Complaint No C18135 [2017] NZREAA 139 (26 October 2017)

Last Updated: 21 June 2018

Before the Complaints Assessment Committee

Complaint No: C18135

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee 1: Licensee 1 (XXXXXXXX) Licensee 2: Licensee 2 (XXXXXXXX) Licensee 3: Licensee 3 (XXXXXXXX) Licensee 4: Licensee 4 (XXXXXXXX)

Decision to take no further action

26 October 2017

Members of Complaints Assessment Committee: CAC416

Chairperson: Rachael Schmidt-McCleave

Panel Member: Geoff Warren

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 15 December 2016 the Real Estate Agents Authority (the Authority) received a complaint against Licensee 1 and Licensee 2 from the Complainant.

1.2. Licensee 1 is a licensed Salesperson under the Real Estate Agents Act 2008 (the Act).

Licensee 2 is also a licensed Salesperson under the Act, and at the time of conduct both

Licensees worked for Licensee 4.

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

1.4. The details of the complaint broadly relate to an alleged failure by Licensee 1 to insert a building report condition into the Sale and Purchase Agreement (the Agreement) for the purchase of the Property. The Complainant alleges she was told this failure by Licensee 1 was due to the instructions he took from his supervisor, Licensee 2.

1.5. In particular, the Complainant advised that:

a) She was not provided with a property pack in relation to the Property.

b) When going through the Agreement with Licensee 1 and Licensee 2, she did not understand what she was being told, and in particular she did not understand that the Agreement once signed was binding, because she does not speak English (which is why she requested Licensee 1 to assist her with her house purchase, as he is the son of her previous landlord).

c) She requested that Licensee 1 insert a building report clause into the Agreement (i.e. making the Agreement conditional upon receipt of a satisfactory building report). However, when she requested a copy of the Agreement after her offer had been accepted by the vendor, she discovered that the Agreement did not contain a building report clause.

d) Licensee 2 attended her home with Licensee 1 on 22 November 2016 with the draft Agreement. Both Licensee 1 and Licensee 2 told her she could submit a back-up offer on the Property and she told them she did not require a finance condition, but a building report clause was definitely required.

e) She received an electronic version of the signed Agreement on 24 November 2016 and discovered that it did not contain a building report condition. When she raised the issue of the lack of a building report clause with Licensee 1, he informed her that if she did not complete the transaction for the purchase of the Property, her application for New Zealand residency could be jeopardised.

f) She also produced texts in which Licensee 1 said he was acting under the instructions of his supervisor, Licensee 2.

g) She did not receive a written copy of the building report organised by Licensee 1 (once the Agreement had become unconditional).

h) There have been subsequent issues with the Property and its level of weather-

tightness.

i) Licensee 1 engaged a solicitor to act for her in relation to the purchase of the Property, without her consent.

j) She first became aware of the Property when it was being marketed at over $2 million NZD. She became very interested in the Property once the price was reduced, and then submitted an offer. When the offer had been accepted, she noticed that there was a $100,000.00 NZD difference in the price and the Property’s capital value (CV). She expressed to Licensee 1 her concern that this difference was an indication that there were problems with the Property.

1.6. The Complainant requested a remedy, being:

a) Cancellation of the Agreement and return of her deposit paid.

b) Reimbursement of all costs incurred.

c) The Licensees to take accountability for their actions and the impact their conduct has had on her.

1.7. The Licensees responded to the complaint against them.

1.8. Licensee 1 denied all the allegations against him. He stated:

a) Licensee 2 was the salesperson for the sale of the Property and he acted as Licensee

2’s assistant, providing the Complainant with translation from Mandarin to English. He was acquainted with her through his father and she had asked him to assist her with purchasing a property through the agency he works for (Licensee 4).

b) On 22 November 2016, when the Complainant told him through the app WeChat that she was interested in the Property, he emailed her all of the Property’s information (confirmed by documents provided) and assisted Licensee 2 by compiling a set of documentation (including the LIM report, the title, etc., and a pre-printed Sale and Purchase Agreement guide) to take along to the meeting with the Complainant.

c) At that meeting, Licensee 2 told the Complainant she should seek her own independent legal advice and the Complainant said, excitedly, that she wished to make an offer on the Property. Licensee 2 took the Complainant through all the documentation, with himself [Licensee 1] translating. The Complainant understood what she was being told.

