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New Zealand Real Estate Agents Authority |
Last Updated: 3 May 2014
the Matter of Part 4 of the Real Estate Agents Act 2008
And
In the Matter of Complaint No: CB7102901 and CB7131521
In the Matter of Jiehui (Jessie) Lu and Barfoot &Thompson
License Number: 10013318 and 10018521
Decision of Complaints Assessment Committee
Dated this 29th day of May 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 Jiehui (Jessie) Lu (the Licensee) and Barfoot and Thompson (the Company Licensee). Ms Lu is licensed salesperson under the Real Estate Agents Act 2008 (the Act) working for Barfoot and Thompson Ltd in Auckland.
1.2. The complaint concerns the conduct of the Licensees in regard to the sale of the Complainant’s
property. Specifically the Complainant says that:
i) She was not adequately informed by the Licensee or the Company Licensee about the requirements in the Act regarding the purchase of her property by an employee of the Company Licensee.
ii) The Licensee presented the consent form (Form 2) after the sale and purchase agreement had been executed. Also, the Complainant states that it was presented in an aggressive manner and without allowing the Complainant time to seek professional advice.
iii) The Complainant did not have an opportunity to select the independent valuer
iv) The Licensee instructed painters to complete work to the purchasers requirements prior to the agreement becoming unconditional.
v) The Licensee persuaded the Complainant to abandon plans to sell by auction and accept the
offer from the Company Licensee’s employee instead.
1.3. During the investigation of these matters the Committee became aware that the Licensee did not provide the Complainant with a market appraisal supported by comparable sales information prior to listing the Property for sale. Failure to supply a market appraisal is a breach of Rule 9.5 of the Professional Conduct and Client Care Rules and has been admitted by the Licensee. The Licensee also showed the Property to prospective purchasers without having an agency agreement in place. The Committee deems that this is a potential breach of Rule 9.15 in that showing a purchaser through a property constitutes “offering it for sale”
1.4. The Company Licensee did not ensure that an appraisal was completed on the Property, or that an agency agreement was in place prior to customers viewing. This may be a breach of the supervisory provisions of section 50 of the Act.
1.5. The Company Licensee also instructed the Licensee to have Form 2 signed by the Complainant and suggested that the document should be back dated to the date of the sale and purchase agreement.
2. Material Facts
2.1. The Complainant and the Licensees already had a working relationship prior to the conduct leading to the above allegations. Around the end of April 2012, the Licensee and the Complainant discussed the sale of the Complainant’s investment property. The Licensee indicated that she may have buyers for it and arranged access for those buyers.
2.2. On 27 April 2012 the Complainant listed the Property for sale with the Licensees. No market
appraisal was completed and the Licensee states that the “search indicator” price range noted on the listing agreement was sufficient. A search indicator is a range that is uploaded as part of the website listing. This allows prospective purchasers to search the listings by price even if the property is going to auction, tender or by negotiation without a price.
2.3. The marketing method agreed with the Complainant was auction with an auction date of 5 May
2012, and marketing expenses of $1833 inclusive of GST were agreed to.
2.4. At least two buyers were shown the property prior to the listing agreement being executed. A buyer made a conditional offer of $600,000 which was subsequently raised to $620,000. That offer was countered by the Complainant at $670,000. The counter offer was not accepted.
2.5. The Licensee presented a conditional offer on the Property from Ms F (or nominee). Ms F is the office administrator at the branch from where the Licensee operates and therefore an employee of the Company Licensee at all times during the period in question. The Complainant and the purchaser counter offered several times on price, finally agreeing at $645,000. The building inspection clause was deleted but the agreement contained the following acknowledgement as clause 19 on the further terms page: - “Vendor acknowledges that the purchaser is associated with Barfoot and Thompson”.
2.6. The Act sets out requirements in sections 134 to 137 for a licensee (or related person) who wishes to purchase a property from their client. The requirements are as follows; first, disclosure must be made, and then a formal consent form (Form 2) must be signed by the client. The consent provides for the client to be supplied with a valuation from an independent registered valuer either at the time the consent is given or within 14 days. The valuation is supplied at the expense of the Licensee or the related person and must be completed by an independent valuer. If this process is not followed or if the valuation is for an amount in excess of the purchase price, the contract may be cancelled and any commission paid to the Licensee is to be refunded.
