Assessment 3. pdf

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International College of New Zeland *

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RES420

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Accounting

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May 20, 2024

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Page 1 Task 1: Fair Trading Act 1986 (FTA) Explain the three different elements of the Fair Trading Act in relation to real estate below, and provide a real estate example for each. a. Misleading and deceptive conduct generally (section 9). Misleading and deceptive conduct are classified as a civil offence. Misleading and deceptive conduct and false representations. Businesses must not mislead or deceive you about the things they sell. This covers anything written or said about products or services, including e.g.: advertising. For example, excessive photoshopping on photographs of the property may be misleading or deceptive, as they give a viewer an impression of the property that is different from its true nature. Or another example is a 'buy one get one free' offer. If you raise the price of one item to make up the cost of the second “free” item, this would be considered to be misleading. People have to remember that, everyone has a different level of knowledge, therefore what you know or understand does not necessarily make sence to somebody. Be clear about advertising something because it is easy to create a misunderstanding. If you did something wrong by accident you still have to face the law. If you have committed misleading or deceptive conduct in trade or in an offer of employment, or if an individual has committed such conduct on your behalf, you will have committed a breach of the law. b. False representations and misleading conduct in relation to land (section 14). It can be a criminal offences when someone making a false representation. In relation to land: prohibits false or misleading representation. Conduct in relation to the sale or possible sale or promotion for sale of an interest in land and also apply to real estate work. Or deceptive or is likely to mislead or deceive. It is against the law if salesperson to knowingly hide or give incorrect information of buying and selling property. For most people, their home is their greatest asset and when it comes time to sell or lease it, they put their trust in a property agent. Honesty and transparency in the real estate industry are essential. For example, giving incorrect information about the area of land belonging to a property, e.g. stating that a property has larger land than it actually has or lies about the true price. Or there is a nice and well designed handcrafted house. It used to be but now it is an old house in a poor/weak condition.

Page 2 c. Unsubstantiated representations (section 12A). If something is unsubstantiated, it has not definitely been proved to be true. Unsubstantiated representation in not established as true by evidence or demonstration . An unsubstantiated representation is a claim made in relation to the sale of property that does not have any reasonable basis whether statements made within on websites, marketing materials, verbal statements made by a salesperson. Real estate agents should look at their advertising and business practices to ensure that they accommodate this change. You need to be vigilant and take steps to ensure that any statements you and your staff make (whether verbally to a prospective purchaser or in advertising) are accurate, genuine and can be substantiated. Note: Please ensure explanations are in your own words and not copied directly from the legislation. (Word count guideline: 75 words per element) Task 2 – Contract and Commercial Law Act 2017 (CCLA) Explain the purpose of the Contract and Commercial Law Act in relation to misrepresentations in real estate. Include in your explanation two remedies that are available to complainants under this Act. (Word count guideline: 100 words) Under the Contract and Commercial Law Act 2017, if a party is induced to enter a contract due to misrepresentation, that party is entitled to damages. It is irrelevant whether the other party made the misrepresentation innocently or fraudulently. The party affected by a serious misrepresentation can cancel the contract. A salesperson It is against the law for either a real estate agent or private seller to knowingly hide or give incorrect information about a property. This is called misrepresentation. Misrepresentation is when one party makes a false statement about a past or existing fact that induces another party to enter into a contract. If there is a finding of misrepresentation, the party misrepresenting the issue may have to pay the other party damages. For example, if the owner tells the buyer there are no leaks when they knows the house has had problems with leaks in the past. If your contract provides a remedy in case of a breach of contract or misrepresentation, that remedy can take effect. For example, your contract may state that if one party fails to fulfil their obligations, that party must provide compensation to cover the loss.

Page 3 Task 3 – Scenarios For each of the five scenarios below, answer the following questions: a. What has the salesperson done wrong? Explain what the salesperson has done that could be cause for rules of the Code or legislation to be breached. b. What section of the Fair-Trading Act 1986 has been breached? If appropriate, what section of the Contract and Commercial Law Act 2017 would enable the customer to claim a remedy? c. Identify three relevant rules from the Real Estate Agents Act (professional Conduct and Client Care) rules 2012 (the Code) that the salesperson has breached. (Word count guideline: 75 words per scenario) Scenario 1, I loved the townhouse in Tui Street and wanted to make an offer on it. There was another townhouse down the same driveway, so I would need to fence the property as I have a dog. When I discussed this with the salesperson, he said, “this would be an easy section to fence, no problem at all”. I also told the salesperson that I was a little nervous to make an offer as I struggled to understand everything he was talking about, and the documents he gave me looked very confusing. He also spoke very quickly and English is not my first language. The salesperson told me ‘everything will be okay’, this is a standard sale and purchase agreement and the home is great, you will love it. The salesperson did not recommend that I seek legal advice but thankfully, I decided to get my lawyer to check the sale and purchase agreement before I signed it. The lawyer told me that the townhouse had a cross lease record of title, and I would need permission from the owner of the other townhouse to put up a fence. If I purchased the home and couldn’t fence it, I would not have been able to keep my dog at the property. I did not go ahead with the purchase and made a complaint to the salesperson’s Branch Manager. a. What has the salesperson done wrong? Explain what the salesperson has done that could be cause for rules of the Code or legislation to be breached. The salesperson who wanted to sell the property had not read the cross lease details. However, it is important to read the lease itself to find anything that might be a problem. For example: restrictions on keeping pets … etc If there is a request all salespersons must make the Code available to anyone. It is very important to always send an email to the client or customer suggesting they seek legal advice. In this way salespersons have evidence of having met their obligation. Salespersons should be careful in situations where the customer or client is unfamiliar with the process of buying and selling properties, especially who isn’t reasonably fluent in English. The Commerce Commission and the Courts expect from any salespersons to be careful not to mislead.

