Complaint No C36688 [2021] NZREAA 44 (8 July 2021)

Last Updated: 18 April 2022

Before the Complaints Assessment Committee
In the matter of	Complaint No: C36688 Part 4 of the Real Estate Agents Act 2008
and

Licensee:	Licensee 1 (XXXXXXXX)
Agency:	Agency 1 (XXXXXXXX)

Decision to take no further action 8 July 2021

Members of Complaints Assessment Committee: CAC2101 Chairperson: Gayatri Jaduram

Panel Member: Patrick Waite

V20201203

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 26 May 2020 the Real Estate Agents Authority (the Authority) accepted a complaint against Licensee 1 (the Licensee) and Agency 1 (the Agency) from the Complainant.

1.2. The Licensee is a licensed Salesperson under the Real Estate Agents Act 2008 (the Act). The Agency is a licensed Company Agent under the Act.

1.3. The complaint relates to a property situated at the Property.

1.4. The details of the complaint are that:

1. The Complainant and his wife contacted the Licensee to express an interest in viewing the Property.
   
2. The Complainant and his wife drove to the Property and met the vendors, who invited them to view the Property. The vendors told the Complainant how much they would accept for the Property.
   

100. The Complainant contacted the Licensee to advise that he wanted to make an offer.
     

4. The Licensee emailed an Expression of Interest (EOI) form to the Complainant.
   
5. Complainant responded to the Licensee saying he did not want the EOI form.
   
6. The Complainant contacted his lawyer.
   
7. The Complainant’s lawyer asked the Licensee for a copy of the standard Auckland District Law Society Agreement for Sale and Purchase (ADLS Agreement).
   
8. The Licensee informed the Complainant’s lawyer that the Agency uses the EOI form on a

regular basis, but she could prepare the ADLS Agreement.

1. The Complainant made a complaint to the Agency about the Licensee’s conduct and the

EOI form.

1.5. The Complainant says the Agency’s EOI form is misleading to prospective buyers. The Complainant wants a determination on whether the use of EOI forms is acceptable and complies with the Act and the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules).

• 1.6. In particular, the Complainant said:
  1. He contacted the Licensee to make an offer on the Property. The Licensee emailed him with an EOI form.
     
  2. There was a lack of information on why he was provided with the EOI form, apart from being told it saves time and paper.
     
  100. He was misled into believing there was another offer, when there was no other offer presented at the time.
       
  4. He was required to act as though he was in a multi-offer situation by putting his maximum offer forward thus taking away his ability to negotiate.
     
  5. He has concerns about the following sentences in the EOI form:
     
  
  

“You should assume you are in competition for the property.”

“You will probably have just one opportunity to impress the vendor.”

“You must put your best foot forward and name your very best price as a ‘one shot’.”

6. The EOI process takes unfair advantage of a prospective buyer’s fear of missing out and garners the best offer that a prospective purchaser has and therefore misleads them into disclosing their best offer.
   
7. The EOI process circumvents the protections afforded by the industry code of practice to both the buyer and the seller.
   

1.7. The Authority’s Investigator noted the following:

1. The Licensee and the Director (the owner of the Agency) provided a single response document1; therefore, the Investigator has not differentiated their comments in response to the issues.
   
2. The Director said the EOI form and Preliminary form (Prelim form) 2 is a document which has gone through many iterations and serves the same purpose. The Director said his answers would not have changed regardless of whether the questions were about the EOI form or Prelim form.
   

100. To remove any confusion, the Agency’s references to the EOI form and Prelim form will be referred to as the EOI/Prelim form.
     

1.8. The Licensee and the Agency said in response to the complaint:

1. They could not understand how the EOI/Prelim form could be misleading.
   
2. The EOI/Prelim process is designed to:
   

1 Being the response to the Authority in relation to the issues.

2 The Committee notes that the Prelim form is the subsequent form which replaced the EOI form but are both expressions of interest forms.

• facilitate the process for buyers;
• make the buying process easy to understand and for buyers to feel comfortable participating in; and
• provide the greatest chance of being successful.
  

100. The prospective buyer signs the EOI/Prelim form to state that they understand the process. This gives the prospective buyer the chance to say if they do not understand, at which time the licensee will go over the EOI/Prelim form again.
     

