase price to $375,500 (being the amount she required to “break even”) and that this variation of the agreement was acceptable to the Licensee.

2.9. Before the variation could be completed in writing, the Complainant sent an email at 8.43pm on 10

July asking if the price could be increased to $377,000 so that she could afford to take her children to see their father at Christmas. The Licensee replied at 4.06pm on 11 July stating “jeez you drive a hard bargain; these are 2 different matters business and personal. $376,000 is all I can do” The Complainant replied at 4.12pm agreeing to $376,000.

2.10. The Licensee wrote an email to her branch manager on 11 July to “keep him in the loop” The following is a summary of the concerns described in the email - The deck is rotting, leak problems from the roof and internal gutters, lack of drainpipes and drainage in general, concrete paving is at a higher level than the house at the rear and could lead to flooding issues, concrete is cracked, big trees which are dying need to come out, state of the carpets, needs painting internally, blinds are “trashed”, cracked glass door, some weatherboards need replacing, broken internal door, leaking hot water cylinder which has caused rot in some of the framework.

2.11. Also contained in that email is a statement relating to the former listing agents (Agency 2) in regard to their agency being still in force. The Complainants mother sent an email to the Licensee on 11

July 2012 stating that the extension to the sole agency granted by her daughter was unenforceable as it had not been signed by the Complainants husband. Mrs T’s email went to great lengths to persuade the Licensee that she had a valid sole agency and that the Licensee was the preferred listing agent.

2.12. The sale became unconditional on 18 July 2012. The Complainants Solicitor contacted the Licensees Solicitor in regard to the purchase price being below the valuation. It was suggested that the Company reduce their commission to cover the difference. This was refused and the Complainant’s right to cancel was recommended if the Complainant had changed her mind. This option was declined. A pre-settlement inspection of the Property was undertaken by the Licensee on 23 August

2012 and settlement occurred on 24 August.

2.13. A complaint was received on the matter by the Authority on 8 November 2012.

2.14. The Licensee had a Builder’s inspection report completed by ROK Build Limited on 17 December

2012. That report recommends repairs to the Property at an estimated cost of $22,800

3. Relevant Provisions

3.1 The Real Estate Agents Act 2008

50 Salespersons must be supervised

(1) A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.

(2) In this section properly supervised and managed means that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure—

(a) that the work is performed competently; and

(b) that the work complies with the requirements of this Act.

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

These Rules have recently been updated but were the Rules that applied at the time of the conduct.

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

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

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 the law.

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

4. Discussion

4.1. The Complainant has stated that she felt the Licensee was not looking after her best interests in the negotiations, and that this was a disadvantage in regards to price and the access, or lack of access, to advice on the transaction.

4.2. The Licensee has stated that both she and her manager could see no reason or legal requirement for another representative of the agency to deal with the client. The Committee takes the view that the Licensee and the Company/Agent have overlooked the key purpose of the Act which is “to protect consumers”.

4.3. In our view the Licensee has failed in her fiduciary duty to the client. Fiduciary obligations are the highest standard of care in which trust, confidence and full disclosure are repaid with a commission for acting in the best interests of the client. The client in this case was placed in negotiations directly

with the Licensee/Purchaser with no agent to represent her and, in the Committees view; the agency has effectively charged commission for a private sale.

4.4. The Committee has noted that the Complainant was the person to suggest a reduced price to ensure the agreement proceeded; but disturbingly, this reduction was based on a verbal Builder’s report. The Licensee states that she was close to pulling out of the agreement due to the level of maintenance and repairs required to the Property but instead she chose to renegotiate the price as, no doubt, some Purchasers would do. The key problem with this strategy when you are the agent’s representative dealing with a stressed client is that this looks self-serving. Even if the Committee totally accepted what the Licensee reported about the condition of the Property, she cannot avoid the fact that direct renegotiation was a conflict of interest with the client, particularly when the price went $34,000 below the Company’s initial appraisal and $4,000 below the registered Valuer’s opinion.

4.5. The fact that the Licensee entered into negotiations on the day she listed the Property is another salient point. It is possible that the new price and a fresh approach may have resulted in a sale. The Licensee states that there were 3 other enquiries on the Property but these were not followed up on the Complainant’s instructions. The Committee accepts that the Complainant was tired of the Property being on the market and wanted a fast sale. This is probably why she did not make any complaint until just prior to settlement.

4.6. The Committee believes that the Licensee was only interested in this Property because she could also obtain a commission. The emails between the Licensee and Mrs T infer that there was a potential dispute between the original listing agents (Agency 2) and the Licensee. It seems likely to the Committee that the Complainant may have signed an extension of her sole agency with Agency

2. Until that matter was resolved, it appears that the purchase was in the balance. Clearly, the Licensee was only interested in the Property if she obtained the listing and selling share of the commission. Such a commission effectively becoming a significant discount on the price. A total commission in excess of $15,000 was payable to the agent. The Licensee states that she received

$5,148 plus GST as her share of the fee. This, in effect, gives a substantial discount on the purchase price.

4.7. The Complainant states that the Licensee bullied and put pressure on her during the negotiations.

The Committee finds insufficient evidence to support this claim. The circumstances that drove the sale and the Complainants personal situation appear to have been the driving forces here. The Licensee went to the Complainants Property and left the documents with her so that the Complainants husband could sign them. This would have allowed the Complainant sufficient time and opportunity to take advice from family or a Lawyer, had she felt this necessary.

4.8. The Complainant also signed a receipt for the guides that the Authority provides to assist those making decisions on contracts. The Committee is satisfied that the Licensee provided these and was not aggressive, nor did she pressure the Complainant unduly.

4.9. The conduct of the Licensee after the contract became unconditional was also considered by the Committee. The complaint made by the Complainant, initially through her Solicitor seems to have come as a shock to the Licensee. The Licensee carried out a final inspection prior to settlement and has stated that she hoped the sale would be cancelled. The option to cancel the agreement was being offered as the only solution when the Licensee knew that this was the last thing that the client wanted due to the considerable pressure she was under.

4.10. In her evidence, the Licensee appears to see herself as a victim and the Complainant as being unfair.

Yet it is clear that the Licensee was privy to information about the personal circumstances of the Complainant that no other Buyer would have had. This gave the Licensee a degree of advantage and negotiating power that the Complainant did not possess.

4.11. Further, where a dispute clearly exists, it is important that the Licensee does not act in a manner that would bring the industry into disrepute. The Licensee must act in a manner that a reasonable member of the public might expect of a competent Licensee. In sending a message to the Complainant stating how much money has been spent on the Property (despite being cautioned not to contact the Complainant), the Committee believes the Licensee has overstepped, but does not consider this conduct reaches the threshold for unsatisfactory conduct.

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 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, the Licensee and the Complainant.

6.3. The Licensees 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

Marina Neylon

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 11 July 2013