Complaint No C14266 [2016] NZREAA 201 (4 October 2016)

Last Updated: 16 April 2017

Before the Complaints Assessment Committee

Complaint No: C14266

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee One: Licensee One (XXXXXXXX)

Licensee Two: Licensee Two (XXXXXXXX)

Decision to take no further action

4 October 2016

Members of Complaints Assessment Committee: CAC408

Chairperson: Marjorie Noble Deputy Chairperson: Deborah Clapshaw Panel Member: Geoff Warren

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 3 May 2016 the Real Estate Agents Authority (the Authority) received a complaint against

Licensee One and Licensee Two from the Complainant.

1.2. The Licensees are both licensed salespersons under the Real Estate Agents Act 2008 (the Act).

1.3. The complaint relates to a property (the Property).

1.4. The details of the complaint are that on the 9th January 2016, after viewing the Property, the Complainant made an offer on the address. Licensee Two was the selling agent and in consultation with Licensee Two and the Complainant’s family, the Complainant requested three conditions to be included in the sale and purchase agreement.

1.5. They were - Clause 18 (acknowledgement to seek legal advice), Clause 19 (solicitor’s approval as to form) and Clause 20 (Complainant’s partner’s approval as to suitability). On the 18th January 2016, the Property, which was tenanted, went unconditional.

1.6. On the 19th February 2016 the tenants vacated the Property, and on the 24th February 2016 the Complainant, his family and Licensee One (who was the listing agent) visited the Property for a pre-settlement inspection.

1.7. During that inspection they noticed several issues with the Property, the main one being water damage to the ceiling of the walk-in wardrobe. The Complainant raised the issue with Licensee One, who advised them he would get advice as to the possible cause of the damage.

1.8. On the 29th February 2016 the Complainant called Licensee Two, who had been on holiday, and discussed the issues with her. On 14th March 2016, when the Complainant moved into the Property, the issues had not been rectified.

1.9. The Complainant made a claim through the Body Corporate insurers but was told as the damage was gradual his claim would be rejected.

1.10. In particular, the Complainant advised that:

a) He viewed the Property with Licensee Two on 7th January 2016 and on the 9th January

2016 met again with Licensee Two when he decided to submit an offer for the Property.

b) He was advised by Licensee Two that there were possibly two other interested parties and that they were in a multi-offer situation. On this basis he decided against too many clauses in order to make his offer to the vendor more attractive, however was never advised by Licensee Two that it was prudent to get a LIM or builder report.

c) He was advised by Licensee Two that the dwelling was around eight years old, there had

not been any issues with other dwellings in the complex and there was insurance, so if anything did come up it would most likely be covered under that. She then said the final decision was up to him. His was the successful offer.

d) On the 13th January the Complainant, his wife, together with the Complainant ’s father

and brother, met with both Licensee One and Licensee Two at the Property. This was to

satisfy clause 20 of the agreement.

e) On this inspection the Complainant and his family found multiple things they were concerned about within the Property, including a broken cupboard door handle, a gas element on the stove not working, rubbish in the back yard and wallpaper peeling in a walk-in wardrobe with the wall appearing damp.

f) The Complainant was assured by Licensee One that the property management company

would have the issues of rubbish, door handle and gas stove “sorted out”.

g) When the peeling wallpaper in the wardrobe was pointed out, Licensee One initially blamed steam from an iron, an explanation rejected by the Complainant who asked that it be checked out. Licensee One agreed to this and when asked, stated it may well be covered by the body corporate insurance; however the Complainant may have to pay whatever excess the insurance policy required.

h) The Complainant and his wife stated they were happy with the Property only if the problems they pointed out were fixed prior to them moving in and Licensee One stated that they would be.

i) On the 24th February 2016, the Complainant and his family undertook a final inspection.

At this point they saw that none of the issues he had raised were addressed, but Licensee One assured them the property managers would take care of all issues except the wall dampness which was covered by insurance, the documents for which would be with the property managers when they picked up the keys upon settlement.

j) On the 4th March 2016, the Complainant visited their solicitor to sign the transfer

documents. The Complainant stated he explained the issues with his solicitor and was reluctant at first to sign. However he was advised by his solicitor that there was nothing to worry about, he would email the vendor’s solicitor and if necessary, withhold

$10,000.00 on settlement. The Complainant trusted his solicitor’s advice and signed.

k) When the Complainant picked up the keys from the property managers they were informed the property managers had no knowledge of wall damage or the gas stove element not working, and on arriving at the Property found none of the issues had been addressed. When they rang Licensee One he assured them he had filled in the insurance claim documents and at best they would take two weeks to process.

l) Some months after settlement and with no response from Licensee One, the Complainant contacted the body corporate insurers to find out that the wall damage was considered gradual damage, not accidental, and therefore not claimable under the policy.