d) As the parties started working through the Agreement, Licensee 1 suggested to the Complainant that she insert a building inspection clause into the Agreement. She initially agreed and requested it be inserted. However, after discussion about the best price for the Property and the advantages and disadvantages of a conditional offer versus an unconditional offer (including definitions of a conditional offer and an unconditional offer), the Complainant decided to sign a cash unconditional back-up offer without a building inspection condition.

e) Licensee 1 stated that the Complainant has a certain level of English skill, which enables her to read it “without doubt.” He explained any terms she could not fully understand and she double-checked his translation with her own mobile dictionary. This process was followed for every term of the Agreement which the Complainant initialed.

f) The Complainant freely signed the Agreement as unconditional and before signing she was informed by Licensee 1 and Licensee 2 (and she confirmed she understood) that she should obtain legal and technical advice before signing the Agreement. Licensee 1 understood this had happened by the fact the Complainant retained the services of a law firm and discussed the pros and cons of making the Agreement conditional on a building report before she signed the Agreement.

g) Later that same afternoon, he drove the Complainant back to his office to finalise the

paperwork. He asked the Complainant for her solicitor’s details and, when she didn’t have one, his colleague recommended a law firm (the Law Firm) as Mandarin speakers.

He assisted the Complainant to call the Law Firm and heard the Complainant speak in Mandarin to the solicitor, negotiate a fee reduction, and confirm the engagement. Licensee 1 therefore emailed the full property information to the Law Firm that afternoon on the Complainant’s instruction. He did not know the Law Firm at all.

h) Later that evening, Licensee 1 was informed that the Complainant’s back-up offer had been accepted, and he told the Complainant and informed her that the deposit was due.

i) It was only once the offer was accepted that the Complainant grew hesitant about purchasing the Property. She sent messages to Licensee 1 on WeChat referring to the lower CV and asking why no building inspection clause had been included in the Agreement. Licensee 1 was confused because he had specifically raised that with the Complainant. In a phone call, she told him the lower CV meant it might be a “problem house” and he agreed to arrange a building inspection (while at the same time reminding her that the Agreement was now binding). The WeChat messages he sent to her saying he had followed Licensee 2’s instructions, was because he had started to doubt and blame himself for the situation but, upon reflection, realised he and Licensee 2 had acted entirely with the Complainant’s wishes after she had been fully informed of her options.

j) At the building inspection subsequently arranged by Licensee 1, the Complainant indicated she was satisfied with the result and that she was happy with a verbal, as opposed to written, report.

k) The Complainant contacted Licensee 1 again on WeChat on 25 November 2016, still alleging that the Property had problems and wished to cancel the contract. She nonetheless paid the deposit (with Licensee 1’s assistance driving her to the bank) and her lawyer approved the Agreement as unconditional and released the deposit.

l) The Complainant then purchased another property in a different suburb and refused to settle the Property. She has sought refund of the deposit through her new lawyers.

m) Licensee 1 never discussed the Complainant’s immigration status, or any immigration issues, with her and he has no knowledge of such or that the Complainant had applied for New Zealand residency.

1.9. Licensee 2 stated in her response that:

a) On 22 November 2016, she prepared the Agreement together with Licensee 1 once License 1 asked Licensee 2 to accompany him to go and see the Complainant, who wanted to make an offer on the Property.

b) When she accompanied Licensee 1 to see the Complainant, it was the first time she had met the Complainant. The Complainant was very excited to tell them she had found out about the reduced asking price of the Property.

c) The Complainant did not speak much English, so Licensee 1 helped to translate because he speaks fluent Mandarin and the Complainant also made use of a mobile dictionary. That made going through the Agreement with the Complainant a slow process, but it ensured that the Complainant had a clear understanding of the Agreement. The process took about 4 hours (from 11.10 am to 3.00 pm).

d) Licensee 2 informed the Complainant about the process of purchasing property in New Zealand (using the New Zealand Residential Sale and Purchase Agreement Guide), title information in relation to the Property, the fact that the Property was already under

contract so that the Complainant’s offer would be a back-up offer, and the fact that the Agreement contained a three-working day escape clause for the benefit of the Vendor (and the full definition of an escape clause).

