Topics of interest
We publish a newsletter for licensees every 2 months. Topics of interest from previous newsletters are listed here.
Five ways to resolve complaints
REA’s early resolution team seeks to resolve complaints that don’t need to be referred to a Complaints Assessment Committee (CAC).
When a complainant contacts REA, the early resolution team asks if they have raised their concern with the real estate agency first. Some people tell us they have had a poor experience during the agency’s complaint handling process.
Here are five ways that can help salespeople and their managers resolve issues before they come to REA.
1. A complaint is a gift
Start with the approach that a complaint is a learning opportunity for you and the agency. Regardless of your intentions, the complainant believes something has gone wrong. Why do they have that perception? What can you change in your agency to make sure other customers don’t have the same perception? What can you learn about communication or customer expectations from this experience?
Understand the problem from the complainant’s perspective. Sit down and ask them to tell you what’s happened and what the problem is. Listen, and ask questions to make sure you understand what’s happened for them. Take notes if that helps you to focus on listening instead of responding to every point immediately.
Ask yourself, if I was in their shoes how would I feel? How would this have affected me?
Be prepared to listen to the complainant’s story before making a decision. Often there are three truths to a story:
- The complainant’s truth.
- The licensee’s truth.
- The truth.
3. Who should be involved?
Sometimes it’s best to have someone who wasn’t involved in the issue to look at the complaint, for example, the eligible officer or a dedicated complaints person. If this isn’t possible, try looking at the problem objectively or ask an independent person to help you look at the issues.
Don’t assume you know what the complainant wants - ask them. In our experience, complainants are looking for a range of responses to resolve their concerns, including process changes, having the agency understand the impact the issue has had on them, an apology and/or a contribution towards costs incurred.
Get creative with resolution options. What is the complainant’s underlying concern? What can the agency do to address that concern?
5. The importance of a good complaint process
Often issues arise in the first place because of poor communication or lack of transparency. It is important to tell the complainant what they can expect from the complaint process – who will do what by when? Keep them updated if there are delays or if you need more time to look into a complaint.
A positive experience of a complaint being handled well can improve customer satisfaction and increase customer loyalty.
If there is nothing further you can do to resolve the complaint, be clear about this and inform the complainant of their right to make a complaint to REA. Put your reasons and response to the complaint in writing to help REA’s early resolution team understand the complaint better if the complainant does come to us.
If you receive a complaint from a customer or client and are not sure how to approach resolving it, you are welcome to call us for help.
REA's early resolution team can help you
If problems arise during a real estate transaction, a facilitator from REA’s early resolution team can help all parties work through their differences to reach a mutually agreeable resolution.
Before we can work with a complainant and licensee through the early resolution process, two criteria must be satisfied.
- The complaint must be suitable for early resolution: Our early resolution team assesses every complaint. Complaints suitable for early resolution are generally of a less serious nature and don’t raise matters of public concern. Rather, they could be resolved through better communication and discussion between the parties. More serious complaints that involve issues of professional conduct, ongoing behaviour or relate to industry practice that needs to be clarified are still referred to a Complaints Assessment Committee (CAC).
- The parties must agree to the process: Every person who makes a complaint to REA has the right to have their concerns considered by a CAC. If our early resolution team thinks a complaint is suitable for early resolution, they will discuss this with the parties.
More agencies are choosing to engage in the early resolution process, and REA’s early resolution team is seeing increasingly creative resolutions that are speeding up the process for the industry and reducing the volume of complaints going to the CAC.
Complaints resolved through the early resolution process.
(All names and locations have been removed.)
Mr A, a prospective buyer, was interested in a property. The licensee told him there were no other potential offers coming in, so Mr A travelled to the property to view it and incurred due diligence costs. The property was then sold to another buyer, and Mr A felt he was not given the opportunity to submit his best offer.
REA facilitated a discussion between the parties about what had happened. After understanding the impact the licensee’s statement had had on Mr A, the agency offered:
- an apology for their part in the confusion over the process
- an acknowledgement that they made a mistake
- a financial contribution in good faith to Mr A, to acknowledge the inconvenience and costs he incurred.
