Complaint No C08294 [2016] NZREAA 21 (24 February 2016)

Last Updated: 12 November 2016

Before the Complaints Assessment Committee

Complaint No: C08294

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

The Licensee (XXXXXXXX)

Decision to take no further action

24 February 2016

Members of Complaints Assessment Committee: CAC404

Chairperson: Mike Vallant

Deputy Chairperson: Sarah Eyre

Panel Member: Garry Chapman

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 12 June 2015 the Real Estate Agents Authority (the Authority) received a complaint against the Licensee from the Complainant.

1.2. The Licensee is a licensed salesperson under the Real Estate Agents Act 2008 (the Act).

1.3. The complaint relates to a business (the Business).

1.4. The details of the complaint are that the Complainant was one of two owners of the Business, the co-owner was Ms. X. The two owners decided to sell the Business. The Licensee was the salesperson. The Complainant has complained about a number of aspects of the Licensee’s conduct, including her overall lack of professionalism, “conscious actions, mistakes and omissions”.

1.5. In particular, the Complainant stated that:

(a) the Licensee placed pressure on her to accept the first offer she received, which the

Complainant considers was a conflict of interest, as it was from an Agency manager;

(b) the Licensee did not allow the Complainant to try to complete a private sale or consider interest from other prospective purchasers, while the first offer was conditional;

(c) the Licensee did not act in the best interests of the Business and did not undertake any site visits prior to marketing the Business;

(d) there was a lack of communication by the Licensee and she communicated mainly with the Complainant’s co-owner, not the Complainant;

(e) the Licensee failed to change the restraint of trade clause, which has affected the

Complainant’s ability to obtain work;

(f) a request made under the Privacy Act 1993 has not been actioned.

1.6. The Complainant requested a remedy, being:

a) A refund of the commission of $10,710.98; and

b) An apology.

1.7. The Licensee responded to the complaint against them.

1.8. In particular, the Licensee commented that:

a) She had been approached by the Complainant’s co-owner about selling the Business, as the Licensee had previously sold another business for Ms. X.

b) An appraisal was prepared at the request of Ms. X, which indicated a value including stock and tangible assets of between $200,000.00 and $250,000.00. The Licensee recommended commencing marketing at $240,000.00.

c) She met with both owners of the Business on 17 March 2015. The appraisal was

discussed as was an appraisal from the Company, indicating the value of the Business at $250,000.00 and an expected sale price of $200,000.00. The Complainant also indicated at that meeting that the Business’s accountant had recommended a selling price of $280,000.00.

d) The Licensee agreed to a private sale campaign and a reduced commission between

18 and 26 March 2015. On 27 March 2015, it was agreed that there was only one party (Ms. A) who was possibly interested and that she would be an exemption. The listing agreement was signed and the listing went live on 1 April 2015.

e) The Licensee’s manager made an offer on the Business, as a business for his wife who was already a customer of the Business. A meeting was arranged through Ms. X with both co-owners to present the offer on 3 April 2015. The requirements of section 134 of the Act and the restraint of trade were also discussed. The agreement was signed for the purchase price of $245,000.00, with a 10 day due diligence clause. The vendor’s consent form was signed on 4 April 2015.

f) On 6 April 2015, the purchaser stated that the Business was not worth what it was valued at and amended their offer to $180,000.00. This was put to the Complainant and the co-owner by the Licensee. However, on 8 April 2015, the purchaser advised that the offer was back on the table. The Complainant and Ms. X were both notified of this to their work email addresses. Ms. X forwarded the email to the Complainant at her Hotmail address that evening.

g) The agreement for sale and purchase was unconditional on 21 April 2015, after negotiations between the solicitors for the purchaser and for the Business.

h) The Licensee also provided specific responses to the issues raised by the investigator, which included the following response:

a. she was aware of the need to respect the interests of each vendor;

b. she acted professionally and promptly and followed up on every interested party;

c. she is very aware of her professional obligations and complied with the requirements of s134 of the Act;

d. her appraisal was realistic based on the available appraisals, noting that the appraisal from the accountant was disputed by the accountant himself;

e. that she was very aware of the need to include both co-owners in all communications and she believed she did so;

f. that she was unaware that the Complainant felt under pressure to sign the agreement and that she sensed this may have been related to tension between the co-owners rather than from her as the Licensee.

2. What we decided

2.1. On 13 July 2015 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 21 December 2015 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 there was no evidence of any breaches of the Rules by the

Licensee.

