Edward - Complaint No C04989 [2015] NZREAA 38 (24 February 2015)

Last Updated: 26 September 2015

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

And

In the Matter of Complaint No: C04989

In the Matter of Michael Edward

License Number: 10012455

Jones Lang LaSalle Limited

License Number: 10017814

Decision of Complaints Assessment Committee

Dated this 24th day of February 2015

Complaints Assessment Committee:

CAC306

Chairperson: Paul Biddington Deputy Chairperson: Michael Vallant Panel Member: Marjorie Noble

Complaints Assessment Committee

Decision on Orders

1. Background

1.1 The Complaints Assessment Committee (the Committee) as a result of its decision issued 29

October 2014 has found Michael Edward (the Licensee) and Jones Lang Laselle (the Agency) guilty of unsatisfactory conduct.

1.2 In its decision the Committee found the Licensee had not worked in the best interests of the Complainant by not completing an adequate appraisal of the Complainant’s two units, not providing an appraisal in writing, and not having adequate discussions with the Complainant over the appraisal, which in the Complainant’s opinion caused him to sell the Properties at a lower price than they were worth.

1.3 The Properties were on-sold within a few days of the first purchaser signing the Sale and Purchase

Agreements, at a greater price than the Complainant received.

1.4 The Properties were sold without a signed Agency Agreement in place and the Committee noted in its decision that the Agency appeared to have woeful processes in regard to this. The Committee found in its decision that the lack of a signed Listing Authority meant that the Agency and the Licensee had no authority to sell the Properties or deduct commission from the sales price.

1.5 Further the Committee found that given the short time the Licensee had been back in the industry the supervision of the Licensee by the Agency was inadequate, and in this instance may have resulted in the Complainant receiving a lesser sum for the units than was possible. It is noted that the Licensee was involved in the on-selling of one of the units, not both.

1.6 The decision found that the Licensee had breached Rules 5.1, 6.1, 6.2, 9.1 and 9.3 and the Agency had breached Rule 8.3.

1.7 The following submissions on orders was received from the Complainant:

1. that he be paid the shortfall of $82,500.00 being the difference of what the units were on- sold for within a matter of days;

b) the Licensee to refund fees received for his work;

c) an order censuring or reprimanding the Licensee;

d) a $10,000 fine for the Licensee and $20,000 fine for the Agency;

e) an order that the Licensee undergo training or education; and f) the decision to be published.

1.8 The Licensee in his submissions on orders chose to challenge aspects of the decision which is his right and stated that even though all areas of both REAA and JLL’s procedures and protocols were not fully complied with that there was no causal connection between that conduct and the alleged loss now claimed to have been suffered by the Complainant.

1.9 The Licensee made no further submission on orders.

1.10 The Agency in their submission on orders also chose to challenge aspects of the decision which is their right and also made the statement of there being no causative bearing on the outcome of the transaction.

1.11 The Agency also stated that no penalty is justified and publication of the CAC’s decision would not

be in the public’s interest.

2. Relevant Provisions

2.1 Having made a finding of unsatisfactory conduct against Michael Edward and Jones Lang LaSalle Limited, the Committee must now decide what orders, if any, should be made under section 93 of the Act.

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.

3. Discussion

3.1 Both the Licensee and the Agency have written lengthy submissions detailing what they believe to be errors in the decision issued 29 October 2014 as is their right. However apart from the Agency stating that no penalty is justified and that publication of the decision would not be in the public interest there are no other submissions on orders.

3.2 The Complainant has made submissions on orders that include compensation for the shortfall between what he received and what the units were quickly on-sold for; a refund of fees paid for the work; an order censuring or reprimanding the Licensee; a $10,000 fine for the Licensee and $20,000 fine for the Agency; an order that the Licensee undergo training or education; and the decision to be published.

3.3 The Licensee and the Agency have submitted that even in the aspects of the decision they agree to

be correct that even so there was no causative aspect between the conduct and the outcome of the transaction.

3.4 The Committee does not agree with this view and further reiterates that the appraisal prepared which was not in writing, not discussed thoroughly with the Complainant, and contained much out of date data, was simply not good enough and not of a standard a reasonable person could expect from a reasonably competent Licensee.

3.5 Furthermore there were inconsistencies between the represented m2 between an email, the offer, and the Sale and Purchase document.

3.6 Finally neither the Licensee nor the Agency made certain that a properly completed and signed Agency Agreement was held by them before they progressed the transaction and deducted commission from the proceeds of that transaction.