e) There was also a discussion about the pre-purchase building inspection and making the Agreement conditional on obtaining that. The Complainant, after some discussion about price and the benefits of conditional versus unconditional offers, decided to make an unconditional offer.

f) Each box of the Agreement which the Complainant signed was explained to her (with translation).

g) Licensee 1 returned to the Complainant the same day with the Agreement signed by the Vendor.

h) On 24 November 2016, she became aware that the Complainant had told Licensee 1 she wanted a building inspection and Licensee 1 had arranged one. Licensee 2 told Licensee 1 that the offer was now binding. Licensee 2 attended the building inspection with Licensee 1, as his supervisor. The Complainant was also present and was satisfied with the result of the building inspection. She informed Licensee 1 and Licensee 2 that she would pay the deposit due the next day (this was done).

2. What we decided

2.1. On 25 May 2017 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. The Committee considered the complaint also raised issues about Licensee 3 and Licensee 4, and under section 78(b) of the Act, decided to inquire into them.

2.3. In relation to Licensee 3 and Licensee 4, the Committee asked for the following information in relation to the management and supervision regarding the transaction process followed by Licensee 1 and Licensee 2:

a) The process in place to ensure that Licensee 1, as a salesperson who, at the time of the transaction, had not completed six months’ real estate agency work, was not in breach of the Lawyers and Conveyancers Act 2006.

b) An overview of the supervision provided to Licensee 1 and Licensee 2.

c) The policy in place for licensees selecting a lawyer to work with purchasers and the steps that licensees should take to ensure that the purchaser has given authority to the lawyer chosen.

2.4. Licensee 3 responded in the following manner:

a) She places her management and supervision of “rookie” salespersons on the Real Estate Agents Authority Information Sheet for Agents and Branch Managers (REAA Info Sheet) and on Licensee 4’s Best Practice Standard. In this case, Licensee 1 was an associate salesperson to Licensee 2 and the day-to-day line management of Licensee 1 was monitored and overseen by Licensee 2. Licensee 2 is an experienced salesperson with twelve years’ practice in the industry. It was Licensee 2 who processed the Agreement in this case, assisted by another licensee at the branch with thirteen years’ experience at one stage.

b) Licensee 3’s involvement in the supervision provided to Licensee 1 and Licensee 2 was in regard to checking the documentation required by the company standard and ensuring that Licensee 1 was demonstrating good real estate practice. Licensee 3 met with Licensee 2 regularly to review her team and to discuss with her any particular

issues that she had with her listings and sales and with the performance of her associated sales staff, including Licensee 1. Licensee 3 also met with Licensee 1 at her Tuesday morning branch meetings and held discussions with him in relation to his development and progress.

c) Licensee 3 is not aware of any company policy with regard to salespeople recommending lawyers to their clients or customers. Licensee 3 is aware that the Authority’s verifiable training suggests that a licensee should recommend a minimum of three lawyers and that the client can then make their own decision. Here, the Complainant required a lawyer that spoke Mandarin, and an employee of the Law Firm (the Legal Executive) was recommended to her accordingly.

2.5. In turn, Licensee 4 said in response that:

a) Licensee 4 uses the REAA Info Sheet to provide it with guidance on what real estate agency work new salespersons can do during their first six months and the law’s supervision obligations. It also has an internal Best Practice Standard (introduced October 2016) for its branch managers to provide a level of supervision over and above what is required.

b) The report provided by Licensee 3 addresses the supervision provided to Licensee 1 and Licensee 2.

c) Licensee 4 has no specific policy for managers/licensees in regard to selecting a lawyer to work with purchasers. It is, however, mindful of the Authority’s general guidance that for expert advisers a minimum of three alternatives should be suggested to enable the purchaser to make their own choice. While Licensee 4 encourages that process, it also recognises that there are circumstances when a specific lawyer with specific skills is needed, such as the required language skills in this case. Licensee 4 has no policy for managers/licensees to ensure that a purchaser has given authority to the lawyer they have chosen and Licensee 4 sees that issue as a matter that would be between those two parties and would not involve Licensee 4.

