Complaint No C20739 [2018] NZREAA 56 (3 April 2018)

Last Updated: 8 January 2019

Before the Complaints Assessment Committee

Complaint No: C20739

In the matter of

Part 4 of the Real Estate Agents Act 2008

and

Licensee 1: Licensee 1 (XXXXXXXX) Licensee 2: Licensee 2 (XXXXXXXX) Licensee 3: Licensee 3 (XXXXXXXX)

The Agency: The Agency (XXXXXXXX)

Decision to take no further action

3 April 2018

Members of Complaints Assessment Committee: CAC416

Chairperson: Marjorie Noble

Deputy Chairperson: Rachael Schmidt-McCleave

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 8 June 2017 the Real Estate Agents Authority (the Authority) received a complaint against

Licensee 1 from the Complainant.

1.2. On 16 August 2017 a Complaints Assessment Committee considered the complaint and decided to inquire into it under section 79(2)(e) of the Real Estate Agents Act 2008 (the Act). The Complaints Assessment Committee considered the complaint also raised issues about Licensee 2 and the Agency, and decided to inquire into them under section 78(b) of the Act.

1.3. Licensee 1 is a licensed Salesperson under the Act. Licensee 2 is a licensed Agent under the

Act, and the Agency is a licensed Company Agent under the Act.

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

1.5. The details of the complaint are that Licensee 1 introduced the eventual purchaser of the Property in the absence of listing agreement, the Property was listed for a short time and was undervalued by Licensee 1, and Licensee 1 failed to act in the Complainant’s best interests.

1.6. In particular, the Complainant advised that:

I n regards to I ssue 1 - Whether Li censee 1 showe d th e P roperty to a prospecti v e purchaser

wi thout a l i sti ng ag ree m ent i n pl ace

1. Licensee 1 had sold the Property to the Complainant in 2014 and had since viewed the improvements made to the Property by the Complainant.
   
2. In September 2016, Licensee 1 mentioned she knew of a potentially interested purchaser. The Complainant at the time was not considering selling the Property.
   

100. In October 2016, Licensee 1 asked if the eventual purchaser could view the Property section. Licensee 1 viewed the Property with the eventual purchaser on 12-13 October

2016. After that visit, the eventual purchaser was interested in the Property and

Licensee 1 and the purchaser viewed the grounds and interior of the Property on 29 or

30 October 2016.

4. Viewings of the exterior and interior of the Property occurred before a listing agreement was obtained.
   
5. In December 2016 Licensee 1 contacted the Complainant saying the eventual purchaser was pressuring her regarding his interest in the Property.
   

f) Licensee 1 invited the Complainant to the Agency’s office to discuss the listing of the

Property on 4-5 January 2017.

g) No agency agreement was signed until 7 January 2017.

8. The Complainant understood that the Property was to be listed for only 7 days, no price was discussed, and there was to be no advertising.
   

i) The purchaser viewed the Property after the 7-day period had ended.

10. On 19 January 2017, Licensee 1 called with an offer for $520,000 subject to a building report and replacement of light fittings.
    

I n regards to I ssue 2 - Whether Li censee 1 fai l ed to prov i de an apprai sal that real i sti cal l y

refl ected current m arket condi ti ons

k) She had purchased the Property through Licensee 1 in 2014 for $357,000. Since that time extensive renovations and landscaping of the Property had occurred, at a total expenditure of $129,400.

l) In March and May of 2017, Licensee 1 was an invited guest at the Property and commented on the Complainant having done wonders to it.

m) Licensee 1 provided a Comparative Market Appraisal (CMA) of $500-525,000, which was not an adequate appraisal and was undervalued.

n) The data prepared by Licensee 1 predated the listing agreement for the Property and was therefore not current or comprehensive.

o) No sales price was discussed with her.

p) A second appraisal performed by another real estate agency (Agency Z) on 25 January

2017 valued the Property between $545,000 and $558,625.

q) A similar property (Property Y) was sold by Licensee 1 on 18 February 2017 for $580,000 (with a buyer enquiry over (BEO) price of $525,000).

