Leading Edge Properties Limited - Complaint No C08593 [2015] NZREAA 271 (2 October 2015)

Last Updated: 22 July 2016

Before the Complaints Assessment Committee

Complaint No: C08593

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

In the Matter of Leading Edge Properties Limited

Licence Number: 10052622

Decision of Complaints Assessment Committee

Finding of unsatisfactory conduct asking for submissions on orders

Dated this 2nd day of October 2015

Complaints Assessment Committee: CAC 403

Chairperson: Susan D’Ath Deputy Chairperson: Amelia Bardsley Panel Member: Sandra Wilson

Complaints Assessment Committee

Decision finding unsatisfactory conduct asking for submissions on orders

1. The Complaint

1.1 On 28 May 2015 the Complainant made a complaint against Leading Edge Properties Limited trading as Professionals Western (the Agency). The Agency is licensed under the Real Estate Agents Act 2008 (the Act) and holds a company agent licence.

1.2 The details of the complaint are that the Agency is in breach of Regulations 15 and 30 of the Real Estate Agents (Audit) Regulations 2009 (the Audit Regulations) by failing to provide a list of account balances and a reconciliation statement to the Auditor within the required time frame, on at least one occasion in each of the financial years ending 2012, 2013, 2014, and

2015.

1.3 The Agency is required to provide a list of ledger account balances and a reconciliation statement to their Auditor (the Auditor) by 27 January and the 20th day of every other month, in accordance with regulation 15 of the Audit Regulations. The reports from the Auditor show the Agency provided the monthly reconciliation late for at least one month every period of the last four reporting periods as follows:

(a) two months for the five month period from 11 November 2011 to 31 March 2012; (b) eight months out of the twelve for the financial year ending 31 March 2013;

(c) one month out of twelve for the financial year ending 31 March 2014; (d) nine months out of twelve for the financial year ending 31 March 2015.

1.4 The Authority’s licensing team sent letters to the Agency on 26 November 2012 and 3 July

2013 regarding non-compliance with the Regulations.

1.5 The Complainant requested a remedy being:

• That the disciplinary process be followed.

1.6 On 23 June 2015, the Principal Officer of the Agency was asked to provide an explanation for why the monthly reconciliations required under Regulation 15 were provided to the Auditor late in twenty instances over a three and a half year period.

1.7 The Principal Officer responded to the complaint and in particular, he commented that:

(a) The Agency is a small boutique agency with a combined selling staff of five licensees as of this year. The first year of operation as an agency was in 2012, when he, the Principal Officer, was the sole agent. He asked for consideration, being the sole director, salesperson, manager, accountant, and administrator for a fledging real estate business, to understand how the two months in 2012 could have been easily overlooked. For the late reconciliations for the year ending March 2013 he commented this was a very busy year and at that time his role covered administration, accounting, and sales duties.

(b) During the year ending March 2014, the Principal Officer engaged an administrator to free up his time so he could attend to his obligations under Regulation 15; in this period, only one reconciliation was late. He understands even one late reconciliation is still not acceptable. For the year ended 31 March 2015, nine out of twelve reconciliations were provided to the Auditor late. The Principal Officer said the preparation was up to his administrator in 2014, and he would check and approve

the return before it was sent to the Auditor. The year to March 2015 was turbulent, with three administrators leaving over an eight month period, and reconciliations were overlooked. He said no other issues were identified by the Auditor and no monies were incorrectly managed or disbursed.

(c) The Principal Officer said he is working to improve the trust account procedures; he is

confident no further reconciliations will be sent late in the future and apologizes for the lateness of previous trust account reconciliations.

(d) The Principal Officer said he understands the auditing rules are in place to strictly monitor Real Estate Agencies’ trust accounts and would like to say he has adhered to them, apart from the lateness of the reconciliations, and he has also adhered to all other regulations relating to the operating of a trust account.

2. What we decided

2.1 On 17 June 2015 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it under section 78(a) of the Real Estate Agents Act

2008 (the Act).

2.2 On 26 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 Agency has engaged in unsatisfactory conduct under section

89(2)(b) of the Act.

3. Our reasons for the decision

3.1 The Committee found, pursuant to section 72 of the Act, that the Principal Officer is in breach of the Real Estate Agents Act 2008 and the Real Estate Agents (Audit) Regulations 2009, and is in breach of Regulation 15 and Regulation 30, and has engaged in unsatisfactory conduct.

The Committee established from the evidence put before it that the Principal Officer breached the Real Estate Agents Act 2008 and the Real Estate Agents (Audit) Regulations

2009.

Section 15 Duty to provide monthly list of balances and reconciliation statement

(1) Every agency must, at the end of each month reconcile the balance of the agency’s trust accounts to –

(a) the balance of the agency’s cash book: and

(b) the total of the balances in the list required under subclause (3)(a).

(2) Every agency must keep the reconciliation statements prepared in accordance with subclause (1) in the agency’s cash book, or in any other appropriate manner.

(3) Unless subclause (4) applies, every agency must by the 27 January and the

20th day of every other month, give to the agency’s auditor—

(a) a list of the balances in each client ledger account and of the amount of money (if any) in each trust account, as at the end of the last preceding month or balance period, and

(b) the reconciliation statement referred to in subclause (1) for that

month.

(4) If there is no money in any of the agency’s trust accounts at the end of the month, the agency must give to the auditor a “nil” return.

Section 30 Offences

Every agency, auditor, banker, or other person who fails, without reasonable excuse, to comply with these regulations, commits and is liable on conviction to a fine not exceeding

$15,000.

3.2 Copies of relevant monthly reconciliations were requested and a full summary with the number of days late has been provided by the Principal Officer. Monthly Trust Reconciliation balances have been provided from the Agency for the period February 2012 through to March 2015.

3.3 Independent Auditor’s Reports have been made available from the Auditor on the Identified

Trust Account held by Leading Edge Properties Limited.

3.4 The Real Estate Authority wrote to Leading Edge Properties Limited to remind them of their obligations under the Real Estate (Audit) Regulations 2009, firstly on 26 November 2012 and secondly on 3 July 2013. Despite these letters having been sent to the Agency, the Principal Officer neglected to remedy these breaches, and in fact for the year ended 31 March 2015 nine of the twelve reconciliations provided were late.

3.5 Whilst the Committee can understand the Principal Officer of Leading Edge Properties Limited found himself in a role covering administration, accounting, managing, sales duties, and prospecting for new salespeople, with a start-up business; this does not exclude him from his role as Principal Officer, in ensuring his obligations to the Real Estate Agents Act

2009 and the Real Estate Agents (Audit) Regulations 2009 are adhered to at all times.

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 Agency is to file submissions (if any) on what orders should be made within ten working days from the date of this decision.

4.3 The Committee requires the CAC Administrator to obtain a record of any previous disciplinary decision in respect of the Agency, 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

Sandra Wilson

Panel Member

Date: 2 October 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.