Complaint No C07112 [2015] NZREAA 193 (14 July 2015)

Last Updated: 25 March 2016

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

And

In the Matter of Complaint No: C07112

In the Matter of The Licensee

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 14th day of July 2015

Complaints Assessment Committee: CAC 406

Chairperson: Paul Biddington Deputy Chairperson: Bernardine Hannan Panel Member: David Bennett

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 23 January 2015 the Real Estate Agents Authority (the Authority) received a complaint against the Licensee from the Complainants.

1.2. The Licensee is a licensed salesperson under the Real Estate Agents Act 2008 (the Act). He is employed by the Agency.

1.3. The complaint relates to a property (the Property).

1.4. The details of the complaint are that the Complainants purchased the Property as a vacant section in early 2014. The Complainants say the contract went unconditional, the deposit was paid and settlement was due, when the title and a CCC were issued at the completion of the build. They say the Vendor was a building company, and the purchase included having a house built on the Property, however halfway through the building of the house the company ran into financial difficulties.

1.5. The Complainants say the Licensee, who had listed the Property for sale, contacted them and asked them to cancel their sale and purchase agreement. The Licensee advised he had another purchaser for the Property. The Complainants say they refused unless the Vendor was willing to refund their deposit. Furthermore, the Complainants say the Licensee acted in an unprofessional manner during his contact with them, did not get back to them, and they have since heard the Licensee has sold the Property to another buyer.

1.6. According to the Complainants they say during February and March 2014 they negotiated a private sale and purchase agreement between the Vendor and the Company (nominee for the Complainants). The Vendor was the brother of one of the Complainants and was a building developer at the time. The Complainants stated they paid a deposit of $22,750 to the Vendor and settlement was on completion of the build when a Code of Compliance Certificate was to be issued. The evidence suggests that neither the Licensee nor the Agency were involved in this transaction.

1.7. On November 2014, due to financial difficulties the Vendor signed an agency agreement with the Agency, and the Licensee was the listing salesperson. The evidence suggests the Vendor had been issued a Section 119 Notice (Property Law Act 2007) by the Bank, who held a mortgage over the Property, and the notice remained un-remedied as at 22 December 2014 which was the deadline.

1.8. The Bank instructed the Agency to sell the entire development site including the Property purchased by the Complainants. The evidence suggests the Bank exercised their rights as the mortgagee and were under no obligation to honour the earlier contract, as they had not agreed to its terms. The Bank became the vendor and entered into a sale and purchase agreement with company X.

1.9. The Complainants have stated the Licensee contacted them and it appears that he did so, on instructions from his Vendor client at the time, to determine if the Complainants would cancel their contract so a new contract could be entered into with a prospective buyer, who

was prepared to purchase the entire development site. A clause in the prospective buyer’s contract confirms this; however the Complainants declined to cancel as they were concerned their deposit would not be refunded to them.

1.10. The Licensee responded to the complaint against him saying the Complainants purchased one of the development properties off the plan privately and neither he nor the Agency was involved in the agreement. He says he had been working with the Vendor for some time, and he had disclosed to him his situation and needed to sell some property urgently. Furthermore the Licensee says it became general knowledge the Vendor was financially constrained and in arrears on mortgages.

1.11. The Licensee says the Vendor instructed him to inform the Complainants they had an offer that was acceptable to him. The Licensee says the discussion was amicable, calm, and pleasant and denies trying to bully the Complainants into cancelling their contract. He stated the Complainants said they would talk to the Vendor as it would be stupid to let the deposit go. The Licensee says the Complainants were adamant they had an unconditional contract on the back unit and they would not be giving up their deposit.

1.12. The Licensee says he had tried to sell the Property on behalf of the Vendor under an agency agreement executed on 20 November 2014. He says on 24 November a sale and purchase agreement between the Vendor and Mr. B was signed for the entire development Property. The sale failed to proceed.

1.13. According to the Licensee on 16 December 2014 another sale and purchase agreement was signed between the Vendor and company X. It also related to the purchase of the entire unfinished development of the Property. The sale failed to proceed. Both of these agreements were specifically conditional upon the purchaser either purchasing the back unit or the prior contract being cancelled. This prior agreement is the subject of this complaint. At all times pursuant to the two sales executed on the Property, an agency agreement was held authorizing the Agency to sell the same.

1.14. The Licensee says the agreement dated 16 December 2014 was executed between the parties, conditional upon the prior agreement, and the Bank were not happy with the transaction and wanted to negotiate directly as mortgagee in possession with a legal right to do so. The Complainants state they signed a second agreement with the Vendor on 17

December 2014 for the total Property. A copy of this second agreement was not provided as evidence.

1.15. Pursuant to a master agency held by the Agency on behalf of the Bank, which is a general authority to undertake mortgagee sale by auction/tender/private treaty of such properties from time to time as authorized, the Agency received instructions to sell the Property on behalf of the Bank as mortgagee.

1.16. On 22 December 2014, a sale and purchase agreement pursuant to the terms of the mortgage authority from the Bank was entered into. It was signed by the Bank as mortgagee and the buyer was company X. Accordingly the Bank, who at law had an expired Property Law Act notices permitted them to take action. They then took possession of the Property and one of the consequences was that all prior agreements could be avoided, and in fact were avoided by the Bank, which also related to the Complainant’s agreement.

1.17. The Licensee says the Bank mortgage being a prior interest, took precedent over any other subsequent interest, and therefore any caveat lodged against the title pursuant to the sale

and purchase agreements entered into by the Complainants would in effect not stand encumbrance, and by operation of law the caveat cannot exist. A caveat was lodged by the Complainants prior to settlement however the caveat was removed and the Property settled.