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Page 4 b. What section of the Fair-Trading Act 1986 has been breached? If appropriate, what section of the Contract and Commercial Law Act 2017 would enable the customer to claim a remedy? Fair-Trading Act 1986 : section 9 Contract and Commercial Law Act 2017 : section 36 c. Identify three relevant rules from the Real Estate Agents Act (professional Conduct and Client Care) rules 2012 (the Code) that the salesperson has breached. The Code: 9.7 a, b ; 8.2 ; 9.8 Scenario 2, After struggling to sell my property privately, I decided to put my home on the market with a real estate agency and wanted to choose a salesperson who was very experienced in marketing and selling lifestyle blocks in my area. Looking through the local paper I found a full-page advertisement showing photos of 10 sold properties. The advertisement text stated the following. “10 SOLD in the last four months! If you want your property added to my sold page, call now for an appraisal. As your ‘lifestyle specialist’ I will get you results.” I was delighted to see there was a local specialist who had sold 10 properties recently, all in my area. I phoned the salesperson and requested an appraisal. During the appraisal meeting with the salesperson, I asked her some questions relating to the properties she had recently sold. I was keen to see how similar they were to mine and how long they had been on the market. The salesperson did not appear to have any knowledge on the 10 sold properties, and she had only been working as a salesperson for one month. The salesperson had not sold any property herself, and the 10 properties being advertised as sold, were all sold by other salespeople at her agency. a. What has the salesperson done wrong? Explain what the salesperson has done that could be cause for rules of the Code or legislation to be breached. The law requires that a salesperson carrying out agency work must be properly supervised and managed by an agent or branch manager. This s tandard details guiding principles and information to assist salespersons to understand how to meet their legal obligations. Branch managers and agents are responsible if their licensees have a good knowledge of the Act and other legislation that applies to their work. They must also comply with the Code and the work is performed competently. It is very important the manager have to ensure new salespersons don’t carry out certain real estate work in their first 6 months.

Page 5 b. What section of the Fair-Trading Act 1986 has been breached? If appropriate, what section of the Contract and Commercial Law Act 2017 would enable the customer to claim a remedy? Fair-Trading Act 1986 : section 12 Contract and Commercial Law Act 2017 : section 35 c. Identify three relevant rules from the Real Estate Agents Act (professional Conduct and Client Care) rules 2012 (the Code) that the salesperson has breached. The Code: 8.3 ; 5.1 ; 3.2 Scenario 3, Henry and Alice had found their dream home. When they first viewed the property, the salesperson had indicated the shrub line as being the boundary and commented on the large lawn area within that boundary. The salesperson told Henry and Alice that the current owner had been planning to put in a swimming pool as there was plenty of room and pointed out that it was the sunniest spot in the garden. Henry and Alice were delighted to hear this and told the salesperson they also wanted to put a large swimming pool in, and if the large lawn area was also the sunniest spot, then that sounded perfect! Henry and Alice purchased and moved into their new home. Three months later they engaged a pool company to start building their swimming pool. The pool company had the property boundary surveyed to ensure they could go as close to the boundary as possible. Henry and Alice were shocked to be told that the boundary was not where the shrub line was at all, but two metres inside it. This meant that they would not be able to have a large swimming pool there as planned. Henry and Alice were very disappointed and immediately made an appointment to speak with their lawyer about claiming compensation for not being able to put in a large pool as expected. a. What has the salesperson done wrong? Explain what the salesperson has done that could be cause for rules of the Code or legislation to be breached. The salesperson misrepresented a boundary of the property and the prospective buyer relied on this information. The buyers had clearly been misled. This is important to know that the prospective buyer making an inquiry is relying on the salesperson's skill and the information he/she's providing is accurate. The salesperson should have told them to check the district plan and contact a surveyor before they want to buy the property to find more details about the swimming pool that they want to put in the garden. We do not know that the information that the salesperson told to the prospective buyers about the current owner's plan to put in a swimming pool to the garden was a fact with an approved consent from the city council or it was only an idea.

