Complaint No C23439 [2019] NZREAA 12 (16 January 2019)

Last Updated: 28 November 2019

Before the Complaints Assessment Committee

Complaint No: C23439

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee: Licensee (XXXXXXXX)

Decision to take no further action

16 January 2019

Members of Complaints Assessment Committee: CAC521

Chairperson: Garry Chapman

Deputy Chairperson: David Bennett

Panel Member: Josephine O’Donnell

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 18 January 2018 the Real Estate Agents Authority (the Authority) received a complaint against 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 conduct was engaged by the Agency.

1.3. The complaint relates to the sale of a property (the Property). The Complainant was the co- owner of an accommodation business that operated from the Property on a 20-year lease. The Licensee was the listing salesperson.

1.4. The details of the complaint (in summary) are that the Licensee offered the Property for sale without being authorised by an agency agreement, inflated the Property appraisal thereby misleading the Complainant and the vendor (of the fee simple) and placed undue pressure on the Complainant. The vendor is not party to the complaint.

1.5. The Complainant advised that:

a) The Licensee visited the Property in April 2017 with the vendor. The Licensee indicated to the vendor that the Property could sell for more than $3,000.000.

b) The Licensee inflated the potential selling price to get the Complainant “out of the way.”

c) The Licensee approached potential buyers before having had authority to market the

Property and lied about when the agency agreement was signed.

d) Two prospective purchasers (T purchasers) viewed the Property before the agency agreement was in place. When the Complainant asked the Agency about the T Purchasers, he was told another real estate agency must have sent them. The other real estate agency denied that they had sent anyone to the Property.

e) The Licensee made belittling remarks to the Complainant while the Licensee was visiting the Property.

f) The Licensee arrived at the Property without an appointment while guests and staff were present and pressured the Complainant to sign an offer for the Property. When the Complainant told the Licensee that it was not convenient the Licensee was so insistent that he had to be asked to leave.

1.6. The Complainant requested a remedy, that the Licensee acknowledge he bullied the Complainant; made belittling comments to the Complainant; and that the Licensee acknowledge his appraisal for the Property was inflated.

1.7. The Licensee responded to the complaint against him.

1.8. The Licensee commented that:

a) The Licensee did not introduce, send, or take anyone to the Property prior to having an

agency agreement in place. Two days prior to the agency agreement being in effect, the Licensee told the T Purchasers that he knew of a property that would be coming on the market in the near future, but he did not provide any details about the Property. The T Purchasers showed the Licensee’s personal assistant a photograph of the Property and asked if that was the property that would soon be on the market. The personal assistant did not comment.

b) Later that day one of the T Purchasers told the Licensee that she had been shown around the Property. Neither the T Purchasers nor any other potential purchaser ever viewed the Property with the Licensee.

c) The Licensee’s appraisal recommended a selling range of $2,550,000 to $2,950,000. The appraisal was accurate.

d) The Licensee apologised to the Complainants for his comments.

e) When the Licensee arrived at the Property there were no guests present. He did not ask the Complainant to sign the offer in the Licensee’s presence and did not pressure the Complainant, instead the Licensee referred the Complainant to his solicitor for advice.

f) The Licensee acknowledges it was wrong to arrive at the Property without an appointment. He has apologised to the Complainant.

2. What we decided

2.1. On 28 August 2018 the Complaints Assessment Committee 413 considered the complaint and decided to inquire into it under section 78(a) of the Act.

2.2. On 18 September 2018 Complaints Assessment Committee 413 was disestablished.

2.3. The complaint was referred to Complaints Assessment Committee 521 (the Committee).

2.4. The Committee considered the original complaint afresh and on 17 October 2018 decided to inquire into the complaint under section 78(a) of the Act.

2.5. On 6 December 2018 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

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

2.7. 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 (the Rules).

3. Our reasons for the decision

3.1. The Committee concluded:

a) The Licensee did not inflate the appraisal for the Property.

2. The Licensee did not market the Property prior to having an agency agreement in place and did not facilitate the T Purchasers viewing the Property.
   

c) There is no evidence that the Licensee made belittling remarks to the Complainant.

d) There is no evidence that the Licensee placed undue pressure on the Complainant.

The appraisal was not inflated

3.1. Rule 10.2 of the Rules provides: An appraisal of land or a business must be provided in writing to a client by a licensee; realistically reflect current market conditions; and be supported by comparable information on sales of similar land in similar locations or businesses.

