Real Estate Agents: Complaints and Discipline Process

A new process for dealing with complaints was introduced through the Real Estate Agents Act 2008, which came into force on 17 November 2009. It is a process which greatly increased financial penalties able to be imposed on agents, and it has attracted a flood of complaints.

Under the previous legislation, complaints were made to the Real Estate Institute of New Zealand.  The Institute could refer serious matters to the Real Estate Agents Licensing Board, with the Institute acting as a prosecutor before the Board. 

There were shortcomings in the previous legislation with out-dated penalties and a very high threshold required to be met in order to obtain suspension or cancellation of a real estate agent's license.  Criticism of the previous system received a reasonable amount of publicity.  The result was a new system under which a new body, the Real Estate Agents Authority, is responsible for licensing and discipline. 

 Complaints Assessment Committees

Complaints made to the Authority are referred in the first instance to a Complaints Assessment Committee (CAC).  A CAC can make a determination of unsatisfactory conduct and impose penalties including fines of up to $20,000, as well as orders that the agent pay compensation to the complainant in any amount that the CAC considers appropriate, without any express financial limit. 

 If the CAC considers that a complaint raises particularly serious issues, it can lay charges before the Real Estate Agents Disciplinary Tribunal (READT) alleging misconduct.  The READT can order penalties including cancellation of the agent's licence, as well as compensation of up to $100,000.  The READT will also hear appeals against CAC decisions, either where the agent appeals against a finding of unsatisfactory conduct, or where the person who made the complaint has had their complaint dismissed by the CAC and wants to appeal that decision.

The new system has led to many complaints.  While the old system was criticised as favouring agents, the new system has seen the pendulum shift in the opposite direction.  Many see it as creating an environment which fosters complaints by providing a financial incentive for people to pursue complaints, at no cost or financial risk to themselves.  Once a complaint is dismissed by a CAC, complainants have an unfettered right of appeal to the READT, which must conduct a full appeal hearing.  As a consequence, CACs and the READT are burdened with a very heavy case load. 

Lower standards of proof

CAC hearings are conducted "on the papers", meaning that a CAC will make a decision which resolves a credibility dispute without the opportunity to assess the complainant or the agent in person.  There is a lower standard of proof than previously applied under the old system, with the 2008 Act confirming that decisions are to be made on the balance of probabilities.   Even where the complainant's complaint or subsequent appeal fails, they cannot be ordered to pay any costs. Yet an agent acts at their peril by failing to respond to a complaint or an appeal against the dismissal of a complaint.

Despite the best intentions of those who are charged with administering the new system, errors will occur. The pressure on resources from the volume of complaints, the reduced standard of proof, and the practice of conducting hearings without personally assessing the people concerned, will inevitably lead to mistakes.  There is also a greater risk to agents given the increased penalties that can be ordered, as well the added concern of the effect on professional reputation of an adverse decision. Decisions are publicised on the Authority's website and frequently reported in the media. 

Agents may be reluctant to incur the cost of seeking legal advice when a complaint is received, however, proper guidance on responding to a CAC during the investigation process can be much more cost effective than pursuing an appeal once an incorrect decision has already been made.    The risk to agents is increased given the wide range of financial penalties that can now be imposed, and the value of professional reputation is also very significant. 

Glaister Ennor partner Tim Rea has acted on behalf of REINZ for many years and is presently acting on a number of appeals before the READT. He recently represented a salesperson in the first successful appeal by an agent, in which an unsatisfactory conduct finding by a CAC has been reversed by the READT (Decision No: [2011] NZREADT 8). 

In that case, the CAC had made a decision of unsatisfactory conduct on the basis of legal analysis which was incorrect.  The CAC found that a duty existed for which there was no legal support and which was contrary to established authority.  The decision was then aggravated by the CAC finding that it had jurisdiction to order a penalty when no jurisdiction, in fact, existed because the conduct in question all took place before the 2008 Act came into force.        

Glaister Ennor regularly advises real estate agents on the complaints process and represents agents both in making submissions to a CAC, and on appeals before the READT.   

We can offer real estate agent advice and representation in disciplinary matters at all levels, including:

 * Responding to complaints in communications with CACs;

* Making submissions on liability and/or penalty before CACs;

* Acting on appeals to the READT;

* Defending charges pursued before the READT. 

For more information contact Tim Rea