Complaint No C07438 [2015] NZREAA 267 (29 September 2015)

Last Updated: 24 May 2016

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

And

In the Matter of Complaint No: C07438

In the Matter of Bruce Beer

License Number: 10016466

Decision of Complaints Assessment Committee

Finding of unsatisfactory conduct asking for submissions on orders

Dated this 29th day of September 2015

Complaints Assessment Committee: CAC 404

Chairperson: Michael Vallant Deputy Chairperson: Sarah Eyre Panel Member: Garry Chapman

Complaints Assessment Committee

Decision finding unsatisfactory conduct asking for submissions on orders

1. The Complaint

1.1. On 4 March 2015 the Real Estate Agents Authority (the Authority) received a complaint against Bruce Beer (the Licensee) from the Complainants.

1.2. The Licensee is a licensed agent under the Real Estate Agents Act 2008 (the Act) and at the time of conduct was engaged by Tree Town Real Estate Limited trading as LJ Hooker Cambridge (the Agency).

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

1.4. The details of the complaint are that the Licensee represented to the Complainants that the exterior of the Property was clad in Hardiplank (a fibre cement weatherboard). The Complainants subsequently purchased the Property and some months later discovered the exterior cladding was largely Weatherside (an oil-tempered hardboard weatherboard of reduced durability). In addition, the Licensee purchased a property belonging to one of the Complainants enabling the Complainants to purchase the Property. The Committee at the initial referral stage of the complaint directed the case Investigator to investigate this matter in addition to the substantive complaint.

1.5. In particular, the Complainants advised that in respect of the Hardiplank/Weatherside:

1.5.1. In early 2014, the Complainants viewed the Property on three occasions. The Property was represented to the Complainants by the Licensee as being clad in Hardiplank. Written evidence to this effect was provided to the Committee, and in any event the representation is not in dispute.

1.5.2 In March 2014, the Complainants entered a conditional agreement for the purchase of the Property. The agreement was conditional upon a satisfactory Land Information Memorandum (LIM), “solicitor’s approval”, and the sale of one of either two properties owned by the Complainants. One of the properties was purchased by the Licensee. The agreement became unconditional some two weeks later, with settlement in May 2014. The LIM contained no reference to Weatherside.

1.5.3. In January 2015, while painting the exterior of the Property, the Complainants noticed some weatherboards in poor condition. The weatherboards were subsequently identified as being Weatherside not Hardiplank as had been represented to them by the Licensee.

1.5.4. The Complainants contacted the Licensee about the Weatherside and met him later the same day. The Licensee had with him a copy of a letter dated 13 June 2007, addressed to the former owner of the Property from a Building Control Officer of the District Council. The letter was in relation to a building consent for the future relocation of the Property to its present site. Among the matters contained in the letter was a statement saying “any decayed weather side [sic] weatherboards are to be replaced.” The Licensee obtained this letter from the Property file at the District Council offices. The Complainants had not previously seen this letter, and as noted in paragraph 1.5.2, the LIM was silent as to Weatherside.

1.5.5. The Licensee said he would contact the previous owner of the Property and get back to the Complainants. Two days later the Licensee reported back to the Complainants, saying the previous owner would do “nothing to help us.”

1.5.6. The Complainants attempted to resolve the issue with the Licensee without success.

On 19 February 2015, the Complainants received a letter from the Licensee’s solicitor accepting no liability.

1.6. In particular, the Complainants advised that in respect of the Licensee’s purchase of one of the Complainant’s properties:

1.6.1. The Complainants informed the Licensee that in order to purchase the Property they had to sell one of two properties they individually owned. The Licensee offered to purchase one of the properties privately which was accepted by the Complainants.

1.6.2. After an inspection by a builder on behalf of the Licensee, the Licensee informed the

Complainant the insulation in the roof was insufficient and would cost approximately

$2000.00 to remedy. This surprised the Complainants as the property was approximately seven years old and presumably Building Code Compliant.

1.6.3. The Licensee requested a payment of $2000.00 in order for the agreement to purchase the Property to proceed. This payment was duly made.

1.7. The Complainant requested a remedy, being:

• The Weatherside weatherboards on the Property are replaced with Hardiplank weatherboards.
  

1.8. The Licensee responded to the complaint against him.

1.9. In particular, the Licensee commented that:

1.9.1. The agency agreement for the Property, signed by the vendor, records the exterior as being Hardiplank.

1.9.2. The Licensee had no reason to suspect the vendor’s representation was incorrect.

1.9.3. The information pack supplied to the Complainant’s, which among other matters, described the Property as being clad in Hardiplank, and contained the following disclaimer: “The above information has been furnished to us by the Vendor. We have not verified whether or not that information is accurate and do not have any belief one way or the other in its accuracy. We do not accept any responsibility to any person for its accuracy and do no more than pass it on. All interested parties should make their own enquiries in order to determine whether or not this information is in fact relevant.”

1.9.4 The Licensee asked the Complainants whether they wanted their offer for the Property to include LIM and Building Report conditions. The Complainants elected to include a LIM provision but not a Building Report condition. The Complainants duly obtained a LIM for the Property.

