Complaint No CB7058612 [2013] NZREAA 93 (28 May 2013)

Last Updated: 3 May 2014

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

And

In the Matter of Complaint No: CB7058612

In the Matter of Licensee

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 28th day of May 2013

Complaints Assessment Committee: CAC20007

Chairperson: Ann Skelton

Panel Member: Joan Harnett-Kindley

Complaints Assessment Committee

Decision finding no further action

1. The Complaint

1.1 The Complainant has complained to the Real Estate Agents Authority (the Authority) about the conduct of the Licensee. The Licensee is licensed under the Real Estate Agents Act 2008 (the Act) and holds an agent license. The Licensee works for the Company, trading as the Agency.

1.2 There are several aspects to this complaint:

a. That the Complainant was uncomfortable about selling through an auction process and felt pressured by the Licensee to do so. The Complainant also stated that it was not disclosed to her at the time of signing that a licensee received a larger commission if the sale was via auction;

b. That the Complainant felt pressured by the Licensee to obtain an engineering report for the property;

c. That the Complainant felt pressured to accept a sale at a lower price than the Complainant wanted;

d. That the Licensee was not attracting buyers at the price level the Complainant anticipated;

and

e. That the Complainant was asked to sign a variation to the auction agreement prior to obtaining legal advice.

1.3 The complaint was received by the Authority on 30 August 2012 and referred to a Complaints

Assessment Committee (the Committee). The Committee initially considered the complaint on 17

September 2012 and made a decision pursuant to s 79(1) of the Act to inquire into the complaint.

After further investigation, the Committee considered further evidence gathered on 3 April 2013.

2 Material Facts

2.1 The Complainant had decided in January 2012 to sell her property and obtained proposals from a number of real estate firms. The Licensee provided a quote but was not initially chosen as the selling agent.

2.2 During February 2012 the Licensee contacted the Complainant to see if she was happy with the agency she had chosen. According to the Licensee, the Complainant was not entirely happy and talked about moving to another agency. The Licensee submitted that he again offered the services of the Agency.

2.3 On 19 March 2012 the Licensee became aware that the Complainant had listed the Property with another company. Some weeks after this the Licensee again contacted the Complainant again to see if she was satisfied with the service she was receiving from that agency. The Complainant told the Licensee that her listing with the other company was until about 19 May 2012 and that if the Property had not sold within that time then she would consider listing with the Licensee.

2.4 On 21 May 2012 the Licensee phoned the Complainant regarding progress on the Property. The

Complainant indicated that she wished to discuss marketing with the Licensee and they met on 25

May 2012. During this meeting the Licensee submitted that they discussed the various options for marketing the Property including sale with a price, sale with no price, no price deadline sale and

auction. As two of these options had already been used with no result with the other agencies, the Licensee suggested that an auction might be worth trying. The Licensee submitted that he discussed all the advantages and disadvantages of all the options and reiterated to the Complainant that although he recommended auction, there was no guarantee that it would sell.

2.5 The Complainant stated that she did not become aware until after she cancelled the listing with the Agency that it is common practice for a licensee to receive an increased share of the commission if a property sells at auction. The Complainant believes she was misled by the Licensee as she was never informed of this and felt that her options were not disclosed fully.

2.6 Also at the meeting on 25 May, the Licensee discussed that the best way to have a successful auction was to provide potential purchasers with as much information as possible to enable them to complete their own due diligence given an auction was an unconditional sale. The information that the Licensee suggested obtaining was a copy of the certificate of title, the LIM, EQC claim numbers and scope of works, engineering and/or building reports, insurance policy and claim numbers. Given that insurance, and the transfer of it, was a major issue for sales in the area, the Licensee states that he believed he was trying to get the Complainant in the best possible position to sell the Property.

2.7 The Complainant did provide a notice of preliminary assessment from EQC but an engineer did not complete this and the Licensee indicated that this was insufficient to satisfy any insurer or bank. The Licensee submitted that despite explaining the reasoning and importance of such reports, the Complainant still believed that this was all intended to save the purchasers money rather than to provide them with confidence. The Licensee stated that providing such documentation was customary in the area’s property market.

