Keane - Complaint No C05466 [2015] NZREAA 232 (20 July 2015)

Last Updated: 1 May 2016

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

And

In the Matter of Complaint No: C05466

In the Matter of Adele Keane

License Number: 10007882

Licensee Two

License Number: XXXXXXXX

Licensee Three

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 20th day of July 2015

Complaints Assessment Committee: CAC 406

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

Complaints Assessment Committee

Decision finding unsatisfactory conduct asking for submissions on orders and

Decision to take no further action

1. The Complaint

1.1. On 26 June 2014 the Real Estate Agents Authority (the Authority) received a complaint made by the Complainant against Adele Keane (Licensee One), Licensee Two, and Licensee Three. The Complaints Assessment Committee 406 (the Committee) made a decision to inquire on 4

July 2014.

1.2. Licensee One is a licensed agent under the Real Estate Agents Act 2008 (the Act) and at the time of conduct was engaged by City Realty Limited trading as Ray White City Apartments (the Agency). Licensee One was the listing and selling agent.

1.3. Licensee Two is a licensed salesperson under the Act and at the time of the conduct was engaged by the Agency. He was the second selling agent.

1.4. Licensee Three was the auctioneer and is a licensed agent under the Act. At the time of the conduct he was engaged by agency X.

1.5. The complaint relates to the sale by the Complainant of the property (the Property), and specifically that:

(a) Licensee One did not provide a written appraisal of the Property;

(b) Licensee One and Licensee Two did not attempt to obtain the best possible price for the Property; and

(c) Licensee Three signed the sale and purchase agreement without the Complainant’s

consent.

1.6. In respect of all of the issues, the Complainant requested a remedy, namely that the Complainant does not believe that the Property has been sold and wants the Licensees to “change their attitudes” and look after the vendor not the purchasers.

Issue One - Licensee One did not provide an appraisal of the Property

1.7. Licensee One and Licensee Two met with the Complainant’s brother on 20 March 2014, and in the course of the discussion with him gave a verbal appraisal, based on the brother’s description of the Property and recent sales in the area of $550,000 - $600,000.

1.8. Licensee One and Licensee Two were unable to view the Property at the time as, according to the Complainant’s brother, he did not want the tenant to be disturbed.

1.9. Licensee One and Licensee Two subsequently viewed the Property with the Complainant 11 days later on 31 March 2014, and as a result, gave a revised verbal appraisal of $500,000 -

$550,000 based on the condition of the Property and comparable sales in the area, which Licensee One and Licensee Two considered were relevant. The Complainant made it clear to both Licensees that he would be obtaining his own independent valuation. At this point, the Complainant informed them that he owed the body corporate $200,000 which he said was required to be paid in a week’s time.

1.10. Licensee One and Licensee Two also stated that they had discussed the matter with their colleagues to ensure that the Complainant received the benefit of their “best knowledge.”

1.11. The final appraisal range was given on 15 May 2014, when the agency agreement was signed as $450,000 - $600,000, with an appraised price of $500,000.

1.12. The Complainant states that Licensee One did not provide “an exact price or estimate” but we note that Rule 10.2(b) only requires that an appraisal “realistically reflect current market conditions.”

1.13. It is acknowledged, however, that Licensee One has not provided an appraisal in writing, which amounts to a breach of Rule 10.2(a).

Issue Two - Licensee One and Licensee Two did not attempt to obtain the best possible price for the Property

1.14. The Complainant says that he and his father had studied the market and estimated that the Property had a value of $650,000. The Investigation Report suggests that this was based partly on the Complainant’s need to get a price that would cover repair costs due to weather- tightness issues.

1.15. The Complainant subsequently obtained a valuation report dated 8 May 2014, valuing the

Property at $520,000.

1.16. Licensee One then met with the Complainant on 15 May 2014, to discuss the agency agreement. The agreement was signed by the Complainant, including an agreed appraisal range of $450,000 - $600,000 with an agreed appraised price of $500,000. This contrasts with buyer feedback noted in Licensee One’s marketing report of 3 June of $450,000 - $465,000.

