Complaint No C20781 [2018] NZREAA 19 (17 January 2018)

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Complaint No C20781 [2018] NZREAA 19 (17 January 2018)

Last Updated: 22 June 2018

In the Matter of	Part 4 of the Real Estate Agents Act 2008
And
In the Matter of	Complaint No: C20781
In the Matter of	Licensee 1 (XXXXXXXX)

Decision of Complaints Assessment Committee

Decision to take no further action

17 January 2018

Complaints Assessment Committee: CAC 412

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 12 June 2017 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) and at the time of the conduct which is the subject of the complaint was employed by the Agency.

1.3. The complaint relates to a rural property. The Licensee was the listing agent at the time.

1.4. The details of the complaint are that the Complainants listed the Property with the Licensee in March 2015 were encouraged to sell the Property by tender. The Property was a dairy farm but the Complainants allege that the Licensee suggested that a sale at viticultural prices may be achievable. The Property attracted a number of enquiries on being advertised, one of which was from Family 1 who are allegedly a local family with valuable land holdings.

1.5. Despite the number of enquiries received, there was little actual interest in the Property for viticulture. The Complainants allege that the price being promoted by the Licensee caused the Family 1 to lose interest and it became clear that to promote the Property at such values was speculative.

1.6. Only one tender was received (at $2,180,000 plus GST) which was significantly below the indicative value promoted by the Licensee to the Complainants. Further, the Complainants say that they were under pressure from the BNZ to sell, and that the Licensee was aware of that situation. They say that their lawyer was advised by the Agency that the only interest came from Family 2, the eventual purchaser. Other potential buyers were contacted by their lawyer but not Family 1 as he was not aware of their initial interest.

1.7. Shortly after the Property was sold, the Complainants’ lawyer received an enquiry from

Family 1 who indicated an interest at a figure above the sale price.

1.8. The Complainants were left with a shortfall owing the BNZ after the sale and allege that if Family 1 had been pursued following their initial interest, they would have been in a better financial position.

1.9. The Complainants say that they do not consider that the Licensee has acted in their best interests, nor acted in accordance with their instructions.

1.10. In particular, the Complainants say that a written appraisal provided by the Licensee in March

2015 assessed the value of the property as bare land at $40,000 - $60,000 per plantable hectare with a total possible sale of around $3,000,000. The Complainants signed an authority for the Licensee to lease the Property but instructed the Licensee to alter the sale value to $60,000 - $80,000 per hectare. An independent valuation carried out at the same time assessed the sale value at $40,000 - $50,000 per plantable hectare.

1.11. The Complainant however was of the view that he wanted “grape prices” for the land, and it subsequently transpired that a member of the Complainants’ family was allegedly overheard in the local pub saying that the family would not accept less than $6,000,000 for the Property.

At this point, the Licensee intervened and advised the Complainants to stop discussing price in public.

1.12. The Complainants also claim that interest in the Property was initially shown by Family 1 but that this was not followed up by the Licensee when tenders were called for. The Complainants say that Family 1 is well-known in the area with valuable land holdings. They allege that they lost interest in pursuing the purchase of the Property when they were advised of the sort of values the Licensee was promoting.

1.13. The Complainants further allege that the Licensee was aware of the fact that they were under severe pressure from the BNZ to sell.

1.14. Their complaint about the Licensee’s conduct is that he did not act in their best interests and failed to advise Family 1 that the Property may be available at other than viticultural values.

1.15. The issue for determination by the Committee is whether the Licensee has failed to act in their best interests and in accordance with their instructions in breach of Rule 9.1 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 and section 72 of the Real Estate Agents Act 2008.

1.16. The Complainants have requested a remedy, being:

a) that the Licensee’s licence is revoked; and

b) that they be compensated for their loss given that there are indications that a higher price would have been paid for the Property if it had been marketed at a realistic price.

1.17. The Licensee has responded through his lawyers to the complaint against him and denied any allegation of wrongdoing.

1.18. In particular, the Licensee says that he is very experienced in rural sales with 12 years’ experience in the region during which time he has marketed all sorts of farm properties including dairy, beef, sheep, cropping, viticulture, forestry and lifestyle blocks.

