Complaint No C42117 [2022] NZREAA 65 (9 June 2022)

Last Updated: 6 May 2023

Before the Complaints Assessment Committee
In the matter of	Complaint No: C42117 Part 4 of the Real Estate Agents Act 2008
and
Licensee 1:	Licensee 1 (XXXXXXXX)
Licensee 2:	Licensee 2 (XXXXXXXX)

Decision to take no further action

9 June 2022

Members of Complaints Assessment Committee: CAC2103 Chairperson: Paul Biddington

Deputy Chairperson: Bill Acton

Panel Member: Belinda Moss

V20201203

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 2 July 2021, the Real Estate Agents Authority (the Authority) received a complaint against Licensee 1 and Licensee 2 from the Complainant.

1.2. Licensee 1 is a licensed Salesperson and Licensee 2 is a licensed Agent under the Real Estate Agents Act 2008 (the Act).

1.3. The complaint relates to a residential cross-lease property situated at the Property.

1.4. The complaint details are that the Licensees failed to disclose to the Complainant information about development plans in place at a neighbouring unit, which were material to her when deciding to purchase the Property. This failure to disclose potentially devalued the Property and reduced its rent-ability because of the disruption and noise from the development.

1.5. The development at the neighbouring unit complied with local bylaws however it didn't comply with the cross-lease plan for the development because it encroached onto common land which is for the use of all owners. The owners were not able to formally object to the plan as it was first presented as it complied with the council, but they could object to the

encroachment. The Committee noted that owners of other units had extended their properties but not onto common land.

1.6. In particular, the Complainant said:

1. She had a virtual viewing of the Property on 9 March 2021, along with Licensee 1 and another licensee from the same company [but a different office] who was acting for her. During the meeting she asked about any potential development in the immediate proximity and was told by Licensee 1 that there was none. She was not told that

Licensee 1 had knowledge from the Vendor and other unit owners that an extensive development was planned at Unit A and that plans were in place and were lodged with the Council seeking Resource Consent.

2. She was not told that the Agency was aware as early as February 2021 that there was a development planned at Unit A and no relevant disclosures, as required in the listing agreement, were made to her.
   

100. She was the successful bidder at the auction on the 10 March 2021 and paid a deposit. At a viewing on 16 March 2021 with Licensee 1 and the agent acting for her, she asked about the Unitary Plan regarding potential development of properties surrounding the Property and was only provided with information relating to a nearby street that, according to Licensee 1, would have no adverse effects on the Property. Again, she was not informed about the pending the development at Unit A.
     

4. The Property went unconditional on 25 March 2021, and despite requests for a further viewing, it was not until the day before settlement that she had a further viewing. She contacted management at the Agency to complain about the Licensee 1’s manner and unprofessional attitude.
   
5. On 19 April 2021, she learned from a neighbour that a three-story development was planned at Unit A and that the Vendor had known about it; and that plans had been

submitted to the Council for Resource Consent. She was given a letter of objection dated 10 February 2021, written to the Council by a group of owners including the Vendor, about the development plans. She was also given copies of text messages

between the owner of Unit B and an agent from the same office as Licensees 1 and 2.

In the text messages, the owner of Unit B asked about a car space in to the

development at Unit A, and the agent commented that his associates (presumably Licensee 1 and Licensee 2) would not know about that and he would advise them.

6. She contacted the Agency’s management who told her they would conduct an internal investigation. She purchased the Property because of the advertised benefits, including a private courtyard, and lots of sunshine. ‘Ensuring a private spot in the sun’. She

stresses that her property may not be rentable if the building goes ahead due to

disruption and noise. She considers she was misled and that the information about Unit A should have been fully disclosed as it was material to her decision to purchase the Property and spend money on a renovation to update and obtain a better rental income.

1.7. The Complainant requested a remedy, being:

1. An apology and explanation.
   
2. Disciplinary action and a fine to ensure Licensee 1 does not get away with a similar breach again.
   

1.8. The Licensees responded to the complaint against them.

1.9. In particular, Licensee 1 said:

1. He ran an open home at the Property on 20 February 2021. After the open home, in the carpark in front of Unit C, the owner of Unit D mentioned the possible

development of Unit A. After the open home he informed Licensee 2 about these comments.

