Complaint No C08574 [2016] NZREAA 50 (11 March 2016)

Last Updated: 29 November 2016

Before the Complaints Assessment Committee

Complaint No: C08574

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

The Licensee (XXXXXXXX)

Decision to take no further action

11 March 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 2 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) and at the time of the conduct was engaged by the Agency.

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

1.4. The details of the complaint are that the Licensee (as listing salesperson) and others pressured and deceived the Complainant into increasing her offer for the Property, the Licensee misled the Complainant in respect of the chattels included in the sale of the Property, and the Licensee provided the Complainant with an outdated Computer Register (Certificate of Title) for the Property.

1.5. In particular, the Complainant advised that:

a) The Complainant was interested in purchasing the Property. To this end she attended an auction for the Property held in the Agency auction rooms. A colleague of the Licensee sat beside the Complainant and asked if she was happy to open the bidding. The Complainant disclosed her maximum price limit to this colleague.

b) The Complainant opened the bidding followed by a vendor bid from the auctioneer and in turn another bid from the Complainant. The level of bidding did not reach the vendor’s reserve, and the auction was paused while the auctioneer met with the vendor and the Complainant met separately with the Licensee and the colleague. The Complainant was persuaded to increase her bid, because if she did not, the Licensee and the colleague told the Complainant, the Property would be offered to other prospective purchasers. At this point the Complainant did not know what the Licensees were talking about, what was happening, and was forced to increase her offer, which consequently secured the Property for the Complainant.

c) The Complainant immediately informed the Licensee the auction was unfair as she had been the only bidder and asked the Licensee why the vendor’s reserve had not been disclosed.

d) The Licensee misled the Complainant as to the amount of interest from other buyers.

e) The Licensee misled the Complainant about the inclusion of a washing machine as a chattel in the sale, the working condition of other chattels, specifically a security system and a heated towel rail, and incorrectly described a gas hob as electric.

f) The Licensee provided the Complainant and other prospective purchasers with an outdated Computer Register.

1.6. The Complainant requested a remedy, being:

a) “The Agency acknowledging their role to mislead and manipulation of the sale”.

b) “Cancellation of all the closed door bids”.

c) “Cancellation of the sale of the Property”.

1.7. The Licensee responded to the complaint against her.

1.8. In particular, the Licensee commented that:

a) The Complainant attended an open home for the Property the Licensee was hosting.

The Licensee gave the Complainant a Comprehensive Property Report, which among other matters included details of the Property, the relevant Computer Register, rating information, a Land Information Memorandum (LIM), and a two page guide on buying at auction.

b) The Complainant requested the Licensee email her additional information which the Licensee duly did. Attached to this email were the auction documents (presumably the Particulars and Conditions of Sale), the Computer Register, and LIM again and the New Zealand Residential Property Sale and Purchase Agreement Guide published by the Authority. The Licensee informed the Complainant where the auction would be held and advised the Complainant to seek legal advice in respect of the documents.

c) At the auction the Licensee asked a colleague to sit with and provide assistance to the Complainant and sought permission of the Complainant for the colleague to do so. The Complainant accepted this offer. The Licensee expected other potential bidders to attend the auction and wanted to identify and greet them.

d) When the auction began, the colleague asked the Complainant if she would be

prepared to open the bidding at $1,050,000. The Complainant agreed and opened the bidding. There were no other bids from the floor and the auctioneer placed a vendor bid at $1,075,000. The colleague explained to the Complainant that this was a bid on behalf of the vendor and was at a level below the auction reserve. The Complainant then placed a bid of $1,100,000. There were no other bids from the floor. The auction was paused for negotiation in a separate room between the vendor and the auctioneer.

e) The Complainant, the colleague, and the Licensee moved to another meeting room.