1.19. He was initially asked by the Complainants to provide an appraisal to market the Property for lease but with the option of marketing it for sale if no suitable tenant was found. The Licensee’s written appraisal estimated a value of $40,000 - $60,000 for bare land that had potential for conversion to viticulture. That was approximately half of the farm with the other half comprising mainly hillside land and unsuitable for viticulture. The Licensee noted in his appraisal that “purchasers from outside the wine sector will probably see value below the above levels”. The Licensee’s appraisal figure of $3,000,000 for the sale of the Property was based on contemporary, unstressed dairy farm sales at that time. However, the evidence provided indicates that over the following 12 months, dairy farm prices fell by 20% - 24%.

1.20. The Licensee was asked by the Complainant to show the value on the Property listing at

$60,000 - $80,000 per total hectare rather than the figures he had originally valued on the basis of plantable hectarage. Evidence is provided by the Licensee’s lawyers in the form of a written note from the Complainant, headed the Farm entitled “Notes to consider on the leasing of the Farm” in which the Complainant promotes the farm as suitable for vineyard development (“The advantage of having water such as the Farms has is something that wine companies would pay a premium for”). He also states that “all of the land is useable, no waste areas.....”.

1.21. The Licensee says that at the time (March 2015), he was unaware of the Complainants financial position, and that is the reason for his providing an appraisal based on an unstressed sales process. It was not until the Property had been marketed as having viticulture potential for approximately six months without any serious interest in leasing the farm, that he became aware of the Complainants’ financial position and the BNZ’s requirement that the farm either be leased or sold.

1.22. Accordingly, in September 2015, on the advice of the Licensee, the Complainants gave the Licensee instructions to market the Property for sale. All marketing documents were approved by the Complainants. As stated by the Licensee’s lawyers, the instructions the Licensee was given were to describe the Property with marketing setting out the following:

a) the farm was a dairy unit;

b) there were “firm” instructions to sell;

c) there was a possibility of splitting the farm and sale in parts;

d) details of the milking facilities and water rights; and

e) the possibility of vineyard development.

1.23. Tenders closed on 30 October 2015 with only one tender received at a price or $2,130,000, subsequently increased to $2,180, 000. The Complainants did not accept the offer and instructed the Licensee to continue marketing the Property at viticulture prices despite the lack of interest.

1.24. The Committee notes from the Licensee’s evidence that he did not at any time advise the Complainants that marketing at viticulture prices was a realistic course of action, and in fact had advised them not to do so.

1.25. The Complainants have also claimed that the initial interest shown by Family 1 was not pursued by the Licensee. They allege that the Licensee did not go back to Family 1 before tenders closed, nor was their lawyer made aware of Family 1s interest which, had that been the case they say, would have enabled him to contact the Family’s lawyer who he knows well.

1.26. As often occurs in such cases, the evidence of each of the parties on this point is slightly contradictory, but we have considered the submissions made by all parties and have concluded that the evidence given by the Licensee, which we have to say is given in some detail, is to be preferred for that reason.

2. What we decided

2.1. On 22 August 2017 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it.

2.2. On 22 November 2017 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.

3. Our reasons for the decision

3.1. The Committee was not persuaded that the evidence established that the Licensee had failed to act in the best interests of the Complainant and in accordance with instructions.

3.2. The Licensee was contacted by the Complainants in the first quarter of 2015 seeking an appraisal to market the Property for lease. The Committee is satisfied that the Licensee duly provided a current market appraisal which estimated the value of the Property on a bare land basis of $40,000 - $ 60,000 per hectare for land which had the potential for conversion to viticulture. The Licensee also flagged with the Complainants that potential buyers from outside the wine industry would most likely see the land as having a lower value.

3.3. When subsequently instructing the Licensee to arrange a lease of the Property, the

Complainants instructed him to market it on the basis of their own assessment of $60,000 -

$80,000 per hectare for the total land area. The evidence shows that there was a difference of opinion between the Complainant and the Licensee as to whether the Property was in part unsuitable for grapes (the Licensee) or was all useable with no waste areas (the Complainant) as set out above in para 1.20.

3.4. Nor was the Licensee, in our view, responsible for leaking to the market the vendor’s expectation of a sale price of around $6,000,000. The evidence of the Licensee, confirmed by his appraisal is that he was of the opinion that the land had a total value of around

$3,000,000 based upon contemporary unstressed dairy farms sales at the time.

