Complaint No CO4424 [2014] NZREAA 170 (10 June 2014)

Last Updated: 22 February 2015

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

And

In the Matter of Complaint No: CO4424

In the Matter of Licensee One

License Number: XXXXXXXX & Licensee Two

License Number: XXXXXXXX & Licensee Three

License Number: XXXXXXXX &

Licensee Four

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 10th day of June 2014

Complaints Assessment Committee: CAC303

Chairperson: Amanda Elliott Deputy Chairperson: Marina Neylon Panel Member: Susan D’Ath

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 This is a complaint by The Complainant against Licensee One and Licensee Two.

1.2 The Licensees are licensed under the Real Estate Agents Act 2008 (the Act). Licensee One holds a salespersons license and Licensee Two an agents license. They both work for the Agency.

1.3 The Complainant, through the Trust purchased the Property which had as a dwelling, a pre- fabricated show home that had been moved on to the Property, for the purposes of assisting selling the other properties in the sub-division.

1.4 The properties within the sub-division are all subject to restrictive covenants.

1.5 One of these covenants stipulates that you cannot erect a dwelling house with a floor area of less than 120sqm.

1.6 Since purchase, the Complainant has been advised the dwelling breaches this covenant as it is too small and the dwelling must be rectified with the addition of a further 1.88sqm of enclosed space.

1.7 The Complainant considers Licensee One and Licensee Two did not disclose knowledge of this breach of covenant prior to her signing the sale and purchase agreement. She believes if she had been alerted to this breach, she would either not have purchased the Property or negotiated a lower purchase price.

1.8 The Complainant also considers Licensee One may have had a conflict of interest on the basis that Licensee One had a financial arrangement/relationship with the vendor of the Property.

1.9 The Complainant has also indicated she feels she was pressured into signing the sale and purchase agreement with only 3 working days to undertake the approval of the Certificate of Title and an investigation of the City Council file. The Complainant believes Licensee One reduced the time frame solely to deny the Complainant more time to discover any issues about the house.

1.10 The Complainant is seeking financial compensation for the cost of remedying the dwelling to comply with the covenant and the extra legal expenses she has incurred because of this.

1.11 In addition, during the course of the investigation, the Committee established that there may be ground for a further complaint against Licensee One and Two, regarding marketing premises without a signed listing authority from the vendor.

1.12 The Committee considered section 78(b) and chose to investigate the involvement of Licensee Three who holds a salesperson licence and Licensee Four who also holds a salesperson license regarding whether there was ever a signed listing authority for this property with the vendor.

2. Material Facts

2.1 The history of how the Property came to be sold by Licensee One and Two is as follows; on 30

September 2011 Licensee Two meets at his offices Licensee Three who was a licensee at that time working for XYZ agency. The purpose of that meeting was to advise Licensee Two that Licensee Three and Licensee Four (who also works as a salesperson for XYZ agency) had listed and were going to market a sub-division.

2.2 Licensee Three wanted to gauge whether Licensee Two and the Agency were interested in pre- selling any of the 34 sub-division houses.

2.3 The reason for involving Licensee Two‘s Agency was because Licensee Three and Four are not based where the subdivision is, and Licensee Two and the Agency are based in the area of the proposed sub-division.

2.4 At the meeting, Licensee Two was advised the ‘show home’ located at the Property was also for sale.

2.5 Licensee Two advised he would be interested to assist and requested the plans, prices etc. for the sub-division and to view the Property.

2.6 On 4 October 2011, Licensee Three provided the requested information and documents and they arranged to view the Property.

2.7 On 5 October 2011, Licensee Two viewed the Property.

2.8 On 6 October 2011 Licensee Two sends an email thanking Licensee Three for the marketing and requesting some further information.

2.9 Licensee Two then places a property description listing into the Agency’s system using the notes he made at the viewing.

2.10 Over the next 16 months the Property remained in the Agency’s system and available for purchase.

2.11 On 7 February 2013 the Complainant expressed an interest in purchasing the Property and was shown the Property by Licensee One.

2.12 On 8 February 2013 a conditional sale and purchase agreement was signed. The agreement was conditional on a three working day period for approval of the Title and contents of the City Council file.

