Complaint No C04852 [2014] NZREAA 254 (4 September 2014)

Last Updated: 15 March 2015

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

And

In the Matter of Complaint No: C04852

In the Matter of The Licensee

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 4th day of September 2014

Complaints Assessment Committee: CAC303

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

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 This is a complaint made by the Complainant against the Licensee. The Licensee is a licensed salesperson under the Real Estate Agents Act 2008 (the Act) engaged by the Agency.

1.2 The complaint alleges

a) the Licensee refused to write up an offer to purchase a commercial property (the Property)

for the Complainant on Friday, 14 February 2014.

b) the Licensee did not take his offer until Monday, 17 February by which time there was a multiple offer situation and the Complainant lost out on the Property.

c) the Licensee lied to the Complainant about why his offer could not be made earlier and also the Licensee failed to follow the Agency’s protocol for multiple offers.

1.3 The Complainant is seeking compensation from the Licensee for his losses.

1.4 The Committee determined to investigate the complaint on 28 March 2014.

2. Material Facts

2.1 The Complainant and his partner (Mr. A) own a business which the Complainant states had outgrown its current premises. The Complainant and his partner had been looking for a bigger commercial property for several months.

2.2 The Agency listed the Property on 12 February 2014. The listing salesperson was Mr. B and the

Licensee was asked by Mr. B to assist him with marketing the Property.

2.3 On 14 February 2014 the Licensee showed the Property to a Mr. C at 10am. Mr. C was interested and said he would discuss the Property with his wife and get back to the Licensee.

2.4 At 4.30pm the Licensee showed the Property to the Complainant and Mr. A. He disclosed to the

Complainant there was already interest from another party (Mr. C).

2.5 The Complainant and the Licensee discussed the price expectation of the owners. The Complainant and his partner made a verbal offer of $1.85 million and asked that it be written up immediately. The Licensee stated this was not possible as all offers had to be created online.

2.6 The Complainant contacted the Licensee by email at 5.55pm on Friday the 14th with an offer of

$1.87 million.

2.7 On Saturday 15 February, the Licensee received confirmation by phone call that Mr. C would also make an offer for the Property. The Licensee informed Mr. C there was other interest in the Property and it should be his best offer.

2.8 The Licensee contacted the listing salesperson to make him aware of the situation and was advised to get both offers completed and signed so they were ready to be presented to the owner on the Monday.

2.9 The Licensee prepared the sale and purchase agreements for both parties on the Monday morning and emailed them. The signed agreements were returned to the Licensee by email.

2.10 The Complainant contacted the Licensee by telephone before the offers were presented and was told by the Licensee more than one offer was being presented. The Complainant was very upset by this. He stated that was exactly what he wanted to avoid by getting in first.

2.11 The owner of the Property chose to negotiate with the other purchaser and an agreement was concluded with that party.

2.12 The Complainant contacted the Agency to complain and was responded to by letter dated 4

March 2014. The letter concedes the Licensee did not follow the Agency protocol for multiple offers and apologises to the Complainant.

2.13 The Complainant was not satisfied with the Agency’s response and made his complaint to the

Authority on 7 March 2014.

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 Professional Conduct and Client Care Rules 2012 (the Rules)

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

Rule 9.1 A licensee must act in the best interests of a client (seller) and act in accordance

with the client’s instructions unless to do so would be contrary to the law.

4. Discussion

4.1 The Committee has carefully investigated and considered all the matters raised by the Complainant. In order to making a finding of unsatisfactory conduct against the Licensee, the Committee must be satisfied that the evidence before us has proven, on the balance of probabilities, the Licensee has breached the Act or the Rules.

4.2 The initial complaint received from the Complainant states he was astonished that the Licensee refused to take his offer on the Friday afternoon. The Complainant goes on to state the Licensee

mentioned this was because another buyer may possibly be placing an offer on Monday. The Committee consider this statement shows the Complainant was aware of other interest from the very first meeting. The Complainant clearly did not want to compete for the Property so he sought to clarify that there was no other offer in writing at that point. Once this was confirmed the Complainant insisted his offer be placed immediately “so we have first right to negotiation”.

4.3 The Licensee did not write up an offer at the time. He told the Complainant his office policy required all offers be completed online. The Committee is given to understand that due to the office policy, the Licensee did not have a blank sale and purchase agreement with him at the time. It is also submitted the Licensee had no time to complete the offer by returning to his office as he had another commitment on the Friday evening.

4.4 It appears from the Complainant’s statement his main concern was that any delay in getting his offer presented to the owner would result in there being competition for the Property from another party.

4.5 The Committee has come to the view the Licensee did not do enough to make the Complainant aware that he must work in the client/seller’s best interests. As such, the Licensee had a duty to ensure the client was given the best and strongest negotiating position by encouraging multiple interests wherever possible. The Committee notes there is no requirement in law for a commercial property customer to be provided with an “approved guide” to sale and purchase agreements. This is a requirement for residential property and the guide makes it clear that a licensee works for the seller but must be fair to the buyer.

4.6 The Committee also finds the Complainant was mistaken in his belief that being first on paper would provide him exclusive rights to negotiate with the owner. Even if the Complainant had been successful in having his offer made on the Friday, the Licensee had a duty to inform the client that a second offer was coming. It would be up to the client/owner to decide what action to take from that point, but the Committee believes that a sensible seller would wait and see.

4.7 The Committee then turned its mind to whether or not the Licensee had breached the Act or the

Rules by failing to complete the Agency protocol for multiple offers with the Complainant.

4.8 The protocol requires salespeople to gain written acknowledgement from a customer confirming the customer is aware that there is more than one interested party and that the customer should make their best offer as there is no guarantee that there will be any further negotiation.