2.7. The Company Licensee takes the view that these provisions of the Act do not apply to this situation.
In taking this stance, the Company Licensee has provided a legal opinion from their solicitors dated
7 September 2009 which states that section 137 describes an employee as “an employee of the licensee” who completes the transaction. They contend that Ms F is not an employee of the Licensee (Jessie Lu) and therefore, the provisions are not applicable.
2.8. Despite this contention, the Company Licensee has an internal policy which requires Ms F to undertake to complete the disclosure, consent and valuation procedures “for transparency” reasons. The Company Licensee instructed the Licensee to get Form 2 signed by the Complainant on
1 May 2012. The Licensee states that she was told by the Company Licensee to date the form 30
April to match the sale and purchase agreement.
2.9. The valuation was completed on 4 May by Mr Z, a registered valuer. The Company Licensee paid for the valuation and the valuer was aware of the sale price already agreed by the Ms F. The Complainant’s mother was present during the Valuer’s inspection. The figure assessed as the Property’s current value was $635,000.
2.10. Prior to the sale and purchase agreement becoming unconditional, the Complainant agreed to having some redecoration work (painting) completed by a trades person. The purchaser requested a different colour scheme be used and a variation to the sale and purchase agreement was drawn up by the Company Licensee. This variation was signed by all parties.
2.11. The Property sale became unconditional and proceeded to settlement on 18 May 2012.
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
(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.
134 Contracts for acquisition by licensee or related person may be cancelled
(1) No licensee may, without the consent of the client for whom he or she carries out real estate agency work in respect of a transaction, directly or indirectly, whether by himself or herself or through any partner, sub-agent, or nominee, acquire the land or business to which the transaction relates or any legal or beneficial interest in that land or business.
(2) No licensee may, without the consent of the client, carry out or continue to carry out any agency work in respect of a transaction if the licensee knows or should know that the transaction will, or is likely to, result in a person related to the licensee acquiring the land or business to which the transaction relates or any legal or beneficial interest in that land or business.
(3) The client’s consent is effective only if—
o (a) given in the prescribed form; and
o (b) the client is provided with a valuation in accordance with section 135.
(4) The client may cancel any contract—
o (a) made in contravention of subsection (1); or
o (b) brought about by agency work carried out in contravention of subsection (2).
(5) No commission is payable in respect of any contract of the kind described in subsection (4), regardless of whether the client cancels the contract.
(6) The client may recover any commission paid in respect of any contract of the kind described in subsection (4) as a debt.
(7) For the purposes of this section, a person who is the client of an agent in respect of a transaction is also the client of any branch manager or salesperson whose work enables the agent to carry out real estate agency work for that client.
(8) This section and section 135 have effect despite any provision to the contrary in any agreement.
135 Client to be provided with valuation
(1) For the purposes of section 134(3), the licensee must give the client a valuation made at the
licensee’s expense.
(2) The valuation must have been made by—
o (a) an independent registered valuer; or
o (b) in the case of a business, by an independent chartered accountant. (3) The licensee must give the client the valuation either—
o (a) before seeking the consent of the client; or
o (b) with the agreement of the client, within 14 days after obtaining that consent.
(4) Every consent given under section 134 without the valuation being supplied to the client in accordance with subsection (3) is ineffective.
(5) Any contract to which the client is a party and to which the consent relates is voidable at the option of the client if—
o (a) the client gives his or her consent in accordance with subsection (3)(b); and
o (b) the valuation, when supplied, is greater than the valuation specified in the prescribed
form of consent as the provisional valuation.
137 Meaning of licensee and person related to licensee in sections 134 to 136
(2) For the purposes of sections 134 to 136, a person is related to a licensee if the person is—
o (a) a partner of the licensee under a partnership agreement:
o (b) an employee of the licensee:
o (c) a branch manager or salesperson engaged by the licensee:
o (d) the licensee’s spouse or civil union partner:
o (e) the licensee’s de facto partner:
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.
5.2 A licensee must have a sound knowledge of the Act, regulations made pursuant to the Act, rules issued by the Authority (including these rules) and other legislation relevant to real estate work.
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.
9.5 An appraisal of land or a business must be provided in writing to a client by a licensee; must realistically reflect current market conditions; and must be supported by comparable information on sales of similar land in similar locations or businesses.
9.15 Unless authorised by a client, through an agency agreement, a licensee must not offer or market any land or business, including by putting details on any website or by placing a sign on the property.