2.13 On 14 February 2013 Licensee One was advised by Licensee Two the Property had previously been on the market, but because the actual listing wasn’t with their agency, there appeared to be no paperwork other than what was already known, relating to this Property.

2.14 Regardless, Licensee Two advises Licensee One to go ahead with the selling of the Property to the Complainant.

2.15 On 27 March 2013 the Complainant views the Property for a final walkthrough before settlement. The Complainant’s daughter asks Licensee One, if there were any issues relating to

the covenant. Licensee One replies that there are none.

2.16 On 28 March 2013 settlement takes place.

2.17 In August 2013, the Complainant’s solicitor receives a letter from the developer, ABC Corporation (ABC) who manage and control the restricted covenants. This letter advises the Trust, as the registered proprietor of the Property, is in breach of a covenant because the dwelling is only 118.11sqm, which is below the minimum required floor area of 120sqm.

2.18 The Complainant is requested by ABC to fix the breach by adding a further 1.88sqm of enclosed space.

2.19 The Complainant also states that whilst buying the Property, Licensee One disclosed she was intending to invest in a real estate development venture with the vendor of the Property. This disclosure was made after the signing of the sale and purchase agreement, whereas the Complainant considers that such disclosure should have been made prior to any documentation being signed.

3. Relevant Provisions

3.1 Real Estate Agents Act 2008

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.

Section 136 Disclosure of other benefits that licensee stands to gain from transaction

(1) A licensee who carries out real estate agency work in respect of a transaction must disclose in writing to every prospective party to the transaction whether or not the licensee, or any person related to the licensee, may benefit financially from the transaction.

(2) Subsection (1) does not apply to any matter disclosed under section 128 or 134.

(3) The licensee must make the disclosure required by subsection (1) before or at the time that the licensee provides the prospective party with any contractual documents that relate to the transaction.

(4) For the purposes of this section, an agent does not benefit financially from a transaction merely because a commission is payable to the agent under an agency agreement in respect of the transaction.

Section 126 No entitlement to commission or expenses without agency agreement

(1) An agent is not entitled to any commission or expenses from a client for or in connection with any real estate agency work carried out by the agent for the client unless—

(a) the work is performed under a written agency agreement signed by or on behalf of—

(i) the client; and

(ii) the agent; and

(b) the agency agreement complies with any applicable requirements of any regulations made under section 156; and

(c) a copy of the agency agreement signed by or on behalf of the agent was given by or on behalf of the agent to the client within 48 hours after the agreement was signed by or on behalf of the client.

3.2 The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009

Rule 6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction

Rule 6.4 A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or fairness be provided to a customer or client.

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.

4. Discussion

4.1 The Committee has carefully considered the complaints made by the Complainant and the possible further breach in relation to the Licensees not having the required signed listing authority.

4.2 The Complainant submits Licensee One and Two failed in a duty of care to her by not disclosing the Property breached the covenant as to size.

4.3 Licensee One and Two responded they did not breach any duty as they did not know there were any issues relating to the size covenant. Essentially, because there was no documentation on their file to indicate any problem with a covenant.

4.4 The only listing information was a ‘salesperson fact sheet’ entered into the Agency’s database; the information was supplied by Licensee Two, after he viewed the premises with Licensee Three or after a subsequent conversation with him the next day.

4.5 Licensee Two stated if such a problem had been known, the Agency would not have agreed to help market the Property.

4.6 The Licensees also pointed out the only evidence the Property is below size, is the letter from

ABC to the Complainant’s solicitor stating the breach.

4.7 The Vendor was asked for his opinion on the matter. He advised he did not consider there was

actually a problem. This was because ABC had signed off the original plans as being compliant with their covenant when they were lodged with the Council. This consent was required due to another part of the covenant registered on the Title.

4.8 In addition, the dwelling had been prefabricated off-site as per the plans and it was only after a subsequent inspection, sometime later, that ABC advised him they believed there was a breach.

4.9 Because of the notification, the Vendor commissioned a survey plan from XX Surveyors, who confirmed in their view the dwelling did in fact comply with the covenant.

4.10 The Vendor advised ABC of this and when he heard no more about the matter, he thought it was of further consequence and therefore the Vendor did not advise any Licensee of any problem.

