Three Tales of Deceitful Real Estate Agents Successfully Sued

Posted on January 12, 2012 by | 17 Comments

Tim O'Dwyer M.A., LL.B OPINION
by Tim O’Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au

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Real estate agents are rarely prosecuted or sued. Sure, we regularly hear about misbehaviour in the real estate industry and occasionally a real estate agent appears in court, but this is a rarity compared to the level of misbehaviour and misconduct encountered by consumers on a day to day basis. The reason for the low rate of court actions against real estate agents is the reluctance of consumers or their representatives. Consumers cannot match the dollars real estate agents are able to invest in court action, and those who represent consumers in real estate matters usually rely on referrals from real estate agents and are unwilling to bite the hand that feeds. Occasionally, however, a real estate agent is brought before the court. In this posting Tim O’Dwyer examines three examples of estate agents successfully sued.

TALE ONE (FROM NEW ZEALAND):

Consumer advocate Neil Jenman says treacherous “bird-dog” real estate agents, who locate deals for investors and speculators while still charging their sellers commission, should be busted “big time” – as ultimately happened to the agent in this first tale.

Warren and Rose West’s New Zealand home had been on the market for some time, but they received only one low offer despite reducing their price.  Then they became motivated, if not desperate, sellers when they contracted to buy another home subject to selling their own.  Their “window of opportunity for an advantageous sale” (as one judge subsequently put it) was limited, if they were to proceed with that purchase.  So they quickly sold for $2.75 million, even though they felt their home was worth about $3 million.

Five years, one court hearing and two legal appeals later Wests’ selling agent, KiwiRealty,was ordered to pay them almost $1million for damages, interest, costs and refund of commission.

Wests had discovered, to their dismay, that within six months their buyer, Dave Dagg, on-sold through KiwiRealty to an overseas buyer for $3.555million.   Admittedly Dagg made some improvements, conducted an aggressive international sales campaign in a rising market, but Wests felt betrayed.

They then sued KiwiRealty after dismally discovering further that its saleslady Jenny Spink had not revealed while handling their sale, that she knew Dagg often purchased properties to resell at a profit.  Nor did she disclose KiwiRealty’s ongoing “bird-dog” relationship with Dagg and, in particular, its involvement in several of his previous wheeler-dealing purchases and resales. 

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17 Comments

  • Hi Tim,

    Today I received a letter from Kim Bryant – Fair Trading Liaison Officer that the additional matters raised on misleading and deceptive conduct, are being examined and a response will be provided shortly on the future regulation of the Australian Real Estate Industry.

    The additional matters raised were sourced from this fact sheet below, which was developed by Industry Training Consultants to highlight the issue of misleading and deceptive conduct and the systematic risk management approach needed to avoid breaches and potential prosecution.

    http://www.itc.nsw.edu.au/How%20to%20maximise%20the%20eventual%20sale%20price%20in%20a%20fragile%20market%20Version%201.9.pdf

    Unfortunately Tim, our research shows that traditional real estate businesses haven’t as yet modified their business models to comply with the new Commonwealth Competition and Consumer Act 2010 in particular – misleading and deceptive conduct, unconscionable conduct and unfair contracts.

    I have rationally concluded Tim that neither, state government agencies nor giving the responsibility of regulating the real estate industry to a National Licensing Authority to fix these systemic problems (which go way beyond the conduct of real estate agents) is the answer to raising levels of transparency and protecting consumers in the markeplace. The property market appears too important to be regulated on its current typically severely fragmented basis and we have this ongoing problem with media and investment spruikers, and developers being all unregulated areas of the housing market, but to make matters worse – there are now reports of fund managers, mortgage brokers and financial planners slowly edging their way into the real estate arena and not having met the state legal requirements on licensing. And the worst thing of all, is that the Australian Securities and Investments Commission ( being ASIC ) are powerless to do anything on this front when they have no jurisdiction to regulate the property market and protect consumers. I’ve been told by ASIC officials it is a matter for parliament and one that state fair trading ministers need to take seriously for the sake of economic growth and stability.

