Complaint No C01576 [2014] NZREAA 132 (21 March 2014)

Last Updated: 30 January 2015

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

And

In the Matter of Complaint No: C01576

In the Matter of Licensee 1

Licence Number: XXXXXXXX

and

Licensee 2

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 21st day of March 2014

Complaints Assessment Committee: CAC301

Chairperson: Deirdre McNabb Deputy Chairperson: Patrick Waite Panel Member: Rex Hadley

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 The Complainants have lodged a complaint with the Authority against Licensee 1 the Listing Agent, and Licensee 2 another Salesperson regarding an alleged failure to explain the position taken by the Vendor regarding GST payable in respect of the sale of the Property until the night before the auction of the Property.

1.2 Their complaint is that, with GST being added to the auction price, their mortgage finance would not enable them to borrow against the amount of GST payable on the Property. They saw the consequence of this being that they could not bid at the auction and therefore that they had wasted money on due diligence for the Property and the renovation of their own property in order to sell that to buy this Property.

2. Material Facts

2.1 The Property was to be auctioned by mortgagee sale on 15 August 2012. On the Licensees’ website and other marketing material the Property is described as ‘Originally operated as an exclusive boutique lodge and function centre ... the Property has more recently been occupied as a private residence’. On the Agency website the Property was described as

‘Include GST’ in three instances, namely 27 July 2012, 3 August 2012 and 14 August 2012.

Other promotional material did not describe the GST position in this way.

2.2 On 27 July 2012 the Complainants viewed the Property and were provided with a copy of the Property Information Memorandum (PIM) and the Land Information Memorandum (LIM) for the Property. The PIM describes the Property as ‘Former lodge now used as family home’ and notes ‘A Resource Consent was obtained for the property in 1996 to accommodate up to 10 guests overnight and host up to 20 functions with a maximum of 80 guests per function in any one calendar year.’ It also states that Buyers could choose to use the Property as a family retreat or with paying guests.

2.3 In addition to the marketing material for the Property, Licensee 1 emailed the draft terms and conditions for the auction to the Complainants on 30 July 2012. The Memorandum of contract that was part of those draft conditions showed the purchase price would be ‘Plus GST (if any)’.

2.4 The invoice from the Complainants’ Lawyer in respect of the Property shows that they first met with their solicitor on 31 July 2012 and that he reviewed the PIM and LIM for the Property and the conditions of auction. He met with the Complainants again on 3 August

2012 and 13 August 2012. The narration on the account from the Complainants’ Solicitor shows that the Solicitors extensively reviewed comprehensive documentation that related to the Property including the draft auction conditions.

2.5 On 14 August 2012, the day before the auction, the Complainants Solicitor was given a copy of the final version of the auction conditions. These included the Vendor’s GST registration number. That evening Licensee 1 contacted the Complainants and told them that GST would

be added to the successful bid. The Complainants say that this was the first they knew that

the sale would be ‘plus GST’.

3. Relevant Provisions

3.1 The Committee examined the information supplied by the Complainant in her written complaint to determine whether section 72 or section 73 of the Real Estate Agents Act

2008 (the Act) applied i.e. was there evidence which would indicate that the Licensee could be considered guilty of unsatisfactory conduct (section 72) or misconduct ( section 73).

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 of 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.

Section 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 wilful 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.

3.2 Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012

Rule 6 Standards of professional conduct

6.3 A Licensee must not engage in any conduct likely to bring the industry into disrepute.

6.4 A Licensee must not mislead a customer or client, nor provide false information, nor with-hold information that should by law or in fairness be provided to a customer or client.

4. Discussion

4.1 The Committee considered the material provided to it by the Complainant, the responses from the Licensees and the investigation file.

4.2 The Committee noted that from the time the Property had been promoted it was made clear in the marketing material that it had been a boutique lodge and was currently used as a private residence. It considered this to be a flag to any Prospective Purchaser that the Property had been operated as a business (even though it was not currently) and therefore any ramifications from that ought properly to be discussed with professional advisors.

4.3 The Committee noted that the Property was incorrectly described as ‘Include GST’ on three instances on the Agency’s website but other promotional material did not describe the Property in this way. For the purposes of this complaint there was no evidence that the Complainants had viewed or been influenced by the Ageny’s website. The Committee found that the dates of publication on that website made it unlikely the Complainants were influenced by that material. Even if they were, the Committee noted that the draft conditions of auction provided to the Complainants on 30 July 2012 (shortly after they attended the open day at the Property) showed that the purchase price would be ‘Plus GST if any’ and these were provided to their Solicitor for review and advice.

4.4 The Complainants made a number of allegations about the Licensees. Whilst they believed that the terms and conditions of auction contained only standard clauses about GST, in fact the clause in the draft conditions required an option to be deleted and the mortgagee Vendor had chosen to delete ‘inclusive of GST (if any)’ to leave the option of ‘Plus GST (if any)’. The Committee took the view that the Property had been marketed throughout with an emphasis on the private/business options for which it was capable. This was an aspect of the Property that it would have expected the Professional Advisors for the Complainants to have considered and advised upon in the course of their retainer. Clearly the Complainants’ Solicitor had been provided with extensive documentation by the Complainants.

4.5 Taking all of these factors into account, the Committee determined that the Licensees had not acted in breach of the Act or the Rules with regard the marketing of the Property. The GST position for it was disclosed at least as early as 30 July 2012 and reiterated to the Complainants the evening before the auction. The Professional Advisors for the Complainants had ample time and documentation to consider and the Complainants had the benefit of professional legal advice in the lead up to auction day.

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 to 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 Licensee 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

Deirdre McNabb

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 21 March 2014