Wilson - Complaint No C08415 [2015] NZREAA 283 (9 October 2015)

Last Updated: 24 July 2016

Before the Complaints Assessment Committee

Complaint No: C08415

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

In the Matter of Mitchell Wilson

Licence Number: 10011046

Decision of Complaints Assessment Committee

Finding of unsatisfactory conduct asking for submissions on orders

Dated this 9th day of October 2015

Complaints Assessment Committee: CAC 407

Chairperson: Nigel Dunlop Deputy Chairperson: Marjorie Noble Panel Member: Rex Hadley

Complaints Assessment Committee

Decision finding unsatisfactory conduct asking for submissions on orders

1. The Complaint

1.1. On 18 May 2015 the Real Estate Agents Authority (the Authority) received a complaint against Mitchell Wilson (the Licensee) from the Complainant.

1.2. The Licensee is a licensed salesperson under the Real Estate Agents Act 2008 (the Act) and at the time of conduct was engaged by Mike Pero Real Estate Limited (the Agency).

1.3. The complaint relates to a property (the Property) of which the Complainant was the purchaser.

1.4. The complaint is that the Licensee withheld information from the Complainant indicating that he could not let out the downstairs flat at the Property as he planned to do.

1.5. The Licensee was the listing agent for the Property. He advertised it as suitable for “home and income”. It comprised separate upstairs and downstairs living areas, which immediately prior to it being marketed were the subject of residential tenancies.

1.6. The ability to rent out the downstairs flat was an important reason why the Complainant sought to buy the Property. The Licensee was aware of this.

1.7. The Complainant entered into a conditional agreement for the sale and purchase of the

Property on 19 April 2013.

1.8. On 24 April 2013, as a result of a recent inspection of the downstairs flat at the Property, a Senior Environmental Officer of the Council, Mr. X, spoke with the Licensee. He informed the Licensee that the basement flat had not been legally established for a second dwelling. He said that a resource consent and building consent for fire rating remedial work would be required in order to legally establish the flat, or the kitchen facilities would need to be removed. He further told the Licensee that prospective purchasers of the Property should be informed of this.

1.9. The Licensee did not pass on this information to the Complainant.

1.10. The agreement for sale and purchase became unconditional on 30 April 2013.

1.11. The Complainant first became aware of the problems associated with the flat shortly before settlement of the sale and purchase on or about 24 May 2013. This came about as a result of the vendor belatedly receiving, on or about 21 May 2013, an abatement notice in relation to the downstairs flat. The abatement notice had been issued on 24 April 2013 and posted to the vendor overseas.

1.12. The Complainant says that the Licensee should have immediately passed on the information received on 24 April.

1.13. The Complainant requested in the complaint that he be compensated for 10 years’ loss of

rental income and compensated for the difference in the value of the Property as a single

income earner and its value as a dual income earner. He assesses his losses at $77,400.

1.14. The Licensee responded to the complaint against him. He says that he had advised the Complainant to undertake due diligence with the Council in relation to the renting ability of the flats, and believed that the Complainant had done so to his satisfaction. The Licensee believed that the Complainant was already aware of the information supplied by Mr. X, and hence there was no need to contact him about it. He says that Mr. X did not tell him that he was about to issue an abatement notice.

2. What we decided

2.1. On 10 June 2015 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it.

2.2. On 30 September 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 guilty of unsatisfactory conduct under section 89(2)(b) of the Act.

2.4. This is because in terms of section 72 he carried out real estate agency work that:

a) Contravened provisions of the Real Estate Agents Act (Professional Conduct and Client

Care) Rules 2012 (the Rules); and

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

3. Our reasons for the decision.

3.1. The rules which the Licensee contravened were:

a) Rule 5.1 (the requirement to exercise care and diligence). b) Rule 6.2 (the obligation to deal fairly with all parties).

100. Rule 6.4 (the obligation not to withhold information that should by law or in fairness be provided to a customer).

d) Rule 10.7 (the obligation to disclose known defects to a customer).

3.2. When the Licensee received the information from Mr. X on 24 April 2013, he should have immediately passed it on to the Complainant. It was information in direct contradiction to the marketing of the Property to that date, as being suitable for home and income. The Licensee knew that the Complainant was interested in the Property because of its income earning potential. The information supplied by Mr. X was therefore of central importance to the Complainant. The Licensee presumed that the Complainant already knew the information, but did not know whether that was actually the case. Given the central importance of the information to the Complainant, the Licensee should not have made that presumption. He withheld vital information which the Complainant would have been very keen to receive at that stage.

3.3. There appears to be a suggestion in the evidence from the Licensee and the Agency that as a result of advising the Complainant to undertake his own due diligence with the Council, that the Licensee believed that he was thereby released from the obligation to pass on information to the Complainant from that source. If that is in fact what is being suggested,

the Committee does not accept it. Having regard to the decision of the Real Estate Agents Disciplinary Tribunal in LB & QB v REAA & Li[2011] READT39, the Licensee should have undertaken the due diligence with the Council. The Committee is not deciding that point, but it does reinforce the point that licensees are not entitled to expect customers to have undertaken due diligence, or to make any presumptions as to what has been discovered as a result.

3.4. The Committee notes that on receipt of the abatement notice, the Licensee did not immediately forward it to the Complainant. He should have done so. This breach is of less seriousness than the breach of 24 April given that the Complainant became aware of the abatement notice shortly thereafter.

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 by within 10 working days from the date of the decision. These submissions, if any, will then be provided to the Licensee, with a timeframe 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. 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

Nigel Dunlop

Chairperson

Date: 9 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.

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

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 10.7 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 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.