2. He and Licensee 2 knew they should make further inquiries to determine if these statements were factual, so they spoke to the Vendor, her solicitor, the Agency’s compliance team, and the Agent who has been in communication with the owner of

Unit B. After reconsidering all the Property documents and making significant inquiries, they were satisfied that the comments from the owner of Unit D about a development at Unit A were unsubstantiated.

100. Licensees 1 and 2 were satisfied that a development could not go ahead without approval from all the co-lessors under the cross-lease title. They determined that any disclosures would be unnecessary and potentially harmful to their client, the Vendor of Unit C.

4. During the campaign and sale, he did not know of an application or actual intention to apply for resource consent to build at Unit A.
   
5. He disagrees that the Property might be devalued, or its rent-ability reduced if the building renovations went ahead for Unit A.
   

1.10. In particular, Licensee 2 said:

1. When the Agency entered into an agency agreement to sell the Property, she asked the Vendor if she had signed any consents or waivers for any works on any neighbouring

properties and was told no. For the purposes of providing potential purchasers with information about the Property, and in consultation with the Agency’s compliance team they prepared a disclosure letter that contained a link to all information about the Property, and they sent it to each potential purchaser after attending an open home.

2. She says that when she and Licensee 1 heard the rumour about a potential development at Unit A, they immediately made inquiries to determine if the

statements were true or not. They contacted the Vendor, spoke to their Compliance team, obtained legal advice from the Vendor’s solicitor and reconsidered all the

Property’s documents. Based on their inquiries, the Licensees were satisfied that under the cross-lease title, no developments could proceed without the approval of all the

co-lessors (including a new owner of Unit C).

100. They relied on the Vendor’s advice that she was unaware of any development plans and had not agreed to any, and they decided that no further disclosures would be required.
     

2. What we decided

2.1. On 3 November 2021, the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.

2.2. On 19 April 2022, 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, namely Rules 5.11 and 10.72.

3. Our reasons for the decision

Failure to disclose

3.1. The Committee concluded that the Vendor of Unit C told the truth when she told Licensees 1 and 2 that she had not signed any consent for any development at any neighbouring unit.

While this may have been correct, the Vendor was aware there was a development planned for Unit A – as evidenced by a letter of objection to the Council about the proposed

development she co-signed, and this was not disclosed.

3.2. The Committee is satisfied that the Licensees were not aware of the planned development at Unit A before being notified about it by the owner of Unit D.

3.3. The Committee has noted that the Licensees and the Agency went to lengths to investigate

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

2 Rule 10.7: A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Where it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects, a licensee must either— (a) obtain confirmation from the client, supported by evidence or expert advice, that the land in question is not subject to defect; or (b) ensure that a

customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.

the potential development when it was brought to their attention. Their investigations (and the Complainant’s due diligence) didn’t discover the consent for work in the Council records because consent wasn’t granted until May 2021.

3.4. The Property is a cross-lease, and all owners must agree to any structural changes to any unit. As the new owner of Unit C, the Complainant does not need to agree to the development at Unit A going ahead.

3.5. Regarding the Complainant’s issue about the pre-settlement inspection, the Committee is satisfied that Licensee 1 understood the viewing on 16 March to be the pre-settlement

viewing until the Complainant requested another viewing before settlement. He knew the Vendor, who was living at the Property, did not want a second viewing but eventually

negotiated a second viewing the day before settlement.

3.6. The Committee notes that the Complainant was concerned about the Property’s value being reduced or a reduced rental for her unit if the development in the neighbouring unit went ahead. However, the Committee has seen no evidence to support this despite the

Complainant having the Property assessed for a rental.

3.7. The Committee has made a finding of no further action in response to all the issues raised by the Complainant.

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 Real Estate Agents Disciplinary Tribunal (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 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

Paul Biddington Chairperson

William Acton

Deputy Chairperson

Belinda Moss Member

Date: 9 June 2022

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

Rule 10.7: A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Where it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects, a licensee must either—

(a) obtain confirmation from the client, supported by evidence or expert advice, that the land in question is not subject to defect; or

(b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.