A $20,000 unsatisfactory conduct fine against business Bayleys Remuera and two licensees who work for the real estate business is "huge", a barrister says.
John Waymouth was commenting on the case where Bayleys' licensees At T'ng (Jenny) Kek, Michael (Tony) Bayley and Bayleys Real Estate trading as Bayleys Remuera were fined $20,000 after a complaints assessment committee of the Real Estate Authority ruled behaviour over the sale of a $2.5 million property was unsatisfactory conduct.
Waymouth said the fine sent a signal to the sector and other licensees to be careful in how they marketed or represented a property.
The fine reflected the seriousness of the issue, especially when it came to property defects that are known or should have been known to the agents, he said.
"Compensation for the complainants is not available. That can only be awarded by the Real Estate Agents Discipliniary Tribunal for misconduct and this does not seem to fall within that criteria, but a civil action for damages may still be possible," he said.
"In July 2017, the authority imposed much higher supervision requirements on companies over salespersons. The Bayleys' penalty reflects the seriousness of the supervision failure and is a wakeup call for companies to ensure they do properly supervise and manage their sales teams," Waymouth said.
The agency must pay $10,000, Kek $6000 and Bayley $4000 within 21 days of the decision, issued on January 23.
The authority lists the decision as being under appeal.
The case involved the sale of a home with untreated timber but which the complainants agreed to buy for $2.5m and where they hoped to build a swimming pool. Advertising said the house was solidly built with the plaster over brick, a cavity system and H5 treated timber. The property had room for a pool in the grounds, advertising said.
The complainants had a building inspection carried out on the house built in 2002 but it was non-invasive and found the house was generally in good condition. It did not confirm the level of timber treatment.
Kek had been "made aware that a prospective purchaser had discovered the property's timber was not treated." She said she was very surprised about this.
During the open-home period, another buyer had carried out due diligence by contacting the construction company and timber yard and found out the place did not have H5 treated timber. The timber had left the year with "no treatment whatsoever" apart from some timber which was H3, the decision said.
Sample cores were taken and the buyers were "devastated" when they found the timber had only insecticide treatment but not timber preservative to guard against water penetration or deterioriation, as H5 treatment would give.
The complainants said they had relied on the honesty and professionalism of Bayleys Remuera and its licensees.
It was only after they bought that they asked Auckland Council about building the pool, only to be told the non-covered ground area was too small for that and they would need a resource consent which might not be approved.
The committee found Kek "misrepresented the property as having H5 treated timber, misrepresented the stud height of the living areas of the property and represented that a pool could be installed in the grounds of the property when it likely could not".
Bayley was found to have "failed to adequately address the misrepresentations or to take appropriate actions in respect of the complaint".
Kek claimed she had relied on information from the vendor and that was reasonable. The vendor said the whole house had H5 timber and he relied on his builder. The stud height was mentioned in one website and again information was provided by the vendor, she said.
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Kek "stands by her assessment that the property has potential for a pool", the committee said.
Bayley said in his defence that he was technically the qualified supervisor of Bayleys Remuera but he delegated day-to-day supervision to another licensee.
The committee found the agency was obliged to ensure all licensees were properly supervised.
It is not the first time Kek or Bayleys Remuera got a reprimand although, in this latest penalty hearing, she said the previous circumstances were different.
In 2016, Kek, the same agency and another agent Rachel Dovey were found guilty of unsatisfactory conduct. That case involved Kek failing to put an offer in writing, tell of a multi-offer situation or that she had verbally presented their offer. The agency's supervision of the licensees "fell short as it provided advice that was not adequate or fair to the parties involved", it was found three years ago.
• 2016 decision against the same agency and agent
Bayleys national compliance manager and group licensee Tony Bayley said dual appeals to the decision had been lodged by the complainant and the respondents, and as a result the agency was unable to comment further while the matter was still under review.