Packer - Complaint No C15143 [2017] NZREAA 104 (20 July 2017)

Last Updated: 20 June 2018

Before the Complaints Assessment Committee

Complaint No: C15143

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee: Gerard (Jim) Packer (10002300)

The Agency: Highland Real Estate Group Limited t/a Harcourts

Dunedin (10049113)

Decision finding of unsatisfactory conduct - asking for submissions on orders

20 July 2017

Members of Complaints Assessment Committee: CAC409

Chairperson: Jane Ross

Deputy Chairperson: Peter Brock

Panel Member: Josephine O'Donnell

Complaints Assessment Committee

Decision finding unsatisfactory conduct - asking for submissions on orders

1. Complaint

1.1. On 13 June 2016 the Real Estate Agents Authority (the Authority) received a complaint against Gerard (Jim) Packer (the Licensee) from Complainant 1 and Complainant 2 (together the Complainants).

1.2. The Licensee is a licensed Salesperson under the Real Estate Agents Act 2008 (the Act) and at the time of conduct was engaged by Highland Real Estate Group Limited t/a Harcourts Dunedin (the Agency).

1.3. The Committee considered the complaint also raises issues about the Agency and decided to inquire into it under section 78(b) of the Act. The Agency is a licensed Company Agent under the Act.

1.4. The complaint relates to the Property.

1.5. The details of the complaint are that the Complainants:

a) submitted an offer for the Property with the intention of expanding their business.

During due diligence their solicitor advised that a search of the title for the Property had revealed the City Council owned a 4m wide corridor, intended for a cycle track, running through the Property rendering it unsuitable for the Complainants’ intended use.

b) cancelled the agreement for sale and purchase (ASP) on the advice of their solicitor.

c) believe the Licensee was negligent in his failure to discover and disclose to them the

“significant encumbrance” on the Property title.

4. conveyed their complaint to the Agency but consider the complaint was not taken seriously and was not well handled by the Agency.
   

1.6. In particular, the Complainants advised that

1. they became aware the Property was for sale when they saw the Agency’s advertisement offering a vacant industrial section of 2930m2, which was exactly what they were after to facilitate the next stage of growth for their business. The location was ideal and they were quick to put in an offer which was accepted with an 11 day due diligence clause to allow for arranging finance and other matters.
   
2. Complainant 2 had concerns about a boundary peg and an onsite meeting was arranged by the Licensee with the vendor, the Licensee and Complainant 2 in attendance. During the meeting the vendor agreed to have a new survey peg installed (which he did) but no other issues of concern were raised by the vendor or the Licensee at that time.
   

100. they arranged finance, started looking for another employee and secured a front end loader with that purchase to be confirmed after settlement on the Property.
     

4. one and a half hours before the ASP was due to go unconditional, their solicitor phoned saying he urgently needed a meeting with them prior to the 5pm deadline. Complainant

2 met with him and was shown an ASP dated 21 November 2011 selling part of the

Property to the City Council for a proposed cycle way reserve. The cycle way corridor showed as 4m wide and running through the centre of the Property dividing it in half which rendered it useless for the purposes of their business. On their solicitor’s advice they cancelled the agreement.

5. the vendor and the Agency had tried to sell them a lot the vendor did not own as they had already sold it to the City Council in 2011. Had they confirmed their ASP for the Property on the due date they consider they would have been left with two worthless pieces of land on either side of the cycle way corridor.
   
6. Complainant 2 phoned the Agency’s manager, licensee Y, and complained that the Licensee had not declared the information about the cycle way corridor and had tried to sell them a lot the vendor did not own. Complainant 2 tried to arrange a meeting to discuss the issue but says the only response was two phone calls from licensee Y on 3

June 2016, saying he was waiting on a reply from the vendor’s solicitor.

7. Complainant 1 phoned licensee Y again on 10 June 2016, and was told the Licensee would be looking after the complaint. They were very disappointed that the Agency’s management would put the complaint back to the Licensee they were complaining about.
   
8. they think the Agency should have taken the complaint more seriously and should have a procedure for customer complaints other than referring back to the person complained about.
   
9. they were very upset at having to cancel an agreement for the purchase of the new front end loader, and even more upset at having to phone their new employee to say they could not employ him after all.
   
10. the Licensee told them he was not aware of the issue of the cycle way corridor but they consider him negligent in not researching all relevant information before listing the Property for sale. They say that had the transaction proceeded they would have lost their business.
    

1.7. The Complainant requested a remedy, being:

a) The Licensee is censured

2. They are compensated for the additional costs incurred in having to cancel the agreement.
   

1.8. The Licensee responded to the complaint against him.

1.9. In particular, the Licensee commented that

1. on 13 April 2016, he entered into an agency agreement with Mr AB on behalf of Company A (the Vendor) to sell the Property. Mr AB confirmed the land was vacant and there were no outstanding requisitions against the Property.
   
