Complaint No C29486 [2019] NZREAA 67 (15 May 2019)

Last Updated: 28 November 2019

Before the Complaints Assessment Committee

Complaint No: C29486

In the matter of Part 4 of the Real Estate Agents Act 2008

and

Licensee 1: Licensee 1 (XXXXXXXX)

Decision of Complaints Assessment Committee

Decision to take no further action

15 May 2019

Complaints Assessment Committee: CAC 520

Chairperson: Bernardine Hannan Deputy Chairperson: Peter Brock Panel Member: Craig Edwards

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 8 January 2019, the Real Estate Agents Authority (the Authority) received a complaint against the Licensee from the Complainant.

1.2. The Complainant is a Licensed Agent and the Licensee is a Licensed Salesperson under the

Real Estate Agents Act 2008 (the Act).

1.3. The complaint relates to a property (the Property).

1.4. The complaint involves an allegation of misleading information being supplied to the Complainant by the Licensee about the Property when it was offered for sale off the plans in early 2015.

1.5. In particular, the Complainant advised that on 28 April 2015 he entered into an agreement to purchase the Property which was listed by the Licensee. The purchase price was $535,000. The Complainant states the Licensee told him at this time that the size of the unit on the architect’s plans (the Plans) was wrong and the Licensee crossed out the 56 m2 noted on the Plans and wrote in 61 m2.

1.6. The Property was built, and the transaction settled in February 2017. The Property was listed for sale by the Complainant a short time later. At this time the Complainant learned the Property size was stated as 56 m2 in the City Council code compliance certificate (CCC) and other property documents. The Complainant states that if he had known the correct size of the Property, he would not have paid $535,000. The Complainant states the property was misrepresented by approximately 13%.

1.7. The Complainant requested a remedy, being recompense for the difference in price due to the change in size of the apartment – around $53,000 and that the Licensee amend the official records for the Property in relation to its size if it is 61 m2 (gross).

1.8. The Licensee responded to the complaint against him, denying he misrepresented the

Property or provided misleading information to the Complainant.

1.9. In particular, the Licensee states he was instructed to alter the floor area by the developer/vendor and all subsequent marketing was changed to reflect this on the vendor’s instructions. The Licensee admits he changed the size on the Complainant’s agreement for sale and purchase from 56 m2 to 61 m2 as per these instructions.

1.10. Further, the Licensee states the developer has commissioned an architect to peer review the

‘as-built’ plans and his finding is that the floor area for the type C unit gross floor plan, as purchased by the Complainant, is 61.4 m2 proving the property was not misrepresented to the Complainant.

2. What we decided

2.1. On 13 February 2019, the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it.

2.2. On 29 April 2019, 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).

3. Our reasons for the decision

3.1. The Committee concluded:

The Committee is not persuaded the area of the property was misrepresented or that the

Licensee breached his professional competence and conduct obligations under rules 5.1 and

6.4 of the Rules.

Complaint

3.2. The Complainant entered into an off-the-plans sale through the Licensee in April 2015. The Complainant admits that the area of the property was discussed, and both parties agree that, following this discussion, the Licensee crossed out the figure of 56 m2 on the architect’s plans attached to the agreement and entered an area of 61 m2.

3.3. The Licensee states he did this on the instruction of the vendor and that he told the Complainant that the architect’s figures in the original plans were incorrect. The Licensee further states that he has evidence to support this change; the peer review of the ‘as-built’ plans as submitted by Mr X of the Architecture Firm 1. The peer review confirms the unit area as 61.57 m2 including the deck.

3.4. The Complainant says that as a purchaser he was relying on the Licensee’s integrity and feels misled by him as to the size of the Property. The Complainant, while admitting the area was never clarified as to whether or not it included the deck area, states the floor measurement size should be nett internal and excluding decks. The Complainant states that there is a standard requirement on real estate agents to represent unit areas fairly, as this allows comparison with other prospective properties. The Complainant claims to have spoken to other real estate agents and valuers dealing with the city’s multi-residential units and claims the consensus among these agents is that unit areas are advised and valued with the area of the unit split between the unit area and the deck area, i.e. other licensees never show or represent the actual unit area as inclusive of the deck. The area of the unit and the area of the deck should be stipulated separately.

3.5. The Complainant also states that, at the time of purchase, he was unaware that unit sizes are usually marketed excluding decks, and if they include decks, that should always be stipulated, and therefore, did not know that he needed to clarify this with the Licensee. The Complainant states that this failure to exclude the deck area mislead him when making comparisons with other properties and the Licensee made no attempt to clarify this.

3.6. The Licensee’s evidence is that the Complainant is incorrect in his presumption unit sizes are normally being shown as net. The Licensee claims that architects, surveyors and valuers always use gross sizing for their measurements. For example, when a house is measured, it is always gross, measuring to the exterior of the outside walls. The Licensee claims that is exactly the same for apartments. The Licensee claims some specialisation in off-the-plan unit sales, having marketed in excess of 30 projects with plans showing gross size. The Licensee

claims he cannot convert these nett sizes as he has no expertise to do so, and there has never been any requirement for such a plan to be shown as nett size, apart from a possible exception for commercial leasing. Again, the Licensee has not provided the Committee with any independent evidence to support his view, however the Committee notes that two experienced licensees have expressed opposite opinions on this point.