3.2. The purpose of the above rule is to ensure transparency and that any appraisal provided by a licensee is realistic so as to avoid the risk of an inflated (and therefore misleading) appraisal used simply to obtain a property listing; or an unrealistic low appraisal to ensure a quick sale and commission for the licensee but may lead to vendors achieving significantly lower than market value for their property.

3.3. It does not follow that an appraisal will always match the purchase price. A different purchase price may be realised, whether that be under or over the appraised value. What is important is that the licensee has exercised the required skill and care in reaching his or her market appraisal and that it is supported with comparable sales data. This enables a vendor to make an informed decision as to price.

3.4. In the Licensee’s appraisal he provided a list of recent sales and a list of properties for sale that he deemed comparable. The recently sold properties listed had sold within the previous 12 months, were of relatively similar land and building sizes, and in the same general location. The appraisal also included community reports, property sales trends for the area, and historical price trends. While it would have been useful for the Licensee to list specific reasons for the inclusion of each property in the appraisal and to explain why each property was inferior or superior to the Property it is not necessarily required by the Rules in every case.

3.5. The Complainant (as purchaser) claimed that the appraisal was inflated. Generally, appraisals are regarded as being confidential to vendors and are not available to prospective purchasers. There is no evidence that the appraisal was known to the Complainant. The Complainant stated that the Licensee indicated to the vendor that the Property could sell for more than $3,000.000. There is no independent evidence of this statement and in any event, the appraisal provided to the vendor records a selling range of $2,550,000 to $2,950,000.

3.6. The Complainant purchased the Property for $2,145,000. Notwithstanding the difference between selling price and the appraisal, it was not unreasonable for the Licensee to come to the selling range conclusions he did. The appraisal realistically reflected the market conditions at the time and the Licensee appeared to have considered sales of properties that were relatively similar. The lower purchase price can be explained by the circumstances, including that the Complainant had a vested interest as a prospective purchaser in the appraisal and purchase price being as low as possible. As noted by his Honour Hansen J in Crown Money Corporation Ltd v Pink-Martin & Anor the truth is the market sets value even better than the valuers.1

3.7. While understandably frustrating for the Complainant to have believed that the Licensee inflated the appraisal, we can find no evidence of anything other than a properly executed appraisal by the Licensee that would reasonably be regarded by licensees of good standing and by reasonable members of the public as appropriate. Accordingly, we find there was no unsatisfactory conduct in respect of this part of the complaint.

1 Crown Money Corporation Ltd v Pink-Martin & Anor CIV-2008-404-000297 at [13].

The Licensee did not market the Property prior to having an agency agreement

3.8. An agency agreement is the foundation upon which transactions involving the sale and purchase of property rest. The term "agency agreement" is defined in section 4(1) of the Act and means an agreement under which an agent is authorised to undertake real estate agency work for a client in respect of the transaction. An agency agreement must disclose rebates, discounts and commissions and represents substantial consumer protections.

3.9. Rule 9.6 holds that unless authorised by a client, through an agency agreement, a licensee must not offer or market any land or business. Having an agency agreement in place before carrying out real estate agency work is therefore a fundamental requirement of real estate transactions and a key safeguard for clients and licensees. We further take the view that the failure to obtain a valid authority cannot be dismissed as a matter of little substance. Unless there is a clear written statement of the entitlement to commission, disputes will arise between agents and consumers which could otherwise have been avoided.

3.10. It is not in dispute that the vendor and the Agency entered into an agency agreement on 28

July 2017 (signed on that date in the United Kingdom). What is in dispute is whether the

Licensee offered the Property to the T Purchasers (or others) prior to the agency agreement being in place.

3.11. The Licensee said that two days before the agency agreement took effect, the T Purchasers visited the Agency office, coincidently while the Licensee was on duty. The Licensee told the T Purchasers that he knew of a property that would be coming on the market in the near future, but he did not provide any details about the Property. The T Purchasers showed the Licensee’s personal assistant a photograph of the Property and asked if that was the same property. The personal assistant declined to comment.

3.12. The Complainant said that the T Purchasers viewed the Property (without the Licensee) before an agency agreement was in place. The Licensee said neither the T Purchasers nor any other potential purchaser had ever viewed the Property with the Licensee. It is entirely possible that both parties are telling the truth. The T Purchasers having determined that the Property was the same property that the Licensee would soon be listing simply made their own arrangements to view the Property without the consent or knowledge of the Licensee.

