Poppelwell - Complaint No C14332 [2018] NZREAA 143 (29 August 2018)

Last Updated: 2 December 2019

Before the Complaints Assessment Committee

Complaint No: C14332

In the matter of

Part 4 of the Real Estate Agents Act 2008

and

The Licensee: David Poppelwell (10006725)

The Agency: Astute Real Estate Limited t/a Astute Real Estate

(10020131)

Decision finding unsatisfactory conduct - asking for submissions on orders

29 August 2018

Members of Complaints Assessment Committee: CAC410

Chairperson: Nigel Dunlop

Deputy Chairperson: Paul Elenio

Complaints Assessment Committee

Decision finding unsatisfactory conduct - asking for submissions on orders

1. The Complaint

1.1. On 10 October 2016 the Real Estate Agents Authority (the Authority) received a complaint against David Poppelwell (the Licensee) from the Complainant.

1.2. The Licensee is a licensed Salesperson under the Real Estate Agents Act 2008 (the Act) and at the time of the conduct was engaged by Astute Real Estate Limited (the Agency).

1.3. Although the Complainant complained only about the Licensee, the Authority joined the Agency into the complaint with the agreement of the Complainant, pursuant to section 12(1)(k) of the Act.

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

1.5. The Complainant was the vendor of the Property. The Licensee acted for the Complainant on the sale.

1.6. The central thrust of the complaint is that the Licensee did not act in the Complainant’s best interests.

1.7. The Licensee approached the Complainant unsolicited in August 2017, asking whether she might be prepared to sell the Property. She indicated that she might be. A short time later the Licensee presented an offer to her from a developer, Mr X. There then ensued a series of counter-offers, eventually resulting in the Complainant selling the Property to Mr X.

1.8. The Complainant says that the Licensee downplayed the value of the Property, and pressured her to accept the initial and subsequent offers from Mr X. She says that the Licensee did not provide her with a proper comparative market analysis (CMA). The eventual sale price was significantly higher than the initial offer from Mr X, which she says indicates that the Licensee should not have been encouraging her to accept the early offers. She says that Mr X is a friend of the Licensee.

1.9. The Complainant also complained that she had initially been invoiced for commission on a GST exclusive basis, whereas it had been agreed that the stated amount of commission would be GST inclusive. She notes, however, that after she raised this with the Licensee and Agency, she was subsequently invoiced for the correct amount.

1.10. The Complainant requested a remedy, namely that the Licensee be required to refund the commission she paid for his services.

1.11. The Licensee responded to the complaint against him.

1.12. The central thrust of the Licensee’s response is that the advice that he gave the Complainant was based on objectively reliable data which he shared with the Complainant, and that he assisted her to achieve not only a good sale price, but an agreement allowing her to remain in occupation of the Property for a period after settlement of the sale, and to then be able to remove the house from the site.

1.13. The Agency responded to the complaint in the same terms as the Licensee.

1.14. The initial material provided to the Authority by the Complainant indicated to the Committee that the requirements of the Act and the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules) concerning agency agreements might not have been complied with by either the Licensee or the Agency.

1.15. The concerns identified by the Committee in relation to the agency agreement issue arose because it appeared that no fully completed agency agreement between the Complainant and Agency had come into effect. These concerns became a part of the investigation.

1.16. The response of the Licensee and the Agency to the agency agreement concerns was to the effect that an agency agreement had been sent to the Complainant for approval and signature but she had not returned it, although she had acted on the basis of the agreement being in effect before she made her first counter-offer.

2. What we decided

2.1. On 1 March 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. On 12 August 2018 and prior dates the Committee conferred and considered all the information that had been gathered during the inquiry.

2.3. The Committee determined on the balance of probabilities pursuant to section 89(2)(b) of the Act that the Licensee and the Agency engaged in unsatisfactory conduct in relation to agency agreement requirements.

2.4. In particular, the Committee found, with reference to section 72 of the Act, that the Licensee and the Agency carried out real estate work that:

(a) Falls short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee

(b) Contravenes a provision of the Act or Rules

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

2.5. In relation to both the Licensee and the Agency, the Committee found the following breaches of the Rules:

• Rule 5.1 (the requirement of skill, care, competence, and diligence at all times)

• Rule 9.9 (the requirement not to submit an agency agreement for signature unless all material particulars have been inserted or attached)
  
• Rule 10.6(b) (the requirement to set out in writing before a client signs an agency agreement as to when it ends)
  

2.6. The Committee found that none of the other matters investigated had been proven on the balance of probabilities. It determined therefore, pursuant to section 89(2)(c) to take no further action with regard to these aspects of the complaint.

