Pyatt - Complaint No C18903 [2018] NZREAA 55 (16 March 2018)

Last Updated: 8 January 2019

Before the Complaints Assessment Committee

Complaint No: C18903

In the matter of

Part 4 of the Real Estate Agents Act 2008

and

Licensee 1: Michael Pyatt (10036904)

Licensee 2: Licensee 2 (XXXXXXXX)

Decision finding unsatisfactory conduct in the matter of Michael Pyatt and

Decision to take no further action in the matter of Licensee 2

16 March 2018

Members of Complaints Assessment Committee: CAC416

Chairperson: Marjorie Noble

Deputy Chairperson: Rachael Schmidt-McCleave

Panel Member: Geoff Warren

Complaints Assessment Committee

Decision finding unsatisfactory conduct – asking for submissions on orders and

Decision to take no further action

1. The Complaint

On 22 June 2017 the Real Estate Agents Authority (the Authority) received a complaint against Michael Pyatt (Licensee 1) and Licensee 2 from the Complainant 1, Complainant 2, and Complainant 3. These parties will collectively be known as the Complainants.

Licensee 1 was a licensed Salesperson under the Real Estate Agents Act 2008 (the Act) and, at the time of conduct, was engaged by Regent Realty Limited trading as Harcourts Taradale (the Agency). Licensee 2 is a licensed Salesperson under the Act and at the time of conduct was engaged by the Agency.

Licensee 1 voluntarily surrendered his Salesperson’s licence on 18 January 2017. The complaint relates to a property (the Property).

The details of the complaint are that the Licensees marketed the Property without a current agency agreement, failed to record correctly the GST status on the agreement for sale and purchase, and that they put undue pressure on the Complainants on settlement day.

In particular, the Complainants advised that:

Complainant 2 challenged Licensee 2 subsequent to the sale becoming unconditional that the Property had been sold without a current listing authority, to which Licensee 2 “laughed this off” but did agree there was a “typo” on the third page that showed the listing authority was a sole agency from 4/11/15 - 4/2/15. The front of the document showed the dates to be

4/11/15 - 4/2/16. Complainant 2 agreed this was clearly a typing error.

It was also explained to Complainant 2 the clause detailing the sole and exclusive agency agreement contained in the listing authority states that at the expiry of the listing authority, the agency appointment would revert to a general agency agreement, which would continue unless cancelled in writing by either party.

Complainant 2 agreed she never cancelled the general agency agreement, however she had been in real estate for a time and sought advice from previous colleagues currently in real estate, who advised there was a new rule that a general agency agreement only lasts 3 months and the form she had signed was outdated, therefore no listing authority existed.

Complainant 2 explained the Property had been previously listed by Licensee 1 some time ago but did not sell and the listing authority expired, however Licensee 2 was very aware Complainant 1 was registered for GST, and that it had been noted with the GST number on that listing.

The Complainants listed the Property with another agency for a time but again this listing did not result in a sale, culminating in the Complainants re-listing with Licensee 2 in November

2015.

Licensee 2 had produced at least one other offer to the Complainants during and after the sole agency period but these offers were, for one reason or another, unacceptable but did acknowledge Complainant 1 was GST registered.

When Complainant 2 was presented with the accepted offer on or about 25 October 2016 it

included Schedule 2, which deals with GST registration. It was signed by the purchasers, but the boxes to the right were not filled in.

Complainant 2 states she asked Licensee 2 whether they should be filling these in, the response was, “... no your solicitor and accountant will be doing that.” Complainant 2 states she then signed the bottom of Schedule 2 supposing Licensee 2 knew her job, but was comforted by the knowledge they had inserted a clause in the agreement (23.0) that was conditional upon the approval of the agreement by both the purchaser’s solicitor and Complainant 1’s solicitor, in particular regarding the GST treatment of the transaction.

Complainant 2 says, despite both solicitors’ approval, the sale and purchase agreement settled with the GST component incorrectly recorded and, following settlement, Complainants 2 and 3 have been advised GST is payable on the sale price at 15%, which Complainant 2 says should have been zero-rated.

