Auckland realtor Sudesh Kumar loses appeal over tribunal’s conflict‑of‑interest ruling

Auckland real estate agent Sudesh Kumar has failed on appeal to reverse a decision that he breached rules around client care. Image / NZME composite

Two brothers wanting to buy a house lost their $30,000 deposit when the unconditional deal fell through after they could not raise the finance needed to buy it.

Now the real estate agent involved has failed to reverse a decision that he breached the rules around client care relating to his dealings with the brothers.

Auckland realtor Sudesh Kumar was found guilty last year of unsatisfactory conduct when he was found to have a conflict of interest with other parties involved.

It followed a complaint to the Real Estate Agents Authority by the unnamed brothers who accused Kumar of acting improperly on a number of fronts, including a conflict of interest in that he organised the mortgage broker and legal representation, and that he knew the vendors.

Auckland real estate agent Sudesh Kumar. Image/Supplied

Kumar denied he had acted improperly or that he knew the vendors.

He claimed his role in the transaction was limited because of “the personal relationship” between the vendors and prospective buyers, and their decision to negotiate directly and without involving him.

‘Inserted himself’ into buyers’ affairs

The conflict of interest was one of four points raised in the complaint and the only one on which the authority’s Complaints Assessment Committee found him at fault.

Kumar appealed against the decision, but the Real Estate Agents Disciplinary Tribunal this month confirmed the earlier finding and dismissed the appeal.

Tribunal deputy chair Catherine Sandelin, plus members Neil O’Connor and Fiona Mathieson, found Kumar “inserted himself into the affairs” of the potential buyers by arranging lawyers to assist, and for mortgage brokers to provide assistance and dealt with them directly.

Kumar has not responded to NZME’s requests for comment.

Agent recommended broker and lawyers

According to the recent decision, on January 31, 2022, Kumar signed up the vendors to sell their property by auction.

He said he was introduced to the prospective buyers, the brothers, by the father of one of the vendors.

Kumar then recommended a mortgage broker, and also recommended two lawyers, the first of whom advised the pair against entering into an unconditional agreement for sale and purchase.

Kumar said he knew the buyers had only $30,000 to put towards the deposit, and therefore questioned how the pair would be able to purchase the property, but claimed he had been told that the vendor and buyers had “agreed to a gifting arrangement”.

The tribunal said although some details were in dispute, it was not in dispute that a “gifting arrangement” and vendor finance were considered.

Unconditional agreement signed, without finance clause

By the end of May 2022, there were six serious buyers for the property including the brothers, to whom the vendors were “highly motivated” to sell the property.

The unconditional purchase agreement was signed by the parties in June 2022. It did not include a finance clause or any reference to vendor finance or gifting, the tribunal said.

Days later, the brothers paid the deposit on the property indicated to be worth more than $1 million.

In August 2022, Kumar started getting inquiries about the pair’s finance.

He called the mortgage broker he had initially recommended but found he no longer worked at the company.

He then referred the pair to another mortgage broker who was unable to help.

Another broker would only lend a maximum $1,040,000, which was not enough, and the vendors were unwilling to reduce the price.

Settlement notice issued

By late August 2022, the pair had failed to settle and were issued a settlement notice on September 12.

The purchase agreement was cancelled in November and the vendors sold the property to another party.

The brothers had to forfeit the deposit which was placed in the agency’s trust account.

The pair lodged their complaint with the authority the following May, and a guilty verdict against Kumar followed five months later.

It found the brothers had placed considerable trust in Kumar, who should have been alert to their financial risk when determining how to appropriately engage with them.

It said Kumar was “alive to the potential danger of the transaction”.

He needed to ensure there were very clear role definitions and in failing to do so, he did not deal fairly with the couple.

He was censured and fined $4500, and ordered to pay costs of $6678.

The tribunal later reversed the costs order and reduced the fine by $1000.

Appeal lodged against authority’s finding

In April this year, Kumar lodged an appeal. In a substantial set of submissions, he argued that the prospective buyers were “two adult brothers presumed to have competence,” and although first home buyers, they were not unsophisticated.

He also said it was common for licensees to refer purchasers to professionals, particularly for first-home buyers.

Kumar argued he might reasonably have viewed the transaction as not particularly risky, even though there were some unusual elements to it.

In dismissing the appeal, the tribunal said Kumar was aware of the high-risk aspects of the transaction.

He should have asked the buyers if finance had been arranged or whether a finance clause should be inserted into the sales and purchase agreement.

The tribunal said failure to do this was not in the best interests of the vendors who were effectively entering into an unconditional agreement with purchasers who required finance, which was not reflected in the contract.

Tracy Neal is a Nelson-based Open Justice reporter at NZME. She was previously RNZ’s regional reporter in Nelson-Marlborough and has covered general news, including court and local government for the Nelson Mail.