Boon - Complaint No C05053 [2015] NZREAA 47 (3 February 2015)

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Chairperson: Deirdre McNabb Deputy Chairperson: Patrick Waite Panel Member: Rex Hadley

1.1 The Real Estate Agents Authority (the Authority) received a complaint from Ms. M and her son Mr.

F (the Complainants) in regard to Ms. Deborah Boon (Licensee One) and Mr. Michael Hydes (Licensee Two). The Licensees are licensed under the Real Estate Agents Act 2008 (the Act). Both hold a salesperson’s license and work for Whalan & Partners Limited who trade as Bayleys Ashburton (the Agency).

1.2 The complaint is about the conduct of the Licensees in relation to the attempted purchase by Mr. F

1.3 Mr. F placed a successful offer for the Property and an agreement was signed. However the Licensees had overlooked including a clause in the agreement that the sale was conditional upon the vendors purchasing a suitable property. At the request of the vendors they asked Mr. F if that condition could be added to the agreement, which he declined.

1.4 The sale and purchase was conditional upon finance and insurance. Whilst Mr. F had confirmed by a text to Licensee One that he had arranged insurance he was not aware that this confirmation needed to be in writing. The vendor canceled the agreement on the basis that the insurance had not been confirmed in writing by due date. The Complainants say it was confirmed via the text from

1.5 The Complainants allege that the vendor would not allow a registered valuer access to the Property, which resulted in Mr. F not being able to obtain finance within the timeframe required.

1.6 The Complainants believe that there was a conspiracy because Licensee One had recommended a solicitor and a mortgage broker for Mr. F to use.

1.7 The Authority referred the complaint to the Complaints Assessment Committee (the Committee).Pursuant to section 79(1) of the Act, the Committee considered the complaint on 12th August 2014 and made a decision to enquire further.

1.8 The Committee invited the Licensees to provide a response to the complaint, which was received, dated 27th August 2014. The Authority’s investigator undertook interviews with Licensee 1 on 6th October 2014 and with Licensee 2 on 7th October 2014.

1.9 Having satisfied itself that it had completed its inquiry into the complaint, the matter was considered by the Committee on 25th November 2014.

1.10 The hearing was conducted on the papers pursuant to section 90(2) of the Act and the

Committee made its determination on the basis of the written material before it.

2.1 The Complainant, Mr. F, successfully negotiated the purchase of the Property and an agreement was signed on 25th March 2014. The Complainants advised the Licensees that they had little experience in real estate transactions and Licensee One recommended a finance company and a

2.2 At the time of listing their Property the vendors had requested that the Licensees include in any agreement to sell the Property a clause (vendor’s clause) which provided for any sale to be conditional upon them finding a suitable property.

2.3 On 26th March 2014 the vendors noticed that the vendor’s clause had not been included in the agreement. The Licensees sought advice from a solicitor who suggested that the quickest and most efficient way to rectify that position was to draw up an alteration to the agreement.

2.4 A series of negotiations ensued with the aim of altering the agreement to allow the vendors’ clause to be included, however the parties were unable to agree on suitable terms.

2.5 A special condition clause had been inserted in the sale and purchase agreement at the time that it was signed, which required the Complainant to obtain insurance within five working days from the date of the agreement. The Complainant had obtained insurance within this time frame and texted Licensee One to say his insurance was “all sorted”. It would seem that he believed that the Licensee would advise the vendors that the insurance condition had been satisfied. However Licensee One, whilst acknowledging the text, took no action about the insurance having assumed that the Complainant would have also advised his solicitor about the insurance he had arranged, who would then advise the vendor’s solicitor.

2.6 The Licensees have accepted full responsibility for omitting the vendor’s clause from the agreement.

3.1 The Committee examined the information supplied by the Complainant in his written complaint to determine whether s72 or s73 of the Real Estate Agents Act 2008 (the Act) applied i.e. was there evidence which would indicate that the Licensees could be considered guilty of unsatisfactory conduct (s72) or misconduct (s73).

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 of rules made under this

(d) would reasonably be regarded by agents of good standing as being unacceptable.

