Henderson Reeves Auckland

Must Agents Disclose Rumours?

September Disciplinary Tribunal Case - Yong-Mewburn.

What happened?

This case relates to the property at 6 Blacks Street, Greenhithe.  There was rumour and gossip in the neighbourhood prior to sale that the house was a “P” house. The agent discussed the rumour with her manager who told her to disclose the rumour to potential purchasers and also to notify the vendor’s solicitor.  The agent did tell the solicitor who inserted a badly drafted clause.  However, the agent did not tell purchasers because her view was that she should not spread rumours without knowing the facts as this might potentially be detrimental to the vendor.

No “P” contamination was found before settlement but the purchasers subsequently received a visit from a policeman who said their new house was a known “P” house.

What did the Tribunal decide?

The Tribunal said there is a fine line between over-disclosure of facts that may damage a vendor’s right to sell their property at a fair market price and under-disclosure which is unfair to a purchaser.  In this case, the agent had achieved the right balance mainly because she disclosed the rumour to the solicitor and the solicitor inserted a clause in the agreement. It was not the agent’s job to question the drafting of the clause and it was sufficient to notify the solicitor.

Contrary to the Committee’s decision, the Tribunal said she did not breach the rules and Yong-Mewburn did not have to pay a penalty.

What does it mean?

So, it appears that rumours do not breach the Rules as long as the agent talks to the vendor’s solicitor first.  But, will the Real Estate Agents Authority take it to the High Court?

Shelley Funnell is one of our friendly local lawyers operating from our Auckland satellite office.  If you have any questions in relation to this article please give us a call on 281 3723.