4. The EOI/Prelim form enables everybody to participate without the issues being clouded by the use of intimidating legal forms.
   
5. Before the Complainant made his offer, the Licensee received communications from the

Complainant’s lawyer making it clear he had sought legal advice.

6. It would seem unusual to expect the Licensee to recommend seeking legal advice when their lawyer was already involved.
   
7. The Agency’s 6-page disclosure form has numerous references to seeking legal advice.
   
8. It is questionable whether legal advice through the EOI/Prelim offer stage is valuable. Regardless, they would not discourage prospective buyers from seeking legal advice.
   
9. Any prospective buyer going on to complete a formal offer must sign off 4 forms before the sale and purchase process starts. The Buyer Approval form asks: “Have you had the opportunity and encouragement to seek legal advice?”
   
10. Unless the prospective buyer has answered ‘Yes’ to the above question, the licensee will not continue the process until the issue is resolved.
    
11. In the latest version of the EOI/Prelim form, it is mentioned that legal advice can be sought at any time.
    

2. What we decided

2.1. On 10 September 2020 the Complaints Assessment Committee (the Committee) considered

the information provided by the Authority and decided to inquire into the complaint, that the use of the Agency’s EOI form is misleading, under section 79(2)(e) of the Act (Issue 1).

2.2. The Committee considered the complaint also raised issues about:

1. Whether the EOI form and process is unfair (Issue 2); and
   
2. The Licensee not recommending the Complainant seek legal advice in relation to the EOI form (Issue 3).
   

Therefore, the Committee decided to inquire into these issues under section 78(b) of the Act.

2.3. On 23 April 2021 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

Agency

2.4. The Committee decided to take no further action against the Agency in relation to Issue 1 and Issue 2. This decision was made under section 89(2)(c) of the Act. This decision was also made with reference to the Rules, namely Rules 6.2, 6.3, 6.4 and 9.2.

Licensee

2.5. The Committee decided to take no further action against the Licensee in relation to Issue 3. This decision was made under section 89(2)(c) of the Act. The decision was also made with reference to the Rules, namely Rule 9.7(a).

3. Our reasons for the decision

3.1. The Committee concluded:

1. The use of the Agency’s EOI form was not misleading.
   
2. The EOI form and process was not unfair; and
   

100. The Licensee did not need to recommend that the Complainant and his wife seek legal advice in relation to the EOI form.
     

Was the use of the Agency’s Expression of Interest form misleading?

3.2. Rule 6.4 provides that “...a licensee must not mislead a customer or client nor provide false information...”

• 3.3. The Committee finds that the use of the EOI form was not misleading to the Complainant and prospective buyers for the following reasons:
  
  1. The first page of the two-page EOI form contains various statements, some of which (in terms of the first stage of the EOI process) are repeated below:
     
     • You should assume you are in competition for the property.
     • You will probably have just one opportunity to impress the vendor. Please don’t miss it.
       
     • You must put your best foot forward and name your very best price as a ‘one-shot’.
  2. In relation to the second stage of the EOI process (which is the sale and purchase stage if the potential buyer is chosen from the first stage) the EOI form says in part:
     
     • If the vendor invites you to make a formal offer you will probably be one of two parties.
       
     • Your formal offer must not be less attractive to the vendor than that shown on the Expression of Interest form (but may be improved and conditions can be changed).
       
  100. It is clear from the EOI form that if a potential buyer is invited to make a formal offer, their formal offer is expected to be at least as attractive as their indicative offer (assuming the potential buyer chooses to carry on).
       
  4. The Complainant’s concern was that this took away his ability to negotiate with the

vendor. However, his concern does not mean the EOI form is misleading in any way. As mentioned, it was very clear as to the process.

5. There are two distinct stages (referred to above) set out in the EOI form. The Committee comments on those stages as follows:
   
   1. The first stage of the EOI form is headed “First stage: Expression of Interest (for all potential buyers)”. The first stage is not a multi offer process (assuming there was multiple interest in the property). The settled.govt.nz website (www.settled.govt.nz) refers to the multi-offer process as follows:
      

“Multi-offer processes can differ from agency to agency, but they can only be described as multi-offer when there is more than one offer in writing.”

