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New Zealand Real Estate Agents Authority |
Last Updated: 20 August 2016
In the Matter of Part 4 of the Real Estate Agents Act 2008
And
In the Matter of Complaint No: C06873
In the Matter of Licensee One
Licence Number: XXXXXXXX
Licensee Two
Licence Number: XXXXXXXX
Michael Broome
Licence Number: 10014844
Decision of Complaints Assessment Committee
Finding of unsatisfactory conduct asking for submissions on orders and Decision to take no further action
Dated this 9th day of November 2015
Complaints Assessment Committee: CAC 404
Chairperson: Michael Vallant Deputy Chairperson: Sarah Eyre Panel Member: Garry Chapman
Complaints Assessment Committee Decision
Decision finding unsatisfactory conduct asking for submissions on orders and
Decision to take no further action
1. The Complaint
1.1. On 18 December 2014 the Real Estate Agents Authority (the Authority) received a complaint against Licensee One, Licensee Two, and Michael Broome (Licensee Broome) from the Complainant.
1.2. Licensee One and Licensee Two are licensed salespersons and Licensee Broome is an agent.
All Licensees are licensed under the Real Estate Agents Act 2008 (the Act) and at the time of conduct were engaged by Mike Pero Real Estate Ltd working at the Stanmore Bay Agency (the Agency).
1.3. The complaint relates to a property (the Property).
1.4. The details of the complaint are:
1.5. Two additional issues were raised by the Committee’s investigator, and pursuant to section
78(b) of the Act, the Committee decided to enquire into them:
• Non-disclosure of the unconsented deck at the rear of the Property.
• The insertion of clause 18 of the contract.
1.6. In particular, the Complainant advised that she owns the neighboring property to Licensee One and her partner (the vendors). The Complainant’s property is directly behind the Property and they have cross lease titles. They share a common driveway on the right hand side of the two properties, if one was looking at the properties from the road.
1.7. Approximately three to four years ago the Complainant and the vendors agreed that a portion of the Complainant’s land would be provided to the vendors so they could each have separate access to their respective properties.
1.8. The Complainant and the vendors approached the Council and were advised that the agreement was fine as long as the parties agreed and there was nothing special that needed to be undertaken. The vendors were to instruct their solicitor to prepare a written agreement between the Complainant and the vendors, however this never eventuated.
1.9. On 29 October 2014, the vendors listed the Property with Licensee Broome. Both vendors signed the listing agreements. Licensee One stated that she did not disclose the 'land swap' to Licensee Broome. Her partner, however, stated that she fully explained the situation to Licensee Broome and pointed out to him the correct boundaries.
1.10. On the listing authority Licensee Broome wrote that a solicitor’s letter was to follow, indicating contrary to Licensee One’s statement that at least some disclosure of the land swap
was made.
1.11. In November 2014, Licensee One left the employment of the Agency and went to reside in city X. Licensee One would have no further involvement with the sale of the Property, apart from the signing of the sale and purchase agreement, and did not receive any commission in relation to the sale of the Property.
1.12. On 12 December 2014, the ultimate purchasers made an unconditional offer to purchase the
Property. The offer was accepted by the vendors on the following day.
1.13. On 14 December 2014, the Complainant contacted Licensee Broome and advised him that the fence, which runs from the road up the side of the Property and around her courtyard between the rear of the Property and the front of her property, had been built over the common access way and on common property.
1.14. On the 18 December 2014, the Complainant made a complaint to the Agency and the
Authority.
1.15. At 5pm on 18 December, Licensee Broome met with the purchasers and disclosed to them the issue in respect to the fence for the first time. Licensee Broome prepared a letter; which was an attempt by Licensee Broome to ensure the purchasers agreed to allow the existing arrangement in favour of the Complainant, to remain in the interim. The consent was signed by the purchasers and a copy was given to the Complainant. The purchasers completed the settlement of the Property on 30 January 2015.
1.16. The Complainant requests a remedy, being:
• An apology.
