Arbitration, Disputes between solicitors and/or their clients and us

Normally I write about disputes between our Members but there is another type of dispute that can occur and can be very nasty. I am referring to disputes between solicitors and/or their clients and us. We can all go for many months or even years without these problems but for some reason we recently had four situations within one week. Hopefully our experiences may help others.

One, which is currently subject to legal action by us, is a case of a vendor deceptively selling their property privately during our sole agency. Obviously I can’t go into detail but I will say that it is another reminder of how important it is that we are professional in all of our business activities. Fortunately our documentation is all in great shape and very importantly our salesperson kept great records including noting the Vendor’s comments in their diary when they advised him to take the property off the market.

In addition, the call was made to his cell phone. Many people overlook this when in disputes and in Arbitrations I have, for example, had people testify to having called a cell phone numerous times spoken or left messages. When these are disputed the matter can sometimes be cleared up by requesting a copy of phone accounts as evidence of the calls. This can be calls from a cell phone, or to a cell phone. Telephone accounts are great evidence for calls that have been made, or not!

We also had two purchasers renege on unconditional agreements, unfortunately before they paid the promised deposits (both promised for the day after the signing of the agreement).

In one case the purchaser’s solicitor claimed that the agreement was void because his client did not have a copy of the agreement signed by both parties. We were able to point out that the requirement of the Real Estate Act 1976, Sect 65, was that we provide his client a true copy forthwith upon the offer being signed, which we had done. Obviously as the Vendor was not present his signature was not on the copy left with them. He then came back with a claim that for acceptance to be effective it had to be “in writing and delivered”. Again we had to give him a lesson in law and pointed out to him that there is no such requirement unless it is a specified requirement of the offer, which it was not. Advice of acceptance by telephone is sufficient to bring an agreement into effect.

In the other case the Vendor is considering legal action against the purchaser for their losses and costs, including our fee, and this bought up the issue of identification of the purchaser. This was a classic case of a person signing the agreement “for and on behalf of” (PP) another person and purporting that the purchaser was someone else. In fact it seems that this was done to keep open the options as to whose name would go on the title, for whatever reason. The final purchaser might be a couple, include children, include a solicitor or trustee etc. There is nothing wrong with this however the person signing does take on the liabilities outlined on the agreement. Good practice for us would dictate that when we write a purchaser name on a sale and purchase agreement we should include their occupation and address. It does make life easier when things go wrong.
 

Finally, and I hate to admit this, one of our agreements was written up, as per the purchasers instruction, subject to their solicitors approval. Something we don’t see very often these days, and don’t want to. After recovering from the horror of this I questioned our salesperson and it transpired that the purchasers had signed another agreement earlier that same day but then saw our property and wanted to get out of the previous one. They had also included the same provision in that agreement. For those who don’t know, the purchasers solicitors clause is exceedingly dangerous in that, in short, it does not guarantee the purchasers right to cancel the agreement. Anyone doubting this should refer to the REINZ Useful Clauses booklet, which includes such a clause (presumably in case you really do have to use it) but also the instruction “Do not use this clause”. I would have much preferred our agreement to have been subject to the purchaser being released from the prior agreement. That is the truth, always the preferred option. But this time the purchasers insisted on the solicitor clause as they “always” put it in their offers.

The vendor in the earlier agreement would not accept cancellation therefore the purchasers had to get out of our agreement. The solicitor, presumably in collusion with the purchasers chose to attempt to get out of the agreement by accusing us of misrepresentation. Again, fortunately for us, there were two of our salespeople involved and circumstances were such that we were able to show that the allegation was false. We were in a strong enough position to advise the solicitor that we thought that he and his clients were using the false allegations as a device to avoid their obligations and that we considered their accusations were “malicious and defamatory”. You really have to be sure before using such language; certainly you would not attempt a bluff this way.

The moral of this article is that the disputes that you can get into do not just involve other Members of the Real Estate Institute and that the same rules of doing things right and doing them well can and will protect you from far worse than a simple commission dispute.

It is very easy to become blasé or complacent about what we do but the truth is that we bring our clients and customers into legal and binding contracts for many hundreds of thousands and sometimes millions of dollars. A huge responsibility.

It is incumbent on us not only to do the basics right, such as making sure that the agreements are legible, make sense and reflect the wishes of the parties, but to make sure that we are professional in all that we do because we know that for anyone that is in this great business for more than a short time, it is not a matter of “if” things go wrong, but “when”.

Too many of our people appear to take a more casual approach to their responsibilities relying on the premise that it is sufficient to be honest and conduct themselves with integrity. The bad news is that “Honesty is the best policy” is not enough. We can’t rely on that premise to protect us because when things go wrong, we need to be able to demonstrate our professionalism, what we did and how we did it. That will give us credibility and hopefully show where the misconduct and untruths are coming from.

I consider it a privilege to be in this great business and to have people trust us in assisting them in such major issues in their lives as changing their homes, businesses or investments. It is incumbent on us to be absolutely professional and ethical in all that we do in order not just to protect them, but also ourselves, our livelihoods and our families.

Michael Pinkney FREINZ AAMINZ
National Councillor
First Published November 2005