Complaint No CB6758822 [2013] NZREAA 6 (23 January 2013)

Last Updated: 15 February 2014

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

And

In the Matter of Complaint No: CB6758822

In the Matter of Licensee 1

Licence Number: XXXXXXXX

In the Matter of Complaint No: CB6758966

In the Matter of Licensee 2

Licence Number: XXXXXXXX

In the Matter of Complaint No: CB6759074

In the Matter of Licensee 3

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 23rd day of January 2013

Complaints Assessment Committee: CAC20003

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

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 The Complainant owns the Property originally designed as a retirement village.

1.2 The Property was advertised by Agency A as for sale by mortgagee sale, as one lot for sale by tender. The advertisement began with “Attention developers, investors, entrepreneurs, health and care professionals”. It went on to mention “39 residential dwellings each on their own individual titles” plus a community centre. The advertisement appeared on Agency A’s website, as well as in other media.

1.3 The Licensees are all members of the Agency A team. Licensee 1 is the manager and Licensee 2 and Licensee 3 were salespeople involved in the sale.

1.4 The Complaints Assessment Committee (the Committee) has also received and considered a response from Mr T of Agency A.

1.5 The Complainant is believed by the Committee to be an ex-director of one of the mortgagor companies, and was presumably involved in other mortgagor entities as well. The Complainant and his mother, hold a life interest in one of the Units by virtue of a Deed Creating Life Interest dated 30 October 2002. Apparently the consent of the mortgagees’ was not obtained to this Deed and accordingly the mortgagees do not consider themselves bound by it, although the Complainant challenges this position.

1.6 Misleading advertising: The Complainant alleges that the wording of the advertising suggests that the Property could be used for residential use, which would not have been the case without a change in the conditions of the resource consent. The Complainant provided a copy of a valuation dated 3 May 2010, which outlines the fact that there is no consent or approval for residential use, and that the individual unit titles could not be used in this way. It suggests that this would require a change of resource consent conditions and covers the various factors which would come into play in such an application. It expresses the view that it would be difficult to obtain such consent.

1.7 The Complainant hints in one of his responses that some prospective purchasers were actually misled into believing that the Property could be used for residential purposes, but no evidence was produced to support this view.

1.8 The Complainant is also concerned that the advertising made no mention of existing tenancies, and the life interest in favour of himself and his mother. It is unknown which tenancies are referred to here, but the life interest is discussed at paragraph 1.5 above.

1.9 According to the Complainant, the Property also exhibits a number of breaches of the Building

Act 2004, which once again are not mentioned in the advertising.

1.10 Sale process, breach of Tender Code: The Complainant is also concerned that whilst a tender process was underway, a conditional sale of some of the units was effected. The Complainant believes this to be a breach of the Code of Conduct for Tenders. The Complainant’s view is that regardless of whether or not Agency A was responsible for that conditional sale, if they

proceeded with the tender process , they were in breach of clause 4.2 of the Tender Code, which states that: “Sellers are not permitted to sell the Property by any other method during the tender process”.

1.11 Lack of response: The Complainant’s last concern is that the Licensees failed to respond properly to correspondence sent on 3, 13, and 20 April 2012.

2. Material Facts

2.1 The Property was listed for sale with Agency A on 24 March 2012, with a tender closure date of 2

April 2012.

2.2 The mortgagees’ legal representative was a Solicitor A. He represented Bank A, the primary mortgagee and was the point of contact for the other affected mortgagees. He has provided a statement to the Committee. Solicitor A had provided or approved all advertising copy and handled all documentation.

2.3 Each prospective purchaser was provided with a tender pack containing relevant information relating to the Property as well as the tender conditions. The Committee has viewed a copy of this pack, and it is quite comprehensive. As is usual for commercial and particularly mortagee sales of this nature, the terms note that any purchaser must rely on its own judgement, and due diligence in all respects.

2.4 On 3 April 2012, Solicitor B wrote to the Licensees raising the Complainants concerns. This letter was forwarded to Solicitor A by the Licensees.

2.5 On 5 April, Solicitor A wrote to Solicitor B asking them for whom they acted.

2.6 On 10 April 2012, the Licensees wrote to Solicitor B advising that the correspondence had been forwarded to Solicitor A who were handling all communications in relation to the Property.

2.7 Also on 10 April 2012, Solicitor C, lawyer, who appears to have been representing the Complainant (although this has not been confirmed), contacted the Licensees. He was also told that all communications had to go via Solicitor A.

2.8 On 13 April 2012, Solicitor B wrote again to the Licensees acknowledging that they had received communication from Solicitor A but also raising concerns once again about the wording of the advertising.

2.9 The Committee has not been able to see the correspondence from Solicitor A to Solicitor B, as this is privileged.

2.10 Solicitor D, another law firm, were also involved. They represented one of the mortgagees, Solicitor D Nominee Company. A letter from Solicitor D dated 10 April 2012, addressed to one of the mortgagor companies, advised that some of the units in the Property had been conditionally sold with a due diligence condition to be satisfied on 20 April 2012.