2.8 The Complainant did agree to pay for and supply all reports except the engineer’s report. The Complainant submitted that her solicitor had advised against paying for the engineer’s report. The Licensee pointed out to the Complainant that her solicitor was operating out of the area where the property market was quite different and not subject to the same difficulties as the local property market. However, the Licensee stated that he accepted the Complainant’s decision and it was not discussed again until one week before the auction. At this time, the discussion was with the Licensee and the auctioneer, Mr K, and came about because a prospective purchaser required such a report. Both were of the opinion that the Complainant should pay for and supply such a report but deny putting any pressure on the Complainant.

2.9 The listing agreement was signed on 12 June 2012. The auction was set for 2 August 2012.

2.10 On 30 July 2012 Ms C of the Agency, showed prospective purchasers through the Property. These people were Ms C ’s clients. The prospective purchasers’ insurance company had advised them that they needed an engineer’s report before insurance could be transferred. The Licensee stated that he checked with an engineer to see if a report was possible in the short timeframe, which was confirmed, then spoke with the Complainant who declined to proceed with the report. The Licensee stated that he did not pressure the Complainant and then informed Ms C of the Complainant’s decision. The prospective purchasers decided to proceed with their own report. The Licensee phoned the Complainant to arrange a time for the engineer to visit on Wednesday 1

August. The Complainant told the Licensee that she required a copy of that report to which the

Licensee replied there was no obligation on the purchaser to provide a copy.

2.11 Later the Complainant suggested that she pay half the cost of the report so that she could have a copy of it. The purchasers agreed to this.

2.12 Without informing the Licensee, the purchasers decided not to proceed with the engineer’s report

at that stage given the tight timeframe with the impending auction and therefore the engineer did

not show up at the Property at the time arranged. According to the Licensee, the Complainant then suggested that the engineer could provide a verbal report on the state of the Property. The Licensee submitted that his advice to the Complainant was that, in his experience, this would not be enough for insurers. This advice was contrary to the advice the Complainant was receiving from her solicitor and therefore there was some tension between the two views.

2.13 Given that the purchasers had deferred obtaining an engineer’s report, they requested to enter into a side agreement with the Complainant that allowed them three days after the auction to get insurance cover should they be the highest bidder at auction. The Licensee advised the Complainant about this request and it was decided to discuss it at the meeting the following day with the auctioneer.

2.14 At this meeting, on 1 August 2012, the Licensee stated that the side agreement was fully discussed and explained to the Complainant that as the purchasers had run out of time to get an engineer’s report, they were not in a position to confirm their insurance position. The Licensee stated that this was the exact position he had wanted to avoid and the reason why he had suggested that the Complainant commission her own report at the start of the marketing campaign. The Licensee advised the Complainant that she should sign the variation. The auctioneer also confirmed that he told the Complainant that such side agreements were common in the local area. The Complainant stated that she wanted to obtain legal advice, which both the auctioneer and the Licensee stated they were happy for her to do and refute the suggestion that they placed pressure on the Complainant. The side agreement was never signed. The reserve for the auction was set at

$495,000.

2.15 On 2 August 2012 at 8.46am, the day of the auction, the Complainant sent an email to the Licensee seeking to cancel her listing and withdraw the Property. The email states “thank you for your efforts and professionalism”. The Complainant states that by this time she was stressed and the whole situation was making her ill. The Complainant did not make a complaint direct to the Agency as she submitted that she did not feel strong enough to deal with them.

2.16 On 7 August 2012 the Licensee sent the Complainant a list of buyers that he had introduced to the

Property and who, should they buy it at a later date, would be entitled to a commission.