4.11 On the basis of the above, the Committee considers Licensees One and Two cannot be deemed to have withheld information regarding a breach of covenant. They either did not know of any breach or in fact, there is no breach, because the information about the size of the dwelling claimed by ABC is incorrect.

4.12 The second complaint against Licensee One was that she did not disclose she had a relationship with the Vendor. The Complainant stated Licensee One only mentioned this after the Complainant had signed the sale and purchase agreement. The Complainant recalls Licensee One told her she was intending to invest in a real estate development venture with the Vendor. The Complainant now considers due to the above circumstances, she has suffered ramifications because of this relationship.

4.13 Licensee One responded she has not had any personal or business relationships with the Vendor beyond this sale. Licensee One accepts she may have mentioned she would like to obtain further listings from the Vendor, however this has not happened and therefore she had nothing to disclose to the Complainant.

4.14 The investigation has not produced any further information to suggest Licensee One has any type of relationship with the Vendor other than this business transaction. Therefore, the Committee considers there is insufficient evidence to prove there has been a breach of s136 of the Act.

4.15 There was also a suggestion by the Complainant that she had felt undue pressure from Licensee One to sign the sale and purchase agreement. As evidenced by the reduced timeframe of only three days for confirmation of the conditional sale and purchase agreement.

4.16 The Committee requested an explanation from Licensee One why the timeframe for confirmation was 3 days. Licensee One stated the reduced timeframe was because the Complainant was running short of time, before she had to settle the sale of her own home. Also because the offered purchase price was below the listing price, it was also considered this shortened timeframe would make the offer more appealing to the Vendor.

4.17 Licensee One also provided a copy of an agency survey written by the Complainant regarding

Licensee One. In that feedback the Complainant writes,

“My agent was exceptionally excellent across all aspects of my buying /selling including amazing accessibility and positivity no matter the small or big anxieties topics, questions on my part.”

Licensee One says as this was written before any problems with the covenant were raised, the Licensee considers this feedback indicates the Complainant was very happy with all the services she received at the time and did not feel pressured.

4.18 As the Committee has received no other evidence by the Complainant regarding undue pressure and Licensee One has adequately explained why the timeframe was reduced, the Committee does not consider that any undue influence was placed on the Complainant.

4.19 The other issue for the Committee to consider was whether Licensee Two, as the supervising agent for the Agency may have been in breach of the Act in failing to obtain a signed agency agreement with the Vendor.

4.20 Licensee Two stated no listing agreement could be produced, as they were not the original listing agents, but gave details as to how his Agency became involved.

4.21 Licensee Two suggests he was unaware the subdivision had been withdrawn from sale from the original listing agency around March 2012.

4.22 The Vendor also has no recollection as to whether the Property was ever listed with any agency but agreed to a sale when Licensee One brought him a buyer. The Vendor did not seem concerned that no listing agreement could be found.

4.23 The original listing agent being Licensee Three confirmed he had the original listing agreement, but it cannot now be found because he since moved to a different agency.

4.24 The agency with whom he previously worked, XYZ agency also cannot find a copy of the listing agreement but states this doesn’t mean they did not have one. They suggested it may have been removed from the office, but is unsure by whom or when.

4.25 After considerable investigation the Committee has come to the view that Licensee Two appears to have breached this obligation because if there was no listing agreement then the commission, should have been shared with the original listing agency, XYZ.

4.26 As no commission was shared with XYZ agency, Licensee Two must have considered the original listing agreement had lapsed and should have sought his own listing agreement in those circumstances. The lack of a listing authority in this situation means the Vendor would be absolutely within his rights to refuse to pay a commission for this sale.

4.27 However, given that the listing authority to the Agency appears to have been ratified by the Vendor and the convoluted circumstances, the Committee has elected not to deem this breach as unsatisfactory conduct. However, Licensee Two should consider this is a warning that signed listing agreements must always be obtained where a commission is to be charged and/or there should be a record of any shared listings to prevent a situation like this from occurring in the future.

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. Any application for an order preventing publication must be made to the Real Estate Agents Disciplinary Tribunal (the Tribunal).

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

Amanda Elliott

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 10 June 2014