1.17. The Licensees responded to the complaint against them.
1.18. Licensee One’s evidence is that she did not disclose the land swap issue to Licensee Broome.
1.19. Her involvement with the sale of the Property was not as a licensee, but that of a vendor.
1.20. Licensee Two’s evidence is that her only involvement was obtaining a final signature by one of the purchasers on the sale and purchase agreement, as instructed by Licensee Broome, and undertaking a pre-settlement inspection with the purchasers.
1.21. Licensee Broome acknowledges that the land swap issue was disclosed to him, but he did not tell the purchasers. He understood the matter was with solicitors and a written agreement would shortly be available.
1.22. In respect to the issue of the non-permitted deck, Licensee Broome was of the opinion that as the deck was less than one metre high, no permit was required.
1.23. In respect to the inclusion of clause 18 in the sale and purchase agreement, Licensee Broome acknowledges that he prepared the sale and purchase agreement, prior to the purchasers
signing, and it was forwarded to the purchaser’s solicitor for their approval.
2. What we decided
2.1. On 23 January 2015 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it.
2.2. On 9 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 Michael Broome has engaged in unsatisfactory conduct under section 89(2)(b) of the Act. The decision was also made with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, Rules 5.1, 6.2, 6.4, 9.8 and 10.7.
2.4. The Committee decided to take no further action on this complaint against Licensees One and Two. 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
The Committee found, pursuant to section 72 of the Act, that Licensee Michael Broome’s
actions would reasonably be regarded by agents of good standing as being unacceptable.
3.1. Pursuant to section 4 of the Act, real estate agency work or agency work—
(a) means any work done or services provided, in trade, on behalf of another person for the purpose of bringing about a transaction; and
(b) includes any work done by a branch manager or salesperson under the direction of, or on behalf of an agent to enable the agent to do the work or provide the services described in paragraph (a).
The Committee concluded:
Licensee One
3.2. Licensee One’s evidence is that she, together with her partner, listed the Property with Licensee Broome. Shortly thereafter she left city Y permanently to reside in city X and took no further part in respect to the sale of the Property, apart from signing the sale and purchase agreement. She left her partner to deal with Licensee Broome and the sale of the Property.
3.3. It is accepted by the Committee that she did not receive any part of the commission for the sale of the Property and certainly was not involved in the marketing or showing of prospective purchasers through the Property.
3.4. Before the Committee can inquire into the activities of Licensee One, they must be satisfied that she was undertaking real estate agency work as defined by the Act. This is set out above but essentially is 'work done or services provided in trade on behalf of another person for the purpose of bringing about a transaction.’
3.5. In this instance, the Committee cannot find any work or services that Licensee One undertook to bring her within the definition of real estate agency work. The mere signing of a listing authority and sale and purchase agreement does not constitute real estate work. If she had taken part in open homes, helped with the marketing, or received some of the commission, then in those circumstances the Committee could have found Licensee One had engaged in real estate work. The evidence is quite clear that this did not happen, and accordingly the Committee has no jurisdiction in respect to Licensee One’s involvement in the sale of the Property.
Licensee Two
3.6. As with Licensee One, Licensee Two’s involvement in the sale of the Property is minimal. It is however, in the Committee’s view, sufficient to meet the definition of real estate agency work. Licensee Two’s evidence is that her only involvement was arranging for the obtaining of one of the purchaser’s signatures on the agreement, and conducting a pre-settlement viewing of the Property with the purchasers. This evidence is slightly contradicted by Licensee Broome, who stated that Licensee Two also undertook an open home; although not one which the purchasers attended.
3.7. The Committee also notes that when the Investigator asked Licensee Two what she recalled about the issue of the driveway and boundaries, she responded 'look I can't comment unfortunately I'm not really 100% sure'. It would appear that Licensee Two had little or no understanding of any of the issues in respect to the Property.
3.8. This is of some concern to the Committee if we are to accept that Licensee Two was taking part in open homes. The Committee would expect any licensee undertaking open homes to have reviewed the Agency file and made themselves familiar with any of the issues that the Property may have. Clearly this did not happen in this instance, and it was by good luck rather than good management that the purchasers did not attend the open home undertaken by Licensee Two, or other prospective purchasers did not raise the issues surrounding the driveway and deck. Clearly if they had done so, Licensee Two would not have been in a position to adequately respond to those queries.