The parties agreed to the proposed resolution.
A licensee was appraising a property for Mrs B, a prospective seller based overseas. The licensee approached the local council for information about the property, which resulted in the council conducting an inspection of the property. Mrs B believed the licensee should have notified her about any issues with the property and sought her authority before approaching the council.
The eligible officer (EO) suggested the licensee may not have fully understood their obligations to the seller and requested a conversation between the EO, the licensee and REA’s facilitator. As a result of the conversation, the licensee appeared to better understand their obligations. Mrs B was satisfied with this approach.
A complainant and a licensee had a difference of opinion around whether interest was due on a deposit payment that sat in the agency’s trust account for around 15 months before title was issued. The complainant lodged a complaint with the agency but was not happy with the delay in receiving a response from the agency or the tone of the response. He felt his issues had not been addressed by the agency.
The complainant made a complaint to REA. As a result, the agency put significant effort into addressing the complainant’s issues, including a review of their own complaints processes. They directly addressed the complainant’s concerns, and the complaint was resolved.
The early resolution team is impressed with the way complaints are being addressed by agencies. Sometimes we hear of barriers to resolving matters such as concerns raised by insurance companies. We would be interested to learn more about any barriers you encounter and hear about your experiences dealing with complaints both in-house or through REA.
Laws and conflict of interest
Laws and rules all licensees should know
In addition to the Real Estate Agents Act (2008) and its associated regulations, there are a number of laws and rules that you must comply with when carrying out real estate agency work. These are some of the laws to be aware of.
Commerce Act 1986
The Commerce Act is administered by the Commerce Commission and aims to promote competition and prohibit restrictive trade practices. A recent example of this Act being used in the real estate industry was the proceedings taken by the Commerce Commission against a number of licensees in relation to anti-competitive behaviour when Trade Me increased its advertising prices. Information on price fixing and cartels can be found here (external link).
Fair Trading Act 1986
The main impact of the Fair Trading Act (FTA) on licensees is the prohibition against false or misleading representations in relation to the sale or possible sale of land (section 14). This includes representations made in advertising when marketing a property. This is also mirrored in Rule 6.4 of the Code of Conduct. The Commerce Commission has useful factsheets about advertising - for example, see here(external link).
The FTA also sets out the terms on which auctions must be run (sections 36X – 36ZF). See the Commerce Commission’s factsheet on auctions here(external link).
Unit Titles Act 2010
The Unit Titles Act (UTA) sets out the regime for the establishment and administration of unit title properties. All licensees working in residential sales should be aware of the requirements of the UTA, particularly as they relate to disclosure and holding the deposit as stakeholder until the disclosure requirements in the UTA have been complied with. See, in particular, sections 144-157 of the UTA.
Health and Safety at Work Act 2015
The Health and Safety at Work Act came into force on 4 April 2016. It sets out the principles, duties and rights in relation to workplace health and safety. It is important that agency owners and licensees employed or contracted to an agency understand their rights and obligations under the Act. Licensees need to especially be aware of health and safety implications when visiting properties and when travelling to and from them. WorkSafe New Zealand has a lot of valuable resources and guides on the Health and Safety at Work Act. You can find WorkSafe's resources here(external link).
Anti-Money Laundering and Countering Financing of Terrorism Act
The Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT) was amended in 2017 and expanded to apply to real estate agents. Specific information for licensees can be found here(external link). The Act introduces customer due diligence requirements on agents and requires agencies to have completed risk profiles and an established AML/CFT compliance programme. Real estate licensees must comply with the AML/CFT Act and Regulations from 1 January 2019. Official guidance will be provided by the Department of Internal Affairs prior to this date. Banks, casinos and financial service providers are already covered by the AML regime and guidelines and information resources for these sectors can be found on the Department of Internal Affairs website here(external link) and on the Police website here (external link).
Understanding the Privacy Act
The Privacy Act governs how we collect, store, use and disclose personal information – information about an identifiable individual.
It also sets out rules around individuals’ rights to access information about themselves and to have that information corrected. The Privacy Act also provides a mechanism for individuals to make a complaint about matters to do with their personal information.
