Complaint No C49217 [2023] NZREAA 85 (20 November 2023)

Last Updated: 14 April 2024

Before the Complaints Assessment Committee
In the matter of	Complaint No: C49217 Part 4 of the Real Estate Agents Act 2008
and
Licensee 1:	Licensee 1 (XXXXXXXX)

Decision to take no further action

20 November 2023

Members of Complaints Assessment Committee: CAC2203 Chairperson: Rachel Palu

Deputy Chairperson: Jim Lindsay Panel Member: Nigel Fletcher

V202211

Complaints Assessment Committee

Decision to take no further action

The Complaint

1. On 2 August 2022 the Real Estate Agents Authority (the Authority) received a complaint against Licensee 1 from the Complainant.
   
2. The Licensee is a licensed Agent under the Real Estate Agents Act 2008 (the Act).
   
3. The complaint relates to a property situated at the Property.
4. The background to the complaint is that the Complainant bought a property marketed by Licensee 1 while she was out of town. She viewed the property remotely relying on a video call with Licensee 1. As an out of town buyer, she also relied on Licensee 1’s experience, observations, and disclosures.
5. The Complainant discovered that a neighbouring property, (the neighbouring property), was associated with gang activity and was rundown when she moved in after settlement.
   
6. Against this background the Complainant complains that Licensee 1 failed to show the neighbouring property in his video call and only showed the nicer surroundings, deliberately failed to disclose gang activity that he had observed, and failed to disclose that the neighbouring property was a well-known gang associated house.
   

Issue

7. The central issue in this complaint is whether Licensee 1 failed to disclose information about the neighbouring property which in fairness should have been disclosed.
   

The Committees decision and reasons

8. The Section 72 Real Estate Agents Act 2008 provides that:
   

... 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 under this Act; or
(c) Is incompetent or negligent; or

(d) Would reasonably be regarded by agents of good standing as being unacceptable.

9. Rule 5.1 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules) sets out the basic level of competence required of licensees and provides that a licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.
10. Rule 6.2 provides that a licensee must act in good faith and deal fairly with all parties engaged in a transaction.
    
11. Rule 6.4 states that 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.

12. The High Court has held that an evaluation of what “should by ... fairness” be provided to a client must be undertaken in the particular circumstances of each case.1
13. The starting point when marketing a property has been succinctly summarised by the Tribunal as:
    

Any licensee must know and understand the property being marketed, must know of both the good and the bad features of the property, and must represent the property fairly so that a prospective purchaser (whether viewing the property or not) can make an informed decision as to whether to commence the process of considering a purchase.2

14. The Complainant felt she had been misled because Licensee 1 had not:
    
    • (a) Disclosed that an open home had been cancelled due to a gang associated Tangi;
      
    • (b) Shown the neighbouring property’s state of neglect on the video call;
      
    • (c) Disclosed that the neighbouring house was a well-known gang associated house.
      

Disclosure of the Tangi

15. The Complainant claims that Licensee 1 observed a large group of approximately 100 gang members attending a Tangi in the area when he arrived to conduct the first open home on 16 January 2022. The presence of gang members raised sufficient concern to notify the vendors and resulted in cancellation of the open home. The Complainant’s learned about the Tangi from talking to the vendor and neighbours after purchase. She has referred to evidence from her neighbour, the Neighbour, and the fact that the Tangi was something being monitored by Police and reported in a Stuff article at the time. She considers that even gang activity on one occasion required disclosure.
    
16. The Complainant’s complaint was supported by the Neighbour, a neighbour who has owned various properties and lived in the neighbourhood since 2009. The Neighbour’s evidence is that the neighbouring property hosted the Tangi and involved gazebos and crowds of people in their yard which spilled out into the street and adjacent park. This also resulted in the cancellation of an Air BnB booking at the Neighbour’s house at the start of the Tangi. Her statement to the REA Investigator also considered that the attendees at the Tangi were well behaved and it was a family thing.
    
17. The Stuff article refers to the death of a Gang member from City A, the prospect of gang members travelling into the region from out of town and Police expectations that this would not cause trouble.
    
18. Licensee 1 says that when he arrived for the first open home, he noticed several gang members at the park playing loud Reggae music and a small gathering of people, without gang patches, at the neighbour property. There were also gatherings of other people 150 metres down the road and in the park. He did not see a crowd of around 100 people at the neighbouring property. He considered the impact of the heightened activity and was concerned about the gang members he saw attending the open home. He discussed this with the vendor who was
    

1 Barfoot & Thompson Ltd v REAA [2014] NZHC 2817 at 50; [2014] NZHC 2817; (2014) 15 NZCPR 650; [2015] NZLR 254 at 264.

2 Bridge v Real Estate Agents Authority [2018] NZREADT 61 at [29].

shocked and instructed him to cancel the open home. He felt that because this was a singular event, he did not have to disclose it.