2. as part of his preliminary inquiries he obtained a copy of the certificate of title for the Property and noted the Vendor had been incorrectly described. Subsequently he also became aware the Property encompassed two adjacent properties (Property A and Property B). An updated agency agreement was entered into to reflect the correct ownership and address for the Property.

100. he obtained a certificate of title for Property B and notes that both titles for the Property (Property A and B) were “particularly complex in nature” with a number of instruments registered against each title and he could not comfortably interpret them. He considered that in view of the Vendor’s uncertainty and the complex nature of the titles, it was crucial for prospective purchasers to obtain their own expert advice and to carry out detailed due diligence inquiries to gain a complete understanding of the Property.
     

4. on 29 April and 30 April 2016, he was contacted by the Complainant 2 who considered the Property would be ideal to run his skip business from. Complainant 2 viewed the Property, boundaries were discussed and on 2 May 2016 the Licensee was instructed to prepare an ASP.
   

e) he advised Complainant 2 to include a due diligence clause in the ASP and Complainant

2 advised he had spoken to his solicitor who had also instructed that a due diligence clause be included in the ASP. The Licensee sent a draft copy of the ASP, which included the Harcourt’s special form due diligence clause, to the Complainants’ solicitor for review prior to meeting with the Complainants. He then spoke to the Complainants’ solicitor to discuss the ASP and was not instructed to include any further conditions in the agreement.

6. he met with the Complainants in the evening of 2 May 2016, provided the sale and purchase guide and took them through the agreement and took particular care to draw their attention to the due diligence clause, the finance clause and the fact the boundaries needed to be identified. He explained the titles were complicated but that the due diligence clause would enable them to conduct their own inquiries and take expert advice regarding the title. He considered the Complainants’ solicitor would be better placed than he to advise them accurately in this respect.
   
7. he advised the Complainants that he would send the ASP to the Vendor ’s accountant who would arrange for it to be signed by the Vendor’s authorised signatory.
   

h) on 3 May 2016, he went to the Property to identify boundary pegs and met Complainant

2 who advised he had been to the council and obtained further information on the Property. That information included a number of matters including the road fence not being the boundary and that he could build on the flat area but not the sub-link (subsequently described as the cycle way). Complainant 2 said that he considered he could store his skip bins on the sub-link and that he would probably not erect any buildings but may consider a portable office. He did not mention the proposed cycle way.

1. from 4 May 2016 to 10 May 2016, he received several phone calls from Complainant 2 asking when the agreement would be signed by the Vendor. On 10 May 2016 he received an email from the Vendor’s accountant with the executed ASP attached and on 11 May

2016, emailed the fully signed and dated ASP to the parties.

10. on 16 May 2016, he met with Mr AB (for the Vendor) and Complainant 2 at the Property for the purpose of identifying boundary pegs at the bottom end of the land. They were unable to locate the southern boundary peg and Mr AB confirmed the Vendor would have the peg reinstated. Mr AB and Complainant 2 also discussed potential buildings on the site but at no time did Mr AB mention an existing ASP or a lease over the land.
    

k) Complainant 2 appeared eager to move forward with his plans and advised he was considering purchasing a digger. The Licensee suggested he wait until the ASP was unconditional before doing so.

50. on 25 May 2016, he received a phone call from the Complainants’ solicitor requesting an extension of a week on the settlement date, and asking if he had any knowledge of a cycle way running through the Property. He advised he didn’t see any difficulty extending the settlement date and that he had no knowledge of any cycle way.
    

m) he called Complainant 2 to confirm he was unaware of a cycle way and immediately proceeded to pursue the matter with the Vendor and their solicitor but was unable to obtain more information. He called Mr AB, who was out of town, and he neither confirmed nor denied any knowledge of the cycle way but he assured the Licensee he would obtain the information from his resource management consultant when he returned. He considered Mr AB was aware of the cycle way but had failed to disclose it.

14. on 27 May 2016, he emailed the Complainants’ solicitor and asked for a copy of the documentation they had from the council. There was no reply to his email and he received no further correspondence until a fax of 31 May 2016, advising the agreement was at an end.
    
15. on 2 June 2016, he received a phone call from Complainant 2 who advised he understood the cycle way ran through the middle of the Property. He said he had obtained an ASP dated 21 December 2011 between the Vendor and the City Council. The Licensee advised he had been unable to obtain information from the Vendor or its representatives and was unable to comment on the matter. He says Complainant 2 was disappointed but indicated he would still consider purchasing the Property if the issue could be resolved.
    
16. he continued to ask for information from the Vendor but did not receive any further correspondence beyond the information already available.
    
17. On 14 June 2016, he called to update the Complainant 2 who advised he now thought he could not build on the site. He also advised he had made a complaint to the Authority regarding the Licensee’s conduct and expressed dissatisfaction with the Agency’s owner, licensee Y, who had not met with the Complainants.
    
