Property vendors and real estate agents beware

October 16, 2014

in Property

Property: HousingMost experienced real estate agents will recall some of the practical difficulties arising from the Real Estate Agents Disciplinary Tribunal’s decision in LB and QB v The Real Estate Agents’ Authority & Li (2011).

This case involved a land covenant that had been registered on the title, which prohibited the land from being used as residence for multiple household units, flats or for any trading or commercial purpose. It was only after settlement of the property that the buyer discovered this land covenant.

The tribunal made the following comments:

“We consider that a licensee, upon taking instructions for a sale of a property, should search its title, or have some competent person search it for the licensee, and be familiar with the information gained from such a search. In this case it would have also been necessary to search the content of a transfer shown as containing a restrictive covenant.  Such a search is not a difficult task to carry out or arrange. 

 Similarly, the licensee should ascertain such matters as zoning and compliance with town planning regulations or Council requirements. We do not accept that a licensee can simply regard such matters as within the realm of a vendor or purchaser’s legal adviser.  Licensee’s should be familiar and able to explain clearly and simply the effect of any covenant or restrictions which might affect the rights of a purchaser.  This is so whether that purchaser is bidding at auction or negotiating a private treaty”.

The Property Law Section of the New Zealand Law Society and the Real Estate Institute of New Zealand subsequently provided recommendations to address the issues raised in the tribunal.

These regulatory bodies recommend that licensed real estate agents should obtain a copy of the Certificate of Title for the property and ensure that the information on that title matches the information on the listing. Licensed real estate agents should also establish whether there are any interests or restrictions on the title such as covenants, caveats, and easements that should be brought to the attention of the potential purchasers of the property.

This information should be raised by the licensed real estate agent with the vendor client and he or she should recommend that an information pack be obtained from the vendors’ lawyers, which the agent can request with the client’s authority.

If the vendor objects to this idea, then the licensed real estate agent should inform potential purchasers of the situation and recommend to each purchaser that he or she obtains their own independent advice from their own lawyers preferably before they make any written offer and remind the purchasers of the right to make their offer conditional on lawyer’s approval clause or a due diligence investigation.

The writer recently attended an open home for a flat in a central Auckland suburb. He was informed by the licensed real estate agent listing the property that it was subject to a cross lease but she did not know where the boundaries were and had no information of the owner’s common areas, maintenance obligations, and easements. Aside from a search copy of the title and the relevant deposited plan, no further information or advice was made available.

If no further advice or information was provided to the potential buyers subsequent to the open home, then it is likely that these comments alone will fall short of the regulatory bodies’ recommended standard of care and advice.

Licensed real estate agents must also comply with new consumer protection requirements. It is essential that they provide satisfactory explanations to potential buyers. A defence of ignorance or lack of knowledge regarding the property is likely to be found wanting by the Real Estate Agents Disciplinary Tribunal.

We assist vendors and licensed real estate agents by advising them of their legal obligations, details of any property to be listed and compiling an information pack inline with the New Zealand Law Society and the Real Estate Institute of New Zealand’s recommendations.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Steven Lee
09 379 0055 or 03 477 8870


The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.

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