1.11. The Complainant requested a remedy, being:

a) Both Licensees to share in cost of water damage repairs.

b) Both Licensees to be censured.

1.12. The Licensees responded to the complaint against them.

1.13. In particular, the Licensees commented that:

1.14. Licensee One

1.15. On the 9th January 2016, Licensee One was in receipt of three offers on the Property which he conveyed to the vendor. The vendor decided to accept the offer from the Complainant.

1.16. A viewing was arranged for 13th January by Licensee One with the tenants, who were still in occupation, to enable the Complainant, his partner and father to again view the Property, to enable clause 20 of the agreement to be satisfied.

1.17. Licensee Two was also present and verbally confirmed to Licensee One that her clients were happy with the house and therefore clause 20 would be satisfied subject to a pantry door handle being fixed.

1.18. Licensee One produced a diary entry dated 13 January that he had advised the property manager about having the door handle fixed.

1.19. On the 18th January 2016, he was advised that the Property was declared unconditional and conveyed this to the property managers for them to prepare and present to the tenants the necessary documents to vacate the Property.

1.20. The tenants, with the agreement of the vendor, vacated the Property on the 19th February

2016.

1.21. A pre settlement inspection was undertaken by the Complainant and his family on the 24th February 2016, with Licensee One in attendance at the request of Licensee Two who was on holiday.

1.22. All appliances, lights, heat pump and garage doors were inspected with one of the rings on the gas stove noted as working intermittently and some rubbish and garden furniture in the back yard noted. Licensee One stated he would advise the property manager of this who would address these as part of the exit inspection with the tenants.

1.23. On inspecting the upstairs bedrooms it was noted there was some peeling wallpaper in a walk-in wardrobe. Licensee One stated he had never noticed this before as it had previously been covered by clothing. He commented that if the Complainant had undertaken a building inspection report this would have been identified and addressed between solicitors.

1.24. At this the Complainant informed Licensee One they had chosen not to include a builder’s report clause in their offer. Licensee One stated he then advised them to let their solicitor know of the issues identified so they could be conveyed to the vendor’s solicitor, and their own solicitor could advise the Complainant accordingly.

1.25. Licensee One also stated he undertook to get an independent builder in to identify the issue around the dampness to the wall and there was a possibility the body corporate property insurance might cover that type of damage. Licensee One undertook to ask the question of the body corporate manager once they knew what the problem was and report back to the Complainant.

1.26. On the 2nd March 2016, Licensee One met with a builder at the Property. On inspection the builder reported that when the roof was installed around 2006 a nail missed the timber batten. Since that time expansion and contraction of the roof would have loosened the nail causing water to run down the nail and drip onto the top plate. There was obvious progressive damage to the top plate and top of the wall inside the wardrobe.

1.27. Licensee One stated he then rang the vendor and advised of the findings. The vendor instructed him to contract a plumber to repair the hole, which he did. They also discussed a possible insurance claim and based on this Licensee One stated he contacted Ms X of Body Corporate Administration Ltd, the administrator for the complex. Ms X advised she would need to contact the insurance company and get back to him.

1.28. Licensee Two

1.29. Licensee Two advised that on the 9th January 2016 she met with the Complainant and his father at her office to draw up an offer for the Property. The Complainant had viewed the Property earlier and had shown interest in it, been advised there was other interested buyers and his offer was to be presented to the vendor as part of a multi-offer presentation.

1.30. They went through the agreement, Licensee Two advised him to put his best offer forward for presentation and a discussion ensued between them as to conditions to be inserted. There was discussion around the body corporate structure of the complex and age of the Property.

1.31. Licensee Two stated the Complainant was a first home buyer and relied on advice from his father and both discussed whether or not to include a LIM and builder ’s report as conditions. Licensee Two stated they asked her opinion, to which she replied that it was prudent to get one but ultimately their decision.