The Complainants say as a result of this they have had to incur the expense of a valuation report detailing the GST components involved in the transaction, plus additional legal and accounting costs.

Complainant 2 says on 30 January 2017, one day prior to settlement, the purchasers together with Licensee 2 undertook a final inspection of the Property. At that time the Complainants were busy removing possessions in and about the Property.

As a result of this visit their solicitor advised he had been contacted by the purchaser’s solicitor, who threatened to withhold $100,000 if they were not out by settlement (4pm, 1

February 2017). The Complainant stated they were forced to agree to a removal contractor entering the Property to provide a quote to clear the yard after settlement, at the Complainants’ cost.

Complainant 2 says on the day of settlement Licensee 2 must have gone to the purchasers and told them the Complainants would need until 8pm that day to clear the Property, because the Complainants had several telephone calls from their solicitor to see how they were going and to down tools and vacate by 4pm; what was left would be removed by the contractor at the Complainants’ cost. Complainant 2 says all their possessions were removed by 4pm, but Licensee 2 was instrumental in putting undue stress on them and they felt Licensee 2 was working in the purchasers’ interests only.

The Complainants requested a remedy, being:

a) A complete result on the GST issue

b) Refund of commission

c) A refund of extra costs incurred of valuation, solicitor’s and accountant’s fees. The Licensees responded to the complaint against them.

Licensee 1 response

Licensee 1 responded to the complaint against him. In particular, the Licensee commented that he was previously engaged by the Complainants under an earlier sole agency agreement.

Licensee 1 was approached by the Complainants in October 2015 to re-list the Property.

Licensee 1 prepared a CMA and a sole agency agreement commenced on 4 November 2015, with Licensee 2 as co-listing salesperson.

The sole agency was for a period of 3 months, expiring on 4 February 2016. Part 3 of the listing authority included a “roll over” provision that stated, “... at the expiry of this exclusive agency authority the agency appointment shall continue on general agency terms.”

Terms of the general agency agreement state, “the general agency authority shall continue until 7 days after written notice of its cancellation is given by either party.”

Licensee 1 says the Complainants did not provide written notice of cancellation and he considers the transaction occurred under a valid agency agreement.

In October 2016 Licensee 1 says the purchasers viewed the Property with Licensee 2 and subsequently wished to put an offer in. Licensee 2 was going to be absent at that time and Licensee 1 prepared a draft offer on Licensee 2’s behalf, which was sent to the purchaser’s solicitor for approval then presented to the Complainants. The offer was for $1,020,000 plus GST (if any), which the Complainants signed without negotiating on price.

Licensee 1 acknowledges he made a drafting error in relation to the vendor’s GST status by not inserting the vendor’s GST number in Schedule 2. However, in his defence, Licensee 1 says the error does not amount to unsatisfactory conduct as both parties clearly understood the transaction would be zero-rated and were advised to seek legal advice.

Licensee 2 says the independent trustee for the vendor’s trust, a company run by the Complainants’ solicitor, signed the agreement. There was a solicitor’s approval clause for both the vendors’ and the purchasers’ solicitors to confirm the “commercial and conveyancing aspects” were correct and reflected, particularly, the Complainants’ wishes.

Licensee 1 states he was not involved with the transaction on settlement and could not comment further.

Licensee 2 response

Licensee 2 responded to the complaint against her. In particular, the Licensee commented that the Property was previously on the market for some time under a sole agency agreement through Licensee 1, before it was de-listed some time in 2015.

On 4 November 2015 Licensee 1 re-listed the Property with Licensee 2 as the co-listing salesperson. Licensee 2 states she was not present at the listing meeting and only met the Complainants about a week later. In February 2016 Licensee 2 prepared and presented an offer on the Property to the Complainants. This was not accepted, and neither was a second offer some time later.

However, in October 2016 Licensee 2 took the purchasers through the Property and they subsequently wished to make an offer. As Licensee 2 was to be absent at that time, the sale and purchase agreement was prepared and presented by Licensee 1, and was accepted by the Complainants without negotiation as to price.