1.17. The Complainant was hopeful of a higher sale price, despite his own valuation (which Licensee One had not seen at that stage) and despite market advice to the contrary. Licensee One also made a number of comments to help the Complainant present the Property in the best condition for sale.

1.18. On 4 June 2014, Licensee One emailed the Complainant a marketing report setting out a number of factors which might influence the price a purchaser would be willing to pay; such as weather-tightness issues, ongoing litigation costs incurred by the body corporate, and separate claims/litigation against the owners of at least two apartments.

1.19. On 10 June 2014, a further marketing report was sent to the Complainant in which new buyer feedback was given, and issues with the apartment or the building were once again highlighted. A final marketing report was sent on 17 June, two days prior to the auction date. Similar buyer feedback was provided with almost all indicating interest in the $450,000 -

$485,000 range.

1.20. Licensee Two confirms that at a meeting on 13 June 2014, the Complainant confirmed that he and his father were aware of the issues arising out of the marketing reports and the information provided.

1.21. Licensee One and Licensee Two met with the Complainant at their offices on the date of the auction, 19 June 2014. The Complainant was accompanied by a friend who, although he had

not seen the Property and had little knowledge of the issues with the building, told the Complainant’s father the Property would be worth $700,000 - $800,000. The Complainant’s father advised the Complainant that the reserve should be $650,000. After further discussion, the Complainant decided it should be set at $600,000, and confirmed that he understood that Licensee Three would talk to him and get instructions if the bidding did not reach that level.

1.22. Licensee One in her evidence referred again to the agency agreement, which provided for an appraisal range of $450,000 - $600,000 with a sale price of $500,000. She strongly refuted any suggestion that she applied a discount to the reserve, as suggested by the Complainant, nor did she take into account any discount relating to the financial position of the Complainant (monies owing to body corporate).

1.23. Licensee One points to the sale price eventually achieved, which although not above the reserve of $600,000, was nevertheless $28,000 above the Complainant’s valuation of

$520,000.

Issue Three - Licensee Three signed the sale and purchase agreement without the

Complainant’s consent

1.24. Pursuant to clause 3.1 of the agency agreement, Licensee Three was authorised to sign a sale and purchase agreement for the Property.

1.25. On the date of the auction, 19 June 2014, Licensee Three met the Complainant prior to the start of the auction, and discussed the process with him. Licensee Three was advised that the Complainant had already signed the reserve form with a reserve of $600,000.

1.26. Bidding reached $535,000, at which point Licensee Three paused the auction to seek instructions from the Complainant.

1.27. The Complainant agreed with Licensee Three’s suggestion that he should talk to the highest bidder to see if the bid could be increased. Negotiations took place with the highest bidder who increased his bid to $545,000, and eventually to $548,000.

1.28. At this point, Licensee Three confirmed to the Complainant that the bidder had advised that was his highest bid and he would go no further. Licensee Three says that he asked the Complainant whether he was prepared to sell at that price, but he did not pressure the Complainant in any way.

1.29. The Complainant understood Licensee Three’s advice that there would be little chance of the bid being increased, but he asked Licensee Three to try anyway. Licensee Three explained that he would resume the auction at $548,000, and if there were no further bids, he would sell at that price. He says that the Complainant confirmed that if there were no further bids, then he may do so. Licensee Three amended the reserve form (reducing the reserve from

$600,000 to $548,000) and placed the form on the table for the Complainant to sign.

1.30. Licensee Three was clear that the Complainant understood the process as he had explained, and that he had clear instructions to sell at $548,000 if there were no further bids.

1.31. Licensee Three reopened the auction, and called for further bids three times. When there were no further bids, he sold the Property to the highest bidder.