Page 6 b. What section of the Fair-Trading Act 1986 has been breached? If appropriate, what section of the Contract and Commercial Law Act 2017 would enable the customer to claim a remedy? Fair-Trading Act 1986 : section 13 Contract and Commercial Law Act 2017 : section 37 c. Identify three relevant rules from the Real Estate Agents Act (professional Conduct and Client Care) rules 2012 (the Code) that the salesperson has breached. The Code: 9.7 ; 9.17 ; 8.2 Scenario 4. I was looking for a home to buy for my elderly mother. She does not drive so it needed to be within walking distance to shops and amenities. I went to view a property that had been advertised in the local paper as: “An easy stroll, just 5 minutes from the popular Northcity shopping centre”. When I arrived at the open home, I realised that the road and driveway were extremely steep and my mother would not be able to walk up either the road, or driveway. In fact, it wasn’t going to be ‘an easy stroll’ anywhere, to or from, that property. The home was situated at the end of a very steep driveway, up a steep hill, and was at least fifteen minutes’ walk to the shopping centre. a. What has the salesperson done wrong? Explain what the salesperson has done that could be cause for rules of the Code or legislation to be breached. In this scenario the salesperson advertised misguided information. Instead of asserting that the property is close to something (for example, shopping Mall, school, public transport, doctor, park, beach, library...etc) there is a best way to advertised approximate distance. It is misleading to say that the property is located in a better area than it really is. It must describe everything accurately. (For example, the property is in a nice and flat area but the property is on the hill side. ) It is very important that salespersons need to be careful not to make false representations. They have to be knowledgeable about the Fair Trading Act 1986 and should stay on the safe side of the law.

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Page 7 b. What section of the Fair-Trading Act 1986 has been breached? If appropriate, what section of the Contract and Commercial Law Act 2017 would enable the customer to claim a remedy? Fair-Trading Act 1986 : section 14 Contract and Commercial Law Act 2017 : section 35 c. Identify three relevant rules from the Real Estate Agents Act (professional Conduct and Client Care) rules 2012 (the Code) that the salesperson has breached. The Code: 6.4 ; 5.2 ; 6.3 Scenario 5 Taika and Mia are very excited to be purchasing a lifestyle property to expand their current business. They have been growing sunflowers and watermelons and have outgrown their current lifestyle block. Their budget is $1,250,000 and they have seen a property for sale advertised on their local agency’s website. The advertisement reads ‘buyer enquiry over $1,100,000’. Noting the price guide is within their budget they quickly phoned the salesperson Ben, to arrange a viewing. At the viewing Taika and Mia made it very clear to Ben that they were looking to purchase the lifestyle property to expand their watermelon business and will need to use the four large paddocks at the front of the property. Ben assured them the paddocks would be perfect for growing the watermelons. The following morning Taika phoned Ben to make an offer of $1,200,000. Ben told Taika he would need to make the offer higher as the clients were looking for offers over $1,300.000. Taika and Mia were surprised by his comment as the price advertised said buyer enquiry over $1,100,000 so they were expecting they could make an offer of around $1,200,000. However, Taika and Mia did not want to miss out and really needed to purchase a large property so they could expand their business. They made an offer that evening fo r $1,300,000 and it was accepted. One week before Taika and Mia were due to move into the property, they were driving past when they noticed the four large paddocks were all completely under water. Whenever there was heavy rain, the paddocks flooded. The clients had previously informed the salesperson of this flooding issue on their property, but the salesperson did not disclose this information to Taika and Mia. They were very upset to find the property was not going to work for them. A complaint was made, and they requested the contract be cancelled. a. What has the salesperson done wrong? Explain what the salesperson has done that could be cause for rules of the Code or legislation to be breached. This advertisement misleads potential customers into thinking they may be able to buy the property for $1.100,000, when the client has no intention of selling at this price.

Page 8 This is misleading and deceptive conduct because the salesperson has not disclosed information to the buyer about the property being located in a flooding zone. Salespersons must tell everything that they have and never attempt to hide the truth. The vendor must be genuinely willing to consider offers in the lower end of the price range otherwise, the price ‘band’ is misleading. b. What section of the Fair-Trading Act 1986 has been breached? If appropriate, what section of the Contract and Commercial Law Act 2017 would enable the customer to claim a remedy? Fair-Trading Act 1986 : section 14 Contract and Commercial Law Act 2017 : 41 c. Identify three relevant rules from the Real Estate Agents Act (professional Conduct and Client Care) rules 2012 (the Code) that the salesperson has breached. The Code: 6.4 ; 12.2 ; 9.2

Assessment 3. pdf

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