Licensee 2 says based on pre-offer discussions with the Complainants and purchasers she is confident the parties understood they were each GST registered and entered the agreement on the basis the transaction would be zero-rated.

Licensee 2 says at 10.30am on 30 January 2017 (two days prior to settlement) a final inspection was made by the purchasers. The purchasers expressed concern at the amount of gear still to be moved off the Property.

Licensee 2 states the purchasers contacted their solicitor, who advised they obtain a quote from a removal contractor to establish the amount they needed to hold back on settlement. The purchasers’ solicitor also contacted the Complainants’ solicitor to raise the concern.

At 4.30pm on 31 January 2017, a removal contractor met with the purchasers and Licensee 2 at the Property. Licensee 2 says she visited the Property at 1pm on 31 January 2017 (settlement day) on her own and found there was still a huge amount of gear to be removed.

License 2 returned at 4pm with the purchasers to find the Complainants had resorted to

depositing their gear onto the neighbour’s property. At no time does Licensee 2 recall telling the Complainants to vacate the Property at that time. The purchasers had concerns about when the Complainants would vacate based on the amount of gear they saw still present, and asked Licensee 2 to speak with the Complainants who indicated they would need until

8pm, which the purchaser did not agree to.

2. What we decided

On 24 August 2017 a Complaints Assessment Committee considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.

On 16 February 2018 the complaint was referred to Complaints Assessment Committee CAC416 (the Committee) 1 for consideration. The Committee considered the original complaint afresh and on 16 February 2018 decided to inquire into it, pursuant to section

79(2)(e) of the Act.

On 26 February 2018 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

Licensee 1

The Committee found Licensee 1 has engaged in unsatisfactory conduct under section

89(2)(b) of the Act. The decision was also made with reference to the Real Estate Agents Act

(Professional Conduct and Client Care) Rules (the Rules), in particular Rule 5.1 (skill, care and competence).

Licensee 2

On 26 February 2018 the Committee decided to take no further action on the complaint against Licensee 2.

This decision to 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), in particular Rule 9.2 (undue or unfair pressure).

3. Our reasons for the decision

On the complaint against Licensee 1, the Committee found, pursuant to section 72(a) of the Act, that the conduct of the Licensee falls short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee

The Committee concluded:

a) The Property was marketed with a current listing authority

b) Licensee 1 failed to correctly record the GST status of the Complainants

c) Licensee 2 did not put undue stress on Complainants on settlement date

The Property was marketed with a current listing authority

Complainant 2 had previously worked in real estate, and as part of this complaint had sought the opinion of some of her ex-colleagues as to the validity of the listing authority at the time of the transaction taking place.

These colleagues had suggested there had been a law change to the rules governing listing

1 This transfer was due to reasons unrelated to this complaint.

authorities, and that an authority, whether exclusive or general, expired after 3 months, after which a new listing authority had to be drafted.

The Committee can find no evidence supporting this opinion and concluded the listing authority signed by both Complainants and the Agency to be valid, in that at the expiry of the sole agency period there was provision for a “roll over” to a general agency agreement. This provision states, “... the general authority shall continue until 7 days after written notice of its cancellation is given by either party.”

Both Licensees and the Complainants agreed no notice of cancellation had been given. The

Committee takes no further action on this issue.

Licensee 1 failed to correctly record the GST status of the Complainants

Complainant 2 stated this part of the complaint was against Licensee 2 only. Investigations established that Licensee 2 was not present at the time the sale and purchase agreement was drafted. Both Licensee 1 and 2 stated she was absent at that time, and Licensee 1 agreed to draft and negotiate the agreement on Licensee 2’s behalf. Licensee 2 was removed from this part of the complaint.

Licensee 1 acknowledged he made a drafting error in relation to the Complainants’ GST status, but mitigated this by stating both parties clearly understood the transaction would be zero-rated and were advised to seek legal advice.