    Also, as you are aware and going by the article below, NSW alone made $3.9 billion from real estate stamp duties in the year 2011 to June, around one third of the national total. I concur with the comments made in this article, that any lost revenue could be paid for by increasing the goods and services tax by a quarter, from its current rate of 10 per cent to 12.5 per cent or implementing a broad-based land lax on the owner-occupied home. The Henry tax review reported that “ideally there is no place for stamp duty in a modern tax system”. It found they discourage property turnover and penalise property improvements

    http://www.macrobusiness.com.au/2011/09/abolishing-stamp-duty/.

    I don’t know about you Tim, but I can feel a real estate revolution is just around the corner with a high level of technological innovation and change to drive it.

    By the way the title heading of your article “Three Tales of Deceitful Real Estate Agents Successfully Sued” is an absolute beauty and from me well done!

  • Hi George,

    Just on the issue of ASIC needing control over real estate businesses, if real estate businesses were to operate as incorporated legal practices they would certainly come within the purview of ASIC, as well as that of the Legal Services Commissioner.

  • Loved the article, Tim.

    Regulators and State Governments have deliberately chosen to avoid easy low-cost enforcement in the introduction of the national occupational licensing legislation.  That legislation expressly enable each jurisdiction to elect to use one of two mechanisms:

    –  the usual prosecution process whereby the DPP considers a report from the regulator and, if the DPP wants tp proceed, the police are engaged to gather evidence, etc. etc.  Very resources hungry, costly and slow!

    –  for less serious offences, a ‘show cause’ process in which the regulator with reasonable grounds to suspect a breach serves a notice on the alleged offender requiring him/her to show cause why he/she should not be penailsed (scope of penalty outlined) on the basis of the alleged facts set out in the notice.  If the alleged offender is unable/unwilling to refute the alleged facts, he/she is penalised on that basis by a special tribunal – with the penalty taking into account any prior history and matters raised by the offender.  This process is particularly applicable to alleged fiduciary breaches because a fiduciary must be able to show that he/she did act in the client’s best interests.  It also means that minor breaches (which are presently ignored by DPPs owing to cost, resources and relative unimportance) are progressed.  Relatively quick and cheap.

    The Govts and regulators have elected not to use the ‘show cause’ mechanism.  The only reasons that come to mind are:

    –  electoral – ie they do not want to upset anyone;  or

    –  cost – ie they do not want to spend money on enforcement.

    My personal view is that either reason is unacceptable and encourages unethical and illegal behaviour.  

  • http:// says:

    It’s really necessary to have a law or something that would control real estate businesses. Aside from we’re talking about trust in this matter, we’re also talking about property investments which is huge money investment.

  • Geoffrey Adam, you may have heard about a Melbourne real estate agent to deceived a purchaser into paying $200,000 more for a property. He was sued by the victim, but what what about the serious criminal offence of Obtain Financial Advantage By Deception under Section 82 of the Crimes Act?

    Well Consumer Affairs Victoria, as regulator of real estate agents in this State, appears to have decided that a serious criminal offence involving a gross breach of trust in circumstances of fiduciary duty is not something it wants before the criminal courts. Instead, CAV has asked VCAT to determine whether or not the real estate agent should be regarded as fit to hold an estate agent’s licence.

    Surely a custodial prison sentence could have answered this question so meekly raised by our supposed industry watchdog.

    We need to take this industry away from lame duck regulators who have no stomach for proper regulation and enforcement, and entrust it to those who are better staffed and equipped to deal with it. A well resourced Legal Services Commission and ASIC would put things right.

  • http:// says:

    Hi, I live in a small coastal town in NSW. A very run down house in a well-known street has had a very nice renovation done on it – it looks fantastic. The problem is it is being marketed by a very high profile local real estate franchise as a “new contemporary home” but it is definitely not a new build. It was a 1940s build I’d say, and in very poor condition. The phrase “new contemporary home” appears on the street sign, in the agents window, on a postal flyer and on the internet. The asking price is astronomical. It is the most blatant case of misleading advertising I have ever seen. I don’t know what to do as a complaint to fair trading cannot be anonymous. The problems of being a small town resident….I have photos of the house pre and post-renovation, taken from the same angle. If it wasn’t so wrong it would be funny. Any advice? I would just really like to see the agent delete the word new from the listing.

