Complaint No C02611 [2014] NZREAA 23 (17 January 2014)

Last Updated: 18 September 2014

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

And

In the Matter of Complaint No: C02611

In the Matter of Licensee

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 17th day of January 2014

Complaints Assessment Committee: CAC20009

Chairperson: Paul Biddington Deputy Chairperson: Stuart Rose Panel Member: Joan Harnett-Kindley

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 The Complainants have complained to the Real Estate Agents Authority (Authority) about the conduct of the Licensee. The Licensee is licensed under the Real Estate Agents Act 2008 (Act). The Licensee holds a salespersons licence and works for the Agency.

1.2 The complaint relates to the conduct of the Licensee during the purchase of the Property, by the

Complainants on 6 November 2012

1.3 The Complainants allege that the Licensee must have been aware of the issues with metal in the water supply and repairs required to the septic tank but did not disclose these to the Complainants.

1.4 The complaint was received by the Authority on 19 June 2013 and referred to a Complaints

Assessment Committee (Committee). The Committee initially considered the complaint on 21

August 2013 and made a decision pursuant to section 79(1) of the Act to inquire into the complaint. The Committee considered further evidence gathered on 1 November 2013.

2. Material Facts

2.1 The Licensee listed the Property as a general listing with the Agency on 1 November 2011. The Property was also listed as a general agency with Agency 2. According to the Licensee he made inquiries with the Vendors in relation to the water supply and the septic tank at the time of listing. The Licensee says that the Vendors told him that water supply came via an easement from the Neighbour and that the septic tank had been cleaned on 13 February 2013.

2.2 The Licensee stated that the Vendors told him the water was fine and he had no reason to doubt what they said. According to the Licensee he did notice that there was no sand trap to filter iron which is standard for properties of this era if issues existed with iron quality, however as the Vendors had said the water was fine he accepted that in good faith.

2.3 Furthermore the Licensee stated that he did not notice any tell-tale signs, for example, stains in the sinks, stains in the bath or stains in the toilets and there was nothing to alert him to any problems.

2.4 The Licensee says that in relation to the septic tank there were no obvious tell-tale signs such as “green patches” which is synonymous with leakages around the tank which could indicate blockages. Also there were no odours or running sewage which can be signs that the septic tank is not working properly.

2.5 The Licensee stated the Vendors signed the warranties on the listing agreement that the

Property information was correct in all respects.

2.6 The Complainants viewed the Property with Mrs C of Agency 3 and the Licensee in August 2012.

The Complainants say they asked the Vendor and the Licensee if the water was ok. The Vendors replied that the water was all good and the hot water cylinder was also good.

2.7 On 31 August 2012 the Complainants signed a sale and purchase agreement for the Property with Mrs C. The agreement required the Complainants to complete extensive pre-purchase disclosure in relation to a LIM, Builder’s Report and valuation.

2.8 The Licensee says that the Complainants also undertook due diligence with the Water Provider next door. The Complainants were advised by the Neighbour that the water was ok and that the farmer’s staff drank it, however it needed extra filtration. The Licensee stated that after the Complainants were advised of this they later undertook to install the extra filtration on their own volition.

2.9 The Complainants say that the house inspection found a number of issues which the Vendors were not prepared to remediate and the offer was cancelled.

2.10 About a month later the Complainants contacted the Licensee to inquire whether the Property was still for sale. According to the Complainants the Licensee advised that the Vendors were thinking of planting a garden and taking the Property off the market with the intention of staying.

2.11 Mrs C contacted the Complainants and subsequently on 6 November 2012 the Complainants entered into a sale and purchase agreement on the Property. The Licensee says that because of the short time period between the first and second offer the Complainants chose not to get a LIM or Building Report and made the agreement subject to finance only. The agreement became unconditional with the due date for settlement on 29 November 2012.

2.12 The Complainants say they contacted the Vendors to inquire if they could have Contractors come out and prepare the Property before their moving date. According to the Complainants the Vendors were happy for this to happen, except they would not let the Complainants switch the water supply over to the new pump they had installed.

2.13 The Licensee stated that he did not find this unreasonable as the Complainants had not yet settled the Property and the decision by the Vendors to deny the Complainants the right to cut into the new system was taken under legal advice and furthermore the Vendors had permitted the Complainants to do all the necessary work before settlement.

2.14 On settlement day the new pump was switched on and the water was like mud and sludgy. The Complainant’s Plumber wondered if the pump was sucking in dirt somewhere and perhaps the removal truck had caused a leak in the pipe, however no leak was found.

2.15 The Complainants say they tested all the taps and it was the same everywhere. When the water was running you couldn’t see it, but as soon as you filled anything up it became obvious. After spending considerable money on filters, the Complainants say they were still not prepared to drink it.

2.16 The Complainants stated they had the water tested and were told that the water was unsafe to drink due to the iron and magnesium levels. It was noted that the Complainants did not provide any expert or specialist reports showing that the water was defective.

2.17 The Complainants say that the Licensee and the Vendors must have discussed the quality of the water at the time of listing the Property. The Licensee refutes the assertion that he and the Vendors discussed the quality of the water supply and the sewage issues at the time of listing. The Licensee added that he was more than satisfied with the Vendor’s responses and his own

inspections in relation to those issues at the time.

2.18 On 24 April 2013 the Complainants noticed that the septic tank was over flowing and instructed a septic tank company to clean it. When the Plumber arrived he advised the Complainants that it was over flowing due to the lid being broken. The Complainants say the Plumber mentioned he had advised the previous owners of this several times but it had still not been done.

