Complaint No C39968 [2021] NZREAA 57 (6 September 2021)

Last Updated: 28 April 2022

Before the Complaints Assessment Committee
In the matter of	Complaint No: C39968 Part 4 of the Real Estate Agents Act 2008
and
Licensee 1:	Licensee 1 (XXXXXXXX)
The Agency:	The Agency (XXXXXXXX)

Decision to take no further action

6 September 2021

Members of Complaints Assessment Committee: CAC2108 Chairperson: Andrew Hayes

Deputy Chairperson: Denise Evans Panel Member: Ian Keightley

V20201203

Complaints Assessment Committee

Decision to take no further action

1. The Allegation

1.1. On 27 November 2020 the Real Estate Agents Authority (the REA) received a report against Licensee 1 and the Agency in relation to the sale of 4 properties. The report concerned the proper completion of a client consent form (Form 2) and provision of a valuation, as required by s 134 and s 135 of the Real Estate Agents Act 2008 (the Act), when a licensee, or person related to a licensee, acquires an interest in a property in respect of a transaction for which the licensee has carried out real estate agency work.

1.2. Licensee 1 is a licensed Salesperson under the Act.

1.3. The Agency is a licensed Agent Company under the Act.

1.4. The REA referred the allegations to Complaints Assessment Committee 2105 (Committee 2105) on 16 February 2021.

1.5. The allegations relate to properties situated at Property 1, Property 2, Property 3, and Property 4.

1.6. The details of the allegations are that Licensee 1’s brother, the Purchaser, purchased four properties which were listed with the Agency, but no Form 2 was completed, and no

registered valuation was provided for the transactions.

1.7. When approached by the REA the Agency were not able to find completed Form 2’s for Property 2, and Property 4. The REA also noted that Form 2 for Property 1 was completed incorrectly, as the provisional value was given as a range, which appeared to have been amended on the form. The Agency provided a completed Form 2 for Property 3.

1.8. The REA raised the following key concerns:

1. That a Form 2 was not completed for the sale of Property 2;
   
2. That a Form 2 was not completed for the sale of Property 4; and
   

100. That an incorrect provisional value was included, and appeared to have been altered, in Form 2 for Property 1.
     

1.9. The licensees responded to the allegations against them.

1.10. In particular, the licensees said:

1. Over a 2-year period the Purchaser purchased the Properties through Licensee 1 and/or the Agency.
   
2. Licensee 1 says that an extra clause stating that Licensee 1’s brother was the purchaser was added to every Agreement for Sale and Purchase and signed by the vendor.
   

100. Although they have not been able to locate the Form 2 in respect of Property 2, and Property 4, Licensee 1 is fairly certain the vendors of those properties were provided

with the Form 2 as well, that being the usual practice.

4. Licensee 1 organised independent valuations on all four properties.
   
5. Licensee 2, the principal of the Agency, states that while they could not locate the Form 2’s for Property 4 and Property 2 they are “99% sure” they were signed.
   
6. Licensee 2 states that both vendors of those properties acknowledge Licensee 1 had disclosed all the conflicts to them and that they understood their rights to cancel the agreement had the valuation not come up to the agreed amount.
   
7. Both properties were sold at prices above the registered valuations that were obtained by Licensee 1.
   
8. In respect of the concern raised by the REA that an incorrect provisional value was

included in Form 2 for Property 1, Licensee 1 said that the amended figure had been altered by her before it was presented to the vendor by another licensee. That licensee said that the document was clear as to what the figure was and acknowledges that the amendment should have been initialed by the vendor when she presented it to them.

1. In addition to the information provided by the licensees the Committee was also provided evidence from a third-party who had previously worked as the compliance officer for the Agency. Her evidence was that as the compliance officer, she was

required to check that all documentation related to the sale and purchase of property was thoroughly checked before being sent to affected parties and various websites. She said further that both Licensee 1 and 2 started their real estate careers with Agency 2 and had been trained by her. During her time at the Agency, she was extremely careful to ensure that all paperwork was completed correctly, and the salespeople were trained

thoroughly in the importance of ensuring that Sale and Purchase Agreements were completed correctly and all forms pertaining to the sale were completed.

2. What we decided

2.1. On 20 February 2021 Committee 2105 considered all the information provided by the REA and decided to inquire into these allegations under section 78(b) of the Act.1
2.2. The Committee considered the complaint also raised issues about whether the Agency properly supervised Licensee 1 and kept proper records. Therefore, Committee 2105 also decided to inquire into this issue under section 78(b) of the Act.

2.3. On 13 July 2021, Complaints Assessment Committee 2108 (the Committee) considered and affirmed the decision made by Committee 2105 and adopted the decision to inquire.
2.4. On 13 July 2021 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 allegations.

2.6. This decision was made under section 89(2)(c) of the Act. The decision was also made with

1 The email advising the licensees of the decision to inquire incorrectly referred to section 79(2)(e) of the Act, which applies where a committee determines to inquire into a complaint, rather than a referral from the REA. However, the Committee is satisfied that this has not prejudiced the licensees in any way.

reference to rule 5.1 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012.

3. Our reasons for the decision

3.1. The Committee concluded in respect of each of the transactions as follows:

Property 1

3.2. The Committee is satisfied that the vendor was aware that the intended purchaser was Licensee 1’s brother. That information is provided in the Form 2 dated 28 September 2020 a copy of which was provided to the Committee by the licensees and the vendor. Evidence was also provided from the vendor to confirm that full disclosure of the relationship between Licensee 1 and the Purchaser had been given.

