Complaint No C07563 [2016] NZREAA 54 (15 March 2016)

Last Updated: 21 December 2016

Before the Complaints Assessment Committee

Complaint No: C07563

In the matter of

Part 4 of the Real Estate Agents Act 2008

The Licensee: The Licensee (XXXXXXXX)

Decision to take no further action

15 March 2016

Members of Complaints Assessment Committee: CAC403

Chairperson: Susan D'Ath Deputy Chairperson: Amelia Bardesly Panel Member: Sandra Wilson

Complaints Assessment Committee

1. The Complaint

1.1. On 25 March 2015 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).

1.3. The complaint relates to a rental property (the Property) owned by the Complainant and her partner and managed by the Licensee's real estate and rental property company (the Company) licensed under the Real Estate Agents Act 2008. The Licensee is the sole director of the Company.

1.4. The Complainant alleged that the Licensee, through his Company, was managing her rental Property from June 2014. That the monthly statements over that period stated that the rental income would be paid to her account within the first five working days of the month but the rent collected from her tenants was not paid to her bank account until she followed it up.

1.5. The Licensee responded to the complaint.

1.6. In particular, the Licensee sought to excuse his conduct by placing blame on staff members and minimising his involvement in the conduct.

2. What we decided

2.1. On 28 April 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 29 August 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.

3. Our reasons for the decision

The Committee concluded:

3.1. The Complainant’s rental Property had been managed by the Licensee’s Company since June

2014.

3.2. The landlord statements supplied to the Complainant each month stated that rental income would be paid to their account within the first five working days of each month. The Licensee’s Company was collecting the rentals but was not making payment to the

Complainant account in a timely manner.

3.3. The Committee has been provided by the Complainant with landlord statements which show that between August 2014 and May 2015 the payment of rental to the Complainant’s bank account was consistently later than the payment date shown on the landlord statements sent to her by the Licensee’s Company. The earliest a payment was received was two days after the statement stated, the latest 18 days.

3.4. The Licensee issued a letter of apology to the Complainant. He excused the delays to the Committee as being as the result of errors. He has not reimbursed the Complainant for the interest which she and her partner have lost on those funds. We note that in that letter he refers to the rentals being held in a trust account, however from the investigation carried out it appears that this is simply a standard business bank account. The Licensee places emphasis on this being a non-interest bearing account saying this demonstrates he had nothing to gain from the delays. With respect this proves nothing in the absence of the bank statements.

3.5. The Committee notes that it does not find the explanation offered by the Licensee particularly convincing. Previous employees spoken to during the course of the investigation have alluded to a pattern of late payment of rentals to landlords, which concerns us. Throughout the investigation the Licensee has shown a marked reluctance to provide copies of bank records which could prove his conduct was not improper. He has refused to provide the names of the staff members who he says are to blame for what he terms “errors in processing” and has not provided a copy of the financial processes used by his staff. The excuses provided for the failure to produce the records are in our view thin to the point of transparency. The administration of rental receipts on behalf of others appears unsatisfactory and suggests negligence on his part.

3.6. Further, to the disquiet of the Committee he has stated that had the statements not made reference to “payment within 5 working days” then he would have no complaints. In saying that, he appeared to take a dismissive approach to the complaint and the investigation.

3.7. At the time of the conduct the Licensee was operating a large number of offices. He has since divested himself of two branches and at the present time owns two companies which operate five branches, four of which maintain a rent roll. He employs four property managers, one in each of those offices, and an accounts person based in the same branch as him. He does not use a trust account to hold rents received.

3.8. The Committee finds that the Licensee failed to make prompt payment of rentals to the Complainant. We note he has admitted this and he has provided an explanation for the delays. Even were his staff to blame (and we do not have before us any convincing evidence to support this suggestion) then the responsibility to check and ensure proper systems and oversight were in place and functioning was his. The Committee considers the overall impression given is one of poor management and oversight and a too casual or even slapdash approach by the Licensee to the responsibilities incumbent in handling other peoples money. We do not however have any evidence of misuse of funds or defalcation before us.

3.9. This case raises an issue of jurisdiction. Residential property management is not subject to any regulation in New Zealand. The Real Estate Agents Act 2008 provides for the regulation of the conduct of persons licensed under that Act of which the Licensee is one. The Act goes further however and defines matters which can be the subject of disciplinary action.

3.10. There are two categories of offending, Misconduct (the higher level) and Unsatisfactory

Conduct (the lower level).

3.11. The Act goes further to define in section 4 what matters can constitute conduct which could fall into the category of Unsatisfactory. This conduct is limited to “Real Estate Work” which the section defines as:

“means any work done or services provided, in trade, on behalf of another person for the

purpose of bringing about a transaction”.

3.12. Transaction is defined so as to limit its meaning to the sale, purchase or other disposition interests in land so as to specifically omit the renting of residential properties. Accordingly, property management is not Real Estate Work in terms of the Act and the Committee is unable to make a finding of Unsatisfactory Conduct against the Licensee. The only option available to the Committee in conduct around property management is that of Misconduct.

3.13. The Real Estate Agents Disciplinary Tribunal has made it clear in its decisions that Misconduct is conduct of a very serious nature, conduct that would be considered 'disgraceful' by agents of good standing or reasonable members of the public and involves a 'marked and serious departure from the standards ‘REAA v Stevenson [2013] NZREADT. The Tribunal has emphasised that any suggestion of dishonesty on the part of a licensee is likely to constitute disgraceful conduct ‘CAC v Collins [2015] NZREADT 2’.

3.14. In this instance we do not have before us evidence of any dishonest use of the Complainant's funds. The delays of several days in payment of the rentals to the Complainant do not in our option amount to a 'serious and marked departure” from the expected standards. As a result we do not find that there is sufficient to support a charge of Misconduct being brought against against the Licensee. This should not be interpreted by the Licensee as condoning his conduct.

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 (Section 111).

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

Justice-Tribunals (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

Susan D'Ath

Date: 15 March 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.

The relevant provisions from the Real Estate Agents Act (Professional Conduct and Client Care) Rules

2012 are:

Rule 6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

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