1.32. Immediately following the auction, a discussion took place between Licensee One, Licensee Three, the Complainant, and his father, in the course of which the Complainant said that he would not sign the sale and purchase agreement because he wanted a higher price. As the Complainant refused to sign, Licensee Three reminded him that he (the Complainant) had given him clear legal authorisation to sell the Property. The Complainant did not deny this but said he wanted more for the Property, at which point Licensee Three said that he had sold the Property as instructed for $548,000. Licensee Three then reminded the Complainant that he had authority to sign the sale and purchase agreement if the Complainant did not do so, and when the Complainant became agitated, he suggested that the Complainant contact his solicitor for legal advice. When the Complainant was unable to contact his solicitor, he and his father left the office despite Licensee Three asking them not to do so.

1.33. Licensee Three signed the agreement on behalf of the Complainant.

1.34. Licensee Three has advised that the completed reserve form was not left in the room and he assumes was taken by the Complainant. It appears from the evidence that no copy was kept.

2. What we decided

2.1. On 14 July 2015 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it.

2.2. On 3 December 2014 Complaints Assessment Committee CAC304 was disestablished.

2.3. The complaint was referred Complaints Assessment Committee 406 (the Committee).

2.4. The Committee have considered the original complaint afresh and made a decision to inquire into the complaint.

2.5. On 18 June 2015 the Committee held a hearing on the papers and considered all the information gathered during the inquiry.

2.6. The Committee found that:

(a) in respect of Issue One - Licensee One, Adele Keane, engaged in unsatisfactory conduct under section 89(2)(b) of the Act;

(b) in respect of Issue Two - no further action is to be taken against Licensee One and

Licensee Two under section 89(2)(c) of the Act;

(c) in respect of Issue Three - no further action is to be taken against Licensee Three

under section 89(2)(c) of the Act.

3. Our reasons for the decision

Issue One

3.1. It is clear from the evidence that no written appraisal was provided as required by Rule

10.2(a). The Committee felt that, although Licensee One and Licensee Two appear to have taken reasonable steps to ensure that the Complainant received a verbal appraisal, based on current market information and the condition of the Property; as soon as they were able to

inspect the Property, Licensee One should have complied with Rule 10.2(a) and provided a written appraisal.

3.2. Licensee One and Licensee Two were initially prevented from providing a written appraisal as they were unable to gain access to the Property. From the evidence, it appears that the Complainant was not prepared to cooperate with Licensee One and Licensee Two to enable them to provide a written appraisal, as he made little, if any effort, to arrange access with the tenant. Without viewing the Property, as at 20 March 2014, Licensee One and Licensee Two gave a verbal appraisal of $550,000 - $600,000 based on the description given to them by the Complainant’s brother.

3.3. A little over a week later on 31 March 2014, Licensee One and Licensee Two were able to view the Property with the Complainant, and on the basis of the inspection, revised their verbal appraisal downwards to $500,000 - $550,000. They did not provide a written appraisal at this point as they could, and should have done. At the same time, they were told by the Complainant that he intended to obtain his own independent valuation.

3.4. After providing further information to the Complainant, in a discussion at the time of signing the agency agreement about one month later, Licensee One incorporated an appraisal range of $450,000 - $600,000, and an appraised value of $500,000, inserted for commission purposes. Licensee One was unaware at this stage of the independent valuation received a week earlier by the Complainant.

3.5. The Committee noted that Licensee One and Licensee Two had given verbal appraisals on more than one occasion to assist the Complainant to understand the true value of the Property; that the value was something of a shifting target as more information came to hand, that they were careful to give an appraisal which realistically reflected current market conditions at the time, and was supported by comparable information on sales of similar properties. However, incorporating an appraisal price range into an agency agreement does not constitute providing a written appraisal, and the Committee considers that there has been a clear breach of Rule 10.2(a) which amounts to unsatisfactory conduct under section

72 of the Act, in that it:

(a) contravenes a provision of the Act or of any regulations or rules made under the Act;

and

(b) would reasonably be regarded by agents of good standing as being unacceptable.

