Complaint No C16052 [2017] NZREAA 42 (18 April 2017)

Last Updated: 13 December 2017

Before the Complaints Assessment Committee

Complaint No: C16052

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee: Licensee 1(XXXXXXXXX) Licensee 2 (XXXXXXXXX)

Decision to take no further action

18 April 2017

Members of Complaints Assessment Committee: CAC412

Chairperson: Bernardine Hannan

Deputy Chairperson: David Bennett

Panel Member: Craig Edwards

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

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

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

Agency is also licensed under the Act.

1.3. The complaint relates to a property the Property.

1.4. The details of the complaint are that the Licensee 1 pressured the Complainant into accepting an offer for the Property and cancelled the auction then on-sold the Property for $180,000 more prior to settlement. The Complainants also say the Licensee did not report to them about other interest in the Property and did not advise them to get legal advice before they signed the sale and purchase agreement.

1.5. In particular, the Complainants advised that:

a) The Complainants were selling the Property as executors of their late mother’s estate.

They listed the Property with the Licensee and agreed to an auction programme.

b) An offer was received prior to the first open home at the price of $950,000 which the

Complainants told the Licensee was not acceptable.

100. The Complainants say the Licensee began ‘badgering’ them to accept the pre-auction offer which required the auction to be cancelled. They say the Licensee told them the market had dipped, that it was a difficult Property to sell and that Asians were no longer buying.
     

4. The Complainants says they were surprised as they understood it was unusual for this to happen and had expected the auction would go ahead.
   
5. The Complainants contacted the Agency and was reassured that it was not unusual to accept a pre-auction offer. After negotiating an increase in the price to $990,000 the Complainants accepted the offer.
   
6. The Property was on-sold for $180,000 more than the sale price with both sales settling at the same time. The Complainants believe the Licensee was involved in the on-sale.
   
7. The Complainants say the Licensee did not act in their best interest, did not provide feedback about other buyers after the open home and that they were also not advised to seek legal advice before signing the agreement.
   

1.6. The Complainants requested a remedy, being:

a) That the Licensee be held accountable for her actions.

1.7. The Licensee responded to the complaint against her.

1.8. In particular, the Licensee commented that:

1. She presented the initial offer of $950,000 to the Complainants who told her the price was not enough. She says the Complainant wanted to keep the buyer interested and consider further if there weren’t any better buyers after the open home.
   
2. The Licensee says she did not pressure the Complainants to accept the offer. She says that the Complainants asked her after the open home if the initial buyer was still interested and whether they would be prepared to increase their offer to $1,000,000.
   

c) The Licensee went back to the purchaser who verbally agreed to pay $970,000. This was relayed to the Complainant 1 who said it wasn’t enough. Complainant 1 said she would need the other executors to agree but wanted the buyer to get closer to a price of

$1,000,000.

4. The Licensee says the buyer signed an offer at $980,000 which she discussed with Complainant 1 on the phone. The Licensee says Complainant 1 told her to ask the buyer if they would pay $995,000. The buyer said they would pay $988,000.
   
5. The Licensee says she then phoned her sales manager, Mr C, to discuss the situation and the proposed cancelling of the auction. She says Mr C discussed this with the auctioneer and they agreed to contact all interested buyers to ensure there were no other genuine buyers before the vendor accepted the offer. The Licensee says that the purchaser was happy to wait until 5pm the following day while this was going on.
   
6. The Licensee says they contacted all parties who had shown interest in the Property and other salespeople who had interested buyers. She says there was not one other party interested in purchasing the Property.
   
7. Mr C on behalf of the Agency spoke with Complainant 1 regarding their intention to accept the offer and cancel the auction and sought further advice from the auctioneer. He says the Complainant contacted him for his advice.
   
8. After getting the purchaser to sign the final agreement at $990,000 she presented the offer to Complainant 1 and at around 4pm on 16 February Complainant 1 signed the offer.
   

i) The Licensee says there were 11 inspections including neighbours and other salespeople.

She says she prepared a buyer feedback report and that this was discussed verbally with the Complainants on the phone on 15 February but not sent or presented to the Complainants as they had by then decided to accept the offer.