2.11 No other information about this sale has been provided to the Committee, except in Mr T’s letter to the Committee. He states that when the Property was listed with Agency A, a complex sale and purchase proposal was under consideration but that Agency A’s instructions from Solicitor A were that this offer was separate to the agency appointment to Agency A for sale by tender.

2.12 In communications from Solicitor A, it seems that the Property has now been sold but no details on this have been provided.

3. Relevant Provisions

3.1 The Committee has considered the provisions set out below:

Section 72 of the Real Estate Agents Act 2008 (the Act) which provides for “unsatisfactory conduct” and states 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 The Committee also considered Rules 6.2, 6.3,and 6.4 of the Real Estate Agents Act (Professional

Conduct and Client Care Rules 2009 (the Rules), as well as section 9 of the Fair Trading Act 1986.

4. Discussion

4.1 Misleading advertising: The Licensee’s response is that the wording of and approach to advertising was all governed by Solicitor A, which is not unusual for a transaction such as this. It is true that this fact would not necessarily exonerate the Licensees from responsibility for any misleading statements that were made.

4.2 The Committee is however satisfied that the wording of the advertising was not misleading. The Licensees have stated that nothing in the advertisements suggests that the units might be used as residential property, and the Committee agrees. Although the word “residential” is used, the context is such that its use is not misleading. The wording clearly stated that the sale was as one lot.

4.3 Further, a detailed tender pack was provided to interested parties.

4.4 The fact that there was no mention of any competing interests in the Property was entirely appropriate. As mentioned above, it is unclear as to the leases referred to in the complaint, and as the life interest was not approved by the mortgagee, the mortgagee did not consider itself legally bound by it. Accordingly it did not need to be mentioned, in the opinion of the mortgagees’ legal representative. It was not for the Licensees to challenge that position.

4.5 As to the issue of Building Act breaches, even if the Licensees were aware of those (and the Committee did not view any evidence to suggest that they were), it would not be usual to see that disclosed in advertisements. The tender pack was the appropriate place for any such matters to be raised, and where the sale is a mortgagee sale, it is usual for the mortgagee to exclude any liability for such breaches. This is because the mortgagee is not in a position to be aware of the details of any such breaches, and the tender contract makes this clear in this instance.

4.6 Accordingly, the Committee is satisfied that no aspect of the advertising was misleading.

4.7 Sale process, breach of Tender Code: As mentioned above, the Complainant is concerned that while the tender process was underway, a private treaty sale of some of the units was entered into. While the Committee has not been presented with much detail on this issue, it appears that the mortgagees were already considering this offer before the agency listing was entered into.

4.8 The Tender Code is a document setting out best practice guidelines for carrying out a sale by tender, and the Licensees were not in a position to determine what course of action the individual mortgagees took. They were instructed to ignore this potential sale for the purposes of their agency which is what they did. They owed no duties to the Complainant in this regard, and no question of unsatisfactory conduct arises in relation to this matter.

4.9 Lack of response: This aspect of the complaint also has no substance in the Committee’s view.

The Licensee was instructed to refer all communications to Solicitor A which is what happened. They were not authorised to reply to the Complainant’s letters. Letters were acknowledged and forwarded on in a timely manner.

4.10 Conclusion: In conclusion, the Committee finds that the Licensees acted appropriately in all respects. Solicitor A has suggested that there were avenues open to the Complainant to challenge either the earlier conditional sale of some of the units, or the sale of the whole Property by tender, and to present arguments as to the status of his and his mother’s interests, through the courts. No such action would appear to have been taken although the Complainant obviously took legal advice at some point.

4.11 It appears to the Committee that the Complainant is in the situation of a disgruntled mortgagor, who was unable or unwilling to challenge the sale through legal means, and hoped to disrupt the sale by means of the complaints process. The Committee is concerned to ensure that the complaints process afforded by the Real Estate Agents Act 2008 is not subject to abuse by such actions.

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)(c) of the Act to take no further action with regard to the complaint or any issue involved in the complaint.

6 Publication

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

6.2 Publication gives effect the purpose of the Act of ensuring that the disciplinary process remains transparent, independent and effective. The Committee also regards publication of this decision as desirable for the purposes of setting standards and that it is in the public interest that the

decision be published.

6.3 The Committee directs publication of its decision, but omitting the names and identifying details of the Complainant (including the address of the property), the Licensees and any third parties in the publication of its decision.

6.4 The Authority will publish the Committee’s decision after the period for filing an appeal has ended unless an application for an order preventing publication has been made to the Real Estate Agents Disciplinary Tribunal (Tribunal). Such an application can only be made as part of an appeal to that Tribunal. In order to ensure publication of the decision does not take place it is important that you serve a copy of your application on the Authority. Publication of the decision will not take place until the Tribunal has made a decision on the application.

7 Right of Appeal

7.1 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.

7.2 Appeal is by way of written notice to the Tribunal. You should include a copy of this Notice with your Appeal.

7.3 Further information on filing an appeal is available by referring to the Guide to Filing an Appeal

at www.justice.govt.nz/tribunals.

Signed

Alison Wallis

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 23 January 2013