For the purposes of this Act, a licensee is guilty of misconduct if the licensee’s conduct –

(a) would reasonably be regarded by agents of good standing, or reasonable members of the public, as disgraceful; or

(b) constitutes seriously incompetent or seriously negligent real estate agency work; or

(d) constitutes an offence for which the licensee has been convicted, being an offence that reflects adversely on the licensee’s fitness to be a licensee.

3.2 Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012

The Real Estate Agents Act (Professional Conduct and Care) Rules (the Rules) set out the standard of conduct and client care that agents, branch managers and salespersons (licensees) are required to meet when carrying out real estate work and dealing with clients. Whilst these rules are not meant to be an exhaustive list, they set minimum standards that licensees must observe and a reference point for discipline.

	Rule 5 Rule 5.1	Standards of professional competence 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 6.1	A licensee must comply with fiduciary obligations to the licensee’s client.
	Rule 6.2	A licensee must act in good faith and deal fairly with all parties engaged in a transaction.
	Rule 6.3	A licensee must not engage in any conduct likely to bring the industry into disrepute.
	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.
4.	Discussion

Issue One: The Licensees omitted to insert “vendor’s clause” into the sale and purchase agreement.

4.1 At the time that the vendors listed the Property with the Agency, they requested a clause be added whereby any sale would be conditional upon them finding a suitable property to move into (vendor’s clause).

4.2 Licensee One drafted the sale and purchase agreement with the Complainant’s offer, however she omitted to include the vendor’s clause. The Complainant subsequently signed the agreement, which was reviewed by Licensee Two prior to it being presented to the vendors.

4.3 The day after the offer was accepted, the vendors contacted the Licensees and advised them about the vendor’s clause not being included in the agreement.

4.4 Despite negotiations to allow the vendor’s clause to be included in the agreement, the parties were unable to agree on suitable terms.

4.5 The Licensees have accepted full responsibility for the oversight of the vendor’s clause being omitted from the agreement.

Issue Two: Professionals that had been recommended by Licensee One were not acting in the best interests of the Complainant.

4.6 Licensee One had recommended a solicitor and a finance company to the Complainant. He had used these parties for services relating to the purchase of property before.

4.7 The Complainants believe the professionals that had been recommended to them did not work in their best interests and conspired against them, and that this resulted in the contract being cancelled.

4.8 Licensee One in her response states that when the Complainants viewed the Property they discussed finance. She says that the Complainants were going to talk with the bank but asked her if she had any other recommendations. She says that she provided them with details of a finance company so they could have a second opinion, as she knew they were effective.

4.9 When drafting the sale and purchase agreement Licensee One asked Mr. F who his solicitor was and he responded that he did not have one and asked her to suggest someone suitable. She recommended a solicitor who had a sound reputation in the community.

4.10 Both Licensees have stated that they do not have a personal or business relationship with the finance company or the solicitor. Both of these firms have confirmed that there is no formal relationship between them and the Licensees.

4.11 The Committee has reviewed all documentation including copies of email exchanges between the various parties. It could not identify actions or advice that indicated that the two organizations had not acted in the best interests of the Complainant.

4.12 The Complainants allege that the Licensees failed to provide support to Mr. F in the following areas:

• Licensee Two bullied the Complainant to insert the alteration to the agreement clause.

4.13 Licensee One accepts that she received a text message from the Complainant advising that his condition of insurance had been satisfied. She says she responded acknowledging the text message however her expectations were that he would advise his solicitor.

4.14 Whilst the Committee can understand why she would make that assumption, the fact remains that the Complainants had earlier stated that they had little experience in real estate transactions. The Committee finds it reasonable in such circumstances to expect this to alert the Licensees to take extra care to ensure that the Complainants fully understood the transaction they were entering into and what was expected of them in relation to matters such as the satisfaction of special conditions contained in the agreement.

4.15 Whether the agreement was validly cancelled on the basis of the insurance special condition is a

civil matter to be resolved between the parties, given that the vendors’ agent (Licensee One) had been informed that the insurance condition had been met.