18. although he was aware of the complaint against him, he still wanted to resolve the matter and went to the council planning department to request further information regarding the cycle way and building on the site. The planning department had no information on the cycle way but said it was not unusual for planners to register cycle ways without informing the front desk staff.
    
19. the planning department did provide a resource consent dated 17 May 2011, which suggested that an existing lease was in place over part of the Property. They did not hold a copy of the lease and had no information regarding an existing ASP but advised him to contact the property division which he did with a referral to Mrs J.
    
20. on 17 June 2016, he met with a resource management consultant for the Vendor, Mr P, who explained his understanding of the title. Mr P’s associate, Mr Z (of a land surveying company, who were working for the council) was asked for further information and he explained that the relevant title plan was still subject to change. Mr Z supplied the plan and explained the provisions applying to each lot.
    
21. as a result of his meeting with Mr P, he understood the Complainants had been misinformed when they were advised it would not be possible to build on the Property. Mr P confirmed that a building could not be erected within 7 metres of the top of the bank but that this would only impact on the flood bank area which would not be a

practical location to erect a building. The location of the cycle way also appears to have been incorrectly identified by the Complainants’ solicitor leading them to conclude the Property would not be fit for their intended purpose.

5. while he accepts the existing agreements with council would impact on the available area he thinks it relevant to note the location of the cycle way coupled with the physical characteristics of the Property mean the ‘useable’ area of the Property would not have been greatly impacted. He considers it likely the Complainants would still have been able to use the Property to run their business from.
   

w) he met with Mrs J, council property advisor, and property manager, Mr H, on the afternoon of 17 June 2016. They explained there was an existing ASP for the Property dated 21 December 2011 but that the sale had not been completed and council did not own the Property. They advised there was a current lease in place with a final expiry

date of 2028 and that the lease needed to expire or be surrendered before the ASP could be completed. Mrs J and Mr H provided a copy of the ASP but referred him to the Vendor’s solicitor for the lease as the council did not have a copy of it.

10. on 22 June 2016, the Vendor’s solicitor contacted him to see if he could provide any assistance regarding the Property. He informed the solicitor of the complaint to the Authority and asked again about the cycle way, ASP and the lease. The solicitor said he would review the property file but could not comment before doing so. No further information has been provided.
    

25. prior to notification of the complaint to the Authority, he and the Agency were acting on the understanding that the Complainants accepted a mistake had been made, but still wished to proceed with the purchase if a workable solution could be found. His assessment is that it is likely the Property would have been suitable for the Complainants and he is confident the Vendor would have agreed to renegotiate the price had the Complainants wished to pursue the purchase of the Property.
    
26. the Vendor did not disclose any information about the cycle way when the agency agreement for the Property was signed or during any subsequent on-site meetings with the parties to the ASP. He says there was no acknowledgement of the cycle way or the ASP with the City Council until the Complainants had cancelled their ASP and he and the Agency presented the Vendor with the information they had obtained.
    

aa) he considers it relevant to note it was extremely difficult to obtain information on the proposed cycle way and council appeared reluctant to provide a copy of the ASP for the cycle way land. He only obtained a copy after several visits and with the knowledge the Complainants’ solicitor had been able to obtain a copy. He believes even if he had gone to council at an earlier stage it is unlikely he would have obtained information relating to the proposed cycle way.

1.10. In response to questions put to the Licensee in respect of his understanding of the compensation certificate shown on the title for the Property he stated he was aware the land was previously owned by NZ Railways. The fact he did not have any experience with ex- railway land coupled with the complicated title arrangement led him to suggest the issues should properly be addressed by a solicitor. The due diligence clause was included in the ASP to facilitate this and both the titles and the draft ASP were sent to the Complainants’ solicitor for review before signing. He states he was dealing with “competent, sophisticated commercial parties” and that he “directed the [Complainants] to obtain expert advice from their solicitor as to the instruments registered against the title”.

1.11 Licensee Y responded to the complaint against the Agency.

1.12 In particular, licensee Y commented that

1. in 2015 he joined the Agency as the Manager following eleven years as a sales consultant. He says he takes pride in his professionalism, depth of knowledge of the real estate industry and the relationships he has with clients and customers.
   
2. the Agency has a system in place where the office administrator obtains the titles for any listing and provides those titles to the listing licensee before the listing is published. The licensee reviews the titles and checks the boundaries recorded on the title against what they know of the property. They also put a request through to the office administrator

for any additional instruments and information they consider necessary. He notes the

Vendor confirmed there were no requisitions affecting the Property.

100. on 3 June 2016 he received a phone call from Complainant 2 advising there was an issue with the title for the Property and the Complainants were unable to confirm the ASP for that reason. Complainant 2 requested a meeting with him to discuss the matter and licensee Y asked for further information so he could look into the matter to obtain a better understanding and facilitate a more constructive meeting.
     