2.19 The Complainants stated that they contacted the Licensee with their concerns and found that he was not approachable or helpful. The Licensee refutes this and says that when the Complainants approached him with their concerns he did listen to them and advised that they contact Mrs C or their Solicitor. The Licensee further stated that he had advised his Principal Agent of the Complainants concerns and he confirmed that the Complainants should go back to their Solicitor.

2.20 Mrs C stated that she did hear the Complainants ask the Licensee and the Vendors about the water quality and both advised that it was fine. While she has very serious concerns about the Vendor’s knowledge of the water issues, she does not know if the Licensee was aware.

3. Relevant Provisions

3.1 The Real Estate Agents Act 2008 establishes a statutory basis for the licensing and hearing of complaints against real estate agents, amongst other things. The Act provides for the setting up of Complaint Assessment Committees to hear the complaints and allegations about Licensees. It also establishes a Disciplinary Tribunal to hear complaints at the next level.

Section 3 of the Act set out the purposes of the Act.

Purposes of Act

(1) The purpose of this act is to promote and protect the interests of consumers in respect of transactions that relate to real estate and to promote public confidence in the performance of real estate agency work.

(2) The act achieves its purpose by-

(a) Regulating agents, branch managers, and salespersons: (b) Raising industry standards:

(c) Providing accountability through a disciplinary process that is independent transparent and effective.

3.2 When committee considers a complaint it must decide whether it breaches the standards of conduct that are set out in section 72 and 73 of the act and also the Rules of Professional Conduct and Client Care as set out in the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012.

3.3 The Real Estate Agents Act 2008

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 be regarded by agents of good standing as being unacceptable.

3.4 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 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 thus 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.

3.5 The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (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 are a reference point for discipline.

3.6 In relation to this complaint the following rules may apply.

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

Rule: 10.7 A Licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Where it would appear likely to a reasonably competent Licensee that land may be subject to hidden or underlying defects, a Licensee must either-

(a) obtain confirmation from the client, supported by evidence or expert advice, that the land in question is not subject to defect; or

(b) ensure that the customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.

4. Discussion

4.1 In reaching a decision and making a finding the Committee has to look carefully at the evidence before it and then come to a decision based on our assessment of what we believe is more likely than not to have occurred, or in other words, on what we see as the balance of probabilities in this case.

4.2 This threshold has been considered by the Disciplinary Tribunal in its decision: Hodgson v CAC & Arnold [2011] READT03. In that decision the Disciplinary Tribunal said that the onus to establish

a complaint rests with Complainant. The consequence of this is that unless we are able to form a view that what the Complainant alleges is more likely than not what happened, or if we believe that the conduct complained of does not reach the threshold set out in section 72 of the act, we must dismiss the complaint.

4.3 We note that when the Complainants viewed the Property with the Licensee and Mrs C and were asked the question about the water quality, both the Licensee and the Vendors said it was fine.

4.4 The Committee must now consider whether the Licensee did in fact know or ought to have known that the Property may have a defective water supply and if it was known by the Licensee was it withheld from the Complainants at the time of purchase.

4.5 The Committee must further consider whether the Licensee, although not required to discover hidden or underlying defects in the land, had certain responsibilities where it may appear likely to the Licensee that the land may be subject to hidden or underlying defects such that in this situation he should have been alerted to the potential for the Property to have a defective water supply.

4.6 At the time of listing the Property the Licensee stated that he did notice there was no sand trap to filter iron, which was standard for properties of that era, if issues existed with iron quality however the Vendors had said the water was fine and he accepted that in good faith.

4.7 The Committee accepts the Licensee did not see any tell-tale signs like stains in the bath, sink or toilet and there was nothing to alert him to anything that may indicate there was a problem with water quality. We accept that unless the Licensee had had good cause to suspect the Vendors were not telling the truth, or by his own observations became aware of defects with the Property then the Licensee had no choice but to rely on what the Vendors told him.

4.8 We note that the Complainants made their own inquiries and inspections and that these did not reveal any issue with the water.

4.9 Accordingly, the Committee is of the view that on the balance of probabilities the Licensee has not breached his responsibilities or obligations under the Act or the Rules in relation to his duty to the Complainants because we find he was not aware of the issue and there was no event or facts that should or could have alerted him to the issue, and as a result the Committee has decided to take no further action in relation to this part of the complaint.

4.10 In the second part of the complaint the Committee also had to consider whether the Licensee, although not require to discover hidden or underlying defects in the land, had certain responsibilities where it may appear likely to the Licensee that the land may be subject to hidden or underlying defects such that in this situation he should have been alerted to the potential for the Property to have repairs needed to its septic tank.

4.11 The Licensee said that at the time of listing the Property there were no obvious tell-tale signs such as “green patches” which is synonymous with leakages around the tank which would indicate blockages. Furthermore, he said there were no odours or running sewage which can be signs that the septic tank is not working correctly.

4.12 Again, unless the Licensee had had good cause to suspect the Vendors were not telling the truth, or by his own observations became aware of defects with the Property then the Licensee had no choice but to rely on what the Vendors told him.

4.13 Accordingly, the Committee is of the view that on the balance of probabilities the Licensee has not breached his responsibilities or obligations under the Act or the Rules in relation to his duty to the Complainants in this part of the complaint and the Committee has decided to take no further action.

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

Paul Biddington

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 17 January 2014