The first stage of the EOI form is not the offer stage but an expression of interest. In other words, no formal offer is made at that stage.

2. In the first stage section there is a handwritten comment “I have 1 other party advising they are making an offer” beside the words “You should assume you are in competition for the property”. There is no evidence

to suggest that at the relevant time there was not another party who wanted to make an offer. There did not need to be one officially “on the table” as

the Complainant suggests.

3. The second stage of the EOI form is headed “Second stage: Sale and Purchase agreement (by special invitation to selected buyers only)”. This

stage follows once a prospective buyer (after naming their price under the first stage) has been selected by the vendor. The second stage describes the process. For

example, it says:

“You will be required to sign off 4 compliance documents that must be completed and returned... before your Sale and Purchase Agreement will be drawn up.

A Multi-Offer form must also be signed at that time (if there is multiple interest)” The process is clearly set out in the second stage.

4. Overall, the EOI form sets out a process and to what is to happen, when and how.
   

3.4. For the reasons above, the Committee concludes that the Agency did not mislead the Complainant through the EOI form under Rule 6.4 and the form would not be misleading to other potential buyers.

Whether the EOI form and process is unfair

3.5. The Complainant referred to the following Rules in his complaint:

1. Rule 6.2 which states:
   

A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

2. Rule 9.2 which states:
   

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

100. Rule 6.3 which states:
     

A licensee must not engage in any conduct likely to bring the industry into disrepute.

3.6. The Committee refers to the extracts below from the Agency in its response to the Authority:

History

The EOI or Preliminary offer form has been used very successfully in our company for 8 years in various iterations but with the same intent and the same benefits for buyers and sellers. We have used the form many hundreds, probably thousands, of times over that

period without the sort of complaint that the Complainant raised. In fact, we regularly hear from buyers that they appreciate the opportunity to make an offer without spending a couple of hours of their time and incurring legal expenses when there is a very good chance they will not be successful in what is typically a hectic multiple offer situation.

We appreciate that many buyers need to be educated in effective offer-making and this is also a role of the Preliminary Offer form. Many buyers miss out because they simply do not understand the multi offer process and believe that they can make an offer and negotiate it out (as used to be common practice). They do not appreciate that in the frenetic market of the past 5 years they have just one chance to make an impression on the Seller. If that impression is not adequate,

they will be left behind.

Our Preliminary offer form serves to provide that educational role for the benefit of the buyer. Many buyers deal with us remotely and we do not have a chance to sit down with them and explain how the buying process works in 2020. Our form is remarkably simple and explicit, especially around the multi offer aspect, and spells out other process in ‘words of one syllable’. We are intent on helping them to be ‘in there with a chance’, and not just to be ‘in there’. While only one buyer party can be the ultimate winner, we want everyone to know that they must put their best foot forward if they are to be considered seriously by the seller.

We are unsure as to how this description [that the form and process is unfair] could be applied to a process that is specifically designed to add simplicity, clarity and ease of use when compared to a process that that can be intimidating and confusing due to the appearance of and the number of documents we use when preparing a formal offer on a S & P agreement.

The connotation of the word ‘unfair’ is that the Preliminary Offer form somehow shifts the balance in favour of one party over another. In this context, the inference is that somehow either the salesperson or the seller has an unfair advantage over the buyer and that by using the form we are intensifying an imbalance of power. Nothing could be further from the truth.

....

Being ‘unfair’ to a buyer would be if we stayed quiet about how competition from another buyer could destroy their house-owning dreams. If we adopted the role of ‘order takers’ who did not advise buyers of the risks associated with competition and how to counter those risks - then we could be accused of being unfair. The fairness of our form is that it spells out the situation and all the associated risks and allows all buyers to enter the game on a level playing field. That’s what we call fair.

3.7. The Committee also refers to the settled.govt.nz extract below on its website in relation to the multi-offer process:
- When it comes to multi-offer situations agents are expected to clearly explain the process and any relevant paperwork to the seller and all buyers.

- All the offers are presented fairly, usually by an agency manager. An agent must not favour one offer over another. However, an agent is allowed to provide the seller with advice and information about how the offers might benefit or disadvantage the seller.

- Some real estate agencies will hold on to the first offer they receive while they check for others, effectively resulting in a multi-offer process. This may feel unfair if your offer was first, but the agent’s primary responsibility is to get the seller the best outcome.