3.6. The Committee considers that Licensee One, and not Licensee Two, is responsible for the breach of Rule 10.2(a) because Licensee One was the listing agent, and as a licensed agent, was in the position to supervise Licensee Two.

Issue Two

3.7. The Committee rejects the allegation that Licensee One and Licensee Two did not attempt to obtain the best possible price, and considers that the Complainant has no grounds on which to make this claim.

3.8. Licensee One and Licensee Two’s initial assessment of the Property was based solely on a description provided by the Complainant’s brother and their knowledge of recent sales in the area. As it transpired, such an assessment was slightly on the high side of its eventual sale price.

3.9. Licensee One and Licensee Two were careful to discuss with the Complainant the issues associated with the Property, which they said might affect the price a purchaser would be prepared to pay; such as water-tightness issues, ongoing litigation against body corporate members for unpaid levies, continuing litigation by the body corporate in respect of Unit X, and an outstanding claim in damages against the owners of Unit Y.

3.10. The Committee took into account the Complainant’s price expectations and the level of the reserve, which in the circumstances the Committee found to be unreasonably high and contrary to the advice from Licensee One, Licensee Two, and market information. In fact Licensee One and Licensee Two were very clear in providing evidence of recent comparative sales which demonstrated that the price expectations of the Complainant were optimistic at the very least.

3.11. The Committee also took into account the buyer feedback obtained over a three-week period between 3 June 2014 and 17 June 2014, ending two days before the auction. The feedback showed purchaser interest as being consistently in the range of $400,000 - $500,000.

3.12. The Complainant’s decision to set the reserve at $600,000 was based on his own views of the market (which were not supported by Licensee One and Licensee Two for the reasons set out above) and an opinion from “a friend” who supposedly knew the apartment market. Licensee One has stated categorically that her view of the value of the Property was not in any way “discounted” from what the Complainant thought it should be.

3.13. The Committee is satisfied that Licensee One and Licensee Two have attempted to get the best possible price for the Property and that there has been no breach of Rule 6.1 or Rule 9.1, nor any breach of section 72 of the Act.

Issue Three

3.14. The Complainant’s concern is that Licensee Three signed the sale and purchase agreement without his consent. The question therefore is whether Licensee Three had a legal obligation to do so in the absence of the Complainant’s signature, where the reserve had been met, in accordance with the agency agreement.

3.15. The evidence is that prior to the auction, the Complainant signed the reserve form at

$600,000. Although Licensee Three was not present at the time, he says that he did see it before the auction so that he would be able to bid for the vendor if required.

3.16. After the bidding stalled at $535,000, Licensee Three sought instructions from the Complainant to negotiate with the highest bidder to see if the bid could be increased, and was eventually successful in raising it to $545,000. When he was asked if he was prepared to sell at that price, Licensee Three’s evidence is that he wanted “just a little more.” The bidder indicated that he would increase his offer by a further $3000, to $548,000, but no more.

3.17. The Complainant was then advised that this was the highest bid made, and was asked whether he would be prepared to reduce the reserve in order to sell at that price. Licensee Three says that, although the Complainant was hesitant, he did not pressure him in any way to make a decision.

3.18. The Complainant’s recollection of what then followed was slightly contradictory, and for that reason the Committee preferred the evidence of Licensee Three, who stated that he quite

clearly recalled being instructed by the Complainant to sell at $548,000 if no further bids were received.

3.19. The reserve form was then amended in the presence of the Complainant but it appears that the Complainant did not sign or initial the amendment and the form was removed from the room at the conclusion of the auction.

3.20. Licensee Three was quite clear as to his instructions. The Complainant understood that there was little chance of the bid being further increased, given the comments of the bidder who had confirmed that he would not go any higher, but the Complainant nevertheless asked Licensee Three to try.

3.21. The Committee is of the view that the Complainant understood the advice of Licensee Three, and further understood that if there were no further bids above $548,000 Licensee Three would be obliged to sell the Property. Licensee Three confirms that the Complainant spoke good English.