No evidence of breach of the Rules

3.1. The Rules impose on licensees certain obligations. The Rules potentially relevant to this complaint, which the Committee had regard to, are:

A licensee must act in the best interests of a client and act in accordance with the client’s instructions unless to do so would be contrary to law (Rule 9.1)

A licensee must not engage in any conduct that would put a prospective client, client, or customer under undue or unfair pressure. (Rule 9.2)

An appraisal of land or a business must—

(a) be provided in writing to a client by a licensee; and

(b) realistically reflect current market conditions; and

(c) be supported by comparable information on sales of similar land in similar locations or businesses. (Rule 10.2)

Where no directly comparable or semi-comparable sales data exists, a licensee must explain this, in writing, to a client. (Rule 10.3)

An advertised price must clearly reflect the pricing expectations agreed with the client. (Rule

10.4)

3.2. The Committee has had regard to the evidence of the Complainant and her assertions regarding the Licensee’s conduct and attitude towards her, and specifically the Complainant’s concerns about the lack of prompt communication and pressure exerted on her. It is clear to the Committee that the Complainant is adamant that she felt the Licensee’s conduct and communications were not satisfactory. However, this is strongly disputed by the Licensee who has provided a very detailed response to the Complainant, with a number of attachments including copies of communications and emails.

3.3. The Committee may only make a finding of unsatisfactory conduct where it is satisfied to the standard of the balance of probabilities that the complained of conduct occurred and that it was unsatisfactory. In this claim, that means that there must be evidence that proves it is more probable than not that the Licensee breached one of the Rules referred to above.

Communications

3.4. The Complainant has highlighted in her complaint a number of concerns about the Licensee’s communication. In particular, she has said that the Licensee communicated more with the co- owner than the Complainant. This is not proven on the actual emails provided by either the Licensee or the Complainant; the emails show correspondence predominantly between the two co-owners and the Licensee and/or other parties. There is nothing in the tone or the content of the correspondence which the Committee considered favoured the co-owner over the Complainant, or was unfair towards the Complainant.

3.5. It appears that the Licensee did phone Ms. X to arrange a meeting with both co-owners and Ms. X then passed this message on to the Complainant, but the Committee does not consider this indicates any lack of professionalism or fairness towards the Complainant. It is a reality that only one person can be phoned at a time and it appears to have been a practical step for Ms. X to pass the message on, rather than the Licensee making a separate phone call.

3.6. It is accepted by the Complainant and the Licensee that the Licensee did on one occasion use the Complainant’s work email address rather than her preferred Hotmail address. However, the Complainant did still receive the communication on the same day and the Licensee did intend to send it to both parties, albeit making an error in which was the best email to use on that occasion. It was subsequently forwarded later that day from Ms. X to the Complainant.

3.7. It is also accepted by the Committee that the Complainant is aggrieved she did not receive any confirmation from the Licensee of the sale and instead she was the one who advised the Licensee that it had gone unconditional upon advice from the Businesses’ lawyer. It is clear that the Complainant knew the Business had sold, so the fact the Licensee did not tell the Complainant this directly does not amount to unsatisfactory conduct.

3.8. The Committee has considered all the examples of correspondence provided by both the Complainant and the Licensee, and concludes that there is no evidence that the Licensee’s communications with the Complainant breached the Licensee’s obligations towards the Complainant under Rule 9.1 or any other Rule.

Undue Pressure

3.9. The Complainant asserts that the Licensee applied undue pressure on her to sign the agreement. This is disputed by the Licensee. While the evidence of the Complainant does indicate that she felt under pressure, there is no evidence that this pressure arose from the Licensee. The Complainant’s own description of the circumstances regarding the signing of the agreement focus on her arguments with Ms. X. The Complainant suggests that the Licensee should have picked up on this and suggested they go away and think about it. The Committee does not consider that the fact that the Licensee did not suggest this amounts to undue pressure or unsatisfactory conduct. The Committee finds that there was no evidence of a breach of Rule 9.2.

Conflict of interest

3.10. The Complainant complains that it was a conflict of interest for the Business to be sold to a manager from the Agency. This situation is potentially a conflict of interest and must therefore be managed by the Licensee in accordance with s134 of the Act, which is designed to provide some protection to vendors in these situations. It is clear that the Licensee did arrange for the completion of the form relating to s134 of the Act in accordance with s134 and the valuation was provided within 14 days. The s134 form was completed the day after the Agreement for Sale and Purchase was signed, but as it is clear that the Complainant and the co-owner were aware when signing the Agreement for Sale and Purchase that the purchaser was from the Agency, s134 form has been complied with in all material respects. The Committee finds that there was no breach of s134 of the Act by the Licensee.

Other purchasers

3.11. The Committee has had regard to the complaint that the Licensee did not conta ct other interested purchasers and was too restrictive in relation to the exemption for Ms. A as a private buyer.