- If a buyer submits an offer before a multi-offer process starts, the agent must give them a chance to review their offer when the process becomes multi-offer. Similarly, the agent must inform you if the other buyers included in the multi-offer process pull out, leaving your offer as the only offer. In this instance, you should be given the opportunity to review your offer and submit a new one if you want to.

- Each agency should have a multi-offer policy you can read to become familiar with how they run their multi-offer process. If you have any concerns about a multi-offer process you are part of, you can ask to speak to the supervising agent or branch manager.
-

• 3.8. The multi-offer process may arise at Stage 2. As mentioned on the Settled website (see extract above) in a multi- offer process, the prospective buyer will have the opportunity renegotiate their offer if other prospective buyers pull out. The licensee must inform that prospective buyer if others pull out.
  
• 3.9. With the Agency’s two stage process, any offer at Stage 2 must not be less attractive than the Stage 1 indicative offer. It is more likely than not that if it were a straight multi-offer process the prospective buyer would put their best offer forward. In a multi-offer situation, the licensee is obliged to tell a prospective buyer that they should be putting their best offer

forward because they may not have the ability to go back and make changes later. The Committee also notes that the Stage 2 process also states:

“If it transpires that yours is the only offer, you will be advised of that. You will not be required to complete a Multi-Offer form and you will have the opportunity to review the terms of your preliminary offer as your formal offer is prepared.”

This would mean the prospective buyer could offer a lower price than they gave at Stage 1.

3.10. It would appear however that the Agency wanted to keep the process simple and cost effective for prospective buyers so that they did not need to incur the additional expense and complexity if they were unsuccessful at the first stage. Of course, the licensee’s primary responsibility is to act in the interest of the vendor. It is a vendor’s prerogative as to how they wish to market and sell their property, provided the marketing and sale complies with the

law. There is nothing in the Act that suggests this process cannot be used.

3.11. The Complainant contacted the Licensee to advise that he wanted to make an offer but the Licensee emailed the EOI form to the Complainant. The Complainant responded to the Licensee saying he did not want the EOI form.

3.12. As mentioned above, the Committee finds that the EOI form was clear. Prospective buyers did not have to follow the EOI process. It says on page 1 of the EOI form:

“However ..... you do not have to follow the process described above:

○ If you prefer, you can have your lawyer prepare a Sale and Purchase Agreement.
○ We do not provide any Agreement forms if you decide to use your lawyer.
○ You must have your lawyer –prepared offer delivered to the salesperson in good time for presentation to the vendor...”

The Complainant and his wife did in fact get legal advice. The Licensee prepared the Sale and Purchase Agreement which the Complainant’s lawyers completed.

3.13. The Complainant also says there was delay and time wasting which he says, “resulted in our offer being presented to the vendor officially two days after it was submitted making it the

‘second’ offer instead of being presented in a timely manner which may have resulted in the vendor accepting or negotiating with us.” The Committee notes however, the statement in the settled.govt.nz site in relation to the multi-offer process (see paragraph 3.7 above and repeated below):

“Some real estate agencies will hold on to the first offer they receive while they check for others, effectively resulting in a multi-offer process. This may feel unfair if your offer was first, but the agent’s primary responsibility is to get the seller the best outcome.”

3.14. For the reasons above the Committee does not find:

1. (in relation to the Complainant and his wife) that the Agency was in breach of Rules 6.2 and 9.2; and
   
2. the Agency was in breach of Rule 6.3.
   

3.15. Accordingly, the Committee does not find that the EOI form and process is unfair.

That the Licensee did not recommend the Complainant seek legal advice in relation to the EOI form

3.16. The Committee notes that Rule 9.7(a) requires (amongst other things) a licensee to recommend a person seek legal advice before a prospective client signs an agency

agreement, sale and purchase agreement or other “contractual document”. Under section 4(1) of the Act a contractual document is defined as follows:

“...in relation to a transaction, means a document that contains or records an agreement or a proposed agreement to enter into or effect the transaction, and includes a document that contains or records an offer that, on its acceptance, gives rise to such an agreement.”

3.17. The EOI form was not in itself a “contractual document” (as defined). In other words, it is not:

1. an “agreement” or “proposed agreement”; nor
2. an offer that, on its acceptance, gives rise to an agreement.