3. Our reasons for the decision

Best interest s , C M A , und ue p res s ure, and relat i on s hip w it h pu rchas er

3.1. The Committee discusses the above four issues under the one heading because they are interconnected. They relate to the Licensee only. A range of allegations and considerations point at least to the possibility of the Licensee working in the interests of Mr X rather than the Complainant. The scenario painted by the Complainant is that the Licensee was endeavouring to ensure future business from Mr X and so understated the true value of the Property. This scenario is reinforced in the mind of the Complainant by the Licensee’s assessment of the value of the Property corresponding with the initial offer from Mr X. It is also to be noted that the Property was not placed on the open market at any stage.

3.2. The Licensee says that he presented the Complainant with a spreadsheet on 5 August, about

five days after his initial approach to the Complainant, at which she indicated that she might be willing to sell. The spreadsheet showed sales of properties within the Special Residential 8 zone in which the Property is situated. This zone allows buildings of 5 or 6 storeys. Alongside the reference to the Property on the spreadsheet “1.150.000” has been handwritten. This

$1.15M figure is what the Licensee told the Complainant the Property is worth. It is also the

amount of the initial offer from Mr X.

3.3. The Licensee says that he based his assessment of the value of the Property on a land area of

357m2. The Property was subject to a cross lease. The title to the Property referred to a half

share of 657m2. The Licensee, however did not base his assessment of value on a land area of

half the amount referred to in the title, namely 328.50m2, but on the larger area. It would

seem that this was to reflect the positioning of the two houses on the land referred to in the title. The Complainant herself points to there being more private land available on the Property than on the other cross lease property (flat 2) which was located at the rear of the section.

3.4. In assessing the value of the Property, the Licensee says that he had particular regard to the September 2014 and May 2014 sales of Property A and Property Bfor $1.28M and $1.305M respectively. Both properties were in the Special Residential 8 zone when sold. These sales represented values of $2,554 per m2 and $1,962.40 per m2 respectively. Having regard to these sales and the subsequent escalation in property prices, the Licensee assessed the value of the Property to be in the range $3,220-$3,805 per m2. The assessed $1.15M value of the Property based on a land area of 357m2 represents a value of $3,221 per m2. The ultimate sale price of

$1.65M represents a value of $4,621 m2 based on a land area of 357m2. The Property was

eventually sold for $500,000 (43.5%) more than the original value assessed by the Licensee.

3.5. The Complainant did not fundamentally challenge the Licensee’s account as set out above, but emphasised that in her view the 43.5% differential just referred to, combined with his encouragement to her to settle at the low end of the range, clearly pointed to the Licensee not having acted in her best interests. In other words, the difference in viewpoint between the Complainant and Licensee is not so much as to what occurred, as to what conclusions should be drawn.

3.6. Rule 10.1 required the Complainant to be provided with an appraisal. Rule 10.2 required that appraisal to be provided in writing, realistically reflect market conditions, and be supported by comparable information on sales on similar land in similar locations. In the Committee’s view the spreadsheet achieved that, and so Rule 10 is not breached.

3.7. It is fair to say that the Committee has had a degree of disquiet that the Licensee twice assessed the value of the Property well below the price achieved. It is arguably risible for him to claim any credit for the price achieved when from the outset the Complainant advocated a price well above the Licensee’s recommendations. She insisted on a counter-offer to the original offer

($1.15M) of $1.99M. The eventual sale price was $349,000 below this figure, but $500,000 higher than the first offer which the Licensee recommended that she accept. Does this suggest that the Licensee was not acting in the Complainant’s interest?

3.8. The evidence from Mr X is relevant to this issue. This was to the effect that the Licensee has previously acted for him both as a buyer’s and seller’s agent. He told that the investigator he has known the Licensee in a business capacity for more than 10 years, that he uses other licensees apart from the Licensee, that he prepared the first offer, that the Licensee did not have input into it, and that he did not discuss it with the Licensee before presenting it. In short, Mr X confirmed the evidence of the Licensee that in regard to this transaction, Mr X and the Licensee maintained a proper licensee/customer relationship. This evidence contradicts the Complainant’s suspicion that the Licensee was looking after Mr X’s interests rather than her own.