2.6. On 25 September 2017 the Committee held a hearing on the papers and considered all the information gathered during the inquiry.

2.7. The Committee has decided to take no further action on the complaint.

2.8. 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 (the 2012 Rules), and particularly Rules 5.1 (skill and care), 6.3 (industry into disrepute), 6.4 (must not mislead), 8.3 (properly supervised and managed), 9.2 (undue or unfair pressure),

9.8 (must not take advantage of inability to understand relevant documents), and 9.9 (all material particulars) of the 2012 Rules.

3. Our reasons for the decision

3.1. The Committee concluded:

3.2. On the balance of probabilities, the bulk of the evidence establishes that Licensee 1 did not breach the obligations upon him in preparation of the Agreement, and obtaining the Complainant’s signature to it. The Committee preferred the evidence of Licensee 1, supported by Licensee 2, that the Complainant was made fully aware of the import of each clause of the Agreement, and that fact it was an unconditional offer which, if accepted, would be binding upon her. This is shown by the fact the Complainant initialled each clause of the Agreement.

3.3. There were no issues of concern with Licensee 2’s supervision of Licensee 1, or of Licensee 2’s

actions in relation to the Agreement (see summary of finding in relation to Licensee 1).

3.4. Licensee 3 has acted properly and appropriately, and in accordance with all Authority and company policies, in her supervision and management of Licensee 1 and Licensee 2.

3.5. Licensee 4 has acted properly and appropriately, and in accordance with all Authority and company policies, in its supervision and management of Licensee 1 and Licensee 2.

3.6. Further details as to the Committee’s reasoning are provided below.

Licensee 1 – actions in relation to the agreement

3.7. The Committee found the following in relation to the specific allegations made against

Licensee 1:

a) Emailed records show that the Complainant, despite her assertions to the contrary, was provided with a property pack electronically, which she accessed on 22 November

2016. The Committee therefore prefers Licensee 1’s evidence over the Complainant’s in relation to this allegation.

b) Regarding the Complainant’s understanding of the Agreement when she went through it with Licensee 1 and Licensee 2, the Committee notes that the Complainant has subsequently refuted that she used an online translation app and says she paid the deposit under duress. The Committee is not in a position to resolve any conflict in the evidence between the Complainant on the one hand, and Licensee 1 and Licensee 2 on the other hand, but notes simply that the process took four hours which suggests the Agreement was traversed in some detail, and the Complainant initialled each clause of the Agreement. In so initialling, she did not indicate then the omission of a building inspection clause.

The Committee therefore accepts, on the balance of probabilities, that the Complainant indicated to Licensee 1 and Licensee 2 that she understood what she was signing (even if it transpired subsequently, by her failure to settle the transaction, that she did not so understand). The Committee also accepts that both Licensee 1 and Licensee 2 recommended to the Complainant that she seek independent legal advice but that she elected to sign an unconditional agreement after both types of agreement were thoroughly explained to her.

While the Committee was initially troubled by some of the self-effacing and apologetic language used by Licensee 1 in the WeChat messages between the Complainant and himself, after reading Licensee 1’s explanation of those messages, supported by both his and Licensee 2’s version of events when the Complainant signed the Agreement, has satisfied the Committee he acted at all times in a proper manner and fully explained all aspects of the Agreement to the Complainant.

c) In relation to the allegation of engaging a lawyer without the Complainant’s consent, it is noted that the Investigator spoke to the Legal Executive. Her recall of the transaction was sketchy although she confirms that she did not know her firm had been engaged to act for the Complainant until a signed sale and purchase agreement was emailed to her at 5.53 pm on 22 November 2016. She confirmed that Licensee 1 had confirmed her engagement in a call on the morning of 23 November 2016. She then confirmed with the vendor’s lawyers that the Agreement had become unconditional.

Licensee 1 has advised that he did not know that the Legal Executive was a legal executive, not a lawyer. He spoke with his colleague who recommended the Legal Executive because of her Mandarin language skills. He rejects the statement that it was he who asked the Legal Executive for a quote and says those arrangements were

made directly by telephone conversation between the Complainant and the Legal Executive in his presence. He also denies he sent the Legal Executive the Agreement and says this was done by Licensee 4 at a later point in time. He also denies telling the Legal Executive the Agreement was unconditional.