3.18. The EOI form is not a legally binding document. Prospective buyers can withdraw at any time during the first stage of the EOI process. This is made clear on the document, particularly at the top of page 2, which states:

“‘Expression of Interest’ in the property (indicative offer only)

THIS DOCUMENT IS NOT A SALE AND PURCHASE AGREEMENT, NOR AN OFFER FORM. IT IS AN EXPRESSION OF INTEREST”

3.19. In any event the Complainant and his wife had engaged a lawyer and got legal advice.

3.20. In short, there was no obligation on the Licensee to recommend that the Complainant and his wife seek legal advice in relation to the form.

Additional comments

3.21. In addition to the Rules referred to above, the Complainant also raised Rules 5.2 (A licensee must have a sound knowledge of the Act, regulations, rules issued by the Authority ... and other legislation relevant to real estate agency work) and 9.2 (A licensee must not engage in any conduct that would put a prospective client, client, or customer under undue or unfair pressure). Having made the findings as canvassed above, the Committee concludes that the

Agency’s use of the EOI form was acceptable and complied with the Act and the Rules and did not put the Complainant under undue or unfair pressure.

3.22. The Complainant also raised Rule 12.2 which says that a Licensee must ensure that

prospective clients and customers are aware of certain procedures before they enter into any contractual documents. In this regard the Complainant says the “REA Guide” was not

provided with the EOI form. The Committee notes that Rule 12.2 relates to Rule 12.1 which says an agency must develop and maintain in-house procedures for dealing with complaints and disputes resolution and does not relate to the REA Guide.

3.23. The REA Guide needs to be provided before a person signs a contractual document in the

circumstances set out in section 133 of the Act. However, the EOI form was not a contractual document, and the REA Guide did not need to be provided before it was signed. Similarly, for the purposes of Rule 12.2, the Complainant was not entering into a contractual agreement at the EOI stage. Further, the Committee notes the Agency’s complaints policy on the second page of the Buyer Approval signed by the Complainant, which the Agency says must be

signed before the sale and purchase agreement process can start.

4. Publication

4.1. The Committee directs publication of its decision. This 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.

4.2. 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.

4.3. 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.

5. Your right to appeal

5.1. If you are affected by this decision of the Committee, the right to appeal is set out in section 111 of the Act. 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 the 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.

5.2. The Notice of Appeal form, which includes information on filing an appeal, can be located on the Ministry of Justice’s website: https://www.justice.govt.nz/tribunals/real-estate-

agents/apply/.

6. Provisions of the Act and Rules referred to

6.1. The provisions of the Act and the Rules referred to in this decision are set out in the Appendix.

Signed

Gayatri Jaduram Chairperson

Patrick Waite Member

Date: 8 July 2021

Appendix: Provisions of the Act and Rules referred to

The Real Estate Agents Act 2008 provides:

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 or 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 Disciplinary Tribunal against the determination within 20 working days after the day on which

notice of the relevant decision was given under section 81 or 94, except that no appeal may be made against a determination under section 89(2)(a) that a complaint or an allegation be considered by the Disciplinary Tribunal.

(1A) The Disciplinary Tribunal may accept a late appeal no later than 60 working days after the day on which notice was given to the appellant if it is satisfied that exceptional

circumstances prevented the appeal from being made in time.

(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 (ab) the prescribed fee, if any; 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 Rules from the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 referred to in this decision are:

Rule 5.2 A licensee must have sound knowledge of the Act, regulations and rules

issued by the Authority (including these rules), and other legislation relevant to real estate agency work.

Rule 6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

Rule 6.3 A licensee must not engage in conduct likely to bring the industry into disrepute.

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.

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

Rule 9.7 Before a prospective client, client, or customer signs an agency agreement, a sale and purchase agreement, or other contractual document, a licensee must—

(a) recommend that the person seek legal advice; and

(b) ensure that the person is aware that he or she can, and may need to, seek technical or other advice and information; and
(c) allow that person a reasonable opportunity to obtain the advice referred to in paragraphs (a) and (b).

Rule 12.2 A licensee must ensure that prospective clients and customers are aware of these procedures before they enter into any contractual agreements.