19. Licensee 1’s text messages with the vendor confirm that he was concerned about the presence of Gang members and that this was out of the ordinary from the vendor’s perspective. The vendor had owned and tenanted the Property and the unit next to it since 2007 and was unaware of any gang presence in the neighbourhood. Licensee 1 and the vendor’s evidence confirms that both gathered further information and discovered that gang members were in the area attending a Tangi. According to Licensee 1, he also observed gang members in other areas of City A and he was not aware of the neighbouring property’s connection to the Tangi or that it had any gang affiliations until he received the complaint. His evidence is that a week later the area was again quiet as it had been previously.
    
20. We accept that the influx of large numbers of gang members paying their respects and attending the Tangi could well have been disconcerting to those living close by. However, the gathering of whanau and friends for a Tangi is not a common event. The evidence also does not disclose that the overt presence of gang members was more than a one-off event. Consequently, we accept that as a one-off event Licensee 1 was not in fairness required to disclose the fact that gang members had attended a Tangi a week earlier or that the presence of gang members had led to the cancellation of one open home. No further action is to be taken on this issue of the complaint under s 89(2)(c) of the Act.
    

Video call

21. The Complainant felt that Licensee 1 deliberately did not pan his camera to the right to avoid showing the state of the neighbouring property. She said that had he done so she definitely would have noticed the state of the property.
    
22. The Complainant said that when she moved in on 9 March 2022, she noticed broken down vehicles, overgrowth, trolleys, rubbish outside the neighbouring property and a skip bin full of rubbish and furniture. This raised concern which increased when she noticed that the inhabitants at the Property wore a lot of red and there always seemed to be a run-down vehicle, trolleys kept piling up and rubbish bags were discarded on the sidewalk. The Complainant considers that the neighbouring property would have had rubbish and been in disarray following the Tangi which she says is confirmed by neighbour, the Neighbour.
    
23. The Neighbour’s evidence is that the corner house was rough looking, always messy and full of rubbish but after the Tangi the mess had extended outside the house and over the road. According to The Neighbour, while the rubbish outside the neighbouring property was mostly cleaned up over the next week, the rubbish in the property and around the berm remained for many weeks. The neighbour who lived directly next to the corner property, Neighbour N, reports that two abandoned cars were moved outside the corner property to enable a marquee to be erected for the Tangi. These were moved back into the property after the Tangi and said it was peaceful, and the visitors were respectful.
    
24. A video clip taken by the Complainant in mid-August 2022 shows a messy yard with two vehicles, washing on the line and rubbish and two shopping trolleys with rubbish inside and car tyres stacked outside the timber boundary fence. The Complainant says that the Property was far worse when she moved in.
    
25. Another neighbour said that corner house has been a mess since the tenant of the corner house moved in in 2019/2020.
    
26. The vendor’s evidence is that the situation with the neighbouring property evolved after the

Tangi and he and the Complainant had approached the council to do something about the state of the house.

27. Licensee 1 refutes that he avoided showing the Complainant the neighbouring property in his video call. He states that during the video call, the Complainant was particular about what she wanted to see. She advised that she was an experienced purchaser, had renovated properties, and may wish to sell this property in the future. For this reason, the Complainant wanted a clear and precise view of the street and neighbouring properties. Licensee 1’s evidence is that he showed the Complainant the Eastern and Western sides of the streets. He also says that he crossed the street, walked through the Park, stood on the opposite side of the street looking back at the Property, and panned the entire street from West to East.
    
28. Overall, we accept that the yard at the neighbouring property was messy and would have had more mess than usual in the weeks following the Tangi. It is also possible that that the house deteriorated after the Tangi.
    
29. Both parties have a different record of the video call. From Licensee 1’s description it is possible that the side of the house at the neighbouring property was visible. However, there is no recording of the video call and without further evidence we are not able to reconcile the differences between the Complainant and Licensee 1 on this point. Overall, we are unable to find that Licensee 1’s video did not provide an accurate representation of the property and neighbourhood. Therefore, we take no further action under s 89(2)(c) of the Act.
    

Gang Associated Property

30. The Complainant considers that Licensee 1 knew or had sufficient information available to him to know that the Property had a gang connection. She also considers that as a real estate agent with 23 years’ experience in the local area, Licensee 1 reasonably ought to have known of the gang connection and he had a duty to disclose this. She relies on the presence of gang members at the time of the Tangi, the state of the Property, the account of neighbours, a view by locals that the neighbouring property was a “gang house”, and the views of real estate agents she engaged to sell the Property for her.
    