10. The Licensee says she had been contacted after the sale by the purchaser in relation to the settlement date and understood the solicitors were dealing with a request to change this. She assumed this related to the purchaser getting money from overseas. She says she had received enquiry from the purchaser about other listings since the purchase but had had no other dealings with the buyer. The Licensee says she had no knowledge of or dealings with the on-sale purchaser and did not know about the on-sale until the complaint was laid.
    
11. The Licensee says that she does not recall the words used but that it is always her practice to advise buyers to obtain legal advice before signing an agreement.
    

2. What we decided

2.1. On 6 September 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. The Committee considered the complaint also raised issues about Licensee 2 and supervision and under section 78(b) of the Act, decided to inquire into this.

2.3. On 23 March 2017 the Committee held a hearing on the papers and considered all the information gathered during the inquiry.

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

2.5. 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 Rules); Rules 5.1 (skill, care and competence), 6.1 (fiduciary obligations), 6.2 (good faith),

6.3 (disrepute), 9.2 (undue pressure) and 9.3 (communication). The Committee concluded:

2.6. There was no evidence presented to substantiate the claim that the Licensee 1 or Licensee 2 were involved in the on-sale of the Property. The Committee is also not convinced that the Licensee put undue or unfair pressure on the Complainants to accept the offer or that their actions were not in the best interests of the Complainants. The Committee also did not find that the Licensee failed to communicate adequately on matters relevant to the Complainants’ interests or that the Agency failed to adequately supervise the Licensee.

Pressure to Accept Pre-Auction Offer

2.7. Rule 9.2 requires that a licensee must not engage in any conduct that would put a client under undue or unfair pressure. The Committee has concluded that while the Complainants feel they were pressured to accept the pre-auction offer that the evidence presented does not support the claim that the Licensee’s actions were a breach of this rule or that any undue or unfair pressure was applied.

2.8. In considering this the Committee has taken account of the timeline and considers that there was ample opportunity for the Complainants to discuss and consider the offer, obtain advice where necessary and make an informed decision.

2.9. In this regard the Committee notes that the first offer by the purchaser was made on 9

February 2017. There was a period of a week during which open homes were conducted and discussion occurred between the Licensee, the Agency and the Complainants about the pre- auction offer before the sale was concluded on 16 February 2017.

2.10. The evidence presented does not indicate that the Licensee misled the Complainants about any undue urgency for the Complainants to make a decision.

2.11. There was no corroborating evidence to support the Complainants’ claim to have been “badgered” by the Licensee into accepting the offer. No evidence has been supplied suggesting that the Licensee adopted a manner, frequency, or style of communication or interaction that was inappropriate.

On-Sale of the Property

2.12. The Licensee and the Agency claim that neither had involvement in or knowledge of the on- sale of the Property by the purchaser. The Complainants’ solicitor claims that, with regard to the on-sale transaction, ‘The branch and agent which were involved were the same...’ A print

out of information held by Core logic was presented as evidence of this and records the Licensee as having been involved in both sales. The Committee has determined that this is not, in itself, evidence that the Licensee or Agency were involved with the second transaction. Information is collected by Core logic from publicly available marketing information which would have shown the Agency’s involvement in the marketing and sale of the Property. The Committee considers it unlikely that any specific information was available to Core logic to confirm the involvement of the Agency in the second sale.

2.13. The second sale and purchase agreement form does not identify any agent as having affected the sale. While it might appear from the photocopied/scanned document that agency details had been deleted from the form used there is no evidence to suggest the involvement of the Licensee or Agent in the second sale.

2.14. The purchaser denies that the Licensee was involved in any way with their on-sale and claim this was a private sale completed without her knowledge.

2.15. No evidence has been presented to indicate that the Licensee knew or had had any involvement with the second purchaser.

2.16. The Committee has therefore concluded that, on the balance of probabilities, the Licensee and Agency were not involved with the on-sale and that this was a private sale negotiated by the purchaser to someone known to them. There has also been no evidence presented to

lead the Committee to suspect that the Licensee knew the purchaser had this intention at the time they purchased the Property.

2.17. The Committee has also considered whether the Licensee acted in the Complainants’ best interest in negotiating the sale at the agreed price prior to auction. In this regard, insufficient evidence is presented for the Committee to form a view that the property was sold for less than a fair market price at the time. The fact that it was on-sold for more by the purchaser, to a buyer who does not appear to have had an opportunity to view the property, is not in itself convincing evidence of a sale at less than fair value for the Complainants.

