Whether you’re a lawyer or a real estate agent, a complaint is the thing we all fear. It’s not just the time it takes in dealing with it, but the uncertainty around what the outcome of the complaint will be. A recent decision of the High Court has provided an insight into when the courts will (or in this case - won’t) require a licensee to pay money to a buyer to correct an error or omission.
Let’s start with a few facts about the case.
It all starts with a property in the small town of Waipawa that was advertised with (among other misleading features) a “new solid fence”. The out of town buyer who didn’t visit the property in person, commissioned a building report during his due diligence condition period. Together with other issues, the building report identified that the “new solid fence” was in fact a corrugated iron fence needing some remedial work. After unsuccessfully trying to negotiate a price reduction, the buyer confirmed the due diligence condition and proceeded with the sale.
“The main takeaway is to remember to always be very careful with your advertising.”
Following settlement, the buyer made a complaint that the Property’s advertising was misleading and sought $49,381 compensation to bring the Property up to the advertised standard. The Complaints Assessment Committee made a finding of unsatisfactory conduct and fined the Licensee $5,000 and ordered further education. This decision was appealed and the Tribunal ordered the Licensee to contribute $10,000 towards the buyer’s costs of rectifying the misrepresentations about the Property. Unsurprisingly this was appealed to the High Court. The Licensee accepted the finding of unsatisfactory conduct, but appealed the order to pay $10,000.
In a nutshell, the High Court found that while the buyer had been misled at the time he made the offer, the builder’s report put him “on notice that the Property’s condition was not necessarily that advertised”. This finding was based on the buyer’s actions in trying to negotiate a price reduction, and despite having the ability to cancel the agreement, deciding not to cancel and instead confirm the due diligence condition.
The Court set aside the order to pay $10,000 and found that there was no casual connection between the Licensee’s misrepresentations and the cost of remedying the issues with the Property once the sale and purchase agreement became unconditional.
So what does this all mean? The main takeaway is to remember to always be very careful with your advertising. Secondly, where a buyer isn’t able to visit the property in person, encourage them to make any offer subject to a builder’s report and ensure they get one done.