31. The Complainant’s evidence is that within her first week of moving in she realised there was a substantial gang association. She says that she felt compelled to move for her own safety and sanity. She had planned to slowly renovate the Property, but instead she completed a quick renovation and placed the Property on the market in early July 2022. Her agent felt obligated to disclose information about a gang connection and from this point the Complainant learned more about disclosure obligations and raised her complaint.
32. The Complainant’s correspondence with Licensee 1’s Agency refers to disclosure obligations discussed in the Real Estate Agents Disciplinary Tribunal decisions in Tapu3 and CAC 409 v Kemp & Scoble.4
33. Kemp and Scoble 5 involved the disclosure of an issue concerning the physical state of a property, the stability of a party wall which had been flagged through prior dealings with the Property, and cancellation of an earlier conditional offer. In the context of Rule 10.7 and 6.4, the Authority found that the licensees’ decision that disclosure of a potential defect was not required because they did not have actual knowledge of an actual defect or the existence of a
    

3 [2021] NZREADT 32.

4 [2021] NZEADT 04.

5 Above n. 4 at [28].

negative report from an engineer, was contrary to their obligations under the Rules. 6

34. Tapu concerned issues beyond the boundary, and the use of an adjacent derelict property by gang members. The adjacent property was described as “gang headquarters”, “a gang pad” and as having a known “gang presence” and “gang affiliations”. The Tribunal found that this type of gang connection, which the Licensee was aware of, was a matter that, in fairness, should have been disclosed to the purchaser to enable her to make an informed decision about whether the property met her known safety and security needs. Ms Tapu accepted that the gang connection was something that she should have disclosed, but considered that it had been disclosed by the vendor. The Tribunal found that Ms Tapu failed to inform the purchaser, a failure which constituted misconduct.
35. Licensee 1 says that his visits to the Property from 10 December 2021 did not reveal an issue that required disclosure.
    
36. On the evidence, and beyond what Licensee 1 observed from the Tangi, which we have found was an isolated event, we are not able to find that Licensee 1 knew or had reasonable knowledge of a gang connection.
37. In relation to the gang connection, the evidence from those who lived in the neighbourhood discloses the following:
    
    • (a) The Neighbour described the neighbourhood as having a lovely sense of community until the time of the Tangi. She also referenced seeing patched gang members with motorbikes standing near the corner of the house since before the COVID lockdown, the regular presence of young unpatched men there dressed in gang colours, and knowledge that the house was a feeder for gang initiates.
      
    • (b) Neighbour N said that the gang presence is not overt but patched Gang members have been showing up the whole six years she has lived there.
      
    • (c) Another neighbour understood that the person who died lived as a guest at the neighbouring property. Occasionally he saw patched Gang members at the neighbouring property and young men but said there was no trouble. He said it is not the gang house which is further up the street in the valley.
    • (d) In July 2022 the vendor reported that there were a lot of youngsters hanging around usually later in the day, but he was unsure if they were affiliated with a gang or whether the house was actually a gang house.
      
    • (e) The disclosure made when the Complainant sold the Property in August 2022 stated that the corner property was owned by Kaianga Ora and that there had been a Tangi in January for a gang member who lived there which attracted a large gathering of gang associates, but that the Complainant was unaware of any issues with the current tenants of the property other than general untidiness which she had seen the Council clean up on occasion.
    • (f) The Complainant reports that the tenants in the neighbouring Property were evicted by Kainga Ora in October 2022 and the house boarded up.
      
38. Overall, we are satisfied that a tenant at the neighbouring property had a link to gang members, but this was not overt or problematic for those living there. The gang connection in this case
    

6 At [27]

was more distant than the gang connection in Tapu, which involved the use of a derelict property as a ‘gang pad’ by gang members.

39. Given the weaker gang connection, the lack of any issues arising from the connection, and Licensee 1’s established level of knowledge, which was limited to the Tangi, we have not found that the neighbouring property’s link to gang members required disclosure in this case. No further action is to be taken on this issue of the complaint under s 89(2)(c) of the Act.
    

The Outcome

40. The Committee has decided to take no further action on the complaint under s 89(2)(c) of the Act.
    

Publication

41. 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.
42. 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.
43. 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.
    

Your right to appeal

44. 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.
45. 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/.
    

Provisions of the Act and Rules referred to

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

Signed

Rachel Palu Chairperson

Jim Lindsay

Deputy Chairperson

Nigel Fletcher Member

Date: 20 November 2023

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 6.4