Download Complaints Assessment Committee - Decision to take no further action

In the Matter of
Part 4 of the Real Estate Agents Act 2008
And
In the Matter of
Complaint No: CB6718538
In the Matter of
Russell Benshaw
Licence Number: 10017032
Decision of Complaints Assessment Committee
Dated this 2nd day of October 2012
Complaints Assessment Committee:
CAC20006
Chairperson: Paul Biddington
Deputy Chairperson: Ann Skelton
Panel Member: Peter McDermott
Complaints Assessment Committee
Decision finding unsatisfactory conduct
1.
The Complaint
1.1.
Ms C (the Complainant) has complained to the Real Estate Agents Authority (the Authority) about
the conduct of Russell Benshaw (the Licensee). At the time of the conduct the Licensee held a
certificate of approval as a salesperson and was working for Key2 Limited which ceased trading in
January 2009. The Licensee now works for KEY2 Real Estate Limited which is licensed under the
Real Estate Agents Act 2008 (the Act).
1.2.
The complaint relates to the purchase, by the Complainant, of an investment property (the
Property) on 21 December 2007 in which the Licensee introduced the Complainant to the Property.
The Complainant alleges that:
(1)
(2)
(3)
(4)
(5)
(6)
The floor area of the Property in the valuation report is 98sqm;
The plans attached to the sale and purchase agreement show 81sqm;
No DP number recorded on the sale and purchase agreement;
No DP number recorded on the plans attached to the sale and purchase agreement;
Code of Compliance records the total value of five units as $500,000; and
Valuation report values the five units at $1.5 million.
1.3
The complaint was received by the Authority on 5 April 2012 and referred to a Complaints
Assessment Committee (the Committee). The Committee initially considered the complaint on 7
May 2012 and made a decision pursuant to section 79(1) of the Act to inquire into the complaint.
The Committee considered further evidence on 25 June 2012.
2.
Material Facts
2.1
The Complainant was introduced to the Licensee in December 2007 by a property investment
advisor. The Complainant was looking to purchase an investment property. The Licensee contacted
a Trustee for the Trust (the Vendor), a person with whom he had previous dealings with, to
ascertain if they had any suitable properties for sale. The Licensee was able to offer the
Complainant the Property which was the last one available in a block of five units. The Complainant
wanted to purchase the Property under $300,000, and the Vendor agreed to a purchase price of
$290,000 with a reduced deposit of $15,000. The Property was purchased by the Complainant predevelopment. The developer submitted to the Committee that he was responsible for the
development plans consisting of five units, with a site coverage of 406m2 and a floor area of 81m2
per unit.
2.1.
On 5 August 2007 the Vendor commissioned a valuation company to provide a valuation on the
plans for the development of five units. The valuation company’s representative’s instructions from
the Vendor were to assess the current market value of the proposed individual units 1-4 for
mortgage security purposes, even though five units were to be constructed. The plans supplied for
valuation specified each unit would have a total floor area including the garage of 81m 2. The floor
area of each unit was calculated by the valuation company’s representative at 74m2 and the garage
and laundry at 24m2 giving a total of 98m2. It appears that this discrepancy was not picked up at
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this time. Each of the five individual units was valued at $300,000 inclusive of chattels.
2.2.
On 21 December 2007 the Complainant entered into a transaction to purchase the Property for
$290,000 with a deposit of $15,000. The transaction was conducted by the Licensee. At the time
the Licensee introduced the Complainant to the Property and drew up the agreement there was no
listing authority from the Vendor for the Licensee to act. The Complainant submits when signing
the agreement, the Licensee supplied a copy of the Valuation. The development plans were
attached to the agreement. The Complainant arranged finance and conducted due diligence. The
Licensee sometime later heard from the Vendor that the transaction was unconditional. The
Licensee did not receive the deposit of $15,000. This was held in the Vendor’s solicitor’s trust
account.
2.3.
The Complainant further submits that the sale and purchase agreement did not record a Deposited
Plan (DP) number and there was no DP number recorded on the plans attached to the sale and
purchase agreement. The transaction provided that the purchaser was purchasing Unit B of the
Unit Title subdivision. Also the Valuation showed a total value of the five units as $1.5 million
whereas the consent issued in March 2008 by the City Council was for a total value of $500,000.
2.4.
On 27 January 2012 an Insurance Valuation was undertaken by (the Body Corporate). This valuation
indicated a gross floor area of 395m2 and four residential units. The Body Corporate confirmed
there were five units, a total coverage of 405m2 with each unit’s floor area of 81m2. The
Complainant furthermore made a complaint to the New Zealand Institute of Valuers against the
valuation company about the accuracy of their valuation. On 27 April 2012 the Institute advised
that if the Complainant’s unit is only 81m2 in gross building area then it is a different unit to that
valued by the valuer.
3.