1.9.5. In January 2015, after being informed of the presence of Weatherside, the Licensee

obtained a document from the District Council. The document, in addition to the reference to Weatherside in paragraph 1.5.6, included the following statement: “The inspection revealed the following areas of non-compliance: 1. Electrical Certificate. 2. Paint chipped weatherside [sic] cladding on bathroom exterior wall.”

1.9.6. The Licensee is of the opinion that in the minds of the District Council, and the building consultants engaged in the relocation of the Property, that the Property was clad in Hardiplank as well as Weatherside.

1.9.7 Upon request by the Complainants, the Licensee contacted the vendor of the Property in order to seek compensation on behalf of the Complainants. The vendor told the Licensee she did not know what Weatherside was and following legal advice of her own stated she would not agree to any compensation.

1.9.8. The position of the Licensee is that neither he nor the Agency are responsible for the incorrect information supplied at the time of listing the Property for sale. In addition,

the Licensee is of the opinion that some liability rests with the District Council for not recording the presence of Weatherside in the LIM they supplied.

1.10. In particular, the Licensee advised that in respect of his purchase of a property owned by one of the Complainants:

1.10.1. The property owned by one of the Complainants was never listed with the Agency and the transaction in question was at all times a private sale and purchase.

1.10.2. Prior to negotiating the purchase of the Complainant’s property, the Licensee sought advice from the Authority, in particular whether the provisions of sections 134-136 of the Act applied. The advice from the Authority was that being a private sale the above sections did not apply.

1.10.3. The Licensee organised a building inspection of the Complainant’s property, which identified a matter which in the Licensee’s opinion would cost approximately

$2,000.00 to remedy. The Complainants, as vendor, agreed to reduce the sale price by the sum of $2,000.00.

2. What we decided

2.1. On 6 April 2015 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it.

2.2. On 18 August 2015 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

2.3. The Committee found the Licensee has engaged in unsatisfactory conduct under section

89(2)(b) of the Act.

3. Our reasons for the decision

The Committee found, pursuant to section 72 of the Act, that the Licensee’s actions would reasonably be regarded by agents of good standing as being unacceptable.

3.1. The Committee concluded:

3.1.1. The Licensee misrepresented the Property as having Hardiplank cladding and failed to disclose to the Complainants that the Property was also clad in inferior Weatherside cladding. Therefore, the Licensee breached rules 5.1, 6.4, and 10.7 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules).

3.1.2. There was no evidence that the Licensee engaged in any unsatisfactory conduct in respect of his purchasing the property owned by one of the Complainants.

Reason One: Misrepresenting the cladding as being Hardiplank

3.2. Weatherside was manufactured in the 1970s and was an oil-tempered hardboard weatherboard of reduced durability. The only remedy was to replace the Weatherside cladding, often with Hardiplank, a fibre cement product. A television programme brought the issue to public attention in the 1980s. The manufacturer offered homeowners compensation packages but unfortunately not all owners used the compensation to replace the faulty cladding. The compensation packages are no longer available.

3.3. The two products look similar, especially once painted, being the same width. Weatherside is

10mm thick and Hardiplank 7.5mm. With Weatherside, the joiners between planks are metal not plastic and wider than Hardiplank and the nails flush with the surface rather than protrude. If there is any damage and the base colour is visible, Weatherside is brown and Hardiplank light grey.

3.4. It is not in dispute that the Property was represented by the Licensee to the Complainants as having Hardiplank cladding. Similarly, it is not disputed that the Property comprised of both Hardiplank and Weatherside weatherboards. The percentage of each material is unknown, and for the purposes of this complaint before the Committee, the exact percentage is immaterial except in acknowledging the percentage of Weatherside present is significant. In other words, more than a few planks of Weatherside and sufficient to concern the Complainants and the Committee.

3.5. The Licensee, by his own admission, simply relied on the vendor signing the Agency agreement that the cladding was Hardiplank. The folly of this approach is demonstrated by the evidence of the Licensee when upon bringing the issue to the attention of the vendor, the vendor reportedly replied she did not know what Weatherside was. The Real Estate Agents Disciplinary Tribunal (the READT) in its decision in LB & QB v REAA & Li [2011] READT39 said at [20] “acting merely as a conduit from seller to purchaser may not exonerate a licensee from blame. We do not think that a licensee should place sole reliance and credence on advice or assurances from a vendor, even though given in good faith”. Plainly, at the listing and selling stages, the Licensee never turned his mind to the possibility that some of the cladding at least may be Weatherside. The Committee is of the view the Licensee should have completed due diligence on the Property before making any representations and before any marketing was undertaken.

3.6. The Licensee offers the disclaimer on the Information Pack provided to the Complainants as the basis for having no responsibility as to the accuracy of such information. The Tribunal in Brown v REAA [2013] NZREADT48 at [34] held the use of disclaimers in materials cannot remove professional liability. The Committee notes, although the High Court allowed an appeal and quashed the finding by the Tribunal under s73(b) of serious negligence against Brown, the issue of the use of a disclaimer was not appealed. Accordingly, the Committee finds that a disclaimer such as used by the Licensee does not abdicate the Licensee or Agency from their obligations under the Act or the Rules.