4. he contacted Licensee Packer to discuss the matter and immediately realised it was complicated and the Agency would need more time to gather information. The Licensee advised the Complainants’ solicitor had been able to obtain information the Agency was unaware of and had not been alerted to by either the Vendor or their solicitor. The Complainants’ solicitor declined to provide the Agency with copies of the relevant documents.
   
5. although the situation was complicated he was hopeful a solution could be reached where the land could be made suitable for the Complainants’ purpose. By phone he advised Complainant 2 he would investigate whether it was possible to work with council to remove the cycle way from the site and says 2 confirmed he was still interested in purchasing the Property if the proposed cycle way could be removed. The Agency proceeded with trying to resolve the matter on the basis of this advice.
   
6. during that phone conversation, Complainant 2 explained they were particularly disappointed the Vendor had not drawn their attention to the issue during their on-site meeting. The parties had met on site and discussed the Complainants’ plans to build a shed on the land which would clearly have been compromised by the proposed cycle way. It was clear the Complainants felt let down by the Vendor who failed to raise the matter of the agreement with the City Council regarding the cycle way at that time.
   
7. he assured Complainant 2 the Agency was taking the matter seriously and was working to achieve a resolution that would allow them to proceed with the purchase. He thought the Complainants accepted the Agency was working hard on their behalf and, at that stage, had no idea the Complainants had lodged a complaint. He understood the Complainants’ dissatisfaction was directed towards the Vendor and, had he been aware he was dealing with a complaint, he would have engaged the Agency’s complaints systems and procedures and “put an end to any further contact between the [the Complainants and Jim [the Licensee].”
   
8. on 10 June 2016 he received a phone call from Complainant 1. He confirmed the Licensee was working as quickly as he could to obtain further information on the matter and provided her with an update on the information they had obtained. He explained

the next step was for the Licensee to meet with the council to discuss a solution. He understood the Complainants were “eager to reach a solution” and were aware the Agency was doing everything it could to achieve this. He says at no stage did they advise him they were no longer interested in a solution, nor did he receive a verbal or written complaint.

1. the Complainants did not indicate their dissatisfaction was at a level that they were considering referring the matter to the Authority but he accepts he could have communicated better with the Complainants and provided them with more detail as to what the Agency was doing to resolve the matter. With hindsight he says he should have met personally with the Complainants to assure them the Agency was working hard on their behalf.
   

10. he advised the Complainants the Licensee was dealing with the issues as he was operating on the understanding the Complainants wanted the Agency to help find a solution which would enable them to proceed with the purchase. He thought they trusted the Agency to work hard on their behalf and for that reason he suggested it would be better that the Licensee keep them updated rather than him relaying progress to them “third hand”. Had he been aware the Complainants considered their advice to him constituted a complaint against the Licensee, he would never have referred them back to the Licensee.
    
11. he notes there were significant delays in communication from both the Vendor and the Vendor’s solicitor. He has since spoken to the Vendor who has confirmed they were aware that there was a contract in place with the City Council regarding the cycle way and apologised for failing to notify the Agency of that.
    

50. the Complainants were aware of the complexity of the issue and the fact the Licensee was experiencing difficulties in obtaining a response from the Vendor’s solicitor. He says they were also aware their own solicitor had refused to pass any information on to the Agency. He is disappointed the Complainants only allowed the Agency one week to work on the issue before lodging a complaint with the Authority.
    

1.13 The Agency responded to the complaint against it.

1.14 In particular, Eligible Officer, Licensee Z, commented for the Agency that

1. in 1995 he bought Harcourts in Town A, the business expanded and now has six offices with 76 salespersons dispersed between Town B, Town C, Town D, Town E, Town A and Town F. In addition to himself the business has a General Manager (who holds a salespersons license) and three account staff at Head Office in Town A.
   
2. The office in Town D is the only office with a manager holding a branch manager’s license and four salespeople hold associate status qualifications.
   

100. he overviews operations and standards and visits the Agency in Town E for three days every third week of the month.
     

4. He says day-to-day supervision at the Agency is carried out by licensee Y who “runs the Town E branch”. This supervision includes overseeing “listings and contracts”, training for new salespeople and other licensees, holding sales meetings and conducting “one on one” interviews with licensees weekly or fortnightly depending on the licensee’s level of experience.

5. He says Head Office [in Town A] reviews the CMAs, listings, contracts and transaction reports “...once the contract is signed” and has a “staff member with legal experience who reviews contracts” before passing them to the General Manager and then himself as the Eligible Officer.
   
6. supervision of licensee Y is carried out by the monthly visit from him as Eligible Officer, quarterly managers’ meetings, external trainers six times a year and a weekly teleconference with him.
   
7. He considers the Act removed the necessity for each branch to have a manager with a branch manager’s license and that a manger doesn’t have to be a qualified person - rather they are someone who has the skills to be a manager.
   