3.22. The evidence of a third party, an agency Y licensee, is that following the auction, the Complainant visited him and indicated to him that he may have agreed to reduce the reserve but it was his expectation that Licensee Three would resume the auction and try to get more. The Committee, however, prefers the evidence of Licensee Three (as above).

3.23. The Committee accepts that the evidence concerning Licensee Three’s advice that he would sign the agreement, if the Complainant would not do so, was not contradicted by the Complainant. He was given the opportunity at the time to obtain legal advice but was unable to reach his lawyer. At this point the Complainant leaves the auction and does not return.

3.24. The Committee is satisfied that Licensee Three was acting in accordance with his instructions and as authorised by the agency agreement, and does not consider that there has been a breach of Rule 5.1, Rule 6.2 or Rule 9.2 or section 72 of the Act.

4. Request for submissions on orders: Licensee Adele Keane

4.1. The Committee will conduct a separate hearing on the papers to decide what orders, if any, should be made under section 93 of the Act. Refer to the Appendix of this decision.

4.2. The Complainant is to file submissions (if any) on what orders should be made within 10 working days from the date of issue of this decision. These submissions if any then will be provide to the Licensee with a time frame for filing final submissions.

4.3. The Committee requires the CAC Administrator to obtain a record of any previous disciplinary decision in respect of the Licensee and, if any such decision exists, provide it to the Committee.

5. What happens next

5.1. The Committee will consider all submissions and issue a decision on orders.

Your right to appeal

5.2. In the matter of Licensee Adele Keane, the Committee has yet to finally determine this complaint because the Committee is yet to determine what orders should be made, if any.

5.3. The Committee considers that the 20 working day appeal period does not commence until it has finally determined the complaint against Licensee Adele Keane by deciding what orders should be made, if any.

5.4. In the matter of Licensee Two and Licensee Three, if you are affected by this decision 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 to the Tribunal to consider in relation to the appeal. Refer to Appendix section 111.

5.5. 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

5.6. The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made.

Signed

David Bennett

Panel Member

For Complaints Assessment Committee 406

Real Estate Agents Authority

Date: 20 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 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 93 Power of Committee to make orders

(1) If a Committee makes a determination under section 89(2)(b), the Committee may do one or more of the following:

(a) make an order censuring or reprimanding the licensee;

(b) order that all or some of the terms of an agreed settlement between the licensee and the complainant are to have effect, by consent, as all or part of a final determination of the complaint;

(c) order that the licensee apologise to the complainant; (d) order that the licensee undergo training or education;

(e) order the licensee to reduce, cancel, or refund fees charged for work where that work is the subject of the complaint;

(f) order the licensee:

(i) to rectify, at his or her or its own expense, any error or omission; or

(ii) where it is not practicable to rectify the error or omission, to take steps to provide, at his or her or its own expense, relief, in whole or in part, from the consequences of the error or omission;

(g) order the licensee to pay to the Authority a fine not exceeding $10,000 in the case of an individual or $20,000 in the case of a company;

(h) order the licensee, or the agent for whom the person complained about works, to make his or her business available for inspection or take advice in relation to management from persons specified in the order;

(i) order the licensee to pay the complainant any costs or expenses incurred in respect of the inquiry, investigation, or hearing by the Committee.

(2) An order under this section may be made on and subject to any terms and conditions that the Committee thinks fit.

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.

The relevant provisions from the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 are:

Rule 5.1 A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.

Rule 6.1 A licensee must comply with fiduciary obligations to the licensee’s client.

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 and act in accordance with the client’s instructions unless to do so would be contrary to law.

Rule 9.2 A licensee must not engage in any conduct that would put a prospective client, client, or customer under undue or unfair pressure.

Rule 10.2 An appraisal of land or a business must—

(a) be provided in writing to a client by a licensee; and

(b) realistically reflect current market conditions; and

(c) be supported by comparable information on sales of similar land in similar locations or businesses.