Campbell - Complaint No CB6843548 [2013] NZREAA 71 (24 April 2013)

Last Updated: 2 March 2014

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

And

In the Matter of Complaint No: CB6843548

In the Matter of Michael Campbell

License Number: 10051401

Decision of Complaints Assessment Committee

Dated this 24th day of April 2013

Complaints Assessment Committee: CAC20003

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

Complaints Assessment Committee

Decision finding unsatisfactory conduct

1. The Complaint

1.1. The complainant is the owner and the prospective vendor of an apartment. The Property has an associated carpark, with its own separate title.

1.2. The Licensee, Michael Campbell, is a salesperson working for City Sales Limited (City Sales). The Complainant originally listed the Property for sale with another salesperson, Mr C, but when Mr C left City Sales, the Complainant re-listed the Property with the Licensee.

1.3. There are three arms to the complaint:

1.3.1.The first is that despite it being well understood by the Licensee and the parties that the carpark was not to be sold with the Property, references to the carpark were not properly deleted from the sale and purchase agreement. This resulted in the purchaser raising an argument that the carpark was included, and the Complainant says that this was careless and potentially dishonest, and that it resulted in additional legal fees and disbursements being incurred.

1.3.2.Secondly, the Complainant alleges that the commission actually charged was higher than that originally agreed. The Licensee and the Complainant entered into a listing agreement in February 2012, on the same terms as those previously agreed with Mr C. These included a commission figure of $10,500 including GST which was based on an estimated sale price including the carpark. The agreement provided that this amount was a minimum commission amount. The Complainant understood that the commission was reflective of 4 – 4.5 % of the sale price, and because the sale did not include the carpark and the price was correspondingly lower, the actual commission reflected a percentage of over 6%. The Complainant believes that this was unjustified and potentially dishonest on the part of the Licensee and that she felt tricked.

1.3.3.Lastly, on or just before the settlement date, the Purchaser, Mr D refused to settle and the agreement was cancelled. This was for reasons unconnected with the Licensee. The Complainant feels that the Licensee should then have refunded the commission to her, because the failed transaction meant that she did not receive the “end product” being the balance of the settlement of the Property.

1.4. The Complainant seeks an apology from the Licensee, a refund of the commission paid and reimbursement of $441.00 (later confirmed to be $414.00) being body corporate costs which the Complainant stated resulted from the error on the agreement, as well as an unspecified portion of her legal costs.

2. Material Facts

2.1. In October 2011, the Complainant signed the first sole agency listing agreement with Mr C for a period of 90 days.

2.2. On 16 February 2012, the Complainant signed the second sole agency agreement with the Licensee,

at his offices. This was also for 90 days and provided for a minimum commission of $10,500 plus

GST.

2.3. Later on 16 February or on 17 February, the Complainant phoned the Licensee after having noticed that the commission noted on the agreement was exclusive of GST. She advised him that her previous arrangement with Mr C was that this figure was to be inclusive of GST, and the Licensee agreed.

2.4. An auction was scheduled for 7 March 2012, but the Property did not sell at auction. Three post- auction offers were presented to the Complainant and considered but none were signed that day, apparently because of a need to obtain legal advice on the issue of severability of the carpark from the Property. Mr D’s offer was the only one which did not include the carpark. It was the offer that the Complainant chose to pursue.

2.5. On 8 March 2012 in the afternoon, legal advice from the Complainant ’s former solicitors was received, confirming that the carpark could be sold separately.

2.6. There is some factual disagreement regarding whether the agreement was signed before or after this legal advice was obtained, but the Complaints Assessment Committee (the Committee) believes on balance that it was not signed by both Mr D and the Complainant until after the Licensee had received confirmation on the carpark point. The settlement date was to be 30 March 2012.

2.7. On 26 March 2012, the body corporate AGM was held and matters were raised relating to potential remedial issues, not previously known by owners in general at that time. Mr D was an existing owner of another apartment/s in the building and so became privy to that information.

2.8. At some point between 26 March and the settlement date, Mr Dr decided not to settle.

2.9. On the settlement date, the Complainant was advised by her lawyer that Mr D wanted to cancel the agreement, because of undisclosed information about the building. The settlement did not proceed, Mr D forfeited his deposit and the Committee believes that the Complainant is still the owner of the Property.

3. Relevant Provisions

3.1. The Committee has considered s 72 of the Act which provides for unsatisfactory conduct and provides as follows:

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.

3.2. The Committee has also considered the following rules under the Real Estate Agents Act

(Professional Conduct and Client Care) Rules 2009 (the Rules): Rules 5.1 (skill and care), 9.1 (best interests of client), and 6.4 (not mislead).

4. Discussion

4.1. Carpark issue: Mr D’s offer was the only one which excluded the carpark. The Licensee admits his failure to delete a reference to the carpark in one place on the agreement. In fact there were two places where reference to the carpark was not deleted (in the legal description and also under tenancy details). The Licensee states that “the contract and the intentions of all parties were clear”.

4.2. It is clear that the Licensee was labouring under some pressure and difficulty during the post- auction discussions – as three offers were under consideration, there was time pressure and the Complainant’s solicitor was rather unhelpful.

4.3. The Committee agrees that the intentions of the parties were clear, evidenced by the fact that Mr D appears to have admitted during the post agreement negotiations that the carpark was not included. Certainly the Complainant suffered no actual substantial loss as a result of the error.