8. he was not involved with the practical supervision of the Licensee or licensee Y in the “initial phase” of the listing and sale of the Property. He says the Licensee is experienced and as the Agency has had no complaints about the Licensee before it had no reason to be concerned about him. He further says the Licensee did not seek help from him during the listing or negotiation stages of the Property transactions and he noted the title had gone to the Complainants’ solicitor before they signed the ASP.
   
9. the title for the Property was supplied to the Licensee by Head Office and it was up to the Licensee to decide if the boundaries made sense and if he needed to make any requisitions on the title. He says he did not get a phone call from the Licensee regarding the title for the Property.
   
10. commercial deals are different from residential deals and it was two weeks after the ASP was signed before an issue was raised which he states “reflects the complexity of the situation”.
    
11. he says “the first Harcourts knew of the complaint was after the Complainants lodged a complaint with the REAA” and that he first looked at the title when “the flag was raised”.
    

50. after the complaint was raised the Licensee obtained more council documents and there was conflicting advice on the location of the cycle way. He says advice from the original surveyor, Mr Q , confirmed the Agency’s view that the cycle way was on the stop bank and would not affect the Complainants’ planned use of the land. The Complainants believed the cycle way was elsewhere on the land. He believes there is no cycle way within 5kms either end of the Property and therefore there is no cycle way to connect

to.

m) The Complainants were given the Authority’s guide when signing the ASP and prior to signing had consulted their solicitor for advice. He says Complainant 1 is a property manager and advised she was familiar with the guide. When the Complainants raised the issue of the cycle way he understood they were looking for a solution to keep the

contract alive and the Licensee did not believe they were complaining or needed the Agency’s complaints and disputes information. He says the question was asked of the Complainants “If we could resolve would you still buy?” and that they said “Yes”.

14. he asks “So was it a complaint?” He admits communication could have been better but that the first the Agency knew of the complaint was after it was lodged with the Authority. He says licensee Y approved the Licensee’s involvement with renegotiating after the cycle way issue was raised as licensee Y “didn’t realise the issue was seen by the Complainants as a complaint.”

o) once the complaint was received from the Authority he met with Complainant 1 and

says “They are emotional people and needed someone to sit down and talk to them.” He came away believing the Complainants were “pissed off with the Vendor” and that the Vendor should have known about the cycle way but hadn’t mentioned it at the site visit. He understood the Complainants were thinking of civil action.

(m) the Agency did not respond sooner or further to the Complainants after the initial contact as “It wasn’t a complaint” and notes the Complainants haven’t disagreed with that in their comments. He asks “Should Licensee Packer [the Licensee] have known what was on the title?” and “Was it a complaint?” He states “It was an old government

/railway land title which usually has all sorts of things on it. They are not easy. The agreement went to the solicitor before it was signed by the Complainants”.

2. What we decided

2.1. On 12 July 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 31 May 2017 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

2.3. The Committee found the Licensee and Agency have engaged in unsatisfactory conduct under section 89(2)(b) of the Act. The decision was also made with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 Rule 5.1 (skill, care. competence), Rule 6.4 (not mislead), Rule 8.3 (properly supervised and managed), Rule 8.4 (sound knowledge of the Act) and s50 of the Act.

3. Our reasons for the decision

The Licensee

3.1. The Committee found, pursuant to section 72(a) of the Act, that the Licensee’s actions fall short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee.

Understanding and notifying title issues

3.2. The Complainants consider the Licensee negligent for failing to discover and notify them of the “significant encumbrance” (being a cycle way corridor) on the title for the Property prior to them entering the ASP.

3.3. The Licensee says he made inquiries at the time the Property was listed and discovered the Property encompassed two titles, both of which were complex in nature and had a number of instruments registered against them which he could not comfortably interpret. The Vendor

did not advise of the proposed cycle way at the time the agency agreement for the Property was signed or at any subsequent visits to the Property.

3.4. Due to the complex nature of the titles and his inability to interpret them, the Licensee considered prospective purchasers should obtain their own advice and carry out due

diligence inquiries to gain a complete understanding of the Property. The Licensee did explain

to the Complainant purchasers that the titles were complex and that a due diligence clause should be included in the ASP and he sent a draft copy of the ASP to the Complainants’ solicitor for review prior to the Complainants signing it.

3.5. The Committee acknowledges that the Licensee was not expected to have the degree of legal knowledge potentially required to understand and explain the complex titles to the Complainants without assistance, and that legal advice did need to be sought. It does, however, consider the Licensee should not have commenced marketing the Property for sale until he had obtained advice and did understand the titles and any implications of the instruments registered on them.

3.6. In LB v The Real Estate Agents Authority [2011] NZREADT 39 the Tribunal states “We consider that a licensee, upon taking instructions for the sale of a property, should search its title, or have some competent person search it for the licensee, and be familiar with the information gained from such a search...We do not accept that a licensee can simply regard such matters as within the realm of a vendor or purchaser’s legal adviser. Licensees should be familiar with and able to explain clearly and simply the effect of any covenants or restrictions which might affect the rights of a purchaser... Indeed, it seems to us to be fundamental to effect such a search in order to ensure that the apparent vendor actually has title to the property...It is also our view that office managers, supervising agents, branch managers and the like should ensure that the principles we express above are always applied. We emphasise that our

above views about understanding the state of the title of the property is an essential role for a licensee, and failure to undertake such a title check could well amount to unsatisfactory conduct under s72 or even the more serious offence of misconduct under s73”.