1.32. She stated when asked directly had there been any issues with any of the other houses, she replied that her company had been involved in several sales in the complex and was not aware of any issues with the construction nor had anything been disclosed to her about this house, however reiterated that it was always prudent to get a building inspection and as stated by the Complainant “she said the final decision was up to us”.

1.33. She stated they decided as they were in competition and the complex relatively new to not include a building report. The Complainant’s father also stated that a LIM report was unlikely to show any issues so instructed her not include that clause either.

1.34. The Complainant’s offer was successful and a viewing was arranged for the 13th January to satisfy clause 20. Present were Licensee One and Two and the Complainant and his family. The Complainant’s partner verbally confirmed she was happy with the Property but mentioned the loose door handle, to which Licensee One replied he would follow this up with the property manager to get it fixed as it would form part of the final tenancy inspection.

1.35. A pre settlement inspection was requested for the 24th February 2016 and as Licensee Two would be out of town, Licensee One had agreed to undertake this for her. She received a call from the Complainant on the 29th February to advise that during the pre-settlement inspection some water damage had been noticed in the master bedroom walk-in wardrobe.

1.36. Licensee Two advised she would follow this up with Licensee One and also suggested the

Complainant mention this to his solicitor and take advice from him.

1.37. Licensee Two stated following discussions with Licensee One she contacted the Complainant and explained Licensee One was getting a builder to have the damage inspected and, depending on the outcome of this, Licensee One had advised it may be possible to put in an insurance claim; if accepted, the Complainant would probably have to pay the excess.

1.38. Licensee Two stated she and Licensee One had several conversations over the following weeks as he was liaising with the property manager and body corporate to assist with getting the insurance claim submitted and approved.

2. What we decided

2.1. On 1 June 2016 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.

2.2. On 12 September 2016 the Committee held a hearing on the papers and considered all the information gathered during the inquiry.

2.3. The Committee has decided to take no further action on the complaint.

2.4. 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 concluded:

3.1. Licensee Two did not mislead with advice on a builder ’s report.

3.2. Licensee One acted with skill and care.

Licensee Two did not mislead with advice on a builders report

3.3. The Complainant stated that Licensee Two never made the statement “it was prudent to get a builder’s report”. The evidence submitted by Licensee Two was that although the complex was relatively new and she knew of no issues with other sales within the complex her company had been involved with, it was always prudent to get a builder’s report.

3.4. What is not in dispute is, as the Complainant stated in his submission, Licensee Two had said in regard to a builder’s report, “the final decision was up to us”, and it was the Complainant’s father’s advice to insert as few conditions as possible in the agreement because they were in a multiple offer situation.

3.5. Licensee One stated he queried the Complainant during the pre-settlement inspection when the dampness issue was discovered about a builder ’s report, and was also told it was their decision not to include one.

3.6. The Committee also noted on the sale agreement’s front page, the builder’s report condition stated no, and was initialed by the Complainant.

3.7. The Committee was satisfied on the evidence submitted that there had been discussion between Licensee Two, the Complainant and the Complainant’s father about the inclusion of a builder’s report clause in the agreement, when it was signed by the Complainant on the 9th January 2016. The Complainant agreed in his submission Licensee Two had said “the final decision was up to us”, and as they were in a multi-offer situation it was the Complainant’s decision to waive this clause. The Committee is satisfied Licensee Two did not mislead the Complainant.

Licensee One acted with skill and care

3.8. There were two separate issues the Complainant raised in his complaint against Licensee

One. Firstly, the more cosmetic being a damaged door handle, intermittent working gas hob and some rubbish left in or about the section. The second and more serious issue was dampness to a walk-in wardrobe wall.

3.9. The Property had been tenanted with the tenancy being managed through a professional property manager. Licensee One was the listing agent.

3.10. The Complainant had raised the first issues with Licensee One at the pre-settlement inspection on 24th February 2016. Licensee One submitted he informed the Complainant these were issues for the property manager to address with the tenants when undertaking an exit inspection, but that he would talk to the manager. A diary note of 24th February 2016 confirmed this. Licensee One further stated he advised the Complainant to let his solicitor know so these issues could be conveyed to the vendor’s solicitor.