Relevant Provisions
3.1
Whilst the complaint relates to conduct alleged to have occurred prior to the commencement of the
Real Estate Agents Act 2008 (the Act), section 172 allows for the Committee to consider such a
complaint.
Section 172 Allegations about conduct before commencement of this section.
(1) A Complaints Assessment Committee may consider a complaint, and the Tribunal may hear a
charge, against a licensee of a former licensee in respect of conduct alleged to have occurred
before the commencement of this section but only if the Committee or Tribunal is satisfied
that –
(a)
At the time of the occurrence of the conduct, the licensee or former licensee was
licensed or approved under the Real Estate Agents Act 1976 and could have been
complained about or charged under the Act in respect of that conduct; and
(b)
(2)
3.2
The licensee or former licensee has not been dealt with under the Real Estate Agents
Act 1976 in respect of that conduct.
If, after investigating a complaint or hearing of a charge of the kind referred to in subsection
(1), the Committee or Tribunal finds the licensee or former licensee guilty of unsatisfactory
conduct or of misconduct in respect of conduct that occurred before the commencement of
this section, the Committee or the Tribunal may not make , in respect of that person and in
respect of that conduct, any order in the nature of a penalty that could not have been made
against that person at the time when the conduct occurred.
The Committee confirmed that the Licensee was licensed under the Real Estate Agents Act 1976 and
has not been dealt with under that Act in respect of the conduct subject to this complaint.
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3.3
The Committee examined the evidence supplied by the Complainant in her written complaint to
determine whether section 72 or section 73 of the Real Estate Agents Act 2008 applied, i.e. was
there evidence which would indicate that the Licensee could be considered guilty of unsatisfactory
conduct section 72 or misconduct section 73.
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)
(c)
Contravenes a provision of this Act or of any regulations or rules made under this Act; or
Is incompetent or negligent; or
(d)
Would reasonably be regarded by agents of good standing as being unacceptable.
73
Misconduct
For the purposes of this Act, a licensee is guilty of misconduct if the licensee’s conduct –
(a)
(b)
(c)
(d)
Would reasonably be regarded by agents of good standing, or reasonable members of the
public, as disgraceful; or
Constitutes seriously incompetent or seriously negligent real estate agency work; or
Consists of a wilful or reckless contravention of –
(i) This Act; or
(ii) Other Acts that apply to the conduct of licensees; or
(iii) Regulations or rules made under this Act; or
Constitutes an offence for which the licensee has been convicted, being an offence that
reflects adversely on the licensee’s fitness to be a licensee.
4.
Discussion
4.1
The Committee is satisfied that the total area of the Complainant’s Property is 81m 2 as per the plans
attached to the sale and purchase agreement. The valuation by the valuer contained several errors.
The first paragraph in the valuation instructs the Valuer to assess the current market value of
proposed individual units 1-4 for mortgage security purposes, not five. This was an oversight by the
valuer and his calculations were based on four, instead of five units. His valuation did not include
the total floor area of 395m2 for all the units. If the floor area is divided by 4, the individual units
have a floor area of just over 98m2. The valuation did, however, give a summary for five units which
he valued at $300,000 each, giving a combined market value of $1,500,000. The evidence from the
Body Corporate confirmed the total floor area of 395m2, the number of units being five and the
floor area of each individual unit of 81m2. On 27 January 2012 the Body Corporate commissioned a
report to undertake an insurance valuation. In this report the floor area was correct at 395m 2,
however the report said there were four units instead of five which was incorrect. Having
considered the reports on the Property, the Committee is of the view that the inaccuracy of
the
reports is not an Authority issue and makes no finding in regard to them.
4.2
In terms of there being no DP number on the Sale and Purchase agreement and no DP number
recorded on the attached plans provided, this is not uncommon in properties that are still to be
developed. As the units were yet to be built, they could not be given a DP number until
they deposited with Land Information New Zealand (LINZ). The only DP number available
relates to the original section before the development commenced. As these matters do not come
within the definition of “real estate agency work”, they are outside the ambit of the Act and
therefore the Committee can make no finding on this aspect of the complaint.
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4.3
The Code Compliance Certificate issued by the City Council on 3 March 2008, stating that there
were five units constructed with a value of $500,000, is based on the value of construction of all the
units themselves and does not include the portion of the land allocated to each unit, or the chattels.
The Valuation included a portion of the land and the chattels. As these matters do not come within
the definition of “real estate agency work”, they are outside the ambit of the Act and accordingly
the Committee can make no finding on this aspect of the complaint.
4.4
On 29 May 2012 the Licensee submitted that at the time the Complainant was introduced to the
Property the Licensee did not have a signed agency authority from the Vendor, and the Property
was never marketed by Key2 other than the one off introduction to the Complainant.
Notwithstanding the Licensee never marketed the Property or held a deposit in his trust account, he
acted as a Licensee.
Real estate agency work or agency work means –
(a) Any work done or services provided, in trade, on behalf of another person for the purpose
of bringing about a transaction.