3.7. The Committee considers the Licensee should have notified the Agency of the complexity of the titles and had a duty to seek advice from a “competent person” in respect of the titles prior to marketing the Property. The Licensee did not have a clear understanding of the instruments registered on the titles but did recognise he could not understand them and correctly decided a solicitor’s advice was needed. The error the Licensee made was in not obtaining that solicitor’s advice himself, or through the Agency, prior to marketing, and relying on the Complainants’ solicitor to advise the Complainants in that respect.

3.8. The Committee accepts information regarding the cycle way and the previous ASP with the City Council was complex to understand and difficult to obtain documentation for, but it was obtainable and able to be understood.

3.9. A search of the compensation certificate on title xxxxx would have alerted the Licensee to the existence of the cycle way. The compensation certificate is not a complicated document and refers to an agreement under the Public Works Act for “...the acquisition of 680m2, more or less [subject to survey], at 4 meters wide, by the City Council for purposes of Local Purpose [cycling] Reserve.”

3.10. The second title for the Property (xxxxx) has a consent notice registered against it. A search of the consent notice would have alerted the Licensee that another part of the Property was to be transferred to the City Council for an esplanade reserve once an existing lease had expired or been surrendered.

3.11. The compensation certificate and consent notice are not complicated documents. Review of them would have alerted the Licensee to the existence of the cycle way, the future transfer of a part of the Property for an esplanade reserve and of an existing lease affecting the

Property. The documents the compensation certificate refers to are somewhat more complicated. However, once aware of the issues the Licensee could have taken professional advice himself or requested the Vendors lawyer provide him with further advice about the titles or he could have advised the Complainants to take legal advice before making an offer.

3.12. The Committee considers the Licensee’s failure to review the compensation certificate and

discover the 2011 ASP between the Vendor and the City Council for a strip of land for a proposed cycle way, led to the Complainant purchasers entering into an ASP for a property which was not what they had been led to believe and that they considered was not suitable for their purpose. The land area for the Property on the ASP is noted as 2930m2 but some

680m2 of that land (the relevant title plan is still subject to change) is the subject of the prior

2011 ASP and was not available to be sold to the Complainants. The siting of the proposed cycle way corridor was also an issue and, in the Complainants’ opinion, limited their ability to utilise the land.

3.13. The part of the Property affected by the consent notice and lease affected what was being sold to the Complainants.

3.14. As a consequence of not understanding the titles to the Property prior to marketing it for sale, the Licensee has incorrectly stated the available land size and has not disclosed limitations on the use of the land and has misled, albeit unintentionally, the Complainant purchasers.

3.15. The Committee does acknowledge the Licensee took steps to protect the Complainant purchasers prior to having them sign the ASP and to mitigate the error once it was discovered. However, he made a fundamental error in not understanding the titles of a property he was offering for sale prior to commencing marketing the Property. The Committee finds the Licensee failed to exercise skill, care and competence (Rule 5.1) and misled the Complainants (Rule 6.4).

Purchase of machinery and new employee

3.16. The Complainants say they were very upset at having to cancel an agreement to purchase a new front end loader and even more upset at having to tell their new employee they could not employ him after all as a result of not proceeding with the purchase of the Property.

3.17. The Licensee says he suggested the Complainants wait until the ASP was unconditional before purchasing machinery.

3.18. The Committee considers the Complainants knew the ASP was conditional on their due diligence clause and that until the ASP was unconditional they were taking a risk in ordering machinery and employing a new staff member. The Committee finds the Licensee has not encouraged them in this respect and indeed cautioned them against such action. The Committee takes no further action on this ground of complaint.

The Agency

3.19. The Committee found, pursuant to section 72(b) of the Act, that the Agency’s actions contravene section 50 of the Act and regulations and rules made under the Act.

Response to the complaint

3.20. The Complainants contacted licensee Y at the Agency to complain that the Licensee had not declared the information about the cycle way and had tried to sell them a lot the Vendor did not own. They were dissatisfied with the Agency’s response with only two phone calls from licensee Y on 3 June 2016. Complainant 1 called the Agency again on 10 June 2016, and was advised by licensee Y that the Licensee would be looking after the complaint. They were very disappointed that the Agency’s management had put the complaint back to the licensee they were complaining about.

3.21. The Licensee says that prior to notification of the complaint to the Authority, he and the Agency were acting on the understanding that the Complainants accepted a mistake had been made, but still wished to proceed with the purchase if a workable solution could be found. He considers the location of the cycle way had been incorrectly identified by the Complainants’ solicitor leading them to conclude the Property would not be fit for their intended purpose. His assessment was that the Property would have been suitable and is confident the Vendor would have agreed to renegotiate the price had the Complainants wished to proceed with the purchase.

