A home buyer in South Auckland was outraged when he discovered that a large portion of his new property was going to be claimed by Auckland Transport – and that the real estate agent knew about this at the time but did not pass this on.
Non-disclosure of material information by real estate agents continues to be a hot topic for our real estate clients. In a recently released decision, the Tribunal found that a real estate agent failed to disclose that Auckland Transport intended to take 107m2 of property under the Public Works Act.
In early 2016 Mr Singh bought a property in Goodwood Heights. What he didn’t know at the time was that Auckland Transport was going to take a slice of the land to widen the road.
Mr Singh made a complaint to the Real Estate Authority, which investigated.
The real estate agent, Indra Prasad, denied she had failed to inform Mr Singh and his agent about the road widening. In support, she pointed to her own diary entries, which recorded in writing on a number of different dates that she had told all prospective purchasers including Mr Singh’s agent about the road widening.
The Authority laid a misconduct charge and a disgraceful conduct charge against her, alleging non-disclosure, and that she had falsified her own diary records by retrospectively adding in diary entries.
At the hearing, one of the key issues was the reliability and credibility of her diary entries. In finding the charges proven, the Tribunal found that:
- There were a number of issues and inconsistencies with her diary notes, and that Ms Prasad’s diary entries were not reliable or credible. A handwriting expert was not needed.
- She had falsified diary records to support her case that she “told everyone” when she learnt of Mr Singh’s complaint.
- There was no advice of the road widening proposal in any written marketing material and that, while Ms Prasad did tell some prospective purchasers about the road widening, she did not inform everyone and it was not for her to select who to inform.
- The road widening and consequent loss of 107m2 from the property would inevitably have a significant impact on the sale price, which clearly gave rise to an obligation of disclosure.
At the penalty hearing, Ms Prasad was censured, her license was suspended for 18 months, and she was ordered to undertake further training and education.
Take away points
A real estate agent will always act in the best interests of the seller when it comes to marketing a property. However, licensed real estate agents have clear obligations when it comes to disclosure:
- The agent must not mislead a seller or a potential buyer.
- The agent must not withhold any information.
- It is not up to the agent to uncover any hidden defects in a property, but they must tell any prospective buyers what they know.
Under the Real Estate Agents Act 2008, if a licensed real estate agent suspects that a property may have a defect then he or she is obliged to ask the seller about it, or advise potential buyers of any risks.
There are sometimes grey areas, and the question of whether something needs to be or has been properly disclosed is not always straightforward. The best way for a real estate agent to avoid any confusion about whether something material has been disclosed and the potential consequences is to provide the information clearly, in writing, to all relevant persons.
Simon Waalkens is a specialist in real estate agency disclosure issues and acted for the successful party in this case. He has acted for and against real estate agents in a number of disclosure related cases, on issues as diverse as failing to disclose a house was contaminated with methamphetamine, failing to disclose weather tightness issues, failing to disclose a conflict of interest, and misrepresenting access rights to land and water.