3.9. On the evidence before the Committee, there is nothing in the actions of Licensee Two that could be considered unsatisfactory conduct as set out in section 72, or a breach of the Rules. Accordingly, the Committee has decided to take no further action in respect to Licensee Two.
Licensee Broome
3.10. There are three parts to the complaint against Licensee Broome, namely, the failure to disclose the land swap in respect to the driveway, secondly, the failure to disclose the deck, and finally, the insertion of clause 18 in the sale and purchase agreement.
3.11. In respect to the land swap, Licensee Broome acknowledges that he was advised by one of the Vendors about the arrangement, and concedes firstly, that he did not really understand the arrangement and secondly, that he should have made further or better enquiries.
3.12. The Committee notes that the listing agreement is dated 29 October 2014, and contained a heading “vendor's disclosure of specific features (including unconsented works)”; under that heading was a hand written note by Licensee Broome, “rear deck non-permitted and driveway access - letter to come re use”. It is therefore clear that Licensee Broome had
knowledge of the issues and the question for the Committee is, having that knowledge, what did he do with it?
3.13. From the evidence before the Committee, it would suggest very little. Firstly, it took Licensee Broome until 19 November 2014 to obtain a copy of the title. This is almost one month after the Property was listed; no explanation is given for the delay. Surely, having knowledge that there is a problem with the title and not fully understanding it, the first thing that should be done is to obtain a copy of that title. It is self-evident from the title and the physical position of the fence what the issue was. Even with the title available to Licensee Broome on 19
November 2014, he still does nothing about understanding or resolving the issue, prior to the purchasers making their offer on 12 December 2014. Licensee Broome's only explanation appears to be that he was waiting for the agreement that the Vendor's solicitor was preparing.
3.14. What could have or what should have Licensee Broome done in the circumstances? Firstly, he could have made enquiries of the vendor as to when the agreement would be available, secondly, he could have pointed the issue out to the purchasers, and thirdly, he could have put an appropriate clause to protect both vendor and purchaser in the agreement. He could have contacted either the vendors’ or purchasers’ solicitors to advise them of the issue prior to the purchasers signing. The Committee notes it is only with the physical knowledge of the Property and a viewing of the title that the issue can be identified.
3.15. Licensee Broome appears not to have done any of the above and only attempts to remedy the situation after the agreement was signed, and when he was contacted by the Complainant. Licensee Broome's purported remedy is discussing, for the first time, the issue with the purchasers after the contact is unconditional, and secondly, getting the purchasers to sign a woefully inadequate and legally unenforceable letter whereby the purchasers acknowledged the existence of the arrangement.
3.16. Licensee Broome's actions, or rather lack of them, leave the Committee somewhat dumbfounded. Firstly, Licensee Broome acknowledges initially not understanding the issue, fails to take steps to understand the issue, fails to do the most rudimentary investigation such as obtaining a copy of the title until almost a month later, and then fails to disclose issues to the purchasers, or in fact any prospective purchasers. The Committee has no hesitation in finding that Licensee Broome has engaged in unsatisfactory conduct and breached Rule 5.1 (must act with skill, care and competence), Rule 6.2 (must act in good faith and deal fairly with all parties), Rule 6.4 (must not mislead or withhold information), and Rule 10.7 (must disclose known defects). Finally, pursuant to section 72(a) of the Act, Licensee Broome’s conduct has fallen well short of a standard that a reasonable member of the public is entitled to expect from a reasonably competent Licensee.
3.17. The second issue is Licensee Broome's failure to disclose the unpermitted deck. There is a substantial amount of evidence around whether or not the deck actually needed a permit. It is common ground that if the deck is less than one metre high a permit is not required. The question, and it is not adequately resolved, is whether the deck is less or more than one metre high.