The auctioneer then came into the room where the Complainant was and explained

that the vendor would not sell at $1,100,000 (the amount of the Complainant’s last bid). The Complainant then increased her bid to $1,120,000. The auctioneer left the room to negotiate further with the vendor.

f) While the auctioneer was absent from the room, the Complainant stated that she would like to take advice from her son. She then sent a text message (presumably to her son). She subsequently received a text message (again, presumably from her son). At that time the Licensee, the colleague, and the auctioneer were in the room with her.

After reading her text message the Complainant increased her bid to $1,130,000.

g) The auctioneer left the room to negotiate with the vendor. The vendor agreed to put the Property on the market at that price ($1,130,000). The process was explained to the Complainant. The Complainant was told that the auction would return to the auction room and her bid of $1,130,000 would then be formally submitted. If there were no further bids from the floor, the Property would be sold to her at the price she had bid. There were no further bids from the floor and the Property was sold under the fall of the hammer to the Complainant for $1,130,000.

h) The Licensee denied there was any deception or that the Complainant was put under any pressure. The Licensee had good reason to believe a number of other interested parties would attend the auction to bid and that there were likely to be other bidders for the Property. The Complainant was informed of the same.

i) The Complainant was given full information about the auction process prior to and during the auction. In particular, the colleague fully explained the significance of the vendor bid to the Complainant. The colleague explained to the Complainant that if there was no bid higher than the vendor’s bid, then the vendor would be free to negotiate with any other party and entertain conditional offers. The auctioneer was

similarly careful to ensure the Complainant was given full information about what was happening in his discussions with the vendor. He also fully explained the auction process to the Complainant and ensured she was not put under any pressure.

j) The Licensee acknowledged she made an error in the Comprehensive Property Report where it stated electric hob when in fact it was gas. The chattels list, which was forwarded to the Complainant prior to the auction, stated the Property included the washing machine taps only, not a washing machine per se. The Licensee was unaware the security system was not operational until after settlement and was not aware that only one of the two heated towel rails worked.

k) The Property had previously been listed for sale in September 2014. The information used at that time was used again in this campaign. This included the Computer Register used at that earlier time, because it was identical to the current Computer Register (except for notation of a lease of the other cross lease property on the Computer Register).

2. What we decided

2.1. On 16 June 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 24 November 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:

3.1. The Licensee (or any other licensee) did not pressure, bully or force the Complainant to bid for or to purchase the Property.

3.2. The execution of the auction was neither misleading nor unfair.

3.3. The Licensee did not mis-describe the chattels included in the sale of the Property.

3.4. The Licensee did not misrepresent the Computer Register for the Property.

No pressure, bullying or being forced to bid at auction

3.5. The threshold for proving the complaint is the balance of probabilities. This principle is set out in the case of Hodgson v CAC v Arnold [2011] READT 3. Therefore unless we are able to form a view that what the Complainant alleged is more likely than not what happened, or if we believe that the conduct complained of does not reach the threshold set out in section 72 of the Act, we have to dismiss the complaint.

3.6. The Complainant alleged she was pressured, bullied, and forced to bid for and eventually

purchase the Property. The Licensee, on the other hand, set out in considerable detail the steps the Agency took in their handling of the auction and in particular their dealing with the Complainant prior to, during, and after the auction. When this evidence is weighed against the evidence provided by the Complainant, it is clear that there is no actual evidence to support the Complainant’s assertion she was pressured, bullied or forced to bid or to purchase the Property.

3.7. Auctions can be an effective process for buying and selling real estate but for some participants they can be somewhat stressful. Unfortunately for the Complainant the auction necessitated a faster and more stressful decision making process than might ordinarily be expected. The Committee understands that some bidders under that type of stress would feel pressured, but finds the pressure was related to the circumstances and was not unduly applied by the Licensee, the colleague or the auctioneer. During the course of the auction the Complainant sought and obtained advice from her son. At any time the Complainant could have simply refrained from bidding. Accordingly, we find there was no unsatisfactory conduct in respect of this part of the complaint.