3.9. After careful consideration, the Committee has decided that it is not proven on the balance of

probabilities that the Licensee breached Rule 9.1, which requires licensees to act in the best interests of their clients. As mentioned, the Complainant was supplied with a valid CMA, and the evidence of Mr X supports that of the Licensee. Overall, the evidence does not point conclusively to the Licensee not acting in the Complainant’s best interests. This is not to say, however, that there is no evidence which could be taken as suggesting that he did not act in her best interests. Circumstances could be taken to suggest that the Licensee was driven primarily by his own interests, but this has not been proven, and so the Committee proceeds on the basis that the Licensee did act in the Complainant’s best interests.

3.10. With the benefit of hindsight, it can be said that the Complainant’s assessment of the value of the Property was more accurate than that of the Licensee. It was not self-evident, however, as to what the Property would sell for. The principal reason was that the sale of the Property to Mr X was linked to the sale of neighbouring properties to Mr X. The price achieved for the Property was only one that a developer would be prepared to pay, and what a developer was prepared to pay was dependent on what other properties the developer was able to secure in order to embark on a major development, and the timing of those other sales. The Licensee was involved in other pertinent sales. The Committee has not seen any evidence to suggest that any developer apart from Mr X was endeavouring to purchase properties adjoining the Property. There was therefore no compelling reason to place the Property on the open market. The CMA did reference other comparable sales, and did provide objective basis for the recommended selling prices, albeit that in the event the assessments were exceeded.

3.11. The fact remains, that with the Licensee acting for her throughout, the Complainant received a price for the Property with which she was content. Not only that, but the settlement date was satisfactory, and she retained the ownership of the dwelling on the Property, and the right to continue to reside in it for an agreed period and for an agreed rental, and the right to then remove the dwelling from the site.

3.12. All this leads the Committee to conclude that it is not proven on the balance of probabilities that the Licensee breached Rules 9.1 (best interests) or 10 (appraisals).

3.13. The Complainant says that after the Licensee presented the initial offer to her, and negotiation commenced, she felt extremely stressed and pressured by him most of the time. The verbal communications between the Complainant and Licensee occurred mostly in private, and so it is very difficult for the Committee to assess their character. The Complainant did not point to any documentary evidence (for example email exchanges) suggestive of undue pressure. It may have been that the Licensee communicated with the Complainant at times in a blunt if not forceful manner. And it may have been that the Licensee was frustrated by what he perceived to be unreasonable expectations on the part of the Complainant, which may have contributed toward a particular communication style. The Committee does not have evidence, however, which proves to the requisite standard, that this style of communication, whatever it was, crossed the line from acceptable to unacceptable. The Complainant did not formally complain about undue pressure until after completion of the Licensee’s work for her which extended over a period of some 6 months. It is quite possible that she experienced stress due to the inherent nature of extended negotiations in relation to her home. That said, the Committee is not finding that the Licensee’s communication style was beyond criticism, simply that there is insufficient evidence to prove on the balance of probabilities that the Licensee breached professional requirements. The relevant rules are Rule 9.2 which prohibits licensees from engaging in any conduct that would put a client under unfair or undue pressure, and Rule 6.3 which prohibits licensees from engaging in any conduct likely to bring the industry into disrepute. The Committee views this aspect of complaint as part and parcel of the central complaint that the Licensee did not act in her best interests. It reflects the fact that from the outset the Complainant and the Licensee had divergent views as to what the Property was capable of selling for.

C ommis s ion

3.14. The Complainant says that the Agency invoiced her for the agreed amount of commission ($30,000) on the basis that the figure was GST exclusive, whereas the agency agreement document sent to her for signature stated it was GST inclusive. The Committee is taking no further action on this aspect of the complaint because it is undisputed that when the error was pointed out to the Agency, a revised invoice was issued.

Ag ency ag ree ment

3.15. No written fully completed agency agreement was entered into between the Complainant and the Agency. There is no dispute about this. A form of agreement was sent to the Complainant by the Licensee for her signature. She signed it and dated her signature 9 September. Despite the incompleteness of the document she signed, she acted as if an agreement was in place, as evidenced by her relying on the incomplete agreement to support her argument that the agreed amount of commission was GST inclusive. The form of agreement sent to the Complainant did not contain commencement or end dates. Nor did it contain a signature on behalf of the Agency.

3.16. Rule 9.9 provides that a licensee must not submit an agency agreement for signature unless all material particulars have been inserted in it. This rule was breached given the absence of commencement and end dates. Rule 10.6(b) provides that before a prospective client signs an agency agreement, a licensee must explain to the prospective client and set out in writing when the agreement ends. This rule was breached, because the form of agreement did not include an end date, and the Licensee and Agency do not claim to have otherwise advised the Complainant in writing of an end date. Rule 5.1 provides that a licensee must exercise skill, care, competence and diligence at all times when carrying out real estate agency work. This Rule was breached because clear and certain terms of agency are fundamental to real estate work, and such clarity certainty was not achieved.