The Committee notes that it has no means of reconciling the conflict in evidence between the parties on this issue, in the absence of a signed and dated lawyer’s letter of engagement. The Committee recommends in future that Licensee 1 always obtain at least three recommendations before proceeding, in order to avoid such issues arising again.

d) The Committee accepts that Licensee 1 did not know any details of the Complainant’s immigration or residency status and made no threats to her in this regard, but rather fully explained the nature of a binding sale and purchase agreement.

e) The Committee is satisfied that there are no moisture issues with the Property (confirmed by both the new owners and the building inspector) and that this confirms with what Licensee 1 states the Complainant was told verbally by the inspector. The Committee therefore prefers Licensee 1’s explanation that the Complainant elected not to receive a written report.

Licensee 2 – actions in relation to the Agreement

3.8. The Committee notes that Licensee 2’s explanation of what transpired with the Complainant and the signing of the Agreement accords both with the explanation of Licensee 1, and of the written record, for example each clause of the Agreement being initialled by the Complainant, and the Complainant being sent (and accessing) an electronic property pack in advance of Licensee 1 and Licensee 2 meeting with her.

3.9. The Committee therefore is satisfied that, on the balance of probabilities, Licensee 2 has acted appropriately in relation to the Complainant and the Agreement, and has provided adequate and proper supervision to Licensee 1. Licensee 2 does not appear to the Committee to be asserting that she was not primarily responsible for the Agreement. The Committee notes that this is appropriate.

Licensee 3 – supervision of Licensee 1 and Licensee 2

3.10. The Committee is satisfied that Licensee 3’s actions in supervising Licensee 1 and Licensee 2 met the standards set out in the REAA Info Sheet, as well as the company’s Best Practice standard. While Licensee 3 was not directly responsible as Branch Manager for the particular transaction, she undertook appropriate supervision of both Licensee 1 and Licensee 2, meeting with both regularly and reviewing their practice in general.

3.11. The Committee recommends in future that Licensee 3 always recommends to her staff that they obtain at least three recommendations for lawyers or other advisers when asked, before proceeding to make a recommendation in order to avoid any claim such as occurred here in relation to the Legal Executive.

Licensee 4 – supervision of Licensee 1 and Licensee 2

3.12. The Committee is satisfied that Licensee 4’s actions in appointing Licensee 3 as Branch Manager and having Licensee 3 supervise Licensee 1 and Licensee 2 met the standards set out in the REAA Info Sheet, as well as the company ’s Best Practice standard. While Licensee 3 was not directly responsible as Branch Manager for the particular transaction, she undertook appropriate supervision of both Licensee 1 and Licensee 2, meeting with both regularly and reviewing their practice in general. There were no further steps necessary for Licensee 4 as an agency to take, in the Committee’s view.

3.13. The Committee recommends in future that Licensee 4 always recommends to its staff, as part of company policy, that they obtain at least three recommendations for lawyers or other advisers when asked, before proceeding to make a recommendation in order to avoid any claim such as occurred here in relation to the Legal Executive.

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 (no later than Thursday, 23 November 2017) (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

Rachael Schmidt-McCleave

Date: 26 October 2017

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

78 Functions of Committees

The functions of each Committee are—

(a) to inquire into and investigate complaints made under section 74:

(b) on its own initiative, to inquire into and investigate allegations about any licensee:

(c) to promote, in appropriate cases, the resolution of complaints by negotiation, conciliation, or mediation:

(d) to make final determinations in relation to complaints, inquiries, or investigations:

(e) to lay, and prosecute, charges before the Disciplinary Tribunal: (f) in appropriate cases, to refer the complaint to another agency:

(g) to inform the complainant and the person complained about of its decision, reasons for the decision, and appeal rights:

(h) to publish its decisions.

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.

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.

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

Rule 6.3 A licensee must not engage in any conduct likely to bring the industry into disrepute.

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 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.

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 9.8 A licensee must not take advantage of a prospective client’s, client’s, or customer’s inability to understand relevant documents where such inability is reasonably apparent.

Rule 9.9 A licensee must not submit an agency agreement or a sale and purchase agreement or other contractual document to any person for signature unless all material particulars have been inserted into or attached to the document.