Complaint No C12948 [2016] NZREAA 217 (19 October 2016)

Last Updated: 16 April 2017

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

And

In the Matter of Complaint No: C12948

The Licensee (XXXXXXXX)

Decision of Complaints Assessment Committee

Decision to take no further action

19 October 2016

Members of Complaints Assessment Committee: CAC412

Chairperson: Bernardine Hannan

Deputy Chairperson: David Bennett

Panel Member: Craig Edwards

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 22 February 2016 the Real Estate Agents Authority (the Authority) received a complaint against the Licensee from the Complainant.

1.2. The Licensee is a licensed Agent under the Real Estate Agents Act 2008 (the Act), employed at the time of the conduct complained of by the Agency.

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

1.4. The details of the complaint are that Mr C, the Complainant’s grandson, has contacted the REAA on behalf of his grandmother, claiming that the Licensee breached his obligations to the Complainant by failing to adequately disclose a conflict of interest in the sale and purchase of the Complainant’s Property in May 2013. Mr C also claims that the Complainant did not receive a valuation or market appraisal for the Property at any point during the sale process.

1.5. Mr C seeks to represent the Complainant in this complaint, stating that the Complainant is a widowed pensioner in her 80s, who lives alone and has difficulties with communication as English is her second language.

1.6. Mr C claims that in April 2013, the Licensee approached his grandmother with an offer from a colleague to purchase her Property. Mr C claims the Property was not on the market at that time. The prospective purchaser was the Company, the director of which, Mr X, was an Agency property manager at the time and colleague of the Licensee. Mr X worked at the same office as the Licensee.

1.7. The complaint alleges that the Licensee did not disclose his conflict of interest in the prescribed manner. Mr C is also concerned that the purchase price arranged by the Licensee was well under the market value of the Property at the time, and claims the Licensee was well aware of this. In support of his allegation, Mr C refers the Committee to the sale of the Complainant’s neighbour’s property, which he alleges sold for $704,000 two weeks prior to the sale of the Complainant’s Property, on or about 12 April 2013. This is

$160,000 more than the sale price of the Complainant ’s Property two weeks later.

1.8. Mr C is concerned that the Licensee and Mr X targeted the Complainant with the aim of making a large profit, both at the point of sale when buying the Property at a vast undervalue and by the subsequent development of the Property. The complaint alleges that the Licensee was not acting independently and in the best interests of the Complainant.

1.9. In particular, Mr C, on behalf of the Complainant, advised that the Licensee did not act in the best interests of the Complainant when selling the Property under its market value, that the Licensee did not provide a market appraisal or valuation to the Complainant and that the Licensee failed to disclose his relationship with the purchaser as required by sections 134 to

137 of the Act.

1.10. The Complainant requested a remedy, being:

The Complainant seeks reimbursement of all commission paid, claiming that the Licensee should compensate the Complainant for arranging a purchase that was markedly undervalued. The Complainant also seeks additional penalties, but these are unspecified in the complaint.

1.11. The Licensee responded to the complaint against him.

1.12. In particular, the Licensee denied the allegations made against him and claims that at all times during the sale and purchase of the Property in May 2013, he complied with his obligations under the relevant legislation.

2. What we decided

2.1. On 9 March 2016 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it.

2.2. On 6 October 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 and in particular, Rules 6.1, 6.2, 6.4, 9.1, 9.2 and 10.2.

3. Our reasons for the decision

3.1. The Committee concluded:

(i) the Committee was not persuaded on the balance of probabilities that the Licensee failed to act in the best interests of the Complainant;

(ii) the Committee was not persuaded on the balance of probabilities that the Licensee failed to provide a completed market appraisal to the Complainant or was required to provide a registered valuation;

(iii) the Committee was not persuaded on the balance of probabilities that the Licensee had failed to disclose the nature of his relationship with the purchaser, Mr X, to the Complainant, prior to the sale and purchase of her Property.