3.22. Licensee Y says he advised Complainant 2 by phone on 3 June 2016, that he would investigate whether it was possible to have council remove the cycle way from the site. He says Complainant 2 confirmed he was still interested in purchasing the Property if the proposed cycle way could be removed and the Agency proceeded with trying to resolve the matter on the basis of that advice.

3.23. Licensee Y received a phone call from Complainant 1 on 10 June 2016, during which he confirmed the Licensee was working as quickly as he could to obtain further information and updated her on information already obtained. He explained the next step was for the Licensee to meet with Council to discuss a solution. He understood the Complainants were “eager to reach a solution” and at no stage did they advise him they were not, nor did they make a verbal or written complaint to the Agency.

3.24. Licensee Y understood the Complainants’ dissatisfaction was directed towards the vendor who had failed to raise the matter of the Agreement with the City Council regarding the cycle way. He says had he been aware he was dealing with a complaint he would have engaged the Agency’s complaints systems and procedures and “put an end to any further contact between the [Complainants] and Jim [the Licensee]”.

3.25. Licensee Z says when the Complainants raised the issue of the cycle way he understood they were “looking for a solution to keep the contract alive” and that he didn’t believe they were complaining. He says the question was asked of the Complainants “If we could resolve would you still buy?” and they said “Yes”. When asked by the investigator why the Agency did not respond sooner after the initial complaint, Licensee Z states “It wasn’t a complaint”.

3.26. The Committee considers there is ambiguity about whether there was a complaint about conduct or a complaint about a problem and that the Licensee and Agency proceeded on the basis it was a complaint about a problem. As they considered the problem could potentially be fixed and the Complainants were “eager to reach a solution”, the Agency sought to discover further information to that end and did not realise the complaint was also about conduct until advised of the complaint to the Authority.

3.27. The Committee finds the Agency did not fail to respond adequately to the Complainants’

complaint to the Agency and takes no further action on this ground of complaint.

Supervision

3.28. The Committee decided to join the Agency to the complaint as it had concerns in respect of supervision by the Agency.

3.29. The Committee notes licensee Y responded to the complaint (at the time the Complainants made it) and the complaint to the Authority and addressed the Complainants’ issues on behalf of the Agency in his role as Manager. The Committee is aware that licensee Y holds a salespersons licence and, as such, although he is not precluded under s50 of the Act from being involved with management and supervision of the Agency’s salespeople, he is not

under a statutory duty in carrying out that role. Licensee Y was not personally involved in the listing and sale transactions for the Property; was not named in the complaint and, as he cannot be held accountable for a supervisory role for which he is not qualified under s50 of the Act, the Committee takes no further action against licensee Y.

3.30. The Committee does, however, note licensee Y’s response to the complaint in respect of what supervision and direction was provided to the Licensee during the transactions for the Property and how the complaint was handled by the Agency after issues were raised.

Licensee Y promotes himself as the Manager of the Agency, the Licensee looked to licensee Y for guidance when it was clear there was a problem with the Property and when the Complainants were unhappy with the transaction, the Complainants contacted licensee Y as the Agency representative, and licensee Y did not involve Eligible Officer Licensee Z until after a complaint had been made to the Authority. The actions of the Licensee and the Complainants infer they perceive licensee Y as the manager and supervisor for the Agency.

3.31. It is clear to the Committee that licensee Y is designated by the Agency as the manager and the day-to-day supervisor in the Agency’s office in Town E. Licensee Z states licensee Y is responsible for listings and contracts, running the branch, training salespeople and conducting one-on-one meetings with the salespeople. He also states that the Act does not

require a qualified person to be the manager and that the manager is someone with the skills

to be a manager.

3.32. Section 50(1) of the Act states “A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.” And in s50(2) “...properly supervised and managed means that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure that

the work is performed competently and that the work complies with the requirements of the Act.” The Committee finds there is nothing in s50 of the Act which precludes licensee Y acting as a manager and assisting with supervision but is clear that he is not under a statutory duty in carrying out that role as he is not qualified as a supervisor in terms of s50 of the Act.

3.33. The role of “properly” supervising and managing the Agency and its salespeople falls to Eligible Officer Licensee Z. Licensee Z says he personally visits the office in Town E for three days each month, holds a weekly teleconference with the managers of each of the Agency’s six offices and holds periodic training sessions for the managers. He says the Agency’s head office reviews CMAs, listings, contracts after they have been signed and transaction reports and that once contracts have been reviewed they are passed to him.

3.34. Licensee Z states he was not involved with the listing and sale of the Property, that the Licensee was experienced and has had no previous complaints against him and that “ There were no reasons to be concerned about Licensee Packer [the Licensee]”. He further states the Licensee didn’t seek help from him during the listing or negotiation stages and that he “didn’t get a call from Licensee Packer on the title of the Property”.

