A complaints assessment committee formed by the Real Estate Authority alleged the agency’s conduct in failing to meet its obligations amounted to seriously negligent or seriously incompetent real estate agency work.
Breaches occurred in 2019, 2020 and 2021.
The agency pleaded guilty to an amended charge and admitted its conduct constituted seriously negligent or seriously incompetent real estate agency work.
UHY Haines was the agency’s auditor until its resignation in August 2019. IRCS then took over as auditor.
But in July 2018, UHY Haines issued its audit report for the financial year ended March 31, 2018, that identified Leading Edge had not filed reconciliations for one month.
That reconciliation was received late.
In June 2019, UHY Haines issued its audit report for the financial year ended March 31, 2019, that identified Leading Edge had breached the audit regulations.
Except for December 2018, all monthly reconciliations for the year ended March 31, 2019, were provided late.
In October 2019, the Real Estate Authority wrote to Leading Edge requesting that it provide explanations within five working days.
Leading Edge said the reconciliations were provided late “due to transitioning of management and directorship, moving premises to a new suburb, a lack of effective and reliable processes and procedures, and a change in administration staff”.
Problems continued.
In 2020, IRCS auditors issued its report for the financial year ended March 31, 2020, that identified the business had provided monthly reconciliations for August, November and December 2019 on time, but all other reconciliations were provided late.
Leading Edge said these were late because the administrator did not produce them on time.
But a year later, IRCS issued its report for the March 2021 year and again said reconciliations were provided late.
Again, the authority sought explanations and referred to similar offending previously.
Leading Edge said this third time the reconciliations were late due to the pandemic and Auckland being in lockdown.
The tribunal noted that an affidavit had been filed by Tony Teague, the sole director and shareholder of Leading Edge.
The committee cited aggravating factors in the case. The first was the length and extent of the offending — 25 separate occasions over three financial years.
Agencies operating a trust account for customers are in a position of trust and should have appropriate procedures to safeguard funds, the committee said.
Leading Edge failed to put in place appropriate systems to ensure the correct management of its trust account.
This meant there was no way to ensure monthly reconciliations were filed and reviewed by its auditors within the right timeframe.
This disrupted the authority’s ability to ensure trust monies were held and used appropriately, the committee said.
Once issues with the trust account were identified, they should have been addressed immediately. This was of significant risk to the public and the situation the regulations are designed to protect against, the committee submitted to the tribunal.
Counsel for Leading Edge said the appropriate penalty would be a fine of $3000 to $5000.
Factors that influenced the situation included Teague taking over the business from his son, lack of communication with UHT and an administrative person going.
Teague regretted this, but he did assist to immediately rectify this once the auditors said, his lawyer said.
Then, there were only three times when monthly reconciliations were not prepared and signed by him on time, counsel submitted.
Leading Edge was not aware reconciliations were being sent late by administrative staff, even though they were signed by Teague on time.
Leading Edge did not fail to have effective systems to ensure the correct management of its trust account, as the committee alleged, his lawyer said.
The trust account was managed properly. There was no suggestion it was ever in overdraft or mismanaged. The issue was timing, which needed to improve, Teague’s lawyer said.
There had been no breaches for nearly three and a half years now, she submitted.
“Leading Edge is struggling financially in the current market and a fine in excess of $5000 may put it out of business,” the decision said.
Teague’s lawyer requested three months to pay any fine.
But the tribunal said while the agency faced staff issues and the licensed agent officer change, it should have implemented measures so breaches did not recur.
The agency admitted liability and co-operated, had no previous disciplinary history and there were no reports of subsequent breaches, the tribunal said, acknowledging pandemic difficulties.
It upheld the charge of misconduct — seriously incompetent or seriously negligent real estate agency work — and censured the agency.
Taking all matters into account, a $7000 fine was appropriate, it decided.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