(b) Includes any work done by a branch manager or salesperson under the direction of, or on
behalf of an agent to enable the agent to do the work or provide the services described in
paragraph (a).
The Committee is satisfied the Licensee engaged in real estate work.
4.5
On the basis that the Committee cannot rely on a breach of an obligation under the current Act and
Rules to find the Licensee guilty of unsatisfactory conduct, as they were not in force at the time the
conduct occurred, the Committee will have to look to the rules of the Real Estate Institute of New
Zealand (REINZ) and the 1976 Act. The rules of REINZ set minimum standards and were a reference
point for discipline. Accordingly the Committee is of the view that the Licensee has breached an
obligation under the rules of the 1976 Act and the relevant rule 14.1 of Rules of Practice.
Rule 14.1
The terms of any agency agreement with a Principal shall be in writing.
This rule required members to have the terms of any agency agreement committed to writing. It is
a breach of this rule to act as an agent without a written agency agreement. The reason for this is
twofold. Firstly, it is consistent with the provisions of the Real Estate Agents Act 1976 that require
an agency agreement to be in writing to be enforceable. Secondly it reduces the risk of a dispute
arising between the agent and principal and of any damage to the industry that may result from
such a dispute. The essential elements of the rule are:
(1) The member acted as an agent; and
(2)
The member had not obtained a written agency authority.
4.6
Having found the Licensee’s conduct was unsatisfactory, the Committee must determine what
orders, if any should be made.
4.7
Section 172(2) prevents the Committee from making an order against the Licensee that could not
have been made in respect of the conduct at the time the conduct occurred. The 1976 Act applied
at the time the conduct occurred.
4.8
Accordingly the Committee must now consider what orders could have been made against the
Licensee in respect of the conduct under the 1976 Act.
4.9
The available orders under the 1976 Act were a maximum fine of $750 and censure. However
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disciplinary proceedings were conducted before Regional Disciplinary Sub-Committees for a breach
of the rules and were based on the concept of “effective control”. This meant, although a complaint
about the breach of the rules could be made concerning an approved salesperson or branch
manager under rule 16.2, the responsible party against whom the orders could be made was the
Licensee who was in effective control of the salesperson or branch manager.
4.10
This was made clear by rule 16.22:
“Where the Regional Disciplinary Sub-Committee (RDS) finds a breach of duties and obligations
imposed by the Act or these rules:
16.22. 1 It may exercise one or more of the following disciplinary powers:
16.22.1.1 Order the member, or, where the member is a company, the principal officer of
the company, to pay the institute such sum by way of a penalty [not exceeding
the sum prescribed by s70 (1) (O) of the Act [$750] as the RDS thinks fit;
16.22.1.2 Censure the member, or, where the member is a company, the principal officer
of the company.”
5.
Decision
5.1
It is the view of the Committee that the Licensee’s conduct was a breach of Rule 14.1 of REINZ Rules
of Practice and the 1976 Act which amounts to unsatisfactory conduct pursuant to section 72(b) of
the 2008 Act.
5.2
Notwithstanding that the Licensee was an approved salesperson under the Real Estate Agents Act
1976, orders cannot be made against the Licensee in respect of the conduct at issue in this
complaint. Therefore the finding of unsatisfactory conduct itself is the only order the Committee
may make in these circumstances.
6.
Publication
6.1
One of the Committee’s functions pursuant to section 78(h) of the Act is to publish its decisions.
6.2
Publication gives effect to the purpose of the Act by ensuring that the disciplinary process remains
transparent, independent and effective. The Committee also regards publication of this decision as
desirable for the purposes of setting standards and that it is in the public interest that the decision
be published.
6.3
The Committee directs publication of its decision, but omitting the names and identifying details of
the Complainant (including the address of the property), and any third parties in the publication of
its decision. The name of the Licensee and the Company she works for should be published.
6.4
The Authority will publish the Committee’s decision after the period for filing an appeal has ended
unless an application for an order preventing publication has been made to the Real Estate Agents
Disciplinary Tribunal (Tribunal). Such an application can only be made as part of an appeal to that
Tribunal. In order to ensure publication of the decision does not take place it is important that you
serve a copy of your application on the Authority. Publication of the decision will not take place
until the Tribunal has made a decision on the application.
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7.
Right of Appeal
7.1.
A person affected by a determination of a Complaints Assessment Committee may appeal by way of
written notice to the Real Estate Agents Disciplinary Tribunal (the Tribunal) against a determination
of the Committee and must do so within 20 working days from the date of the determination.
7.2.
Appeal is by way of written notice to the Tribunal. You should include a copy of this Notice with
your Appeal.
7.3.
Further information on filing an appeal is available by referring to the Guide to Filing an Appeal at
www.justice.govt.nz/tribunals.
Signed
Paul Biddington
Chairperson
Complaints Assessment Committee
Real Estate Agents Authority
Date: 2 October 2012
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