I n regards to I ssue 3 - Whether Li censee 1 fai l ed to exe rci se a duty of care whi l st carry i ng out

real estate work

r) She mentioned to Licensee 1 that the 7 days had expired when the purchaser’s offer was received and Licensee 1 brushed this aside.

s) The contents of the purchaser’s building report were not made available to her and

Licensee 1 ignored instructions to her.

t) She told Licensee 1 that she did not want the sale to proceed but Licensee 1 told her she did.

1.7. The Complainant requested a remedy, being:

a) Acknowledgement from Licensee 1 that her Property was undervalued.

b) Compensation for undervaluing her Property.

c) Reimbursement for the commission paid to Licensee 1.

1.8. During the course of the investigation, the issue regarding adequate supervision of Licensee 1 (Issue 4) was raised by the investigator. The Complaints Assessment Committee thus decided, on 17 November 2017, to inquire into the conduct of Licensee 31 under section 78(b) of the Act. Licensee 3 is a licensed Agent under the Act, and was Licensee 1’s supervisor at the time of conduct.

1.9. Licensees 1, 2 and 3 responded to the complaint against them, and Licensee 2 responded to the complaint on behalf of the Agency:

I n regards to I ssue 1 - Whether Li censee 1 showe d th e P roperty to a prospecti v e purchaser

wi thout a l i sti ng ag ree m ent i n pl ace

a) Licensee 1 commented that:

1. The purchaser had purchased a property through her in 2010 and subsequently sought to purchase a larger property, so sought Licensee 1’s assistance in locating
   

1 Note that in the investigation report, Licensee 3 is listed as Licensee 4 and the Agency as Licensee 3, but this has been altered in this decision so that the Agency is described as the Agency.

a suitable property.

ii. The Complainant was asked about selling the Property and said she would consider it.

iii. Licensee 1 mentioned this to the purchaser and the Complainant consented to the purchaser walking around the Property and viewing it inside.

iv. The purchaser walked around the grounds of the Property on 30 October 2016 in anticipation of obtaining a listing agreement.

v. Licensee 1 discussed the local market with the Complainant on 5 January 2017 and the Complainant was happy to sign a quiet listing with the purchaser as the only potential purchaser.

vi. A listing agreement was discussed on 5 January 2017 and signed on 7 January

2017.

vii. The purchaser viewed the Property on 14 January 2017 and instructed Licensee 1 to prepare an offer of $520,000 (with building and lighting clauses described above), which was made on 15 January 2017.

b) Licensee 2 commented that:

i. The listing documentation shows that the Complainant signed and acknowledged a single buyer and advertising duration from 8 January 2017 until 18 February

2017.

ii. Licensee 1 made the appropriate notification to Licensee 3 (i.e. that the Complainant was potentially in a sole buyer situation) prior to meeting with the Complainant on 5 January 2017.

c) Licensee 3 commented that:

i. Licensee 1 advised him of the purchaser but kept no records of that conversation

(as he is not required to), which he believed occurred on 5 or 6 January 2017.

ii. He approved the sole buyer introduction.

iii. He checked the purchaser was named on the listing form and that the form was initialled by the Complainant.

I n regards to I ssue 2 - W hether Li censee 1 fai l ed to prov i de an apprai sal that real i sti cal l y

ref l ected current m arket condi ti ons

d) Licensee 1 commented that:

i. The CMA was taken from Real Estate Institute of New Zealand (REINZ)

unconditional sales with a price search range $450,000- $550,000.

ii. The price of $520,000 was at the top end for the Property.

iii. Licensee 1 appraised Property Y using the Property as a comparison. Property Y was appraised at a BEO price of $525,000. A multi-offer situation ensued and Property Y sold for $580,000 less than a month after listing. The sale was for a superior property in a competitive buying circumstance.

e) Licensee 2 commented that:

i. He formed the opinion from Licensee 1’s appraisal based upon recorded sales, that it was an appropriate market assessment.

ii. The new Rateable Value (RV) for the Property is consistent with Licensee 1’s

appraisal and inconsistent with the appraisal completed by Agency Z [this appraisal will be referred to as Appraisal Z throughout].

iii. A property used in Appraisal Z was not a comparable property for appraising the

Property.

f) Licensee 3 commented that he ensured that all documentation was signed, he checked the appraisal and it looked in order. He thought the sale price was really strong for the Property.