4. Discussion
Failure to supply a market appraisal or obtain an agency agreement before offering a property for sale
4.1. The Licensee has admitted that no appraisal was carried out on the Property. No reason has been provided to the Committee other than the fact that a search indicator was inserted on the listing agreement and the Licensee believed this to be sufficient. The Committee is not satisfied that using a search indicator range complies with the obligations of Rule 9.5. It is certainly not sufficient to protect and inform the client and therefore the Licensee has breached Rule 9.5 in the Committee’s opinion.
4.2. In relation to market appraisal, the Company Licensee has certain responsibilities. First, under Rule
8.3, to ensure that the Licensee was familiar with the Act and the Rules. Second, under section 50
of the Act, to ensure that all real estate work undertaken by the licensee/salesperson is performed competently and that the work complies with the Act.
4.3. The Committee is not satisfied that the Company Licensee, as a supervising agent, took any steps to ensure that a market appraisal was supplied to the Complainant. The listing authority shows that no appraisal figure was given and this should have alerted the Company Licensee to the omission. The
Company Licensee also failed to ensure that the Licensee was aware of her responsibilities to appraise a property going to auction. The Committee finds that the conduct of the Company Licensee is also unsatisfactory in regard to this matter.
4.4. The Licensee admits that at least two buyers were offered the Property and shown through prior to the execution of an agency agreement. The Committee is satisfied that this conduct represents a breach of Rule 9.15. The rule is in place to protect licensees as well as consumers from situations where authority to act as agent has not been properly explained and formed. The Committee is concerned that the lack of care, knowledge and proper procedures shown up in this complaint is not conceded as an error on the part of either Licensee.
Marketing and negotiation of agreement
4.5. It appears on the evidence before us that the Property was sold to Ms F without being exposed to the open market. Only the two buyers that were known to the Licensee had the opportunity to look at the Property. The Complainant has stated that she was keen to go to auction but the Licensee actively persuaded her not to take this course of action.
4.6. The Complainant alleges that the Licensee said that auctions were not working in this area and that the Complainant should therefore accept the offer from Ms F. The Committee finds that this advice was inconsistent with the available market facts which show that 5 of the 10 properties sold in the area between 1 March 2012 and 30 June 2102 were sold by auction. This is a breach of Rule 9.1, in that it appears that the Licensee has put the interests of her colleague ahead of the interests of the client.
4.7. The Licensees may believe that the independent valuation has shown that the price achieved for the Property was realistic, but the Licensee, the Company Licensee and Ms F were all aware that their own company manual prohibits buying pre auction because it disadvantages other buyers. The auction may have resulted in competition which could have achieved a premium, or it may have resulted in the Property being passed in. If the latter had occurred, the Complainant would have been in a better position to accept Ms F’s offer, knowing that it was the best the market would pay. The Committee finds that it has sufficient evidence that the Complainant was disadvantaged by the speed of the sale process and lack of marketing. This is a finding against both Licensees.
4.8. The Complainant states that the Licensee was aggressive and put pressure on her during the negotiations. The Committee finds insufficient evidence to support this claim. The Licensee went to the Complainants property and to her workplace at times suggested by the Complainant herself. The Complainant also took time to discuss the sale and purchase agreement with her mother, who was a previous owner of the Property. The period of negotiation seems to have given ample opportunity for the Complainant to seek independent advice had she wished to obtain this.
4.9. 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 was not aggressive, nor did she pressure the Complainant unduly. It is more likely that the Complainant lost faith in the Licensee and the Company Licensee after she learned from another agent that the sale should have been subject to the stricter protocols of sections 134 to 137. We will discuss that matter later in this decision.
Form 2
4.10. The Committee is satisfied that the Complainant was aware, at all times, that the Ms F was “associated with Barfoot & Thompson”. The Licensee states that she told the Complainant verbally and that she inserted a term in the sale and purchase agreement acknowledging this fact. The Licensee must have been unsure that this was sufficient as she sought to clarify the matter with the
Company Licensee.
4.11. The Branch Manager was consulted on 1 May by the Licensee about the necessity to comply with S134 – 137 of the Act for this purchase. It appears to the Committee that the Branch Manager was sufficiently concerned and confused by discrepancies between the Act and the Company Licensee’s internal policy manual that he took the more conservative route, albeit after the agreement had been executed.