  • http:// says:

    Hi loyal local, please give me a phone call to discuss a possible solution to your concern: 0732081488

  • MazinGanim says:

    Without a strategy you are just throwing something against the wall and seeing if it sticks. Tim, I have a point, The additional matters raised were sourced from this fact sheet below, which was developed by Industry Training Consultants to highlight the issue of misleading and deceptive conduct and the systematic risk management approach needed to avoid breaches and potential prosecution. What do you say?

  • Mazin, you didn’t add the link to the fact sheet.

  • Without a doubt, Westerns have surely taken a right step. They were ditched by a shrewd real estate agent and they got all the possible rights on earth to get compensation for their losses. My point of view—you gotta do away with absolute researches before buying and selling home from real estate. Roam around and get hang of market prices on properties or you can hire some trustworthy real estate agents.

  • subhadra shome says:

    Four weeks ago I sold my highton property and lost several hundred dollars in a matter of seconds. My reserve price for the property was 480000 which he flatly refused and imposed his 380000 figure with an attached note saying I was giving him the authority to sell at 380000 dollars. When I question ed about this behaviour his comment was he had to get a sale by slashing 120000 dollars of my reserve price.and if the correct price was placed it took too long to get results My property went for a song. Atrocious fraudulent behaviour from a person who owns the real estate business. Should this cheap selling be permitted by law for greedy agents.
    sue

  • Eliana says:

    Hi Peter,
    I am from Sydney & Currently battling with fair trading over my drastic real estate issue but I am getting nowhere.
    Back in 2014, my husband & I were going through a separation. We got to selling our house however not on speaking terms. I found an agency in Belfield & we both signed a sale of house contract.
    The situation was very stressful so I went to Perth for a while however before doing so I left my agent know that I would be back to take care of all my possessions in the house. Furniture, photos, clothes, personal items, pets that were being looked after. I was reassured that I had months before I had to empty the house.
    Long story short, one week later my house was wiped out, pet food was all gone, belongings, food, clothes, jewellary, photos, furniture, all gone.
    I later found out that the agents when to my seperated husband & told him that I moved to perth and was not coming back. They also pressured him & said that agents dont sell houses with furniture in them. My husband then in anger told them to get rid of the items in the house. ( my husband had no idea what was in the house as he was away for 11 months).
    In the end, the agency wired us $5000 when my husband & I got back together & the truth came out. I got so angry at this amount and also my husband has asperges a slight form of autism which means he backs down from confronting people because he is so quiet and shy.
    I have emailed fair trading so much proof of this wrong doing and think this agency really needs to compensate alot more for what they did. I had to sleep on the cold floor for months because they took my bed too. Their license needs to be reviewed also but fair trading is saying they did nothing wrong.
    What is your view?

    Im so upset.

    Thank you for your time.
    Eliana Maugeri

    • Peter Mericka says:

      Hi Eliana, what do you say the agents did wrong? I assume that your husband had authority to instruct them?

      • Eliana says:

        Hi Peter, & thank you for your reply

        My husband & I were separated. I was the only one living in the property for 11 months leading to the event. I turned my back for a few short weeks & the selling agents selling my house switched from one man to another. Before I knew it they had misinformed my husband that I had moved to another state & that abandoned everything in the house. My whole life was in the house. They also told him that houses do not get photographed for sale when furniture is inside the house. Two massive lies. Houses do get photographed with furniture & the agent told me that I had months to remove my items from the house, I went on a holiday & when I got back my life belongings were gone.
        The agency never wanted to show me documentation of where all my belongings went & all agents I speak to tell me that such a thing can not be carried out unless BOTH parties agree and consent to it in writing. Is this true?
        They payed us $5000 to keep quiet but I wont keep quiet & the $5000 is just evidence now.

        • Eliana says:

          I should also add that my husband has asperges so he actually believed everything they were saying.
          2 weeks later I was back in sydney where I always live. I was only in Perth for 2 weeks and I had months to look after the items in the house.

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