The vendor lost money on the sale of a backpackers because of a GST mix-up. Photo: 123rf
Two real estate agents have been ordered to pay just over $35,000 to a vendor who lost money on the sale of a backpackers because of a GST mix-up.
They had already refunded the commission she paid on the sale.
Stewart McLean and Clayton Knowles were found guilty of unsatisfactory conduct by the industry's complaints assessment committee in 2023.
Last year, the issue of whether compensation should be awarded was sent to the Real Estate Agents Disciplinary Tribunal.
It was one of the first referrals under the tribunal's new jurisdiction concerning compensation and is the first to proceed to a substantive hearing and determination.
The complainant, who was not identified by the tribunal, owned a Blenheim property with her former partner, which was used as a backpackers'.
Knowles and McLean worked at Triple 5, a licensed real estate agency trading as Ray White, and previously as First National Commercial.
The woman said, when she first signed her listing agreement to sell the property, she gave her GST number, which she understood was being kept on file.
She was registered for GST and said the property needed to be marketed as a going concern, which usually means GST is not paid on the sale, and cannot be claimed back by the purchaser in their own GST return.
McLean took over the listing in May 2021.
But when the vendor signed an agreement to sell the property for $730,000 the next year, terms were not added to the agreement that stated it was a going concern, and her GST information was not included.
It was not until the agreement was signed that the purchaser's lawyers contacted the vendor's lawyers noting that the GST details were not completed.
Her lawyers said she was GST registered and the transaction should be zero-rated.
The failure to include her GST status meant she was in breach of the vendor's warranty that the purchaser could claim a GST input credit of $95,217.30.
The seller agreed to pay $60,000 to the buyer, which was taken off the purchase price.
She also agreed to pay the buyer's legal costs of $6797.30 and paid her own legal costs of $5750 as well as accounting costs.
The earlier committee decision said Knowles failed to ensure the property was sold as a going concern and failed to include in the sales agreement that the owner was registered for GST.
"The committee accepted that Mr Knowles did advise [the seller] to seek legal advice but that Mr Knowles was in such a hurry to get the ASP signed and completed by all parties that he missed the inability of [the seller] to understand the ASP when such inability was reasonably apparent and therefore breached rule 9.8 of the Rules," the tribunal said.
It said McLean failed to supervise Knowles, which meant the agreement was incomplete and incorrect.
The seller sought damages of $73,486.05, made up of the damages she had paid to the purchaser, the legal cost, and accounting advice.
The real estate licenses said she had contributed to the loss by not inserting her GST number in the agreement when she had been asked to provide it, not giving Knowles her GST number and failing to confirm that the GST number had been inserted before singing the agreement, as well as failing to obtain legal or accounting advice on the agreement.
They had refunded their commission, of $32,200 when she had asked for it, and said this should be taken off the woman's claim for further compensation.
The tribunal agreed.
"We are satisfied that the loss suffered by OQ totalling $73,496.05 was caused by the licensees' unsatisfactory conduct as determined by the committee. The licensees accept that their unsatisfactory conduct 'contributed to OQ suffering loss'. We are satisfied with the breakdown of OQ's loss as set out in the statement of claim."
After the commission refund was taken into account, the amount claimed was reduced to $41,296.
That was then reduced by 15 percent to reflect the vendor's oversights.
"[While she] was entitled to rely on the licensees and to expect their conduct to meet professional standards, her decision to not seek legal advice and to sign the [agreement] despite this, meant that she failed to mitigate her loss," the tribunal said.
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