1.18. Further, the Licensee says his actions did not result in the caveat lapsing, the caveat supporting any interest, was by operation of law as the sale between the Bank and company X was affirmed by the Bank on 22 December 2014.

1.19. The Licensee says he had no obligation to the Complainants as they were not customers of the Agency. He says the Complainants were responsible for their own loss as a result of entering into a contract with the Vendor at the time.

1.20. At all times the Licensee says he acted under authority he had been given by his Vendor client and therefore to whom he had the principal and prime duty of care.

2. What we decided

2.1. On 16 February 2015 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it.

2.2. On 4 June 2015 the Committee held a hearing on the papers and considered all the information gathered during the inquiry.

2.3. The Committee has decided to take no further action on the complaint.

2.4. This decision was made under section 89(2)(c) of the Act. The decision was also made with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012.

3. Our reasons for the decision

3.1. The Committee is not persuaded the Licensee acted unprofessionally in the sale of the Property, and there is no evidence before the Committee to suggest a deposit was paid to the Vendor or that the Licensee was responsible for any loss.

3.2. The Complainants say the Licensee contacted them on 16 December 2014 to advise the Vendor had an offer for the Property that was acceptable to him. They say the Licensee asked if they would cancel their contract so a new contract could be entered into with a prospective purchaser who was prepared to purchase the entire development site.

3.3. The Complainants say they declined to cancel as they were concerned the deposit they had paid would not be refunded to them. The Committee was provided with a copy of a sale and purchase agreement dated 4 March 2014, and the Complainants say they paid a $22,750 deposit to the Vendor; however they were unable to provide evidence to support having paid the deposit.

3.4. The Complainants’ view of the call from the Licensee was that he was rude and did not act in a professional manner when he discussed the cancellation of their agreement. Furthermore, they say the Licensee tried to bully them into cancelling their contract. The Licensee refutes this and stated the discussion was amicable, calm, and very pleasant amendable. The

Committee was not provided with independent evidence to support the exact content of the phone contact between the parties.

3.5. The Committee accepts that when the Licensee contacted the Complainants requesting they cancel their contract, this would have been upsetting as they believed they had a contract to purchase the Property from the Vendor, who was a relative, subject to the building being finished and conditions being met.

3.6. What the Committee does not accept, is that the Licensee was responsible for the Complainants contract being cancelled or the loss of any deposit that may or may not have been paid.

3.7. The Committee accepts the Licensee had no obligation to the Complainants as they were not customers of the Agency and at all times the Licensee was acting under authorities from both the Vendor and the Bank, and it was to them that he owed a duty of care.

3.8. The Licensee submitted that the Complainants were responsible for their own loss as a result of entering into a contract with the Vendor, by paying a deposit to him directly; and their loss was a result of liquidation of the Vendor’s company and not his conduct. The Committee agrees.

3.9. Accordingly, the Committee finds the Licensee has not breached the Act or the Rules and will takes no further action on the complaint.

4. What happens next

Your right to appeal

4.1. If you are affected by this decision of the Committee, you may appeal in writing to the Real Estate Agents Disciplinary Tribunal (the Tribunal) within 20 working days after the date of this decision. Your appeal must include a copy of this decision and any other information you wish the Tribunal to consider in relation to the appeal. Refer to Appendix section 111.

4.2. For further information on filing an appeal, read Guide to Filing an Appeal at M inistry o f

Justice-Tribunals ( ww w.justice. go v t.nz/ tribunals ) .

Publication

4.3. At the Committee’s discretion, the decision will be published without the names or identifying details of the Complainant (including the address of the Property), the Licensee and any third parties.

4.4. The Authority will publish the Committee’s decision after the period for filing an appeal has ended, unless the Tribunal receives an application for an order preventing publication. The Authority will not publish the Committee’s decision until the Tribunal has made a decision on the application.

4.5. Publishing the Committee’s decision supports the purpose of the Act by ensuring that the disciplinary process remains transparent, independent and effective. The Committee also

considers that publishing this decision helps to set industry standards and that is in the public interest.

Signed

Paul Biddington

Chairperson

For Complaints Assessment Committee 406

Date: 14 July 2015

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

Section 89 Power of Committee to determine complaint or allegation

(1) A Committee may make one or more of the determinations described in subsection (2) after both inquiring into a complaint or allegation and conducting a hearing with regard to that complaint or allegation.

(2) The determinations that the Committee may make are as follows:

(a) a determination that the complaint or allegation be considered by the

Disciplinary Tribunal:

(b) a determination that it has been proved, on the balance of probabilities, that the licensee has engaged in unsatisfactory conduct:

(c) a determination that the Committee take no further action with regard to the complaint or allegation or any issue involved in the complaint or allegation.

(3) Nothing in this section limits the power of the Committee to make, at any time, a decision under section 80 with regard to a complaint.

Section 111 Appeal to Tribunal against determination by Committee

(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 the notice given under section 81 or 94.

(2) The appeal is by way of written notice to the Tribunal of the appellant's intention to

appeal, accompanied by—

(a) a copy of the notice given to the person under section 81 or 94; and

(b) any other information that the appellant wishes the Tribunal to consider in relation to the appeal.

(3) The appeal is by way of rehearing.

(4) After considering the appeal, the Tribunal may confirm, reverse, or modify the determination of the Committee.

(5) If the Tribunal reverses or modifies a determination of the Committee, it may exercise any of the powers that the Committee could have exercised.