Complaint No CO4623 [2014] NZREAA 192 (1 July 2014)

Last Updated: 26 February 2015

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

And

In the Matter of Complaint No: CO4623

In the Matter of The Licensee

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 1st day of July 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 Complainants about the Licensee who is a licensed salesperson under the Real Estates Agents Act 2008.

1.2 The Complainants purchased the Property. The Licensee was the listing agent.

1.3 The Complainants say that prior to purchasing the Property they asked the Licensee directly if the house ‘was leaky’. They were advised it was not. However, subsequently they have discovered that there is a leak.

1.4 The Complainants believe the Licensee knew the Property leaked due to their removing a clause from the vendors warranty and undertakings from the conditions of sale.

1.5 The Licensee also gave the Complainants the wrong date for the auction and did not inform them of their rights regarding a pre settlement inspection.

1.6 The Complainants are seeking compensation to fix the wall that is leaking and the cost of consequential work related to that repair.

2. Material Facts

2.1 The Complainants were interested in purchasing the Property and attended three open homes.

2.2 At one of the open homes, the Complainants asked the Licensee “ if the house was leaky”.

2.3 The Licensee’s response to that question was ‘leaky homes were built in the 1990’s and this house was built in the 1970’s’. The Complainants took this indirect reply, to mean that the Property did not leak.

2.4 On the 25 October 2012, the Complainants engaged a professional builder to undertake a building inspection of the Property to verify if there were any defects. No major defects were indentified in the subsequent written building report.

2.5 On 28 October the Complainants purchased the Property by way of auction.

2.6 On 8 November 2012 the Complainants went to the Property with the Licensee to measure up for curtains

2.7 Settlement took place on 28 November 2012.

2.8 The following winter 2013, the Complainants discovered a major leak. This was caused by a retaining wall, which became wet when it rained and as a consequence water entered the

downstairs room of the dwelling.

2.9 Once the Complainants realised the Property leaked, they engaged a foundations expert who advised the leak was not a new issue.

2.10 The Complainants then spoke to a neighbour, who advised he was friends with the vendors and there had been a water problem some years ago.

2.11 This neighbour, who spoke to the appointed investigator for this complaint, confirmed he knew the previous owners well. He said that there had been an issue with a back retaining wall of the Property. However that issue had been resolved about 8-10 years ago at a cost of about $8000 with the installation of a drain on to the street.

2.12 He also confirmed he was not aware of any further issues and the vendors had lived at the

Property until just prior to the Property being sold.

2.13 The Complainants, when making this complaint then recalled there had been a deletion in the particulars of conditions of sale and purchase. Section 8 of the vendors warranties and undertakings was crossed out where it stated “and has no knowledge of”. The Complainants now believe this clause was deleted because the Licensee actually knew there was something wrong with the Property.

2.14 The Licensee also did not advise the Complainants about their right to a pre settlement inspection until the day before settlement.

2.15 In making this complaint, the Complainants also wished the Committee to consider they believed that the Licensee had also given them the wrong auction date, which as a result, meant they almost missed the Auction.

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.

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.)

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.

4. Discussion

4.1 The Complainants consider that the Licensee‘s conduct was unsatisfactory as they were

intentionally misled by the Licensee in regard to leaking issues at the Property.

4.2 The Complainants believe that when they attended an open home and asked the Licensee directly whether ‘this house was leaky” the reply from the Licensee regarding the building date of the Property, made the Complainants believe this Property did not have any leaks.

4.3 The Complainants also subsequently considered, once a leak was known, the alteration of clause 8.1 (1)of the particulars and conditions of Sale of Real Estate by Auction where the standard clause is as follows : the vendor warrants and undertakes that at the date of this agreement the vendor has not (1) received any notice or demand or has any knowledge of any requisition or outstanding requirements... the deletion of the words “or has direct knowledge” was an indication that the Licensee had some knowledge, regarding leaking, that he did not wish to pass on.

4.4 The Committee considered the information supplied by the investigator, which notes this clause was requested to be deleted by the vendor’s solicitors not the Licensee.

4.5 The Committee also considers the deletion of this phrase is irrelevant to this particular complaint, as it does not relate to any issues regarding leaking, but to any outstanding legal requisitions or requirements.