2.18. The appraisal provided to the Complainants by the Licensee at the time of listing provided the Complainants with a price expectation range. The sale price was at a level consistent with the advice provided by the Licensee in this regard.

2.19. No valuation evidence or comparable sales, other than the evidence of the on-sale itself, has been supplied to support the Complainants’ view that they would likely have achieved a higher price if they not accepted the pre-auction offer.

2.20. When it became clear that the Complainants were wishing to accept a pre-auction offer the Licensee took significant steps to ensure that there were no other genuine buyers. The Committee considers that this is an important step, not just to ensure the vendor is well informed, but also to ensure other potential buyers are treated fairly. It is clear from the evidence presented that the Licensee and Agency took this obligation seriously by contacting all parties who had viewed the Property and instructing other salespeople within the agency to urgently notify the Licensee if they had a genuine buyer.

2.21. Therefore, the Committee has determined, on the balance of probabilities, that the Licensee had no involvement with the on-sale transaction and was not in breach of their fiduciary obligations to the Complainant.

Communication / Legal Advice

2.22. The Licensee says that she reported to Complainant 1 verbally about the interest in the Property and parties who had viewed the Property at the open home. A written report on this was prepared by the Licensee but she says matters moved on to consideration of the offer and this report was not presented.

2.23. There is no specific requirement in the Act for Licensees to report all matters or interest to the client in writing. However, it is noted by the Committee that registering potential buyers with the vendor in writing is standard practice. However, in this case it is suggested by the Licensee that matters quickly moved on to the Complainants’ consideration of the offer on the table and that other procedures took a back seat to this. What the Committee has considered in this regard is the other actions the Licensee took at this time.

2.24. It is clear from the evidence that the Licensee took proactive steps to determine whether there was any other potential interest in the Property before allowing the pre-auction sale to progress. This would have been important to ensure fairness to other buyers as well as making sure the vendor was not accepting an offer if a better result was likely at auction. These actions are not consistent with the Complainants’ claim that collusion had occurred enabling an on-sale at a higher price.

2.25. It is impossible, without the benefit of hindsight, to know for sure whether any offer might be the best or whether a better one might later be forthcoming. What the Committee must consider is whether the Licensee acted in good faith in assisting the Complainants in coming to an appropriate decision. In this regard the Committee is of the view, on the evidence presented, that the Licensee fulfilled this obligation and did not mislead the Complainants.

2.26. The Complainants say that the Licensee did not advise them to get legal advice before signing the sale and purchase agreement. The Licensee says that she always advises parties she is dealing with to get legal advice before signing any legally binding document and that

although she does not recall the wording she used that she is confident she did this in this

case.

2.27. The Complainants have not stated what legal advice, had it been obtained before they signed the sale and purchase agreement form, might have revealed. It is unclear therefore what

such legal advice might have been in this situation and how that advice, had it been followed, might have altered the outcome for the Complainants.

2.28. The Complainants in this case appear to be most concerned that they might have got more for the Property had they not agreed to sell pre-auction. This question is not one which a lawyer is necessarily qualified to answer. One might well speculate that, should the Complainants have had concern about the price, then they should have obtained independent valuation advice. However there has been no suggestion made by the Complainants that they should have been advised by the Licensee to do this.

2.29. Accordingly, the Committee is inclined to accept the Licensee’s assertion that it is her habit to advise parties to get legal advice. In this case, there is insufficient evidence for the Committee to conclude that she didn’t give this advice or that, had the Complainants obtained legal advice, a materially different outcome for the Complainants would have been assured.

3. Your right to appeal

3.1. 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).

3.2. 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 ).

4. Publication

4.1. 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.

4.2. 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.

4.3. 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

Craig Edwards

Panel Member

For Complaints Assessment Committee 412

Real Estate Agents Authority

Date: 18 April 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 secti on 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 6.1 A licensee must comply with fiduciary obligations to the licensee’s client.

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

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

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 9.3 A licensee must communicate regularly and in a timely manner and keep the client well informed of matters relevant to the client’s interest, unless otherwise instructed by the client.