I n regards to I ssue 3 - Whether Li censee 1 fai l ed to exe rci se a duty of care whi l st carry i ng out

real estate work

g) Licensee 1 commented that:

i. She does not recall any instructions that were ignored.

ii. There were no discussions on a 7-day listing.

iii. At no time did the Complainant state that she did not want to sell her house, although she did state “I don’t want that man to buy it.”

I n regards to I ssue 4 - Whether Li censee 1 was adequatel y superv i sed

h) Note that this was an issue raised by the investigator.

i) Licensee 2 commented that:

i. Licensee 1 received the company policy at the time her contract for service was signed, and has attended all verifiable and non-verifiable training since joining the Agency. She has also received all weekly updates from the national organisation.

ii. Licensee 3 is in direct weekly contact with Licensee 1.

iii. The Agency is the only real estate agency that prohibits the presentation of offers on all listings for 7 days, to enable market exposure.

iv. The listing of the Property was supervised, and Licensees 1 and 3 complied with the Agency’s single buyer introduction policy.

j) Licensee 3 commented that:

i. Licensee 1 was supervised according to the Agency’s standard policy.

ii. He was satisfied that no additional supervision was necessary given Licensee 1’s attitude and past experience.

2. What we decided

2.1. On 16 August 2017, a Complaints Assessment Committee considered the complaint and decided to inquire into it under section 79(2)(e) of the Act. As mentioned above, the Committee considered the complaint also raised issues about Licensee 2 and the Agency, and under section 78(b) of the Act decided to inquire into them.

2.2. On 16 November 2017 the complaint was referred to Complaints Assessment Committee CAC416 (the Committee)2 for consideration. The Committee considered the original complaint afresh, and on 17 November 2017 decided to inquire into it, pursuant to section 79(2)(e) of the Act.

2.3. The Committee at this point considered the complaint and the investigation completed so far

2 This transfer was due to reasons unrelated to the complaint.

also raised issues about Licensee 3, and under section 78(b) of the Act decided to inquire into him.

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

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

2.6. This decision was made under section 89(2)(c) of the Act. The decision was also made with reference to Rules 5.1, 6.1, 7.3, 8.3, 9.6, and 10.2 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules).

3. Our reasons for the decision

3.1. The Committee concluded:

a) In regards to Issue 1: It is not uncommon in the industry for prospective purchasers to view a property before a listing agreement is in place. The key point in terms of timing is ensuring that the listing agreement is signed before any negotiations take place.

b) In regards to Issue 2: The CMA, when viewed against the totality of the evidence available, was consistent with the majority of other similar properties. There were one or two anomalies but a key difference with those was that the vendors went to the market; these vendors tested the market and did not rely on a single buyer situation.

c) In regards to Issue 3: While it may be good practice for an agent to test with a vendor the possible disadvantages of not going to market and, instead, relying on a single buyer situation, any failure to properly explore this with the Complainant does not amount to unsatisfactory conduct.

d) In regards to Issue 4: There is no evidence that Licensee 1, an experienced salesperson, was inadequately supervised.

e) During the course of the investigation another issue was brought to the attention of the Committee, namely that a subsequent complaint made by Licensee 2 to the Authority may have been in breach of Rule 7.3 (a licensee must not misuse the complaints process for an improper purpose) (Issue 5). The Committee has put this issue to one side as there is no evidence put before it to establish that Licensee 2’s complaint was made for an ulterior motive. The Committee understands that the complaint itself has been dealt with by another Committee. This Committee will not, therefore, make any further finding in relation to this issue.

Issue 1 – Whether Licensee 1 showed the Property to a prospective purchaser without a listing agreement in place

3.2. The Committee notes that it is not uncommon in the industry for prospective purchasers to view a property before a listing agreement is in place. The key point in terms of timing is ensuring that the listing agreement is signed before any negotiations take place.

3.3. In that regard, the Committee emphasises that the agency agreement was formally signed by the Complainant on 7 January 2017, and the offer was presented by the Purchaser on 19

January 2017. The Complainant maintains that the agency agreement was to be for 7 days only so that the offer was made outside that time. However, the dates on the signed agreement clearly show a commencement date of 8 January 2017 and an end date of 18 February 2017, with a single purchaser. Moreover, Licensee 1 cannot recall any discussion of a 7-day period and, in the absence of any documentary evidence showing such a period but, rather, clear signed documentary evidence attesting to a longer period, the Committee must accept the evidence of Licensee 1 on this point.