3.7. In relation to this particular development, the Licensee states that he pointed out to the Complainant and other prospective purchasers that the unit size was measured from the outside of the exterior walls to the halfway mark of any inner tenancy walls. As outlined above, the Licensee states the deck is usually included in the gross floor area, and in this particular case that presumption is even clearer. The deck is an internal one, that is within the actual building footprint and the display unit clearly showed an internal deck of a 2m² tiled area in exactly the shape that it was built. The remainder of the unit was carpeted. The total area including the 2m² deck was 61.57m². The Licensee states that the Complainant has experience with developments and should know that it is not normal practice for developers and developments to use nett measurements, and that he pointed out to the Complainant before purchase how the measuring was done, as explained above.

3.8. The Committee must consider both whether a misrepresentation was made under Rule 6.4 and the Complainant’s allegation that under Rule 5.1, no licensee when preparing marketing information would just rely on verbal advice from the developer when representing critical information. The Complainant submits that a licensee should work off proper prepared development plans, and if there was any major change, particularly in areas to be represented to clients, they would need to see them properly verified.

Professional conduct

3.9. The Committee accepts that the Complainant spoke with the original architect who was contracted for the development, and this architect stated he did not give the Licensee instructions to change the size on the plans. However, this is not relevant to the Committee’s decision as the Licensee never claimed the architect advised him of a change of floor area. Rather, the Licensee claims the Developer did. The Developer of The Apartments has confirmed that in March 2015 he instructed the Licensee to increase the size of the type C units, the type purchased by the Complainant, from 56 m² to 61 m², after he received information from Mr Y of Architecture Firm 2 of that the size had changed due to an area added to the existing floor plate.

3.10. It appears, on the evidence before the Committee, that this architectural plan change increased the internal area of type C units from 56 m² to 59.2 m², increasing to 61.57 m² when the deck area is included. It also appears that the City Council (the Council) documents and Property Company 1’s records show a floor space of 56 m² because the original, but not as built floorplan, was submitted by the Architecture Firm 2 to the surveyor, and hence, to the Council on the developer’s behalf.

3.11. Nobody is alleging the Licensee was responsible for the submission of the developer ’s plans to the Council once the sale and purchase agreement had been signed, but before completion and settlement could take place. The Committee is not persuaded the Licensee can be held liable for the wrong plan being submitted to the Council. The question for the Committee therefore is, was the representation that the unit area was intended to be built to

61 m² correct at the time of sale. The Committee notes that the sale and purchase agreement specifically provides in clause 22.5 that all measurements and areas are subject to variation, and that the purchaser shall not be entitled to claim any compensation, damages, ...... based

on such alteration or variation. Therefore, any representation given by the Licensee at the time of sale can only be as to the intended size at that time.

3.12. On the evidence before the Committee, the Licensee has informed the Complainant that the developer intends to build the unit to the size as disclosed in the attached plans, showing an as built area of 61 m². The Committee accepts the evidence of Mr X that the as-built size of the unit is 61.57 m². Therefore, on the face of it, there is no misrepresentation and the Licensee has not misled the Complainant, nor provided false information with regards to the expected size of the completed unit.

3.13. The Committee also has considered the Complainant’s allegation that no other competent licensee would include the deck area, when discussing the unit area, without explicitly stating the stipulated area included the deck. The Committee accepts the Complainant’s statement that this is the feedback he has had from other licensees dealing with marketing multi-unit residential dwellings, and draws on his 30 years of development experience in commercial property. However, the Complainant has not supported this submission with any independent evidence, and the Committee also has evidence before it which suggests that multi-unit residential dwellings can be described as either internal (excluding decks) or gross (including decks), as in this case.

3.14. The Complainant is not alleging that he ever raised the issue of whether the area included or excluded the deck area and was directly misled in any answer given. Given the Complainant’s claimed extensive experience in commercial property, the Complainant’s admission that the unit area was discussed prior to the offer being made, the description of the display unit and the Licensee's explanation of how the apartment area was measured, the Committee is not persuaded the Complainant had information withheld from him that should, by law or in fairness, also have been provided to as specified in Rule 6.4. The floor area of the unit was raised, and the Complainant was able to ask any further clarifying questions before submitting his offer but declined to do so.

Professional competence

3.15. This leaves the question of whether the Licensee was exercising sufficient skill, care, competence, and diligence when relying on the developer/vendor ’s statement that the completed unit would be 61 m² in size without undertaking his own independent investigation into the plans.

3.16. Whereas the Committee accepts a licensee relying solely on the word of a vendor without undertaking independent checks can expose him or herself to potential risk, this has clearly not occurred in this case. The vendor ’s information was correct; the Licensee has relied on this information and passed it on, unqualified to the Complainant. Had the vendor been wrong, the Licensee could have exposed himself to risk. In this case, the evidence supports the vendor’s claim that the unit area would be increased to 61 m² by the plan change and the Committee is not persuaded the Licensee has engaged in unsatisfactory conduct by merely passing on this correct information without undertaking his own independent investigation of the revised plans.

4. What happens next

Your right to appeal

4.1. If you are affected by this decision of the Committee, the right to appeal is set out in section

111. You may appeal in writing to the Real Estate Agents Disciplinary Tribunal (the Tribunal)

within 20 working days after the date notice is 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. The Tribunal has a discretion to accept a late appeal filed within 60 working days after the date notice is given of this decision, but only if it is satisfied that exceptional circumstances prevented the appeal from being made in time.

4.2. For further information on filing an appeal, read Guide to Filing an Appeal on the Real Estate Agents Disciplinary Tribunal website (https://www.justice.govt.nz/tribunals/real-estate- agents/).

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

Bernardine Hannan

Chairperson

For Complaints Assessment Committee 520

Real Estate Agents Authority

Date: 15 May 2019

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.

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

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.