4.16 In relation to the issue of the registered valuer gaining access the Property, the Licensees have stated that at no time were they asked to arrange such access.

4.17 The Licensees refute the allegation that Mr. F was not advised to consult his solicitor. In fact it was Licensee One who had recommended a solicitor, who Mr. F engaged. She states that they had advised him on numerous occasions to consult his solicitor.

4.18 The Committee reviewed correspondence between the parties which clearly indicates that Mr. F and his solicitor were in regular communication particularly around the ‘vendors clause’. The Committee is of the view that if Mr. F chose not to adequately consult his solicitor, it would be unreasonable to blame the Licensees for that.

4.19 Licensee Two refutes the allegation that he bullied Mr. F to insert the clause relating to finding the vendors a suitable property, after it was inadvertently omitted. He says that he was offering the Complainant advice regarding the ramifications if the vendors became determined not to sell the Property. He submits the Complainants’ solicitor was giving the same advice and that he was not bullying the Complainant, but rather he was acting professionally.

5.1 After conducting an inquiry into the complaint, pursuant to section 89(1) of the Real Estate Agents Act 2008 (the Act), the Committee held a hearing with regard to that complaint. In accordance with section 90(1) of the Act, the Committee conducted the hearing on the papers, and pursuant to section 90(2) the Committee’s determination was made on the basis of the written material before it.

5.2 The Committee reviewed all information and documentation provided by the parties and concluded that the Licensees failed in their duty of care in relation to the following issues:

(a) Not following their clients’ instructions in relation to the ‘vendors clause’ which they omitted to include in the sale and purchase agreement - a breach of rules:

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

Rule 6.1 A licensee must comply with fiduciary obligations to the licensee’s client.

(b) Having been alerted to the Complainants’ lack of experience in real estate transactions, it is the view of the Committee that the Licensees failed to ensure that the Complainants were fully aware of critical elements of the sale and purchase agreement, such as ensuring that Mr. F knew to advise his solicitor about insurance. In addition the Committee takes the view that, even if the Licensees had not been requested to arrange access for the valuer to visit the Property, they ought to be aware that arranging finance was a critical condition in any contract and so should ensure that the Complainants had been provided access for their valuer to facilitate satisfaction of that condition:

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.

5.3 In conclusion the Committee has determined under section 89(2)(b) of the Act that is has been proved, on the balance of probabilities, that Licensees Ms. Deborah Boon and Mr. Michael Hydes have engaged in unsatisfactory conduct.

6.1 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.

(1) If a Committee makes a determination under section 89(2)(b), the Committee may do one or more of the following:

(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;

(e) order the licensee to reduce, cancel, or refund fees charged for work where that work is the subject of the complaint;

(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

(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

(2) An order under this section may be made on and subject to any terms and conditions that the Committee thinks fit.

6.2 The Committee requires the Case Manager to obtain a record of any previous disciplinary decision in respect of the Licensees under either the Real Estate Agents Act 1976 or the Act, if any such decision exists, and provide it to the Committee, the Licensee and the Complainant.

6.3 The Licensees and the Complainants may file submissions on what orders, if any should be made.

The Complainants may file submissions within 10 working days from the date of the decision. These submissions, if any, will then be provided to the Licensees, with a timeframe for filing final submissions.

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

7.2 The Committee has deferred making any decision on publication until it’s hearing to decide what orders, if any, should be made.

8.1 A person affected by a determination of a Complaints Assessment Committee may appeal by way of written notice to the Real Estate Agents Disciplinary Tribunal (the Tribunal) against a determination of the Committee and must do so within 20 working days from the date of the determination.

8.2 The Committee has yet to finally determine this complaint because the parties are being given an opportunity to make submissions on orders before the Committee determines what orders should be made, if any.

8.3 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.

8.4 Appeal is by way of written notice to the Tribunal. Further information on filing an appeal is available by referring to the Guide to Filing an Appeal at ww w.justice . go v t.nz/ tribunals .

New Zealand Real Estate Agents Authority

Boon - Complaint No C05053 [2015] NZREAA 47 (3 February 2015)