At the core of the Privacy Act are the 12 information privacy principles which model the way good businesses handle personal information.
The information privacy principles can be summarised as follows:
- Only collect personal information if you really need it
- Get it straight from the people concerned where possible
- Tell them what you're going to do with it
- Collect it legally and fairly
- Take care of it once you've got it
- People can see their personal information if they want to
- They can correct it if it's wrong
- Make sure personal information is correct before you use it
- Get rid of it when you're done with it
- Use it for the purpose you got it
- Only disclose it if you have a good reason
- Only assign unique identifiers (for example, driver licence number) where permitted.
Together, these principles form a life-cycle for personal information.
Agencies must first decide what information they need and where and how they are going to get it. They then need to ensure they hold the information with appropriate protections and they comply with any access or correction requests they receive. Finally, personal information should be used and disclosed with care and kept securely, and in line with the purposes for which the information was collected.
What does it mean for you?
Licensees collect information about private individuals every day. This might be on listing agreements, open home registers, auction registers, sale and purchase agreements or via online or email correspondence with consumers.
We have received complaints from consumers that indicate that not all licensees are aware of their obligations when it comes to personal information. Consider the cases below:
Case 1: Handwritten flyer
- Licensee handwrote a flyer for a mailbox drop. He stated that he had a buyer looking to purchase a 4-5 bedroom home, citing the name of the buyer and her budget.
- CAC found that the licensee was not familiar with the Privacy Act 1993, saying that he had had no previous need to consider privacy and that it was commonplace to share this information with other licensees (despite the information actually being shared with the general public and without the consent of the individual concerned).
- CAC found the licensee guilty of unsatisfactory conduct and ordered a censure and further education to be completed.
Case 2: Newsletter article
- Newsletter sent to recipients of licensee’s marketing database describing the experience of the ‘happy buyers and seller of 1 Joe Bloggs Road, Auckland’. The newsletter described the auction and its attendees, then went on to note that the property sold for 80% above the CV.
- This was followed by a picture of the seller and buyer outside the house.
- The complainants had their existing property on the market at the same time. The licensee had disclosed to prospective buyers that they had recently purchased another home and how much they had paid for it.
- The complainants said that the licensee had published the photo without their consent - they had thought it was a flyer just circulated amongst agency staff.
- The complainants were also embarrassed that it was so widely advertised that they had probably paid too much for the property.
- The CAC found the licensee guilty of unsatisfactory conduct on other matters not related to the privacy matter but found there was insufficient evidence to prove that the photograph was used without the complainants’ consent. The CAC found no further action in relation to the alleged privacy breach.
Case 3: Phone conversation
- Licensee facilitated complainant to sign a lease on property 2, while the complainant still had 4 months remaining on property 1. Licensee then called the owner of property 1 and enquired whether he could list the property because the complainant was moving out.
- Owner of property 1 called the complainant and asked what was going on and why he had received a call from the licensee.
- When investigated, the licensee responded that he was just making enquiries with the owner and didn’t owe any obligation of confidence to the complainant.
- CAC found licensee guilty of unsatisfactory conduct. He was fined $2000, censured and ordered to complete further education.
These cases demonstrate the need for you to be aware of your wider obligations to protect the personal information of both customers and clients under the Privacy Act as well as your obligations to protect confidential client information under the Code of Conduct.
For more useful information and resources to help you comply with your privacy obligations, visit www.privac y.org.nz(external link)(external link).
What you need to know about buying a client’s property
Let’s imagine you get a call from someone who wants to sell their property. You arrange to meet them and quickly realise that you think you know the perfect buyer. The trouble is, the perfect buyer is you. Here’s what you need to know about the next steps to take.
What are the rules when buying a client’s property?
The Real Estate Agents Act 2008 prohibits a real estate licensee, agency or related person (defined in section 137 of the Real Estate Agents Act 2008) from buying a property the licensee or agency has been engaged to sell, unless the client has given consent on the prescribed form (known as Form 2) and has been provided with a valuation (section 134).
