Can your real estate agent purchase your property or become involved in purchasing your property?

Maclennan Realty Ltd v Court (2004) 5 NZ ConvC 193,900
Can your real estate agent purchase your property? How about as a trustee?

Ms Court engaged Maclennan to sell three town houses in Christchurch. The properties were sold to a family trust. A director of Maclennan Realty, Mr Maclennan, and his wife were among the trustees of the trust. Mr Maclennan took personal responsibility for the sale. Ms Court did not become aware of the friendship between Mr Maclennan and the introduced purchasers, Mr and Mrs Mason, until some time between the dates the contracts became unconditional and the dates of settlement.

Originally the contracts were made with Mr and Mrs Mason alone. The possibility of a family trust acquiring the properties was not raised until after the contracts became unconditional. The Masons did not have at that stage a settled family trust, but one was suggested in discussion with the Masons’ solicitor, and the Masons suggested Mr and Mrs Maclennan as trustees. Until that point Mr Maclennan did not know he would be asked to accept that role. The trust was duly formed with the Maclennans as trustees and the trust was nominated by the Masons as purchasers under the agreement to take title.

Before settlement, the vendors were advised of this arrangement, but elected to continue with the contract. On settlement title was transferred to the Masons and the Maclennans as trustees of the family trust. It was common ground that the Maclennans had no beneficial interest in the properties.

The Court noted that when Mr Maclennan was asked to act as trustee, his work for the vendors was effectively over. It was accepted that he had acted in good faith.
However, section 63(2) of the Real Estate Agents Act prohibited Mr Maclennan, without the consent on the prescribed form, from directly or indirectly purchasing or being in any way concerned or interested, legally or beneficially, in the purchase of the properties which Maclennan Realty had been commissioned to sell. Though acknowledging that Mr Maclennan had not known that he would acquire any interest in the property until after the contract had become unconditional, he pointed out that it had been open to Mr Maclennan to avoid breach of s 63 by declining to act as trustee.

Please note that the above information is intended to provide general information only. The contents contained in this article do not constitute legal advice and should not be relied on as such. For legal advice please contact our professional team at Forest Harrison.