Auckland auction sale's missing permit was a 'red flag', tribunal finds — but disciplinary complaint dismissed

HouGarden New Zealand, 8 October — The case centres on an Auckland property that sold at auction in 2016 for $1.064 million. The ground floor contained a self-contained flat that was marketed as a source of rental income. Years later, the purchaser alleged that the vendors and the real estate agency had wrongly represented that the flat held the necessary building consents and could legally be rented as a separate unit. That civil dispute was settled out of court, with no admission of liability by any party.

What came before the tribunal was an entirely separate, second-tier process: a disciplinary complaint lodged with the Real Estate Agents Authority (REAA), the statutory regulator for the profession. The complainant was one of the vendors — who was herself a licensed real estate professional — and she alleged that the lead licensee had told the purchaser the flat was consented.

The REAA's Registrar, whose role is to screen incoming complaints and decide whether they warrant formal disciplinary proceedings, concluded in May that the complaint was not serious enough to pursue. The vendor sought a review of that decision before the Real Estate Agents Disciplinary Tribunal (READT), an independent adjudicative body separate from the REAA.

The tribunal found that the Registrar had made two significant factual errors. First, the Registrar concluded that the vendor had never raised any consent issue with the licensee. 'That is not correct,' the tribunal stated. The vendor had emailed the licensee's assistant in April 2016 specifically noting that the council had no record of the flat's construction.

Second, the Registrar found nothing in the property's records that should have put the licensee on notice. The tribunal rejected that finding directly. 'The Registrar is wrong about the LIM not disclosing any issue,' it said. A LIM — a Land Information Memorandum, a report from the local council summarising official information about a property — plainly showed that a building consent for the flat was missing. The tribunal described that absence as a 'red flag'.

Despite those errors, the tribunal upheld the Registrar's decision not to take the complaint further. Its reasons were largely evidentiary and practical. There was no direct evidence that the licensee had told the purchaser the flat was consented: the vendor was not present for the alleged conversation, the licensee had not admitted making the statement, and no evidence had been provided by the purchaser.

The tribunal also weighed the passage of time and the licensee's current circumstances. The sale occurred almost ten years ago, the licensee is no longer registered with the REAA, and has since moved overseas. Those factors, the tribunal indicated, further reduced the justification for pursuing formal disciplinary action.

For buyers, particularly those purchasing properties with self-contained or separate rental units, the case highlights a practical risk. A LIM that carries no building consent record for a habitable unit on a property is not a formality to overlook — the tribunal's own language suggests it is precisely the kind of signal that should prompt further inquiry before any offer is made or any representation about rental income is relied upon.