Standards of professional conduct

3.2. The Committee has carefully considered this complaint and all the evidence available to it.

The Committee is not persuaded the evidence before it proves on the balance of probabilities that the Licensee failed to act in the best interests of the Complainant during the course of the sale of her Property in May 2013. Whereas the Committee has had the benefit of Mr C’s evidence, the Committee has been unable to obtain any direct evidence from the Complainant herself. Given the Complainant’s situation, the Committee accepts that such direct evidence will remain unavailable.

3.3. Whereas the Committee has carefully considered the evidence of Mr C, the Committee is also aware that Mr C has been clear in his evidence to the Committee that he has no direct knowledge of the events of 2013, but is drawing inferences from information that he has gathered later. Notwithstanding this, the Committee has carefully considered Mr C’s evidence and through its investigator attempted to obtain further direct evidence in relation to this complaint.

3.4. The Licensee denies that he did not act in the best interests of the vendor during the sale and purchase transaction in May 2013. The Licensee disputes the events as described by the complaint and claims that rather than contacting the Complainant himself, he was initially contacted by her. The Licensee claims that he knew the Complainant as he had previously sold properties for her and that at the time he considered her an “experienced and long-time property investor”.

3.5. The Licensee also claims that having been contacted by the Complainant, she advised him during their initial discussions that she was under some financial pressure and needed to reduce her financial commitments. The Licensee confirms that as a result of these discussions, he approached a developer, Mr X, who was also a property manager at his Agency. Mr X confirmed his interest in the Property, so the Licensee claims he commenced formally listing the Property and facilitating the sale and purchase.

3.6. In relation to the price obtained for the Property, the Licensee claims that he is not aware of the sale of the comparative property referred to by the Complainant. However the Licensee claims that at the time there were significant differences between the two properties, which could explain the variation in sales price.

3.7. The Committee must make its decision based on both the evidence before it and the required evidential standard. To make a finding of unsatisfactory conduct or to refer an allegation of misconduct, the Committee must be persuaded on the balance of probabilities that the Licensee has failed to meet his obligations under the relevant Act. In this case, the Committee accepts that Mr C believes that the Licensee targeted and then approached his grandmother with an offer well below the market value of the Property, relying on a degree of incapacitation on the part of his grandmother. Mr C admits that he has no direct knowledge of this but is drawing this conclusion from information he has subsequently learnt about the behaviour of the Licensee. Mr C has not alleged to the Committee that the Complainant has ever raised these allegations with him directly. Indeed there was no suggestion before the Committee that the Complainant has mentioned such allegations to anyone.

3.8. The Licensee denies that he targeted the Complainant, alleging that he had had previous dealings with her and that she had been engaged in property investment at the time. The Licensee has provided the Committee with evidence of a previous agency agreement, confirming that this Property had been on the market previously.

3.9. The Licensee also denies the Property was sold substantially below market value, while admitting that he knew the Complainant was under some financial pressure to sell.

3.10. In the absence of any evidence that the Complainant herself is alleging unfair treatment or that the Property was sold substantially under its value, given the surrounding circumstances, the Committee is not in a position to prefer the evidence of Mr C over that of

the Licensee. This view is supported by the considerable time delay between the sale of May

2013 and the date of this complaint, 22 February 2016.

3.11. The Committee is not persuaded the evidence before it supports a finding that the Licensee has breached the required standards of professional conduct in his professional dealings with the Complainant during the sale and purchase of the Property in May 2013.

Client and customer care

3.12. An agent, such as the Licensee, who is entering or has entered into an agency agreement with a client for the sale or other disposal of land, must provide an appraisal in writing to her client. In certain circumstances the agent must also provide evaluation. Mr C alleges that the Licensee did not provide such an appraisal or valuation to the Complainant before the sale of her Property in May 2013. However again, Mr C admits he has no direct knowledge of this and there is no evidence before the Committee that the Complainant herself has supported this allegation.