Clauses had been inserted in the agreement under further terms of sale (23.0 and 24.0) which put the responsibility on both the vendors’ and purchasers’ solicitors to confirm the “commercial and conveyancing aspects” were correct and reflected the Complainants’ wishes. The Committee does not disagree with Licensee 1 in this regard.

That the independent trustee, a company run by the Complainants’ solicitor who signed the agreement on behalf of Complainant 1, did not do this does not, in the Committee’s opinion, exonerate Licensee 1 from his responsibilities as defined under the Act and in particular Rule

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

It would have been a very simple matter to insert the Complainants’ GST number in Schedule

2 and tick the appropriate boxes that followed. This would have eliminated the ensuing

stress on the Complainants and the litigation that followed, including the cost by Licensee 1’s

Agency to, in part, resolve the complaint.

In the Committee’s consideration, Licensee 1 acted with complacency and a lack of attention to detail that has resulted in the finding of unsatisfactory conduct against him.

On the complaint against Licensee 2, the Committee concluded:

Licensee 2 did not put undue stress on the Complainants on settlement date

A statement was received from the purchasers whose recollection of events surrounding settlement concurred with those of Licensee 2, but differed from Complainant 2’s recollections.

The purchasers had visited the Property with Licensee 2 for a final inspection two days prior to settlement and voiced their concern at the amount of gear that still had to be removed from the Property. As a result of this they contacted their solicitor, who instructed them to contact a removal contractor for a quote to remove what might be left post settlement, so they could decide how much money to withhold.

Licensee 2 and the purchasers met at the Property with the contractor the day prior to settlement and an amount of $10,000 was discussed, although Complainant 2 states her

solicitor informed her it was $100,000.

On settlement day the purchasers and Licensee 2 were at the Property at 4pm to find the Complainants had cut a boundary fence and moved the bulk of their gear onto a neighbour’s property.

Complainant 2 says she was told by Licensee 2 to down tools and vacate at 4pm. Licensee 2 disputes this saying she never gave this instruction, but approached the Complainants to get an estimated time from them when they would be finished and was told it could be 8pm.

The Committee accepts much of this is “he said, she said” but concluded that the Complainants were given a 3 month settlement date from the agreement going unconditional. This was agreed to by the purchasers in consideration of the amount of gear that was in and about the Property, and to give the Complainants sufficient time to remove it. That the Complainants were still removing gear up to and past the time of settlement led the Committee to consider much of the stress and pressure the Complainants blamed Licensee 2 for was self-inflicted, and find no further action against Licensee 2.

As part of the investigation report the Committee were privy to a mediated settlement between the Agency, Solicitors and Complainants. The settlement reimbursed the purchasers in full for the GST content of the transaction. This, however, and in the Committees consideration, did not reimburse the Complainants for the stress and time involved in resolving the issue, and the Committee has taken this into consideration in its finding against Licensee 1.

4. Request for submissions on orders: Licensee 1

The Complainant is to file submissions (if any) on what orders should be made against Licensee 1 within ten working days (by Tuesday, 3 April 2018) from the date of notice of this decision. These submissions, if any, will then be provided to Licensee 1, with a timeframe for filing final submissions.

The Committee requires the Case Administrator to obtain a record of any previous disciplinary decision in respect of Licensee 1 and, if any such decision exists, provide it to the Committee.

5. What happens next

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

In the matter of Licensee 1, the Committee considers the 20 working day appeal period does not commence until it has finally determined the complaint by deciding what orders should be made, if any.

In the matter of Licensee 2, if you are affected by this decision 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 (by no later than Tuesday, 17 April 2018). 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 the Appendix (Section 111).

For further information on filing an appeal, read Guide to Filing an Appeal at Mi ni stry of

J usti ce -Tri bunal s ( https:/ / ww w. justi ce. g ov t. nz/ tri bunals/ real -estate -agents/appl y/ ) .

7. Publication

The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made against Licensee 1.

Signed

Geoff Warren

Date: 16 March 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.

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 9.2 A licensee must not engage in any conduct that would put a prospective client, client, or customer under undue or unfair pressure.