A young family is suing a real estate agent and his firm after a property marketed as a "great family home with ample potential" was found to be contaminated with P.

Pahiatua-based Bayleys agent Andrew Rankin has been suspended for three months and found guilty of two charges of misconduct after failing to tell the family who was moving into the house that it had tested positive for methamphetamine.

The mother and her two preschool aged children only learned their home was a potential health risk when an anonymous letter was delivered to the house.

The new owners' lawyers are now preparing to head to court and seeking damages after Rankin and Bayleys refused to pay compensation they sought.

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Bayleys has said it accepted the decision, but referred the Herald to the tribunal decision where it was not ordered to give the owners compensation.

However a legal expert has told the Herald the family have a strong case because they would have been left out of pocket and the agents non-disclosure would have affected the price they paid for the property.

Rankin was found to have breached his professional responsibilities when he in March 2015 sold a property to Glenn Brogden and his wife for their daughter Zoe and her two young children to live in. The Real Estate Agents Disciplinary Tribunal ruled in October he let them down by not telling them about a report by another prospective buyer showing it had failed a methamphetamine drug test.

Rankin, who worked for Coast to Coast Ltd trading as Bayleys Pahiatua, also failed to inform prospective buyers viewing the house, about 30km east of Palmerston North, that appropriate personal protective equipment should be worn by people entering the property due to the P contamination.

The Brogdens viewed the house, marketed as a "great-sized family home", with Rankin twice before buying it for their daughter and grandchildren to live in.

Their daughter and her children had lived in their new Pahiatua house for 8 months when she received an anonymous letter in the letter box informing them the house had tested positively for methamphetamine.

The young family moved out immediately and commissioned a detailed report which confirmed it had a moderate level of methamphetamine contamination. Six test locations inside the property had contamination levels above Ministry of Health guidelines.

The owners had the property decontaminated and retested before the daughter and grandchildren moved back in.

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They then lodged a complaint about Rankin's actions to the tribunal.

During the hearing, Rankin claimed he had verbally informed Brogden the house had failed a drug test and had been acid washed and provided a photocopied diary note showing this. But Glenn Brogden said in his evidence he would have remembered being told as it would have been "a totally different ballgame" and "would have shocked me".

The tribunal said it could not accept Rankin's diary note "as conclusive evidence to what he told Mr Brogden" and felt his entry that only the father and daughter viewed the house first was incorrect. It preferred the Brogden's turn of events that they were a tight family unit and had all looked at the property.

In the tribunal's penalty decision released on Friday, Rankin was censured and had his licence suspended for three months for the seriously incompetent or seriously negligent misconduct. He was also fined $3000.

Construction and property lawyer Adina Thorn said the agency and the agent should be offering to settle immediately.

"Because who wants to live in a house that's got P and it was never disclosed to them and the agent had specific knowledge of that?

"It's just not fair on the owner."

The Brogden's lawyer John Key said the decision spoke for itself and that his clients had never wanted publicity, but instead opted for it to be dealt with through the appropriate tribunal.

Bayleys and Rankin had declined the compensation sought and Key had now advised them the family would be taking legal action.

"I have received a response from the lawyers acting for Mr A Rankin and Coast to Coast Limited stating that their clients would not be making the payment as requested. In view of this response, legal proceedings by my clients will be pursued."

In response to the Herald's question about whether the agency would be compensating the family, Bayleys referred to the tribunal's penalty decision which made no order of compensation.

Bayleys compliance manager Tony Bayley said the company accepted the REAA decision, but said agents needed more guidance.

"Methamphetamine is a very serious and growing issue in the wider community. The real estate industry require clear guidance in order for our licensees to actively safeguard the interests of both the vendors and purchasers."

REAA chief executive Kevin Lampen-Smith said licensed real estate agents had clear obligations when it came to disclosure and must not mislead a seller or a potential buyer, or withhold any information that will inform buyers about any known defect.

"While it's not up to the agent to uncover any hidden defects in a property, they must let the seller know of their obligations to tell any prospective buyers what they know.

"Under the Real Estate Agents Act 2008, if a licensed real estate agent suspects that a property may have a defect (such as meth contamination), then they are obliged to ask the seller about it. If the seller does not want to disclose the defect (meth contamination above the standard) to prospective buyers then the agent should not continue to act for the seller."