Natural disaster damage
Listing a property in a high natural event area has its challenges. It is important you understand what these are so you can best protect yourself.
There is an outstanding claim on the property
If a vendor has told you there is a claim on the property, you should ask for the details of the claim to pass on to any potential buyers.
Potential buyers may want to add conditions to the sale and purchase agreement requesting a full and accurate statement of all EQC claims for the property (home and land), including any settled or outstanding claims. The buyer can also include a condition that all claims are assigned to them.
The vendor does not want to disclose any claim or damage
The vendor should disclose any known defects when listing their property. If they don’t disclose known issues, they may be held liable by the buyer for misrepresentation. We recommend you suggest the vendor seeks legal advice about their obligation to disclose any defects that affect the property.
It’s important to remember that, if a vendor asks you not to disclose a defect that you are aware of, such as structural damage following an earthquake, you can’t continue to act for them.
A claim has been paid out, but no work has been done
Ideally, the price will reflect the value of the property in its unrepaired state.
Disclosures should still be made about the property, and any supporting documents you have received from the vendor can be given to potential buyers.
We recommend you suggest buyers get expert advice about risk, finance and insurance so they can make an informed decision. It’s important to remember that, while it is not your job to discover hidden or underlying defects with the property, you should know if it is subject to a defect and must disclose known defects.
If it appears likely that the property may be subject to a hidden or underlying defect, you have additional obligations to either:
- get the vendor to provide evidence stating the property is not subject to any defects or
- ensure a buyer knows there’s a risk and explain they should consider getting expert advice.
Failure to make proper inquiries
The CAC found that the licensee passed on information about EQC to the complainant (the buyer) on at least two occasions when he had failed to make proper enquiries to clarify that information was accurate:
That information included the completed Earthquake Claim and Insurance Form, on which the vendor had stated that the claim had been paid out and repairs not completed, and an email... which stated the vendor had not seen the scope of works report. These two statements were received together by [the licensee], and accordingly, he queried the inconsistency with the vendor. He maintains that the vendor then confirmed that the EQC claim had not been paid out...
The inconsistency between the completed Earthquake Claim and Insurance Form and other correspondence between [the licensee] and the vendor... should have alerted [the licensee] to the need to seek independent verification of what he was being told about the EQC claim. Unfortunately, however, [the licensee] simply relied on a statement from the vendor without seeking confirmation from EQC of the status of the claim.
Misled the complainant regarding EQC information
The CAC found that the licensee misled the complainant regarding the EQC information:
[The licensee] provided to her on two occasions information that he did not know was correct... [and] did not make it clear to the complainant that the information he was providing was from the vendor and that she should make her own independent inquiries. Nor did he explain to her that he had not checked or verified the information he was passing on...
[When] advertising includes a positive representation (we consider that promoting of the property in any form amounts to advertising) the licensee is obliged to ensure that they explain the source of the information to the purchaser, and that it will need to be independently verified. This was not done in this situation.
The licensee breached rule 6.4 of the Professional Conduct and Client Care Rules (Code Of Conduct) and section 72 of the Real Estate Agents Act 2008 as his conduct fell short of the standard expected of a reasonably competent licensee.
He failed to make proper enquiries or seek independent verification when he established that the vendors had not been paid an EQC claim.
The licensee also misled the complainant by failing to inform her that he had not verified the information provided by the vendor regarding the EQC claim.
What this means for you
When providing information to potential buyers, it is important that you first ensure it is accurate and correct. You must also make it clear to buyers where the information you are providing comes from and that it may need to be independently verified to confirm its accuracy.
If the vendor is providing you with contradicting information, you must make proper enquiries and seek independent verification on the matter.
We recommend you seek advice about the effect of the Tribunal's decision if this is a significant matter for you.