There was a meeting between the prospective buyer and Hu where an offer was made and then withdrawn. After that meeting, Hu and the buyer exchanged a series of text messages where they entered into an agreement to split the commission 50/50.
Hu told neither the vendor nor his manager about the agreement and the buyer made an offer of $25.2m, which was rejected, before making another offer of $26.5m which was accepted.
Hu’s share of the commission (less the agency’s take) was $326,293 and he ignored messages from the purchaser when they came asking for their agreed share.
It’s not inherently illegal to enter into a commission-sharing agreement in New Zealand but all the involved parties need to know about it if a deal is made.
Because Hu told neither the vendor nor his manager about the deal he was charged with misconduct by the Real Estate Authority.
The tribunal heard the matter earlier this year where Hu claimed he was pressured into the deal by the prospective buyer who he says grabbed his phone at a meeting and typed a text reply on his phone agreeing to the commission split.
Hu said there was a campaign of intense pressure from the buyer, which he resisted until the final hurdle.
While Hu accepted his offending and was remorseful for it, he claimed that, in his view, the agreement with the vendor ended once their initial offer was rejected and didn’t cover their subsequent higher offer.
Hu’s manager at Barfoot and Thompson, John Urlich, gave evidence to the tribunal that the practice of commission sharing was “rife” in Auckland and many agencies simply turned a blind eye to it.
Urlich said Hu was ethical and professional and conducted business with integrity and the suggestion he proposed the sharing agreement was entirely out of character and he was likely pressured into making the deal.
Several other property industry experts who had worked with Hu over the years also testified to his good character and integrity at the hearing.
A Complaints Assessment Committee of the Real Estate Authority said Hu’s offending was at the serious end of unsatisfactory conduct.
It said the commission was a significant financial motivator for him, that he breached his fiduciary loyalty to the vendor, he concealed the deal from his manager for two months and as a seasoned realtor, he should have been well aware of his obligations.
After three and a half days the tribunal found that Hu had breached his professional obligations and found him guilty of unsatisfactory conduct.
The tribunal said the lesser charge was found rather than the graver charge of misconduct only because it couldn’t be proven that it was Hu who initiated the arrangement rather than the buyer.
“Mr Hu was found to have breached his fiduciary duty of loyalty to his clients, the vendors, by secretly entering a commission-sharing arrangement with the purchaser,” the tribunal’s ruling reads.
“Mr Hu’s undisclosed sharing of commission was a breach of his fiduciary obligation of loyalty to the vendors. They were entitled to know at the time they were presented with his offer that their agent had divided loyalties.”
The tribunal said it didn’t class Hu’s conduct as dishonest but did note that deterring other realtors from entering into secret arrangements with their clients was important.
On the other hand, the tribunal noted this was Hu’s first disciplinary offence in more than a decade and had an otherwise successful career and a good reputation.
The tribunal ordered that Hu pay half of the REA’s legal costs at $22,000 as well as a $3000 fine. It also censured him for the finding of unsatisfactory conduct.
The buyer of the property is also pursuing civil litigation against Hu in the District Court in order to recoup half of the commission totalling $163,000. The Ministry of Justice confirmed that a court date is yet to be set for this.
REA chief executive Belinda Moffat said in a statement to NZME that the realtors had a fundamental fiduciary obligation to act in the best interests of their client and on their client’s instructions.
“Generally, in New Zealand the licensee acts for the vendor,” she said.
“While a licensee may offer to adjust their commission to achieve their client’s desired transaction outcome, a conduct issue can arise if a licensee withholds information from their client about such arrangements.
“REA considers the principle of transparency in relation to the transaction to be an important part of the agent/client relationship of trust.”
Hu declined to comment on the ruling.
Jeremy Wilkinson is an Open Justice reporter based in Manawatū covering courts and justice issues with an interest in tribunals. He has been a journalist for nearly a decade and has worked for NZME since 2022.