2.17 In relation to the complaint that the Licensee was not attracting buyers at the level the Complainant expected, the Licensee submitted that he found it difficult to keep control of the process with potential buyers, given that the Complainant would often be present at either end of open homes and want to talk to buyers. The Licensee submitted that, in his experience, often if vendors told potential buyers of their price expectations then they would not even show up at an auction, so his preference was to have very little contact between vendor and buyer. The Licensee stated that buyer feedback from the first open home was in the range $400,000 to $470,000 and as a result informed others that the feedback was mid $400,000s but that it was an auction so anything could happen. The Licensee denies ever stating that the Complainant would sell the Property for

$400,000. The rateable value for the Property was $427,000 and other recent sales in the same complex, which had sold privately, were $470,000 and $489,000. The Licensee submitted that at no time did he pressure the Complainant to sell at a lower price. However, the Complainant’s evidence was that she felt the Licensee spoke to her in a very forceful tone, reprimanding her for discussing her price expectations with potential buyers. When the Complainant confronted the Licensee about the fact that he was attracting buyers in the early $400,000s rather than the early $500,000s, she submitted that she felt he was unrealistic about getting people to the level that matched her expectations and as a result felt pressured to sell at a lower price.

2.18 The Complainant paid $2,632 in marketing costs and $690 in legal fees and seeks to have these reimbursed.

3 Relevant Provisions

3.1 A complaint can only be made in relation to alleged unsatisfactory conduct (s 72 of the Act) or alleged misconduct (s 73 of the Act).

3.2 Section 72 of the Act provides:

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.

3.3 Section 73 of the Act provides:

73 Misconduct

For the purposes of this Act, a licensee is guilty of misconduct if the licensee’s conduct –

(a) would reasonably be regarded by agents of good standing, or reasonable members of the public, as disgraceful; or

(b) constitutes seriously incompetent or seriously negligent real estate agency work; or

(c) consists of a willful or reckless contravention of—

(i) this Act; or

(ii) other Acts that apply to the conduct of licensees; or

(iii) regulations or rules made under this Act; or

(d) constitutes an offence for which the licensee has been convicted, being an offence that

reflects adversely on the licensee’s fitness to be a licensee.

3.4 The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 (the Rules) set out the standard of conduct and client care that agents, branch managers or salespersons (licensees) are required to meet when carrying out real estate agency work and dealing with clients. Whilst these rules are not meant to be an exhaustive list, they set minimum standards that licensees must observe and a reference point for discipline.

3.5 In relation to this complaint the following Rules may apply:

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 9.7: A licensee must not mislead customers as to the price expectations of the client.

4 Discussion

Pressured into going to Auction

4.1 The Complainant asserts that she felt pressured by the Licensee into accepting auction as the way to sell her Property. The Complainant stated that as she was not told of the fact that the Licensee stood to gain more commission personally from selling the Property via an auction, she asserts that this was also a breach.

4.2 The Licensee stated that the Complainant had already unsuccessfully marketed the Property through two other agencies using a deadline sale and no price marketing so believed auction was the best remaining process. The Licensee’s evidence was that the advantages and disadvantages of all options were fully discussed.

4.3 The Committee has reviewed the evidence before it and finds that there is no evidence to suggest there was any undue pressure put on the Complainant for her to accept auction as the process to sell the Property. The Committee accepts that auction was the process recommended by the Licensee but as he believed that auctions were having some success in the area, the Committee accepts that this was his honest opinion and part of his role was to provide such opinions. The Committee does not find the Licensee has breached his obligations in relation to this part of the complaint.

4.4 In relation to the complaint that the Licensee did not disclose that he would receive more commission if the Property sold through an auction rather than any other sales process, the Rules and Act at the time this conduct occurred did not require such detailed disclosure. However, under the new Rules, Rule 9.8 requires that the estimated cost in an actual dollar amount must be explained to a prospective client in writing at the time of signing an agency agreement but does not go as far as to require a comparative analysis of commission amounts from each different method of sale. On that basis, the Committee finds no breach in relation to this part of the complaint.

Pressured to obtain an engineering report

4.5 The Complainant complained that she felt under undue pressure from the Licensee to provide an engineer’s report relating to her Property. The Complainant believed that this should not be her expense and her solicitor also advised her of this.