3.4. Therefore, the listing agreement was clearly in place when the Purchaser made his offer and any earlier visits, including when Licensee 1 was employed by a separate agency, were just part and parcel of a common industry practice.

3.5. The Committee notes that Licensee 1 and the Complainant were not unknown to one another and Licensee 1 had attended functions at the Property prior to this transaction.

3.6. Finally, the Committee observes that the Complainant was overseas between the date the Purchaser was first shown around the Property in October 2016 and when the listing agreement was signed in January 2017.

Issue 2 – Whether Licensee 1 failed to provide an appraisal that realistically reflected current market conditions

3.7. The Committee considers that the CMA, when viewed against the totality of the evidence available, was consistent with the majority of other similar properties. There were one or two anomalies but a key difference with those was that the vendors went to the market; these vendors tested the market and did not rely on a single buyer situation.

3.8. Further, the appraised market price was expressly noted by Licensee 1 to be a conservative assessment and was dependent on marketing options.

3.9. The Committee considers this situation to have an element of seller’s remorse. It is not a licensee’s role to advise a vendor to obtain several other appraisals from other agents, especially in a situation where the vendor was adamant she did not wish to go to market and was content to enter into a single buyer situation. If the Complainant had misgivings, she ought to have obtained other appraisals before accepting any offer.

3.10. The key difference with the properties that may have been similar to the Property but which attracted a higher price is that those properties were taken to market and had the advantage of having their price tested. Even Appraisal Z is prefaced by the words “If taken to market”, which the Property was not.

3.11. The investigator himself sought information from experienced licensees as to a price expectation for the Property. That gave a range of between $525,000 and $550,000. The Committee does not consider that the CMA range is out of step with that evidence, especially given it was prepared with a single buyer situation in mind.

3.12. Finally, the most recent valuation obtained by the Licensees’ solicitor from an independent third party has appraised the Property as at January 2017 at $510,000, which provides further evidence that the original CMA was well within the appropriate range.

Issue 3 – Whether Licensee 1 failed to exercise a duty of care whilst carrying out real estate work

3.13. The Committee does not consider the evidence shows that Licensee 1 failed to exercise any of her duties of care for the purposes of this transaction. The Committee sees no issue with Licensee 1 contacting a builder to obtain an estimated repair cost and notes that this was done before the Complainant indicated she did not wish for this to happen.

3.14. In addition to those matters already discussed, the Committee notes that, while it may be good practice for an agent to test with a vendor the possible disadvantages of not going to market and, instead, relying on a single buyer situation, any failure to properly explore this with the Complainant does not amount to unsatisfactory conduct on the part of Licensee 1.

Issue 4 – Whether Licensee 1 was adequately supervised

3.15. There is no evidence that Licensee 1, an experienced salesperson, was inadequately

supervised. Section 50 of the Act requires proper supervision and management to mean that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure that the work is performed competently, and that the work complies with the requirements of the Act.

3.16. The Committee is satisfied that all proper supervision and management of Licensee 1 occurred through Licensee 3 throughout this transaction.

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 (no later than Wednesday, 2 May 2018) (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 ( https:/ / ww w. justi ce. g ov t. nz/ tri bunals/ real -estate -agents/ ).

5. Publication

5.1. 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 Licensees, 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

Rachael Schmidt-McCleave

Date: 3 April 2018

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

50 Salespersons must be supervised

(1) A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.

(2) In this section properly supervised and managed means that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure –

(a) that the work is performed competently; and

(b) that the work complies with the requirements of this Act.

78 Functions of Committees

The functions of each Committee are—

(a) to inquire into and investigate complaints made under section 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 7.3 A licensee must not use, or threaten to use, the complaints or disciplinary process for an improper purpose.

Rule 8.3 An agent who is operating as a business must ensure that all salespersons employed or engaged by the agent are properly supervised and managed.3

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 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

3 The Act defines what is meant by a salesperson being properly supervised and managed by an agent or branch manager for the purposes of section 50 of the Act: see section 50(2).

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