3.13. The Licensee admits that he is unable to now provide the documentation in relation to this transaction, but claims that all required information and documentation was supplied to the Complainant at the time of sale. Further, the Licensee claims a written valuation was not required in this instance.

3.14. Whereas the Committee is concerned the Licensee is not able to put this matter beyond doubt by providing the documentation referred to, and in particular, the required market appraisal, the Committee also notes that the transaction subject to this complaint was undertaken in May 2013 and that information and documentation relating to such transactions is only required to be kept for a period of 12 months. It is clear that the issue of whether a comparative market appraisal was completed or not cannot be corroborated independent of the Complainant, her grandson or the Licensee. Given the required evidential standard and the inability of the Committee to obtain any further evidence on this allegation, the Committee is not persuaded on the balance of probabilities that the Licensee has breached his obligations under Rule 10.2.

3.15. The requirement for evaluation is considered below.

Conflict of interest

3.16. The Committee understands that any sale and purchase of property that involves a licensee and a known vendor or more particularly, a known purchaser, can lead to questions in the mind of other parties to the transaction. However that in itself will not give rise to a finding of unsatisfactory conduct. There must also be some evidence of a breach of a legal obligation on the part of the licensee.

3.17. In this case it is not disputed that the purchaser was a property manager working for the same Agency as the Licensee. However, the Committee also accepts that the purchaser, Mr X, was not a licensed real estate agent, an employee of the Licensee or otherwise related to the Licensee.

3.18. The Licensee claims that he fully disclosed to the Complainant that the purchaser was a property manager at his Agency and this information was recorded in the vendor consent form signed by the Complainant. The Committee accepts that there are aspects of this issue

that cannot be corroborated independently given the passage of time, the unavailable documentation and the lack of any direct evidence from the Complainant.

3.19. Given the lack of direct knowledge of Mr C and the Committee’s inability to gain any further direct evidence, the Committee does not have sufficient evidence before it to determine on the balance of probabilities that the Licensee failed to disclose his relationship with the purchaser to the Complainant during the sales process. The Committee also accepts that given the purchaser was not an employee of the Licensee or otherwise related to him, the provisions referred to by the Complainant do not apply.

4. What happens next

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. Your appeal must include a copy of this decision and any other information you wish the Tribunal to consider in relation to the appeal. Refer to Appendix section 111.

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

Justice-Tribunals (http://www.justice.govt.nz/tribunals).

Publication

4.3. 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.

4.4. 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.

4.5. 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

Bernardine Hannan

Chairperson

For Complaints Assessment Committee 412

Real Estate Agents Authority

Date: 19 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.

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.

137 Meaning of licensee and person related to licensee in sections 134 to 136

(1) In sections 134 to 136, licensee includes, in the case of an agent that is a company, every officer and shareholder of the company.

(2) For the purposes of sections 134 to 136, a person is related to a licensee if the person

is—

(a) a partner of the licensee under a partnership agreement: (b) an employee of the licensee:

(c) a branch manager or salesperson engaged by the licensee: (d) the licensee’s spouse or civil union partner:

(e) the licensee’s de facto partner:

(f) a child, grandchild, brother, sister, nephew, or niece of the licensee or of any person referred to in paragraphs (d) or (e):

(g) any other child who is being, or is to be, cared for on a continuous basis by the licensee or any person referred to in paragraph (d) or (e):

(h) a grandparent, parent, uncle, or aunt of the licensee or of any person referred to in paragraph (d) or (e):

(i) an entity that has an interest in the licensee or an entity in which the licensee has an interest (except where either interest is in quoted financial products within the meaning given for those terms in section 6(1) of the Financial Markets Conduct Act 2013).

Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, rules referred to: 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 6.4 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 9.1 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 9.2 A licensee must not engage in any conduct that would put a prospective client, client, or customer under undue or unfair pressure.

Rule 10.2 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.