3.18. The Committee gives credit to Licensee Broome in identifying the issue, whether that came from the vendors or through his own knowledge is unclear, but it is identified and put on the listing authority. Again however, what is of concern to the Committee is Licensee Broome, having established a possible issue, does nothing to resolve the matter and more importantly again fails to disclose the potential issue to the purchasers.
3.19. Again the Committee is mystified by the actions and non-disclosure by Licensee Broome.
There is simply no adequate explanation given by Licensee Broome for his omission. This is a Licensee of some 16 years’ experience and he holds an agents licence. If the deck did not need a permit, then no harm was done by disclosing to the purchasers. If the deck did need a permit, then it should have been disclosed to the purchasers. There is nothing in the evidence before the Committee that establishes absolutely one way or the other whether the deck did or did not need a permit. Clearly the only way this was going to be established was by a council inspection, which was never obtained.
3.20. The purchasers were entitled to be advised about the deck so they could make their own informed decision. Licensee Broome had an obligation to disclose that information and failed to do so. Again clear breaches of Rule 6.4 and Rule 10.7.
3.21. Finally, the inserting of clause 18 in the sale and purchase agreement. Clause 18 had the effect of removing the purchasers’ right to requisition title. It was certainly prepared and inserted by Licensee Broome into the agreement. The purchasers, being first time home buyers, had no understanding as to the significance of the clause, a clause which clearly disadvantaged them.
3.22. It is acknowledged by the Committee that Licensee Broome forwarded the agreement to the purchasers’ solicitor before they signed. There is an issue here, in that the purchasers’ solicitor did not see clause 18 but now accepts it was there and she appears to have missed it. What is not clear to the Committee is why it was inserted and at whose request. Certainly it was not at the purchasers’ request and therefore one can only assume that it was at the vendors’ request.
3.23. The question for the Committee is, however, if Licensee Broome had disclosed the land swap issue to the purchasers prior to them signing the agreement, would they have raised it with their solicitor? If so, what steps would the purchasers’ solicitor have taken? All this is conjecture because Licensee Broome, for whatever reason, did not impart the knowledge he had to the purchasers or their solicitor.
3.24. The fact that the vendors have a defective title, the purchasers are first time home buyers, and Licensee Broome has knowledge about the defective title, puts Licensee Broome, in the Committee's view, in a position where he must act in good faith with all parties and not take advantage of the customers’ inability to understand relevant documents. In short, there is, in the Committee’s view, a slightly higher standard imposed upon Licensee Broome in these circumstances than perhaps normal. Certainly there is an absolute requirement to act in good faith and make full disclosure. This did not happen here, and could have left the purchasers in a very difficult situation should the Complainant or a subsequent purchaser of the Complainant’s property want to change the existing arrangement with the right of way; or the deck is held by the Council as being unpermitted.
3.25. Licensee Broome, having the knowledge in respect of the defective title and possibly unconsented deck, should have taken steps as an absolute minimum to disclose the issue to the purchasers, and more importantly to disclose the relevance of clause 18 to them. Licensee Broome did neither and believed he resolved the issue by forwarding the agreement to the purchasers’ solicitor prior to signing. The Committee does not accept that the steps taken by Licensee Broome in the circumstances were appropriate or resolved his obligations under Rule 6.2 and Rule 9.8. Accordingly, the Committee again finds Licensee Broome has engaged in unsatisfactory conduct.
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 within ten working from the date of this decision. These submissions, if any, will then be provided to Licensee Broome, 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 Licensee Broome 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.
6. Your right to appeal
6.1. In the matter of Licensee Michael Broome, the Committee considers the 20 working day appeal period does not commence until it has finally determined the complaint by deciding what orders should be made, if any.
6.2. In the matter of Licensee One and Licensee Two, 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.
7. Publication
7.1. The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made.
Signed
Michael Vallant
Chairperson
For Complaints Assessment Committee 404
Real Estate Agents Authority
Date: 9 November 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 6.2 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 in fairness be provided to a customer or client.
Rule 9 Client and customer care
Agency agreements and contractual documents
Rule 9.8 A licensee must not take advantage of a prospective client’s, client’s, or customer’s inability to understand relevant documents where such inability is reasonably apparent.
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.
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