3.17. Rule 9.6 provides that unless authorised by a client, through an agency agreement, a licensee must not offer any land. This Rule was breached if the position is taken that no agency agreement ever came into force as between the Complainant and Agency. It is at least arguable, however, that in this case there was an enforceable agreement due to both parties proceeding on the basis that the form of agreement sent to the Complainant was in force, and binding and enforceable. The Committee finds it unnecessary to decide the issue of whether or not an agreement came into force, having regard to the clear breaches of Rules 5.1, 9.9 and

10.6(b). The Committee also takes account of the assertion by the Licensee and Agency that the form of agreement was sent to the Complainant prior to first offering the Property, that is to say, prior to the first counter-offer by the Complainant.

3.18. The agency agreement was between the Complainant and Agency, rather than Complainant and Licensee. Both the Agency and Licensee however, have responsibility for ensuring that the Rules relating to agency agreements are complied with. Simple routine checks on the part of the Agency would have revealed there were problems in relation to the agency agreement. Therefore, the Committee finds that Rules 5.1, 9.9 and 10.6(b) have been breached by both the Licensee and the Agency.

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 Wednesday 12 September 2018) from the date of notice 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 the Agency 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

Nigel Dunlop

Date: 29 August 2018

Appendix: Relevant provisions

The Real Estate Agents Act 2008 provides:

12 Authority’s functions

(1) The functions of the Authority are to—

(a) administer the licensing regime for agents, branch managers, and salespeople, including the granting and renewal of licence applications; and

(b) appoint a Registrar of the register of licensees; and

(c) ensure that the register of licensees is established, kept, and maintained; and

(d) develop practice rules for the Minister’s approval and maintain these rules for licensees, including ethical responsibilities; and

(e) set fees and levies; and

(f) appoint Complaints Assessment Committees and maintain a panel of persons suitable to serve as members of Complaints Assessment Committees; and

(g) develop consumer information on matters relating to real estate transactions, including approved guides on agency agreements and sale and purchase agreements; and

(h) develop and provide consumer information on matters relating to the provision of real estate services, including providing the public with information on how to make a complaint; and

(i) set professional standards for agents; and

(j) investigate and initiate proceedings in relation to offences under this Act and any other enactment; and

(k) investigate of its own motion any act, omission, allegation, practice, or other matter which indicates or appears to indicate unsatisfactory conduct or misconduct on the part of a licensee; and

(l) provide procedures for the lodging of complaints; and

(m) receive complaints relating to the conduct of licensees; and

(n) carry out any other function that the Minister may direct the Authority to perform in accordance with section 112of the Crown Entities Act 2004; and

(o) carry out any other functions that may be conferred on the Authority by this Act or any other enactment.

(2) The Authority may, where it considers it appropriate to do so, consult with representatives of the real estate industry about any matter that relates to the functions of the Authority.

(3) For the avoidance of doubt, nothing in subsection (1) affects the role of an industry training organisation for the time being recognised under the Industry Training and Apprenticeships Act 1992 as an industry training organisation for the real estate industry.

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.

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.

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:

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

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 9.6 Unless authorised by a client, through an agency agreement, a licensee must not offer or market any land or business, including by putting details on any website or by placing a sign on the property.

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.

Rule 10.1 This rule applies to an agent (and any licensee employed or engaged by the agent) who is entering, or has entered, into an agency agreement with a client for the grant, sale, or other disposal of land or a business.

Rule 10.2 An appraisal of land or a business must—

(a) be provided in writing to a client by a licensee; and

(b) realistically reflect current market conditions; and

(c) be supported by comparable information on sales of similar land in similar locations or businesses.

Rule 10.6 Before a prospective client signs an agency agreement, a licensee must explain to the prospective client and set out in writing—

(a) the conditions under which commission must be paid and how commission is calculated, including an estimated cost (actual $ amount) of commission payable by the client, based on the appraisal provided under rule 10.2:

(b) when the agency agreement ends;

(c) how the land or business will be marketed and advertised, including any additional expenses that such advertising and marketing will incur:

(d) (d) that the client is not obliged to agree to the additional expenses referred to in rule 10.6(c):

(e) (e) that further information on agency agreements and contractual documents is available from the Authority and how to access this information.