Complaint No C24483 [2018] NZREAA 162 (18 October 2018)

Last Updated: 2 December 2019

Before the Complaints Assessment Committee

Complaint No: C24483

In the matter of

Part 4 of the Real Estate Agents Act 2008

and

Licensee 1: The Licensee

Decision to take no further action

18 October 2018

Members of Complaints Assessment Committee: CAC416

Chairperson: Marjorie Noble

Deputy Chairperson: Rachael Schmidt-McCleave

Panel Member: Geoff Warren

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 1 March 2018 the Real Estate Agents Authority (the Authority) received a complaint against the Licensee from the Complainants.

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

1.3. The complaint relates to the Property.

1.4. The details of the complaint are that the Licensee failed to act in the best interests of the Complainants, being trustees of the Property, and that the Licensee had a conflict of interest as both selling agent and purchaser of the Property and failed to undertake her obligations under the provision of Sections 134-136 of the Act.

1.5. Further, the Licensee failed to disclose knowledge of a proposed re-zoning of the Property allowing for future potential development opportunities increasing the value of the Property prior to sale.

1.6. In particular, the Complainants advised that:

1.7. Around mid August 2015 they approached the Licensee to sell the Property which was at the time a rental property. A listing agreement was signed with a marketing price of $939,000 and noted in the marketing that the Property was subject to extension and renovations which had not been fully “signed off by Council”.

1.8. In September 2015 the Licensee’s son expressed interest in purchasing the Property to which the Complainant emailed his Solicitor for advice around the process of a sale where the purchaser is related to the listing and/or selling Licensee.

1.9. Another potential purchaser was identified and a multi offer situation then arose between this party and the Licensee’s son. The Licensee’s son made the better offer and the Complainant entered further negotiations with him resulting in a sale price of $910,000.

1.10. The Complainant says there was no recent valuation prepared and paid for by the Licensee, as part purchaser and listing/selling licensee, and as he understood, was required to be provided.

1.11. The Complainants further state that during the sale and purchase of their Property, the Licensee at no time discussed with them the proposed re-zoning of the Property in the future to high rise apartments, and the consequences of this re-zoning on price and land usage.

1.12. They state the Licensee and her partner were aware of these proposed changes coming into fruition, since this fact was publicly notified only months after settlement. The Complainant considered this was why the Licensee was keen for her son and the Licensee to purchase the Property with no Code Compliance Certificate since their intention was to demolish the building and develop apartments.

1.13. The Complainants advised they were not aware of the re-zoning discussion as they lived out of the area.

1.14. The Complainants did not request a remedy

1.15. The Licensee responded to the complaint against her.

1.16. In particular, the Licensee commented that:

1.17. Having commenced marketing the Property the Licensee was approached by her son and his partner who were considering purchasing an investment property and thought this property ideal as it was currently tenanted.

1.18. While undertaking due diligence the son and his partner discovered they would have difficulty borrowing against a house with Code Compliance issues. The Licensee and her husband decided to help their son with their borrowings, with the understanding the Licensee and her husband’s names would go on the Title come settlement.

1.19. The Licensee stated all disclosures were made. The Complainant and his solicitor were aware of who they were. The property had been marketed for several weeks with many viewings but little interest due to the Code Compliance issues.

1.20. At the time the Licensee’s son expressed interest another party likewise wished to submit an offer and a multi- offer situation arose. Both offers were handed to the Licensee’s manager (the Manager) to carry out a multi-offer presentation.

1.21. The Licensee states her son’s offer included the requisite signed clause 2 form, a clause disclosing her relationship with her agency (the Agency) and a clause highlighting the fact that the Property was possibly to be rezoned for terraced housing and apartments under the then proposed Unitary Plan.

1.22. The Licensee states at no stage prior to purchasing the Property was there any intention to be involved in any development, be it on the front or rear site of the cross lease Titles, bearing in mind one would have to own both properties in order to carry out any such development and it was the Complainants mother who owned the other property.

2. What we decided

2.1. On 9 April 2018 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 24 September 2018 the Committee held a hearing on the papers and considered all the information gathered during the inquiry.

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

2.4. This decision was made under section 89(2)(c) of the Act. The decision was also made with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. Rules 5.1 (skill, care), 6.2 (act in good faith), 6.4 (must not mislead), 9.1 (best interest).

3. Our reasons for the decision

The Committee concluded its decision to find no further action was a relatively straight forward matter for the following reasons:

Conflict of Interest

3.1. The Complainant advised the Licensee failed to undertake her obligations under Sections 134-

136 of the Act.

3.2. Evidence was presented which showed the Licensee prepared and presented to either the Complainants or their solicitor the required Client Consent Form Licensee to Acquire Interest in Property (form 2). This document was duly signed by both the Complainants and their solicitor dated 24 September 2015, the same day as the Agreement for Sale and Purchase was executed.

3.3. This document also required the Licensee to provide, within 14 days after the date of this consent a valuation of the Property prepared at the Licensee’s expense by an independent registered valuer.

3.4. The Committee was provided a copy of a registered valuation of the Property from the Licensee’s Valuer dated 7 October 2015 (within the 14 day requirement) addressed to the Manager at the Agency which the Licensee states was forwarded directly to the Complainants solicitor.

3.5. The Licensee also inserted a clause into the ASP stating: “The vendor is aware that the purchaser is associated with [the Agency]”.

3.6. It is the Committee’s decision the Licensee fully complied with her requirements as prescribed in Section 134-136 of the Act.

Disclosure of Potential Re-Zoning

3.7 A registered valuation of the Property dated 7 February 2014, prepared for and addressed to the Complainants by the Complainants’ Valuer was provided to the Committee. Page 2 of the valuation contained a paragraph headed Zoning which made a clear reference to the recently drafted Unitary Plan stating that as of the 5th September 2013 the Unitary Plan had been recommended to be approved by the Council for notification and would from then enter a formal submissions phase.

3.8 A vendor’s clause was included in the completed and signed ASP under Further terms Of Sale, this stated: “This Property and some surrounding properties may be re-zoned under the proposed unitary plan, to mixed use, which may allow development of terraced houses and apartments. This is a proposed scheme and may be altered before it becomes the operative scheme. We advise that purchasers must make their own enquiries in relation to current and proposed zoning of the property”.

3.9 The Committee is satisfied the Complainant was provided notice of potential re-zoning prior to accepting the Licensee’s offer and therefore takes no further action.

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 notice of this decision (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 Complainants (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

Geoff Warren

Date: 18 October 2018

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

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

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 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.