The form of consent is prescribed by Form 2 of the Schedule to the Real Estate Agents (Duties of Licensees) Regulations 2009. It requires the client to state that an agency agreement was signed with the licensee and that the client consents to the licensee or related person acquiring directly or indirectly an interest in the land or business to which the transaction relates. It also requires confirmation from the client that a valuation or provisional valuation was provided or is to be provided in keeping with section 135.
Who pays for the valuation?
The Act clearly says that the licensee should pay for the valuation (section 135(1)), even if the person purchasing the property is a related person and not the licensee themselves. The valuation must be given to the client either before seeking their consent or, with the client’s agreement, within 14 days after obtaining consent (section 135(3)). Any consent given without the independent valuation being supplied is ineffective (section 135(4)).
What is a provisional valuation?
Form 2 has two options regarding the time when the valuation can be presented to the client. The first option (statement A of Form 2) is when the independent valuation is provided at the time of the offer and before Form 2 is signed. The second option (statement B of Form 2) requires the licensee to provide the independent valuation within 14 days of obtaining consent. If this second option is chosen, the licensee must provide a provisional value of the property.
In Advantage Realty v Real Estate Agents Authority and Gambino  NZREADT 83, the Tribunal held that every effort must be made by the vendor and purchaser to wait for an urgent independent valuation of the property, or alternatively, the provisional value figure to be inserted in Form 2 is the appraised value from the licensee.
Where the offer being made is less than the original appraisal figure, the licensee should provide a new or updated appraisal to the seller that reflects the current market value of the property. The new appraisal amount should then be used as the provisional value on Form 2.
What does ‘informed consent’ mean?
It’s important to understand that informed consent requires more than just filling in Form 2. If there is a difference between the amount used as the provisional valuation and the amount of the offer, the licensee must advise the client in writing before or at the time the offer is submitted that the offer is less than the licensee’s appraisal of what the property is worth.
The licensee should also advise the client in writing that the client will not have the right to cancel the contract under section 135(5) if the independent valuation is more than the offer price but less than or equal to the appraisal that is the provisional value.
If the independent valuation turns out to be greater than the provisional valuation, the client can cancel the contract for the sale of their property (if they have already signed one) without any penalty.
Can either party contract out of these requirements?
Form 2 is legally binding and neither party can contract out of it. This is made clear under the heading ‘Important information for clients’ and in sections 134 and 135. It is important that the client seeks legal advice before signing Form 2.
Marketing and appraisals
What you need to know about current market appraisals (CMAs)
Providing an accurate appraisal is important because it means sellers can make well-informed decisions about selling their property or business. Here’s how to ensure you are doing it right.
Appraisals are required for all listings
You must provide a written appraisal to any prospective client - residential, rural or commercial - before they sign an agency agreement. Rules 10.2 and 10.3 of the Code of Conduct 2012 set out the requirements for appraisals. Appraisals must be backed up by comparable sales data. Where there is no directly comparable or even semi-comparable sales data available, you must explain this in writing to your client.
Appraisals should be analysed for the vendor
It is not enough to simply present the prospective client with a list of properties or data collected. A licensee acting with sufficient skill and care will explain how the property compares to other recent sales, and how they have arrived at the appraised figure. You should explain why you have included some properties for comparison and be able to explain why you have excluded others.
Licensees must view the property
A licensee may breach rule 5.1 of the Code of Conduct 2012 if they do not visit a property before appraising it.
Unless there are exceptional circumstances and these have been fully explained to your vendor client, it is expected that a licensee will access the property they are appraising and ensure they have fully inspected the property before finalising the appraised amount.
The appraisal should reflect current market conditions
We hear from vendors who have listed with a particular agency after receiving a very positive appraisal. Shortly after listing the property, the licensee has begun to point out issues with the property and push for them to reduce the price. An over-inflated appraisal range may be a breach of rule 6.4 of the Code of Conduct.
Many vendors will have an idea of the value of their property or business based on what they have heard or observed, but this is not always realistic. A robust and thoroughly analysed appraisal will help manage vendor expectations.