3.7 The Committee questions the authority by which the commission was deducted given the absence of this document. The Agency in their submissions state that giving the Listing Authority to the vendor is acceptable and that it is a “counsel of perfection” to require that there be certainty that this document is in place.

3.8 The submissions further stated that “most if not all commercial property licensees will accept an instruction from a principal in good faith and will believe that if they send the agency to the principal for signing, the principal will sign it.” The Agency says that if the Licensee had not progressed the transaction due to the lack of this signed authority to sell the Property then he was likely to have faced criticism from the Complainant if he had done so.

3.9 The Committee finds this view to be troublesome as it completely ignores Section 126 of the Act –

Section 126 No entitlement to commission or expenses without a written agency agreement

(1) An agent is not entitled to any commission or expenses from a client for or in connection with any real estate agency work carried out by the agent for the client unless –

(a) the work is performed under a written agency agreement signed by or on behalf of

–

(i) the clients; and

(ii) the agents; and

(b) the agency agreement complies with any applicable requirements of any regulations made under section 156; and

(c) a copy of the agency agreement signed by or on behalf of the agent was given by or on behalf of the agent to the client within 48 hours after the agreement was signed by or on behalf of the client.

3.10 The Committee refers to the case Summit Real Estate Limited V REAA & Lewis [2011] NZREADT 88 and in particular notes the comment by Dr. McKenzie that “an agency agreement is the foundation upon which transactions involving the sale and purchase of a property rest and, as such, is the cornerstone of the current Act and its regulatory regime. It was further stated that these provisions cannot be categorized as merely technical; they are important substantive consumer provisions to promote and protect the interests of consumers in relation to real estate transaction.”

3.11 The Agency also has not taken full note of Section 50 of the Act:

Section 50 Salespersons must be supervised

(1) A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.

(2) In this section properly supervised and managed means that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure –

(a) that the work is performed competently; and

(b) that the work complies with the requirements of this Act.

3.12 Clearly the work did not in this case comply with the requirements of the Act and the submission by both the Licensee and the Agency that there was no causative bearing on the outcome of the transaction is not accepted by the Committee.

3.13 The Licensee and the Agency in their submissions try to suggest that because in their view, their breaches had no causative effect on the outcome this somehow exonerates them. This view is totally wrong, the outcome is irrelevant to the Committee, their concern is whether the Licensee and the Agency have met their obligations and requirements of the Act and the Rules which in this case in many instances they failed to do.

3.14 The Agency places weight on the “off market transaction” which the Committee does not accept, as the requirements of the Act cannot be put aside no matter the specific marketing requirements or otherwise of the vendor.

3.15 The Committee, after much thought considers the conduct to be not at the lower end and for this reason have ordered a censure for both the Licensee and the Agency and also makes an order that the commission received for the work be refunded to the Complainant. The Committee does not have the power to award compensation as requested by the Complainant and although a fine was considered by the Committee the refund of the commission was considered more appropriate under the circumstances.

4. Decision

4.1 The Committee orders;

4.1.1 The Licensee is censured pursuant to section 93(1)(a) of the Act;

4.1.2 The Agency is censured pursuant to section 93(1)(a) of the Act;

4.1.3 The commission $8,878.00 received by the Agency and the Licensee for the work be refunded to the Complainant within 21 working days of this decision pursuant to section

93(1)(e).

5. Publication

5.1 One of the Committee’s functions pursuant to section 78(h) of the Act is to publish its decisions.

5.2 Publication gives effect to the purpose of the Act of ensuring that the disciplinary process remains transparent, independent and effective. The Committee also regards publication of this decision as desirable for the purposes of setting standards and that it is in the public interest that the decision be published.

5.3 The Committee directs publication of its decision, but omitting the names and identifying details of the Complainant (including the address of the Property), and any third parties in the publication of its decision. The name of the Licensee and the Company he/she works for should be published.

5.4 The Authority will publish the Committee’s decision after the period for filing an appeal has ended unless an application for an order preventing publication has been made to the Real Estate Agents Disciplinary Tribunal (Tribunal). Such an application can only be made as part of an appeal to that Tribunal. In order to ensure publication of the decision does not take place it is important that you serve a copy of your application on the Authority. Publication of the decision will not take place until the Tribunal has made a decision on the application.

6. Right of Appeal

6.1 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 this notice.

6.2 Appeal is by way of written notice to the Tribunal. You should include a copy of this Notice with your Appeal.

6.3 Further information on filing an appeal is available by referring to the Guide to Filing an Appeal at www.justice.govt.nz/tribunals.

Signed

Marjorie Noble

Panel member

Complaints Assessment Committee

Real Estate Agents Authority

Date: 24 February 2015