4.4. However, to say that the contract was clear is incorrect. Legal descriptions and the like are of critical importance and precision is needed. The fact that Mr D admitted the intention, and did not pursue the matter, meaning that no loss was suffered in this regard, is irrelevant to the application of the rule concerning skill and care. The potential for loss was significant and the situation could have been very different and court proceedings were a distinct possible outcome from an error of this nature.

4.5. The Complainant has also stated that a body corporate fee of $414.00 resulted from the error and seeks this amount from the Licensee, as well as a portion of her legal costs. The Committee has established that the body corporate fees were for provision of documents which would have been part of the sale anyway. They did not result from the Licensee’s error. It is likely that some portion of the Complainant’s solicitors costs were attributable to the error but as the invoice is un-itemised and no further specifics have been provided by the Complainant on this point, it is hard to quantify.

4.6. In summary, although the intentions of the parties were clear, the agreement contained a significant error which had the potential to be very serious.

4.7. The Licensee has admitted the error. The Committee is of the view that the failure to delete the two references to the carpark on the agreement amounts to a breach of Rule 5.1, in that it showed a lack of diligence and care.

4.8. The Complainant has hinted at the error being dishonest in her initial complaint. She states that the error was “careless and with potential dishonest intentions”. With respect to the Complainant, the Committee feels that this is an unjustified allegation. Nothing in the facts before the Committee suggests anything other than an honest mistake, made while working under time pressure and with a number of other complicating factors present.

4.9. The Complainant has also suggested that the Licensee pressured her into signing the agreement before legal advice had been obtained, and says that the Licensee was attempting to speed things up by obtaining her signature to the document before advice was obtained. The Licensee’s version of events, which the Committee believes is credible, is that although the offer was initially presented on 7 March, it was not signed until the evening of 8 March, after advice had been obtained on the severability of the carpark. The Committee does not place much credence on this aspect of the Complainant’s allegations.

4.10. Commission: The listing agreement showed $10,500 as a minimum commission. After discussion with the Complainant following the signing of the document, the Licensee agreed that this amount was inclusive of GST. The actual commission initially charged was $10,580 but the Licensee noted that this was an error and the $80.00 has been refunded. The minimum commission was based on a price expected from the sale of the Property including the carpark, being $230,000. In fact the sale price was $165,000 for the apartment only.

4.11. The Complainant stated in her email of 28 March 2012 that while she accepted that this was legally the fee, she felt either intentionally or unintentionally misguided. She feels that it was clear that a minimum commission amount was not her understanding of the position, and that it should have been pointed out to her.

4.12. The Licensee points out that the word “minimum” is in bold and larger type and quite obvious on the document. He also notes that a significant amount of effort went into the transaction, and the Committee accepts both points.

4.13. The Licensee also notes that he altered the commission amount from GST exclusive, to GST inclusive, following the Complainant phoning him to advise that her previous commission arrangement was that it be GST inclusive.

4.14. The Licensee believes that the listing agreement was clear and that there was no discussion at any point about the commission being percentage based with no minimum, along the lines alleged by the Complainant. The Complainant on the other hand states that she did not notice the minimum fee reference on the listing agreement and that it was not pointed out to her.

4.15. The Committee agrees that the listing agreement is quite clear and the word “minimum” is emphasised. The issue seems to be whether the Complainant was genuinely and reasonably confused as to the arrangements. The Licensee is quite clear that no percentage based commission was discussed and the Complainant, although having a different recollection, has not been able to produce any compelling evidence on the point.

4.16. The Committee considers it significant that the Complainant clearly reviewed the document and phoned the Licensee, either the same day or the day after the listing agreement was signed, asking for an alteration. This suggests that she did read it carefully and turned her mind to its contents. This has meant that the Committee has placed less weight on the Complainant ’s statement that she did not notice the reference to minimum commission.

4.17. It seems to the Committee that if the Complainant had a genuine concern at that point, she would have raised it with the Licensee then, rather than now, following the collapse of the sale. The document was clear and the Complainant was not put under any pressure to sign. The Licensee behaved very reasonably over the issue of the GST, as soon as it was raised.

4.18. For these reasons, the Committee dismisses this part of the complaint.

4.19. Non refund of commission: The Complainant takes the view that the Licensee should refund the commission because of the cancellation of the sale.

4.20. The Committee does not believe that there is any validity to this arm of the complaint.

4.21. The agreement was unconditional and therefore on 8 March when it was signed, the Licensee was entitled to the commission. The deposit was handled in the usual way and in accordance with the relevant rules. It was disbursed on 28 March, and the balance was paid to the Complainant.

4.22. The cancellation of the agreement happened for reasons unconnected with the Licensee. His job

was to obtain an unconditional sale, which he did. The Complainant mistakenly believes that because the sale did not settle, the Licensee was not entitled to payment. The Committee disagrees, and finds that no further action should be taken on this aspect of the complaint.

4.23. Summary: In summary, the Committee finds the Licensee guilty of unsatisfactory conduct on the issue of the error over the carpark, pursuant to rule 5.1, but finds that no other aspect of the complaint warrants further action.

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, the Licensee and the Complainant.

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

Alison Wallis

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 24 April 2013