4.6 In addition, the auction agreement had not changed from that which was sent to the

Complainants on 25 October 2012, being a few days before the Auction.

4.7 The Licensee replied he recalled answering a question at an open home regarding whether the house leaked, by saying that it was built in the 1970’s. He does not recall mentioning leaking homes built in the 1990’s. However he also advised the Complainants they could do a building inspection.

4.8 Whilst the Committee accepts the Complainants asked about ‘leaky homes’ they also accept there may have been a miscommunication between the parties as to what that question actually meant.

4.9 It is clear from the Licensee’s reply he thought the question was in relation to weather tightness issues relating to buildings that have a particular type of cladding that was used in the 1990’s but was not used in the 1970’s. It appears the phrase leaky building is understood to have a particular meaning amongst those working in the real estate industry of which the Complainants’ were probably not aware.

4.10 The Committee accepts the Licensee’s explanation that the reply was never intended to be a response to whether this particular property actually had any leaks (that were not caused by weather tightness issues relating to cladding).

4.11 The Licensee said he had no prior knowledge of any previous specific leaking issues nor did

the vendor advise him of any leaking problem.

4.12 The Committee noted the Complainants had actually engaged a professional builder to undertake an inspection of the Property prior to the auction. In his written report to the Complainants, the building inspector, made no mention of any evidence to indicate the leaking issue that is the subject of this complaint.

4.13 Furthermore the neighbour has confirmed that any leaking issues with the retaining wall were thought to have been remedied nearly 10 years ago by the vendor. He further confirmed he did not believe the vendor knew of any subsequent issues, (which he would probably have known about) as the vendor lived in the Property, until just before it was sold.

4.14 As it appears that the defect was not obvious at the time of listing nor at any time prior to the auction and it did not become noticeable until nearly one year after purchase, the Committee considers the letter supplied to the investigator from the Licensee is an accurate summary of his position. The letter read:

“I believe I have been thorough in my handling of the sale of process. The purchaser was provided all the information available. They were advised to get a building inspection report and they did this. I have no knowledge of leaking issues with this Property. The vendor did not advise me of any leaking problem. The auction agreement has not changed in any way from the copy that was emailed to the buyers on 25 October 2012. The vendor solicitor deleted “has no Knowledge” in clause 8 of the agreement. This has not affected this transaction. I can’t see how I could have handled this matter any differently”

4.15 The Committee accepts on the basis of the above, the Licensee did not have any prior knowledge and cannot be deemed to have had any prior knowledge of any leaking he should have disclosed to the Complainants.

4.16 With regard to the complaint that the Complainant was given the wrong date of the auction by the Licensee, the Licensee responded he believed the Complainant must have misheard him, because the auction date did not change. Accordingly, the Committee does not consider there is adequate evidence to verify this claim.

4.17 With regard to the lack of information regarding the Complainants’ right to a pre-settlement inspection; the Complainants said they were not given adequate notice that they were entitled to a pre-settlement inspection by the Licensee and were only told of this right, the day before settlement. They were therefore unable to have a pre-settlement inspection due to not being able to arrange time off work or transport.

4.18 The Licensee responded to this complaint that the Property was unoccupied and access was unrestricted and the Complainants also had an opportunity to inspect the Property when they had curtains measured on 8 November 2012.

4.19 In addition, the Licensee said a builder had also been given access by him prior to the auction and he also mentioned that after the auction, the Complainants also arranged for a valuation of the Property with access being organised by the Licensee.

4.20 The Complainants accept in their written response to the Licensee’s response they

“remember clearly that a couple of days before the settlement date” the Licensee rang and

told them they had a right to a pre-settlement inspection. They advised they didn’t have time, so reluctantly agreed with the Licensee that the curtain measuring visit could be deemed the pre-settlement inspection.

4.21 The Committee also noted that clause 5.2 of the sale and purchase agreement also advises the purchasers are entitled to inspect the premises prior to settlement.

4.22 The Committee considers that as the Complainants did not raise the issue of their dissatisfaction to a lack of pre-settlement inspection when one could have still been arranged with the Licensee, then this is not an issue that would be deemed as unsatisfactory conduct on the part of the Licensee.

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 Complainants (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. 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: 1 July 2014