4.9 The Agency and the Licensee concede no such written acknowledgement was completed in this case. The Complainant argues this resulted in his not being given the chance to increase his initial offer. The Committee must decide if this failure represents a breach of s72(a) conduct that falls short of that expected from a reasonably competent licensee, or Rule 6.2 failure to deal fairly with the Complainant.

4.10 The Committee looked at the chronology of events to gain a better understanding of what occurred during the offer process. According to the parties, the Complainant asked about price during the initial meeting at the Property and was told by the Licensee an offer of $1.8 million had already been rejected. The Complainant immediately made a verbal offer of $1.85 million and was advised by the Licensee to send the details of this offer to him by email.

4.11 The email sent by the Complainant specifies a price of $1.87 million subject to finance (10 working days) and a flexible settlement date as per the vendor’s requirements. The email stated the Complainant expected to sign the offer over the weekend and also offered the Licensee the opportunity to become the sales agent for a building owned by the Complainant. The Committee notes the price has increased since the initial verbal offer.

4.12 The Licensee submits the opportunity to list the Complainant’s building for sale was intended as a bribe to persuade the Licensee to favour the Complainant over the other buyer interested in the Property. The Committee concedes it may have been intended to sweeten the deal for the Licensee but may also have been because the Complainant liked the Licensee and considered he would be a suitable agent for the task.

4.13 On Saturday morning the Licensee received a phone call from Mr. C confirming his intention to make an offer. The Licensee made it clear to Mr. C this was a multiple offer and he should make it his best. Mr. C confirms this was conveyed to him but added he thinks all agents say that.

4.14 The Licensee contacted his colleague, Mr. B, who advised the Licensee to get both offers signed and that he (Mr. B) would present the offers to the owner on Monday.

4.15 The Complainant contacted the Licensee over the weekend by text message and was advised his offer would be presented Monday morning. The Complainant’s response was “Ok Cheers”. It should be noted that unless an offer to purchase land is in writing and signed by the parties it is not enforceable in law. The email offer from the Complainant would not be considered binding in law.

4.16 The sale and purchase agreements were prepared by the Licensee online and emailed to the buyers who signed and returned them on the Monday morning. The Committee notes the Complainant had reduced the deposit figure on his offer from $100,000 to $50,000.

4.17 The Complainant called the Licensee in the afternoon to check on progress and was told the two offers were being presented soon. The Complainant concedes he was then fully aware two written offers were being presented to the owner.

4.18 The Committee notes the Complainant did not make any comment at that time in regard to improving his offer. This may have been because he felt it was too late, or that he felt the offer was sufficient to be successful. It may also have been because he was very upset at being in competition for the Property. Whatever the reason, the Committee finds that, at this point, the Complainant knew for certain that he was in competition for the Property and made no attempt to improve or alter any terms of his offer.

4.19 The Committee finds the Complainant would have been within his rights to do this or to withdraw the offer. The Complainant took no action and waited for the result.

4.20 Mr. B presented the offers to the owner late on Monday afternoon and the owner took legal advice before accepting the second offer.

4.21 The Committee has been provided with copies of the offers and can understand why the owner would prefer the second offer from Mr C. It was significantly higher in price, had a larger deposit and fewer conditions.

4.22 The Committee notes there is no specific rule that requires a multiple offer to be acknowledged by potential customers in writing. The industry has taken to using a written acknowledgement as good practice so that, in circumstances that exist in this complaint, the licensees have evidence to show the customer was aware they were in competition with other buyers.

4.23 The Committee has no doubt the Complainant was aware there was competition for the Property. The Complainant accepts he was told of this interest at the first meeting with the Licensee. The Complainant’s partner agrees he was told of another buyer who had seen the Property that morning. The Licensee states he told the Complainant to make his best offer and

that is why the original offer of $1.85 million was increased to $1.87 million.

4.24 The Committee believes the Complainant may have assumed he would be formally notified if there was another written offer. The Committee must decide if this was a reasonable assumption for a customer to make and, whether failure of the Licensee to provide formal notification breaches the Act and/or the Rules.

4.25 There is no evidence to suggest the Licensee promised to notify the Complainant if and when the second offer was made. It appears the Complainant may have made the same assumption as the eventual buyer that “all agents say they have other interest” when in fact there is none. The Committee believes a customer should confidently rely on the honesty of such a statement, as if it were to be proved incorrect, a licensee would face disciplinary action through the Authority as well as criminal liability under the Fair Trading Act 1986.

4.26 The Committee finds the eventual purchaser was treated in exactly the same manner as the Complainant. Mr. C confirms he was told verbally of the other interest and encouraged to make his best offer, which he did. The Committee finds the Licensee did not favour either buyer but gave them the same opportunity and the same information. In doing so the Committee has determined the Licensee has fulfilled his duty of care to the Complainant and has complied with Rule 6.2 to be fair to all parties engaged in a transaction.

4.27 The failure of the Licensee to complete the Agency protocol for multiple offers has resulted in a formal apology from the Agency to the Complainant, and the Licensee has learned from his error. An agency policy matter is outside the Committee’s jurisdiction but has been dealt with from a disciplinary standpoint by the Agency.

4.28 The Committee is satisfied a verbal disclosure of a multiple offer meets the requirement for the Rules and the Act providing there is evidence to show such a disclosure was made. In this case such evidence was provided.

4.29 We also find that in a commercial property sale it is not unusual or unacceptable for offers to be required to be constructed and presented during business hours. It is also quite usual for these offers to be completed using online documents as the agreements can be more technical and require much more complicated clauses than a standard residential agreement. We therefore reject the Complainant’s allegation that the Licensee lied to him about this new office policy to subvert the Complainant’s ability to get in first and avoid being in competition.

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 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

Marina Neylon

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 4 September 2014