3.13. There is no evidence that the Licensee introduced, sent, or took anyone to the Property prior to having an agency agreement in place. There is also no evidence that the Licensee played any part in the T Purchasers viewing the Property. There is evidence that the T Purchasers had prior knowledge of the Property before meeting the Licensee. Their suspicions that it was the same property were likely confirmed by the Licensee’s personal assistant when she declined to comment after being shown a photo of the Property. Even if the Licensee had known the T Purchasers intended viewing the Property there is nothing, he could have done to prevent them. Accordingly, we find there was no unsatisfactory conduct in respect of this part of the complaint.

No evidence that the Licensee made belittling remarks

3.14. The Complainant said that the Licensee made belittling remarks to the Complainant while visiting the Property. In a written apology to the Complainant the Licensee stated he did not recall making the comments complained of but nevertheless acknowledged he was sorry. We do not place much weight on the apology. It is clear the Licensee did not recall the alleged belittling remarks and that the apology was more of an attempt to mend a business

relationship rather than an acknowledgment of wrongdoing.

3.15. The threshold for proving the complaint is the balance of probabilities. This principle is set out in the case of Hodgson v Real Estate Agents Authority & Arnold.2 Therefore, unless we can form a view that what the Complainant alleges is more likely than not what happened, we must dismiss the complaint. In the present matter, there is no independent evidence to support either party’s evidence. Accordingly, we find there was no unsatisfactory conduct in respect of this part of the complaint.

No evidence that the Licensee placed undue pressure on the

Complainant

3.16. The Complainant said that the Licensee arrived at the Property without an appointment while guests and staff were present and pressured the Complainant to sign an offer for the Property. When the Complainant told the Licensee that it was not convenient the Licensee was so insistent that he had to be asked to leave. The Licensee said that when he arrived at the Property there were no guests present. He did not ask the Complainant to sign the offer in the Licensee’s presence and did not pressure the Complainant. Instead the Licensee referred the Complainant to his solicitor for advice.

3.17. The Complainant was understandably annoyed that the Licensee arrived at the Property without an appointment, especially at a busy time of the day. The Licensee rightfully acknowledged he was wrong to visit the Property without an appointment. He has also rightfully apologised to the Complainant for doing so. Best practice would have been for the Licensee to make an appointment with the Complainant and to proceed from there.

3.18. Not every departure from best practice will amount to unsatisfactory conduct requiring a disciplinary response. However, in case the Committee is wrong and every error/mistake that a licensee makes is in fact a breach of Rule 5.1 or another rule, then we adopt the reasoning of His Honour in Vosper v The Real Estate Agents Authority3 and conclude that in this case the breach is of such a minor nature that we exercise our discretion under s 80(2) to take no further action in respect of the Licensee’s visit to the Property without an appointment.

3.19. The Committee was presented with contrasting versions of precisely what took place concerning the offer the Licensee presented to the Complainant. An employee of the Complainant provided evidence of the Licensee’s arrival to and departure from the Property, but the employee did not witness the actual discussions between the parties and of course there is the question of the witness’s independence.

3.20. Faced with two competing accounts, neither of which was directly supported by independent evidence and where the burden of proof is on the Complainant, the Committee is not satisfied on the balance of probabilities that the Licensee placed undue pressure on the Complainant. Accordingly, we find there was no unsatisfactory conduct in respect of this part of the complaint.

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 this

2 Hodgson v Real Estate Agents Authority & Arnold [2011] READT 3 at [16].

3 Vosper v The Real Estate Agents Authority [2017] NZHC 453.

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 Complainant (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

Garry Chapman

Date: 16 January 2019

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

80 Decision to take no action on complaint

(1) A Committee may, in its discretion, decide to take no action or, as the case may require, no further action on any complaint if, in the opinion of the Committee,—

(a) the length of time that has elapsed between the date when the subject matter of the complaint arose and the date when the complaint was made is such that an investigation of the complaint is no longer practicable or desirable; or

(b) the subject matter of the complaint is inconsequential.

(2) Despite anything in subsection (1), the Committee may, in its discretion, decide not to take any further action on a complaint if, in the course of the investigation of the complaint, it appears to the Committee that, having regard to all the circumstances of the case, any further action is unnecessary or inappropriate.

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 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

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