4.12. The Complainant was asked to sign the formal consent (Form 2) for Ms F to buy her property on May 1. The consent was then back dated by the Licensee to 30 April. This was suggested by the Company Licensee. Whilst it seems obvious to the Committee that the Licensee was attempting to do the right thing, it was not acceptable to incorrectly date that document. The document itself states in clause 3 that the client should not sign the form if it is not given to her before she agrees to sell. The Committee finds that the Company Licensee has engaged in unsatisfactory conduct in not providing the form prior to the sale being agreed and in giving the instruction to back date.
Changing paint colours to suit the purchaser prior to unconditional date
4.13. The Committee accepts the Licensees’ evidence that the Complainant signed a variation of agreement to accommodate the purchaser’s wish to have certain paint work done in colours that suited her. The Complainant cannot in good faith accept the variation and then complain that this was not what she wanted. It appears that the Complainant’s mother may have been upset by the change in colour scheme more than the Complainant herself. Nevertheless, the Committee is satisfied that the Licensees did not breach any rules or regulations in mediating this alteration.
Appointment of valuer and report
4.14. In considering the Complainants concerns about the valuation, it appears that the Complainant’s loss of faith in the Licensees has expanded to include the fear that the valuer chosen by the purchaser has not acted in good faith. This gave rise to the allegation that the valuer should have been chosen by the Complainant.
4.15. Where a valuation is required and paid for by a purchaser, the choice of valuer is the up to the purchaser. This would apply to compliance with the Act or any other purchase where a valuer is engaged by the purchaser. What surprises the Committee is that in this case, the valuer was paid by the Company Licensee.
4.16. The Committee has no evidence to suggest that the valuer was not completely professional in his report or in his dealings with the Complainant. He has undertaken an inspection and compiled a report substantiated by statistics of similar properties. The valuation figure is not inconsistent with the statistics supplied. The Committee is concerned that the practice of informing a valuer of the purchase price which was paid is a stumbling block to the transparency of the process. It raises the specter that the outcome was pre-ordained rather than completely generated by the facts. The consumer should feel completely confident that the valuer and his opinion are truly independent of the purchaser or her requirements.
4.17. If the Complainant has continued concerns around the valuation, she should undertake a second report at her own expense and follow that up with the valuer in question through his own professional body.
Requirement to comply with Sections 134 – 137 of the Act
4.18. As part of the submissions made on the behalf of the Company Licensee, the Committee was provided with a legal opinion suggesting that it is only the person who is engaged in the real estate
agency work who must comply with section 134 – 137 of the Act. This was to support an argument by the Company Licensee that although the employee of the agent in this case provided a valuation, they were not actually obliged to do so because the employee was not employed by the salesperson that completed the transaction.
4.19. The Committee considers this narrow interpretation of the obligations under section 134 is flawed because it ignores the reality of real estate agency work, in that the contract of agency is not with the salesperson, but with the agent. A salesperson can only carry out real estate agency work on behalf of an agent. The contract of agency is with the agent and not with the individual salesperson. Section 134 refers to the duty applying to the "licensee" and "licensee" is defined in section 4 of the Act as the generic reference for all classes of license. By definition, therefore, the reference to licensee in section 134 is to all licensees who carry out the real estate agency work and pursuant to section 49 of the Act will, in the case of a salesperson (and branch manager) include the agent they are engaged or employed by.
4.20. This means that in this case the obligation under section 134 applied to the salesperson and the agent (Barfoot and Thompson) and all the employees of the agent. The contrary interpretation would not fit with the consumer protection purposes of the Act. Instead would potentially lead to the farcical situation where there would be no requirement, when a salesperson is involved, for any other person in that company to be caught by section 134. That cannot have been the intention of Parliament in enacting this section of the Act. To be fair, we are not certain that the author of the opinion himself intended the section to be interpreted as restrictively as has been advanced by the Company Licensee in this case. In any event, however, we consider the opinion, for the reasons set out above, to be incorrect.
In Conclusion
4.21. The Committee believes that the Licensees have both engaged in conduct that is unsatisfactory. The Company Licensee is in breach of Section 50 failure to adequately supervise a licensee and rule 8.3. Failure to ensure that a licensee engaged by an agent is familiar with the Act and the rules and section 72 (d) in falsifying a document. The compliance with section 134 - 137, albeit belatedly, has avoided a potential charge of misconduct being laid.
4.22. The Licensee is in breach of rule 9.5 by failing to provide an appraisal, rule 9.15 failing to execute an agency prior to offering a property for sale, and rule 9.1 by failing to act in the client’s best interest.
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 both Jiehui Lu and Barfoot &Thompson have 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 Licensees 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: 29 May 2013
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