4.6 The Licensee stated that it was not uncommon when properties went to auction for the vendor to provide some or all of the due diligence reports necessary to give prospective purchasers some degree of confidence given that bidding at auction was (usually) unconditional. The Licensee stated that his advice to the Complainant was that by providing as much information as possible it ensured the highest possible chance of a successful sale at auction. The Licensee also stated that in the real estate market in this area, engineer’s reports were almost a standard requirement in order to secure insurance and financial backing. The Licensee’s evidence was that he was only trying to get the Complainant in the best possible position prior to auction and to get as many people interested as possible in the Property.

4.7 The Committee does not find a breach in relation to this part of the complaint. The Committee accepts the Licensee’s evidence that he was working in the best interests of the Complainant and trying to position the Property so that as many people as possible might be interested in bidding. Whilst the Committee accepts that the Complainant decided to not commission an engineer’s report, as she was entitled to do, it does not find any evidence to show that the Licensee’s conduct was unprofessional or that his advice in relation to this report was anything outside the accepted practice in the industry.

Pressure to accept a lower price

4.8 The Complainant asserted that she felt pressured to accept a lower price via a pre-auction bid. The Committee notes that she did not accept the lower offer and proceeded to withdraw the listing for the Property prior to it going to auction. Whilst the Committee acknowledges that pre-auction bids can be a tense and stressful time, the Committee did not find any evidence to support the allegation that the Licensee put any undue pressure on the Complainant to accept this offer.

Licensee not attracting buyers at an appropriate level

4.9 The Complainant asserted that the Licensee was attracting potential buyers in a price bracket well below what her price expectations were and she did not believe he could raise them up to a level that she would find acceptable. As a result the Complainant stated that she felt pressured going into the auction process to accept a potentially lower bid.

4.10 The Committee notes in the Licensee’s response that it is important in an auction process to try and keep as many buyers interested and attending the auction as possible. The Licensee stated that as a result it may be that during the inspection phase of the marketing, it may be that a price lower than the vendor’s expectations is discussed but the main aim is to get people to the auction. The Licensee submitted that he felt some frustration with the Complainant talking directly to prospective buyers as disclosing a high price expectation often had the result of putting people off entirely. The Committee notes that the reserve was set by the Complainant, in conjunction with the Licensee and auctioneer, at $495,000 and, although the Property was withdrawn prior to going to auction, this reserve was at a level that was acceptable to the Complainant.

4.11 The Committee does not find any evidence to support this part of the complaint. The Committee prefers the evidence of the Licensee on this point and accepts that although the Complainant’s perception was that the Licensee was not attracting the right buyers for the property, he was merely trying to carry out his job to the best of his ability. As the Property never went to auction it is a moot point whether such buyers would have been drawn up to a level acceptable to the Complainant.

Asked to sign a variation to the auction agreement without legal advice

4.12 The Complainant was asked to sign a variation allowing a particular prospective bidder to have a side agreement allowing her 3 additional days after the auction to obtain insurance cover if she was the successful bidder. The Licensee and the auctioneer discussed this variation with the Complainant on the day before the auction. At the conclusion of the meeting the Complainant took the unsigned variation away to get legal advice and later decided not to sign it. The Complainant later withdrew the Property from auction so the signing of the variation became a moot point.

4.13 The Committee does not find any evidence to support the contention that the Licensee did not allow the Complainant the opportunity to get legal advice on this variation.

5 Decision

5.1 The Committee met to consider the complaints and pursuant to s 79(2)(e) determined to inquire into it. Pursuant to s 80(2) the Committee has, at its discretion, decided to take no further action with regard to the complaints against the Licensee because in the course of the investigation of the complaint, it appears to the Committee that, having regard to all the circumstances of the case, any further action is unnecessary or inappropriate.

6 Publication

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

6.2 Publication gives effect to the purpose of the Act by 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 and area of the property) and the Licensee, and any third parties in the publication of its decision.

6.4 The Authority will publish the Committee’s decision after the appeal period has ended. Any

application for an order preventing publication must be made to the Disciplinary Tribunal.

7 Right of Appeal

7.1 A person affected by a determination of a Committee may appeal to the Disciplinary 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 lodging an appeal is available by referring to the Guide to Lodging an

Appeal at www.justice.govt.nz/tribunals.

Signed

Ann Skelton

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 28 May 2013