If the parties are renewing the agency agreement (refer to section 131(2) of the Act) the licensee must provide the client with a new, current appraisal.
The appraisal amount also serves as an important tool in providing the vendor with an indication of how much commission they may be charged as a result of a successful sale. This is set out in rules 9.9 and 10.6 of the Code of Conduct.
Know your obligations before marketing a property
There are a number of things you should check before marketing a property for sale and you must always make sure that you fully understand what you are selling, before you market it for sale.
- When listing a property, get a copy of the certificate of title.
- Review the title and check the information on tenure, ownership, legal description and property description in the listing document matches the information on the title.
- Establish if there are interests registered on the title such as covenants, caveats, easements etc. that should be brought to the attention of prospective purchasers (and the vendor). If necessary have a lawyer help you to interpret what any restrictions mean.
- Find out the zoning and town planning regulations or Council requirements so you are able to point out what restrictions might apply to that property or its development potential.
- Read all the other material you get from the vendor about the property, and anything you intend to give to prospective purchasers, so you can identify anything about the property that may be out of the norm.
- You are not expected to verify where the boundaries are in every case. However, if you are aware of an issue you should point it out. If asked, you must either have the location of the boundaries or advise the purchaser to get professional surveying advice.
- Make sure the way you market the property matches the information you have about the property.
- If there are restrictions on the use of the property or other things features out of the normordinary, point these out to the prospective purchaser and advise them to seek professional advice.
- If the vendor has made a claim about the property that you have not been able to verify, then we recommend you do not make this that claim. In some cases it may be acceptable to tell the prospective purchaser that the claim is based on a statement made by the vendor and that it hasn’t been verified. In this situation you should recommend that the prospective purchaser verify the issue for themselves and get professional advice.
- Keep a written record of information you have given a prospective purchaser and if you have advised them to get professional advice.
You are not expected to know everything about the property. If you don’t know something, don’t ignore it, get professional advice.You are expected to be honest about things that you don’t know, and if you wish to clarify facts about the property that you don’t fully understand you should get professional advice.
What you need to know about drone photography
Drone photography is becoming increasingly popular in property advertising campaigns thanks to its ability to showcase particular features like coastal views or sweeping grounds. Here’s what you need to know about using it.
What rules apply if I want to take photos using a drone?
You must comply with Part 101 of the Civil Aviation Rules(external link)(external link) when you are using a drone.
This includes the following points:
- You must fly the drone so it is not a hazard to other aircraft, property and people
- You must fly only in daylight
- You must have consent from the people you are flying over
- You must have permission from the owner of any land you are flying over
- You must not fly the drone in controlled airspace without authorisation from air traffic control and not within 4km of an airport without agreement from the aerodrome operator.
You should also consider the Privacy Act when taking photos from a drone. Make sure you have permission from everyone whose land you want to fly over, and communicate clearly with them about when it will be taking place.
Is it best to use a drone photography expert?
The Civil Aviation Authority (CAA) suggests the easiest way for licensees to comply with the Civil Aviation Rules is to use a Civil Aviation Certified Operator who can take drone photos for you.
Certified operators have proven to the CAA that they have considered all of the risks that come with operating a drone. This means that not all of the restrictions in Part 101 apply to a certified drone operator. Make sure you ask the operator to see a copy of their certificate.
What happens if I don’t follow the rules?
The CAA can issue infringement notices to those who breach Part 101 of the Civil Aviation Rules. In some cases operators can be prosecuted.
To learn more about drone photography or to raise concerns about anyone operating a drone visit the CAA website(external link)(external link).
To learn where you can operate a drone and what permissions you need, visit www.airshare.co.nz(external link).
Issues to avoid
How to avoid problems with sale and purchase agreements
We receive a lot of enquiries, some of which end up as complaints, about sale and purchase agreements. In our experience, sellers and buyers generally misunderstand:
- What the clauses and conditions in the sale and purchase agreement mean
- That the sale and purchase agreement is legally binding
- The chattels list (including what constitutes a chattel)
- Their right to seek legal advice before signing the sale and purchase agreement
Most of the concerns we deal with could have been avoided if the parties had sought legal advice before signing the agreement. Clear communication from you can also help prevent problems.