3.12. The evidence provided by the Complainant comprises two emails, one where the Licensee is provided the phone number of a potentially interested person and one where the Licensee states that she has not followed up with the interested party, as she states “I would rather see how this current offer eventuates”. This was while the offer from the eventual purchaser

was still conditional. The Committee does not consider that this amounted to a breach of the Licensee’s requirement to act in the best interests of the client, nor was it unsatisfactory conduct. That is because there is no evidence that this was not in the best interests of the client; ultimately the Business was sold to the eventual purchaser and the exercise of the Licensee’s discretion in not immediately following up with the other purchaser does not mean she breached Rule 9.1, as she was entitled to exercise her discretion in considering how best to ensure she sold the Business for her client.

3.13. The Committee also finds that there was no breach of Rule 9.1 regarding the limited exception period for Ms. A. This was a matter negotiated between the Complainant and Ms. X with the Licensee; if they were unhappy with the time period allowed that was a contractual matter for negotiation at that time. There is no evidence of any breach of Rule 9.1.

Did not act in best interests of the Business

3.14. The Complainant has also asserted in relation to a breach of Rule 9.1 that the appraisal provided by the Licensee and the complete lack of site visits amounted to the Licensee not acting in the best interests of the Business.

3.15. The Complainant was concerned that the actual value of the Business was higher than appraised by the Licensee, as the Complainant considered it was $250,000.00 to

$280,000.00. This was based on her understanding that the Business’s accountant had valued the Business at $280,000.00. However the accountant has disputed that he stated this.

3.16. There were three appraisals of the value of the Business: The Licensee’s appraisal of between

$200,000.00 and $250,000.00; the Company’s appraisal of $200,000.00; and the Accountants’ valuation of $193,565.00. The sale of the Business for the sum of $245,000.00 was within the range of the various valuations and appraisals provided, including the appraisal by the Licensee. Accordingly, there is no evidence of a breach of Rule 10.2 regarding appraisals.

3.17. The Rules do not dictate the timing or nature of site visits to be undertaken by a licensee. It is up to the licensee’s discretion when and how they wish to view and understand a business they are selling and/or if they wish to take people through the business. The fact that the Licensee did not undertake site visits does not by itself mean that the Licensee did not act in the best interests of the Business or the Complainant, as the reality is the Business sold for a price consistent with its value as established by a number of appraisals and valuations, which are discussed above.

Restraint of Trade

3.18. The Complainant has complained that the Licensee did not action her request for the restraint of trade to be altered, but there is no evidence this request was made and the Licensee has strongly disputed this. The Complainant has provided an email where she refers to having made an earlier request for a change to the restraint of trade, but this does not prove a request was actually made to the Licensee to change the restraint of trade.

3.19. The Committee finds that there is no evidence that proves the Licensee failed to act on an insertion to change the details of the restraint of trade.

Privacy Act

3.20. The Complainant requested her file from the Agency under the Privacy Act 1993 and had at

the date of filing the complaint still not received it. It is not known if it has since been received or not. The Licensee and her Agency are required to act in accordance with the Privacy Act 1993, but as no other unsatisfactory conduct has been proven in this complaint overall the Committee does not consider this possible failure to comply with the Privacy Act

1993 amounts to unsatisfactory conduct, and notes that the Complainant has available to her

other avenues under the procedures within the Privacy Act.

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 notice of this decision (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 Licensee, 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

Sarah Eyre

Date: 24 February 2016

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 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.

Section 134 Contracts for acquisition by licensee or related person may be cancelled

(1) No licensee may, without the consent of the client for whom he or she carries out real estate agency work in respect of a transaction, directly or indirectly, whether by himself or herself or through any partner, sub-agent, or nominee, acquire the land or business to which the transaction relates or any legal or beneficial interest in that land or business.

(2) No licensee may, without the consent of the client, carry out or continue to carry out any agency work in respect of a transaction if the licensee knows or should know that the transaction will, or is likely to, result in a person related to the licensee acquiring the land or business to which the transaction relates or any legal or beneficial interest in that land or business.

(3) The client’s consent is effective only if— (a) given in the prescribed form; and

(b) the client is provided with a valuation in accordance with section 135. (4) The client may cancel any contract—

(a) made in contravention of subsection (1); or

(b) brought about by agency work carried out in contravention of subsection (2). (5) No commission is payable in respect of any contract of the kind described in

subsection (4), regardless of whether the client cancels the contract.

(6) The client may recover any commission paid in respect of any contract of the kind described in subsection (4) as a debt.

(7) For the purposes of this section, a person who is the client of an agent in respect of a transaction is also the client of any branch manager or salesperson whose work enables the agent to carry out real estate agency work for that client.

(8) This section and section 135 have effect despite any provision to the contrary in any agreement.