3.5. It was the Complainant who referred to his expectations of price from the sale of the Property and often reiterated that he wanted “grape prices” from the sale. The evidence also indicates that it was a member of the Complainants family who was overheard talking somewhat loosely about a price expectation of $6,000,000, this confirmed to the Committee that the Licensee had played no part in leaking such information to the market, and in fact it the Licensee who, when told about it, immediately contacted the Complainants to advise them to remain silent on the matter of price.

3.6. Notwithstanding the advice of the Licensee, the Complainants nevertheless decided to market the Property largely contrary to both the advice of the Licensee and an independent valuation report which supported the appraisal of the Licensee.

3.7. The Committee is satisfied however, that the Licensee was not responsible for providing any misleading information about the Property.

3.8. The Complainant also alleges that the failure of the Licensee to follow up an initial enquiry from Family 1 cost them the opportunity to potentially achieve a price that would have left them in a better financial position.

3.9. The Complainants also say that the failure of the Licensee to advise their lawyer of Family 1s interest did not enable him to make his own enquiries of Family 1s lawyer. The Complainants maintain that had he been able to do so, they would have been able to at least “see what could be done”.

3.10. Having considered the evidence of the Complainants, their lawyer’s information provided to the Authority in his email of 6 July 2017 and the evidence of the Licensee submitted by his solicitors dated 26 October 2017 in response to questions from the Committee, we accept the evidence of the Licensee which is given in detail and in large part is supported by evidence given by Family 1.

3.11. It is apparent from the evidence that the initial contact by Family 1 was in mid October 2015 when Family 1 called into the Agency and picked up a flyer. It appears that she subsequently sent an email message through the Agency’s website on 27 October 2015 asking for more information to which the Licensee responded.

3.12. The Licensee denies that he discussed the sale of the Property with Family 1 at any time although he did, during the investigation that an email enquiry was received by the Agency during the marketing period.

3.13. There then occurred a slight mishap concerning a communication between Family 1 and the Licensee in which she intended to advise him that the Property would only useful for run -off. Unfortunately she (of Family 1) mistakenly addressed the email to her father (of Family 1) instead of the Licensee, but the view of the Committee is that the error has little, if any, bearing on the outcome of the sale and our decision. It is possible that had the email reached the Licensee as intended, the Licensee could then have added Family 1 to the Agency database, but as the Licensee’s lawyers acknowledge, that is speculative.

3.14. The Licensee maintains that the enquiry from Family 1 came in the Agency at a time when a number of other similar enquiries were being received. Most of these enquiries are not considered to be from serious potential purchaser. A salesperson will follow up those which are considered to be from highly motivated potential purchasers, but generally cannot follow up every enquiry, particularly when it is apparent that there is no serious intent.

3.15. The Complainants allege that “when Family 1 found out the price promoted by the Licensee, they lost interest in pursuing the Property”. The Committee does not give this statement any credibility for two reasons:

a) firstly, we have established above that the evidence suggests strongly that the Licensee was not promoting the Property at any price other than at a level of his assessment supported by an independent valuation; and

b) the evidence also establishes that Family 1 were not informed of the price (at least not until well after the sale had occurred).

3.16. We also note the evidence of Family 1 in which they says that the family were concerned by “too many red flags to operate it as a dairy farm and we are not interested in it as a vineyard”, and also states in their evidence to the investigator (7 October 2017) that they “were also sensitive towards the issue due to the circumstances and health of the Complainant.”

3.17. Finally we also noted that while Family 1 may be well-known to a number of people in the community, the Licensee was not raised in the rural region and Family 1 was not known to him. There is nothing in the evidence to suggest that Family 1 should have been known to the Licensee or that it should have been readily apparent that they were associated with the land-owning Family 1. Nor, it is interesting to note, did the Complainants suggest that they were a family which farms in the area and should be contacted to ascertain any level of

interest.

3.18. The Committee, as a result, also came to the view that the evidence does not support the Complainants’ allegation that the Licensee failed to act in their best interests in breach of Rule 9.1 by failing to follow up with Family 1 for the reasons set out above.

3.19. We therefore consider pursuant to section 89(2)(c) of the Act that no further action should be taken against the Licensee.

4. What happens next

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 the notice given of this decision. Your appeal must include a copy of this decision and any other information you wish the Tribunal to consider in relation to the appeal. Refer to Appendix 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 ) .

Publication

4.3. 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.

4.4. 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.

4.5. 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

David Bennett

Deputy Chairperson

For Complaints Assessment Committee 412

Real Estate Agents Authority

Date: 17 January 2018

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

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.

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.

(2) 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 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.