Home Buyers real estate prosecution sets precedent

The recent prosecution of Home Buyers real estate agents was intended as a deterrent under new legislation.

Law firm Simpson Grierson says the case involved a number of mitigating factors and the court imposed a low penalty as a result.

The penalties imposed were kept to a level intended to have a deterrent effect while sustaining the principles of the new Real Estate Agents Act 2008.

“In future cases, the relative newness of the legislation and the lack of awareness about licensing requirements may be two mitigating factors less readily available to defendants,” Simpson Grierson partners and co-authors William Akel and Philip Merfield say.

In February, Home Buyers and Francisca Forster had appealed against the conviction and sentence in the District Court on charges of carrying out real estate agency work without a license.

The charges were brought under s141 of the Real Estate Agents Act 2008. The convictions were the first of their kind.

Home Buyers purchases property in its name and on-sells for a profit.

Often, Home Buyers will buy the property and renovate it before selling it. Sometimes it buys the property and on-sells it through a “rent-to-buy” arrangement.

On occasions, the purchase by Home Buyers from the vendor, and the sale by Home Buyers to the new purchaser, are carried out on the same day.

The deal involved a residential property in Lower Hutt.

Ms Forster was contacted by the owners of the vendors and she marketed the property and advertised it on the TradeMe website.

The buyers sought clarification on Ms Forster’s role and she said she was a “trader” who could do everything a real estate agent could do except take money from the vendors.

There were some complications to the deal but Ms Forster ended up with a $6000 flat fee.

Essentially, the court held that she had carried out negotiations and work that a registered real estate agent would do even though it fell short of being involved in the transfer of money.

“The cornerstone of the Act is therefore the definition of real estate agency work. That is because it determines whether the consumer protection provisions set up by the Act apply and whether an offence has been committed,” the judge held.