3.11. The property manager was spoken to as part of the investigation. She advised that the Property had been cleaned to the standard required by the Tenancy Act and carpets had been professionally cleaned. Any defects such as the gas stove would have been referred on to the vendor.

3.12. The second and more serious issue was dampness to an internal wall caused by a loose nail in the roof allowing water to penetrate into the ceiling cavity, rotting a timber batten and dripping down behind the wall lining in a walk-in wardrobe.

3.13. Licensee One stated he had only become aware of this damage during the pre-settlement inspection, which was after the tenants had vacated the Property. Prior to this the wardrobe had been full of clothes and the wall damage unable to be seen.

3.14. Licensee One advised the Complainant to let his solicitor know, which was confirmed by the Complainant. Licensee One further stated “...I undertook to get an independent builder to get up in the roof and try to identify the problem....I also suggested that there may be a possibility the body corporate’s property insurance may cover this type of damage and may be worth exploring. I said I would ask the question of the body corporate manager once we knew what the problem is and report back”.

3.15. Licensee One stated he obtained the services of a builder who identified the problem. He then contacted the vendor who instructed him to get a plumber to fix the hole in the roof, which was done. He talked with the vendor about a possible insurance claim. Based on that discussion he called Ms X of Body Corporate Administration Ltd, the body corporate administrator for the complex, who confirmed the conversation and advised she would need to talk to the insurer and have an assessor investigate the damage. Licensee One confirmed this conversation was on 2nd March 2016.

3.16. The Complainant said Licensee One told him the wall damage would be covered by insurance and the insurance documents would be waiting for him on settlement.

3.17. Licensee One stated he never said the damage would be covered but that it was worth submitting a claim and he would initiate the obtaining of a claims form.

3.18. The Committee accepts the Licensee’s statement as he was not the insured and therefore it was not possible for him to guarantee anything until the damage had been assessed, which would only be undertaken once the party to the insurance cover had submitted a claim. That party was either the vendor up to settlement, or the Complainant following settlement.

3.19. The Complainant stated on several occasions following settlement he was told by Licensee One an insurance “claim” had been submitted; Licensee One denied this, stating he had requested a claims form only. When the Complainant emailed the body corporate directly on the 19th April 2016, a reply was received saying “apologies for the delay. Please find attached a claim form for you to complete and return to us. We have asked the insurance broker to appoint a loss adjuster as soon as possible to contact you”.

3.20. The Committee concluded there was confusion between Licensee One and the Complainant as to a claim form being requested and a claim being lodged. The delay in receipt of a claim form was not the fault of Licensee One.

3.21. The Complainant stated they had taken Licensee One’s advice and discussed the issues with their solicitor. Part of the Complainant’s statement reads; “We signed the papers with the lawyer, we told the lawyer that we didn’t want to sign the papers at first because [Licensee One] hadn’t done anything we asked him to do. He said he will write an email to the vendors lawyer and that there’s nothing to worry about and if need be then he will hold $10,000 payment back”.

3.22. The Complainant emailed his solicitor on 23rd May 2016 asking what had been sent to the vendor’s solicitor, but prior to submitting this complaint had not received a response.

3.23. The Committee concluded it was satisfied Licensee One had acted in compliance with Rules

5.1 and 6.4 of the Act and takes no further action.

4. Your right to appeal

4.1. If you are affected by this decision of the Committee, you may appeal in writing to the Real Estate Agents Disciplinary Tribunal (the Tribunal) within 20 working days after the date of this decision (no later than Thursday, 3 November 2016) (section 111).

4.2. For further information on filing an appeal, read Guide to Filing an Appeal at Mi ni stry of

J usti ce -Tri bunal s ( ww w. justi ce. g ov t. nz/ tri bunal s ).

5. Publication

5.1. At the Committee’s discretion, the decision will be published without the names or identifying details of the Complainant (including the address of the Property), the Licensees and any third parties.

5.2. The Authority will publish the Committee’s decision after the period for filing an appeal has ended, unless the Tribunal receives an application for an order preventing publication. The Authority will not publish the Committee’s decision until the Tribunal has made a decision on the application.

5.3. Publishing the Committee’s decision supports the purpose of the Act by ensuring that the disciplinary process remains transparent, independent and effective. The Committee also considers that publishing this decision helps to set industry standards and that is in the public interest.

Signed

Geoff Warren

Date: 4 October 2016

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

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.

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 6.4 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.