3.3. The Committee is satisfied that any errors in the way that the Form 2 was completed were not intended to mislead the vendor and have not resulted in harm to the vendor. Another licensee at the Agency was the listing agent for this property and confirmed that the Form 2 had alterations on it when it was presented to the vendor. The vendor also provided the Committee with their copy of the Form 2, which also contained the amended valuation figures, confirming that these amendments were not made retrospectively.

Property 2

3.4. The Committee is satisfied that Licensee 1 had advised the vendor that the intended purchaser was her brother. Although the Licensee could not locate the Form 2 the Committee was provided with a signed consent by owner to entry into contract for sale dated 15 October 2019 which refers to the relationship disclosure. The Purchaser’s relationship to Licensee 1 is also confirmed in clause 20 of the Agreement for Sale and Purchase signed by the vendor and the Purchaser.

Property 3

3.5. The Committee is satisfied that Licensee 1 had advised the vendor that the intended purchaser was her brother. That information is provided in the Form 2 dated 23 July 2019 a copy of which was provided to the Committee. It is also confirmed in clause 21 of the Agreement for Sale and Purchase signed by the vendor and the Purchaser.

Property 4

3.6. The Committee is satisfied that Licensee 1 had advised the vendor that the intended purchaser was her brother. Although the Licensee could not locate the Form 2 the Committee was provided with a signed consent by owner to entry into contract for sale dated 21 November 2018 which refers to the relationship disclosure. The Purchaser’s relationship to Licensee 1 is also confirmed in clause 21 of the Agreement for Sale and Purchase signed by the vendor and the Purchaser.

Valuations

3.7. In addition to the above the Committee was provided with a letter from a registered legal executive who acted for the Purchaser confirming that a registered valuation was provided in

respect of each of these transactions to the respective vendors and copies of those valuations were also provided to the Committee.

Was there adequate supervision?

3.8. The Committee is satisfied that there is a process in place to provide adequate supervision. Licensee 2 outlined the process which is used to ensure the supervision of licensees and the storage of documents. These arrangements were also confirmed by Licensee 1 and another licensee working in the Agency.

Were adequate records kept?

3.9. The Committee is satisfied that the Agency has a system in place for records to be kept. There have been circumstances which mean that some records may have been either removed or lost. However, the evidence before the Committee does not suggest that this is a systemic problem. The Agency’s ability to provide sufficient documentation to respond to these allegations and the steps taken to protect records in future satisfies the Committee that adequate records were kept.

3.10. The Committee concluded on the basis of the evidence provided to it that the allegations had not been proven and therefore there no further action was warranted in respect of the allegations.

4. Publication

4.1. The Committee directs publication of its decision. This decision will be published without the names or identifying details of the addresses of the properties, the licensees and any third parties.

4.2. The REA will publish the Committee’s decision after the period for filing an appeal has ended, unless the Real Estate Agents Disciplinary Tribunal (the Tribunal) receives an application for an order preventing publication. The REA 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 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

Andrew Hayes Chairperson

Denise Evans

Deputy Chairperson

Ian Keightley Member

Date: 6 September 2021

Appendix: Provisions of the Act and Rules referred to

The Real Estate Agents Act 2008 provides:

72 Unsatisfactory conduct

For the purposes of this Act, a licensee is guilty of unsatisfactory conduct if the licensee carries out real estate agency work that—

(a) falls short of the standard that a reasonable member of the public is entitled to expect

from a reasonably competent licensee; or

(b) contravenes a provision of this Act or of any regulations or rules made under this Act; or
(c) is incompetent or negligent; or
(d) would reasonably be regarded by agents of good standing as being unacceptable.

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.

134 Contracts for acquisition by licensee or related person may be cancelled

(1) No licensee may, without the consent of the client for whom he or she carries out real estate agency work in respect of a transaction, directly or indirectly, whether by

himself or herself or through any partner, sub-agent, or nominee, acquire the land or business to which the transaction relates or any legal or beneficial interest in that land or business.

(2) No licensee may, without the consent of the client, carry out or continue to carry out any agency work in respect of a transaction if the licensee knows or should know that the transaction will, or is likely to, result in a person related to the licensee acquiring

the land or business to which the transaction relates or any legal or beneficial interest in that land or business.

(3) The client’s consent is effective only if—
(a) given in the prescribed form; and

• (b) the client is provided with a valuation in accordance with section 135.

(4) The client may cancel any contract—

• (a) made in contravention of subsection (1); or
• (b) brought about by agency work carried out in contravention of subsection (2).

(5) No commission is payable in respect of any contract of the kind described in subsection (4), regardless of whether the client cancels the contract.
(6) The client may recover any commission paid in respect of any contract of the kind described in subsection (4) as a debt.
(7) For the purposes of this section, a person who is the client of an agent in respect of a transaction is also the client of any branch manager or salesperson whose work

enables the agent to carry out real estate agency work for that client.

(8) This section and section 135 have effect despite any provision to the contrary in any agreement.

135 Client to be provided with valuation

(1) For the purposes of section 134(3), the licensee must give the client a valuation made at the licensee’s expense.
(2) The valuation must have been made by—

• (a) an independent registered valuer; or
• (b) in the case of a business, by an independent qualified statutory accountant (within the meaning of section 5(1) of the Financial Reporting Act 2013).

(3) The licensee must give the client the valuation either—

• (a) before seeking the consent of the client; or
• (b) with the agreement of the client, within 14 days after obtaining that consent.

(4) Every consent given under section 134 without the valuation being supplied to the client in accordance with subsection (3) is ineffective.
(5) Any contract to which the client is a party and to which the consent relates is voidable at the option of the client if—

• (a) the client gives his or her consent in accordance with subsection (3)(b); and
• (b) the valuation, when supplied, is greater than the valuation specified in the prescribed form of consent as the provisional valuation.

The Rules from the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 referred to in this decision are:

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