Writing up the sale and purchase agreement
You will often be asked by buyers to help them write up their offer. If you are adding clauses to the sale and purchase agreement, make sure they are clear and the buyers understand who will do what by when. If you are unsure about how to write up a certain condition, refer the buyer/seller to their lawyer or seek advice from your manager or agency lawyer.
You should have clear instructions from the seller about what is to be included in the chattels list. If the seller is planning to remove something that the buyer might consider a fixture (for example, the waste disposal unit or the DVS) make sure this is clearly recorded in the sale and purchase agreement.
If there are conditions in the sale and purchase agreement it is important to ensure buyers and sellers have enough time to fulfil the agreed conditions.
Make sure all of the parties who need to sign the sale and purchase agreement have signed it. If a party is a trust, have all the trustees required by the trust document signed? Have all the directors of the company signed? If it is a marital property ensure all parties on the title have signed.
Changes to the sale and purchase agreement
If there are any changes to what is agreed between the parties (for example, a change in settlement date) this must be recorded on the sale and purchase agreement and initialled by all parties.
Recent issues raised in complaints involving sale and purchase agreements
- One of the more serious issues we deal with is when a licensee fails to check that the GST status of the buyer and/or seller is correctly recorded on the sale and purchase agreement, and does not refer the parties to get independent expert advice about GST issues. Don’t forget to do these things!
- Some local councils lend money to homeowners to upgrade their property (to install insulation or connect to a new sewerage system, for example). The council may then allow the homeowner to pay the loan back through their rates. This loan may pass with the property (the same way rates pass with the property) and may need to be addressed in the sale and purchase agreement.
- A solicitor’s approval condition gives very limited options for either party to get out of the sale and purchase agreement. Most parties think it is a ‘get out of jail free’ card to cancel the agreement if they are not happy with it. You should make sure the party understands that there are limits in how their solicitor can use the clause and refer them to get legal advice before they sign the agreement.
- It is important vendors understand what a ‘cash out’ clause means – they often believe it will allow them to cancel the first sale and purchase agreement immediately if they get a better offer. You should make sure they understand the original purchaser still has a binding contract, just a shorter timeframe to meet their conditions if the seller activates the clause.
How to avoid employing an unlicensed person
Section 6(external link)(external link) of the Real Estate Agents Act 2008 requires that people carrying out real estate agency work are licensed.
If you are responsible for employing or supervising salespeople who carry out real estate agency work on your behalf, or on behalf of your agency, you need to ensure they have a licence.
If you employ someone who does not have a licence, you are exposing yourself and your organisation to significant risk including the possibility of prosecution.
Before interviewing a new salesperson, check the Public Register, to make sure they have an active licence. If the Public Register shows their licence is suspended, you need to note this. If you employ that person, you will need to re-check before they start real estate agency work to make sure their licence has been made active.
Ensure you note the names under which your salespeople are licensed, and the expiry dates of their licences. Do this for all your licensed employees, new and existing, and check the Public Register the day after their licences are due to expire - check that the licence expiry date now shows as being the following year.
If you cannot find someone on the Public Register, it means they are licensed under a name that is different to one you have for them, or they do not have a licence. You should ask to see their evidence of licence – all licensees can download a copy of their licence from the Licensee Portal. You can use the name or the licence number on the evidence of licence to check the Public Register. If you are still unable to find the person on the Public Register, it is likely they have not renewed their licence and have been removed from the register. If this happens, you should contact us to check the status of their licence.
If you have any reason to believe an unlicensed person is carrying out real estate agency work you must contact us immediately. We will be able to confirm the status of the licence of the person concerned. You have a duty to report unlicensed real estate agency work under Rule 7.4.
It is the responsibility of the licensed individual to make sure they renew their licence on time, however it is your responsibility to ensure you only employ people who hold a current licence.
We recommend that you seek legal advice on appropriate conditions to include in your employment agreements that provide a process when one of your employees’ licences expires. This will help to avoid employment disputes.