3.35. In Maserow v Real Estate Agents Authority [2016] NZREADT 19 the Tribunal is clear that “Supervision must be actual, it must be tailored to the circumstances of the agent and the property being sold, it must involve active involvement by the branch manager with the agent(s) including a knowledge and understanding of the issues of each of the properties being sold by the agency, if any.” and further states “The branch manager should be alert to identifying potential problems rather than waiting for a possibly inexperienced agent to identify them...”

3.36. The Committee accepts that the Licensee was not inexperienced but that he did find himself

with property titles which he believed were complex and which he could not fully understand or explain to the Complainant purchasers. It considers that a supervisor exercising “proper” supervision would have had knowledge of the Property and have discovered potential problems, would have identified the issue with the titles and offered assistance and appropriate advice to the Licensee rather than waiting for the Licensee to seek help or make

a call. Licensee Y was not appropriately qualified to offer that “proper” supervision and Licensee Z was not involved with the Property or the transactions, was not aware there was an issue and was not perceived by the Licensee as being in the role of designated supervisor.

3.37. Based on the information provided by Licensee Z about how the Agency provides supervision the Committee finds the Agency is not providing “proper” day-to-day supervision to its salespeople with practical, sensible and timely advice and is relying on a salesperson licensee to fulfill that role. Telling staff to act in a particular way or having a manual telling them to act in a particular way is not supervision. Ultimate responsibility for supervision for the Agency remains with Licensee Z even if licensee Y is an experienced and competent salesperson assisting with the oversight of day-to-day activities of the salespersons under supervision.

3.38. The Authority’s recently released “Professional Standard on Supervision” makes it clear that an agency must provide salespersons with a designated supervisor qualified under s50 of the Act, with a process in that agency for supervision that is established and recognised by the salespersons and the supervisors. The Committee finds the Agency has not provided a recognised, designated supervisor qualified under s50 of the Act, that the Licensee was not adequately supervised during the transactions for the Property and that the Agency has breached Rules 8.3 and 8.4 and s50 of the Act.

4. Request for submissions on orders

4.1. The Complainant is to file submissions (if any) on what orders should be made within ten working days (by Click here to enter a date.) from the date of this decision. These submissions, if any, will then be provided to the Licensee, with a timeframe for filing final submissions.

4.2. The Committee requires the Case Administrator to obtain a record of any previous disciplinary decision in respect of the Licensee and, if any such decision exists, provide it to the Committee.

5. What happens next

5.1. The Committee will conduct a separate hearing on the papers to consider all submissions and issue a decision on orders if any, under section 93 of the Act. Refer to the Appendix of this decision.

6. Your right to appeal

6.1. The Committee considers the 20 working day appeal period does not commence until it has finally determined this complaint by deciding what orders should be made, if any.

7. Publication

7.1. The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made.

Signed

Jane Ross

Date: 20 July 2017

Appendix: Relevant provisions

The Real Estate Agents Act 2008 provides:

50 Salespersons must be supervised

(1) A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or branch manager

(2) In this section properly supervised and managed means that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure – (a) that the work is performed competently; and

(b) that the work complies with the requirements of this Act.

89 Power of Committee to determine complaint or allegation

(1) A Committee may make 1 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.

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.

93 Power of Committee to make orders

(1) If a Committee makes a determination under section 89(2)(b), the Committee may do 1 or more of the following:

(a) make an order censuring or reprimanding the licensee;

(b) order that all or some of the terms of an agreed settlement between the licensee and the complainant are to have effect, by consent, as all or part of a final determination of the complaint;

(c) order that the licensee apologise to the complainant; (d) order that the licensee undergo training or education;

(e) order the licensee to reduce, cancel, or refund fees charged for work where that

work is the subject of the complaint;

(f) order the licensee:

(i) to rectify, at his or her or its own expense, any error or omission; or

(ii) where it is not practicable to rectify the error or omission, to take steps to provide, at his or her or its own expense, relief, in whole or in part, from the consequences of the error or omission;

(g) order the licensee to pay to the Authority a fine not exceeding $10,000 in the case of an individual or $20,000 in the case of a company;

(h) order the licensee, or the agent for whom the person complained about works, to make his or her business available for inspection or take advice in relation to management from persons specified in the order;

(i) order the licensee to pay the complainant any costs or expenses incurred in respect of the inquiry, investigation, or hearing by the Committee.

(2) An order under this section may be made on and subject to any terms and conditions that the Committee thinks fit.

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:

5.1 A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.

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.

8.3 An agent who is operating as a business must ensure that all salespersons employed or engaged by the agent are properly supervised and managed.

8.4 An agent who is operating as a business must ensure that all licensees employed or engaged by the agent have a sound knowledge of the Act, regulations, rules issued by the Authority (including these rules), and other legislation relevant to real estate agency work.