The auction was neither misleading nor unfair

3.8. The Complainant alleged the way the auction was conducted was unfair because the vendor’s reserve price was not disclosed and that she was misled as to the amount of interest the Property had generated. The matter of the vendor’s reserve is easily resolved. The REINZ Auction Code of Practice rules hold the reserve price, if any, shall not be disclosed to bidders. In respect to the amount of interest in the Property, the Licensee was expecting several other interested buyers to attend the auction, a claim supported by emails the Licensee provided to the investigator. It is uncertain if any of these potential bidders attended the auction or not. There are any number of reasons why a genuinely interested party may not attend an auction. In any event, the bidding was transparent and it is not disputed the Complainant was the only bidder, something that was plain to the Licensee, the auctioneer, and importantly the Complainant.

3.9. The Complainant received a two page guide on buying at auction from the Licensee and had ample time to familiarise herself with the auction process, and as recommended by the Licensee on more than one occasion, to seek legal advice before attending the auction. It is uncertain whether the Complainant took either action. If she did, then she was fully informed as to the workings of an auction, and if she did not, then the Complainant only has herself to blame. Auctions conducted by real estate agents in New Zealand are highly regulated and from the evidence before the Committee it appears the Agency operated on a best practice model. As it stands there is no evidence to enable the Committee to find the Licensee engaged in conduct that was unsatisfactory in respect of this part of the complaint.

No misdescription of the chattels included in the sale

3.10. The Complainant alleged the Licensee verbally informed her a washing machine was to be included as a chattel in the sale of the Property. The Licensee denied this allegation. The agency agreement, the Comprehensive Property Report, and the auction particulars all refer to washing machine taps as being included in the sale and not a washing machine. There is simply no independent evidence to support the Complainant’s assertion and significant evidence to the contrary, in the documents referred to, that it was made plain to the Complainant that what was included in the sale were washing machine taps not a washing machine.

3.11. The Complainant also alleged several other chattels included in the sale were not in working order. The Licensee stated she was not aware those particular chattels were not in reasonable working order. There is no evidence as to whether the Complainant conducted a pre-settlement inspection and in any event, resolution of this matter is best left between the Complainant and the vendor of the Property. In respect to the Licensee incorrectly describing a gas hob as electric, the Licensee admits to this error. Although understandably annoying for the Complainant, the Committee does not accept there was a breach of the Rules. Accordingly, we find that there was no unsatisfactory conduct in respect to this part of the complaint.

No misrepresentation of the Computer Register

3.12. It is not in dispute that the Computer Register for the Property, used during the auction campaign, did not show a notation of a lease for a neighbouring property whereas the then current Computer Register did. In all other respects, they were identical. The reason given by the Licensee was that the Property had previously been listed and the information used at that time was used in this campaign. The Committee does not consider this explanation to be wholly adequate, however, given the very minor significance of the additional interest on the Computer Register, the omission of the Licensee to obtain a guaranteed search does not amount to a breach of the Rules. The Licensee should be mindful the only clear and prudent measure appropriate when conducting an auction campaign is to obtain a guaranteed search. We find that there was no unsatisfactory conduct in respect to this part of the complaint.

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 (12 April 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 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

Garry Chapman

Date: 11 March 2016

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

Section 72 Unsatisfactory conduct

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 or rules made under

this Act; or

(c) is incompetent or negligent; or

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

Section 79 Procedure on receipt of complaint

(1) As soon as practicable after receiving a complaint concerning a licensee, a Committee must consider the complaint and determine whether to inquire into it.

(2) The Committee may—

(a) determine that the complaint alleges neither unsatisfactory conduct nor misconduct and dismiss it accordingly:

(b) determine that the complaint discloses only an inconsequential matter, and for this reason need not be pursued:

(c) determine that the complaint is frivolous or vexatious and not made in good faith, and for this reason need not be pursued:

(d) determine that the complaint should be referred to another agency, and refer it accordingly:

(e) determine to inquire into the complaint

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.