3.7. Similarly, the issue of a Licensee’s innocent misstatement was addressed in McCarthy v REAA and Matutinovich [2014] NZREADT 94. The Tribunal stated at [27] “we have found that Mr Matutinovich did make the statement the McCarthys complained of. We make this finding despite the fact that the misstatement was innocent.” Accordingly, the Committee finds that an innocent misstatement such as that made by the Licensee in respect of the cladding does not abdicate the Licensee of his obligations under the Act or the Rules.

3.8. Rule 5.1 sets out that a licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work. There is no question that the Licensee’s actions at issue in this complaint arose in the course of the Licensee’s real estate agency work. While the Licensee may have been trying to obtain the best possible price for the vendor, on this occasion he failed to exercise sufficient skill and care in establishing the actual cladding on the Property when listing and marketing the Property. This meant that the Licensee’s actions fell short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee and accordingly this was

unsatisfactory conduct under s72 of the Act.

Reason Two: Failing to disclose the cladding was Weatherboard

3.9. Rule 6.4 sets out that 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. It is not in dispute the information given to the Complainants about the cladding was incorrect. The Licensee had ample opportunity to establish the actual cladding on the Property prior to the Complainants making their offer on the Property, and failed to do so. Had the Licensee disclosed to the Complainants that some of the cladding was Weatherside, the Complainants would have been able to make a more informed decision as to the terms of their offer. The Committee takes the view that in failing to ascertain the actual cladding on the Property, and to disclose the same to the Complainants, the Licensee breached rule 6.4 in that he withheld information that in fairness should have been provided to the Complainants.

3.10. Rule 10.7 sets out that 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 a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.

3.11. In his evidence, the Licensee claims it was not possible to determine the accuracy of the vendor’s representation that the cladding was Hardiplank, and therefore the Licensee was able to rely on what the vendor told him. The Committee rejects this contention. The Licensee had easy access to information as to the cladding from the District Council. Indeed, upon becoming aware of the cladding issue the Licensee demonstrated just how simple this task was by obtaining that information himself.

3.12. The possible existence of Weatherside on apparently Hardiplank clad dwellings is not a hidden defect. As referred to in paragraph 3.2 the issue was extensively covered in a television programme’ For a Licensee of more than 21 years standing it is inconceivable that he had never heard of the issue and in particular of Weatherside’s similarity to Hardiplank. To the Licensee’s credit, in his evidence he did not claim to have never heard of Weatherside or the problems associated with it. The Committee notes that as part of the continuing education required by licensees in 2013, there was a case study of a previous CAC decision involving the misrepresentation of a property by a licensee as being clad in Hardiplank whereas it was largely clad in Weatherside. In that case the CAC found both the licensee and the agency guilty of unsatisfactory conduct, and censured them.

3.13. Disappointingly, the Licensee in his evidence, elected to downplay his role by variously blaming the vendor, the District Council, and the Complainants in particular for not obtaining a building report.

3.14. The Committee finds that the Licensee was in a position to meet his obligations under rule

10.7. In failing to do so the conduct of the Licensee was unsatisfactory and a breach of s72(a) in that it falls short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee.

Reason Three: No evidence of unsatisfactory conduct regarding the purchase of the

property owned by one of the Complainants

3.15. As with the Hardiplank/Weatherside aspect of this complaint there is no conflict of evidence between that of the Licensee and that of the Complainants in respect of the Licensee purchasing the property owned by one of the Complainants. The Complainant’s property was never listed with the Agency and there is no suggestion the Complainants contemplated doing so. The Licensee also sought advice from the Authority prior to purchasing the property. The Committee determined that there was no evidence of any unsatisfactory conduct by the Licensee and accordingly no further action will be taken regarding this aspect of the complaint.

3.16. In respect of the payment of $2000.00 to the Licensee in order for the agreement to purchase the Complainant’s property to proceed, although the Complainants may have perceived the request unusual, the facts of the matter do not support this view. The Licensee’s building advisor identified a potential issue with a particular aspect of the Complainant’s property. The Licensee calculated the approximate cost of remedy and requested this amount be deducted from the purchase price. The Complainants were free to accept, refuse or negotiate the request. The Committee notes that it is not uncommon for purchasers to request a reduced purchase price from vendors after discovering defects. Accordingly, we find that there was no unsatisfactory conduct in respect to this aspect of the complaint.

4. Request for submissions on orders

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 against the Licensee within 10 working days of the date of this decision. A copy of the submission will be provided to the Licensee.

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

Publication

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

Signed

Garry Chapman

Panel Member

For Complaints Assessment Committee 404

Real Estate Agents Authority

Date: 29 September 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 Standards of professional competence

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

Rule 6 Standards of professional 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.

Rule 10 Client and customer care for sellers’ agents

Disclosure of defects

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 defects4, 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 a customer is informed of any significant potential risk so that the

customer can seek expert advice if the customer so chooses.