New Zealand Salespersons License Exam Set Two

Logical Deduction Process: 1. Identify the core professional duties: The licensee’s primary obligations under the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 are to act in the best interests of their client and to provide service with skill, care, and diligence. 2. Analyze the client’s instruction: The client’s instruction to reject the offer and cease engagement is based on an emotional, positional reaction (“I am insulted”) rather than a strategic assessment of their best interests (achieving a sale at the best possible price). 3. Evaluate the licensee’s role: A licensee’s role is not merely to be a passive messenger for their client. The duty of skill and care requires them to provide professional advice and guidance, especially during the critical negotiation phase. Simply obeying an emotional instruction that may harm the client’s ultimate objective does not fulfill this duty. 4. Contrast positional vs. interest-based negotiation: The client is taking a hard position. A skilled negotiator’s role is to try and shift the focus to the underlying interests of both parties. The client’s interest is to sell the property for a good price; the buyer’s interest is to purchase the property. A flat rejection closes the door, whereas a counter-offer keeps the dialogue open and explores the Zone of Possible Agreement (ZOPA). 5. Synthesize the optimal strategy: The most competent approach involves respecting the client’s authority while providing expert counsel. The licensee should first validate the client’s feelings, then explain the strategic advantages of continuing the negotiation. By recommending a counter-offer, the licensee helps the client move from an emotional position to a strategic one, aimed at testing the buyer’s limits and working towards the client’s actual goal. This demonstrates skill, care, and acting in the client’s best interest. A licensee’s role in negotiations extends beyond simply relaying messages between parties. Under the professional conduct rules in New Zealand, a licensee has a fiduciary duty to act in the best interests of their client, which includes providing skilled and diligent service. When a client, like the vendor in this situation, reacts emotionally and gives an instruction that may be counterproductive to their ultimate goal of selling the property, the licensee’s professional responsibility is to provide guidance. The strategy should focus on moving the client from a rigid, positional stance to a more flexible, interest-based approach. This involves advising the client on the potential consequences of their instruction, such as terminating a negotiation with a potentially willing buyer. The licensee should explain how negotiation tools, such as a counter-offer, can be used strategically to test the other party’s flexibility and maintain momentum towards a potential agreement. This approach respects the client as the ultimate decision-maker but ensures their decision is informed by professional advice, thereby fulfilling the licensee’s duty of care and skill.

In property valuation, depreciation refers to a loss in value from any cause. It is broadly categorized into three types: physical deterioration, functional obsolescence, and external obsolescence. Physical deterioration is the wear and tear on the physical structure, such as a worn roof or faded paint. Functional obsolescence relates to a loss in value from outdated or undesirable design features within the property itself, like a poor floor plan or insufficient bathrooms for the number of bedrooms. The situation described involves a loss of value due to a factor completely outside the property’s boundaries: the construction of a new motorway flyover. This is the definition of external obsolescence, also known as economic or locational obsolescence. This form of depreciation arises from negative influences in the property’s surrounding environment. These influences can include changes in zoning, proximity to undesirable land uses like industrial sites or major transport corridors, or a general economic decline in the area. A key characteristic of external obsolescence is that it is considered incurable from the perspective of the individual property owner, as they have no control over these external factors. A real estate salesperson must be able to identify this type of depreciation and explain its impact on market value to a vendor, as it can significantly affect a property’s desirability and price, regardless of the excellent physical condition or functional layout of the improvements on the land.

The calculation to determine the taxable portion of the capital gain is as follows. First, calculate the total capital gain: \(\$1,350,000 (sale price) – \$950,000 (purchase price) = \$400,000\). The total ownership period is from 10 April 2022 to 10 April 2027, which is exactly 5 years. The period the property was used as the main home was from 10 April 2022 to 10 April 2025, which is 3 years. The period the property was not used as the main home (it was rented) was from 11 April 2025 to 10 April 2027, which is 2 years. Since the property was acquired after 27 March 2021, the 10-year bright-line period applies. As the sale occurs within this 10-year period, the bright-line rule is triggered. The main home exemption is not fully applicable because the property was not used as the main home for the entire ownership period. Therefore, the gain must be apportioned. The taxable portion of the gain is calculated using the formula: Taxable Income = Total Gain × (Days property was not the main home / Total days of ownership). This results in a taxable income of \(\$400,000 \times \frac{2 \text{ years}}{5 \text{ years}} = \$160,000\). The bright-line property rule is a key piece of New Zealand tax legislation designed to tax capital gains from the sale of residential property sold within a set timeframe. For properties acquired on or after 27 March 2021, this period is 10 years. A significant feature of this rule is the main home exemption, which prevents the family home from being subject to this tax. However, this exemption has specific criteria. A critical aspect tested here is the apportionment of the exemption when a property’s use changes during the ownership period. If a property is used as a main home for only part of the time it is owned, and for other purposes such as a rental for another part, the exemption only applies to the period it was genuinely used as the main residence. The capital gain is then divided, or apportioned, based on the number of days it was not used as the main home relative to the total ownership period. The resulting figure is considered taxable income for the property owner and is taxed at their marginal income tax rate. It is vital for a real estate licensee to recognise such scenarios to advise clients to seek professional tax advice, rather than providing the advice themselves.

The core of this issue rests on the hierarchy of a licensee’s duties under the Real Estate Agents (Professional Conduct and Client Care) Rules 2012. While a licensee has a fundamental duty to act in the best interests of their client, this duty does not override the legal and ethical obligation to be fair and honest with all parties in a transaction, specifically customers. The history of a property being used for methamphetamine manufacture, even with subsequent professional decontamination, is considered a significant adverse fact or a latent defect. A reasonable customer would find this information material to their decision to purchase the property and the price they are willing to pay. Therefore, withholding this information would be a breach of Rule 10.7, which prohibits misleading conduct and the withholding of information that should in fairness be provided. The client’s instruction to conceal this fact is an unlawful instruction, and a licensee cannot follow it. The primary professional obligation is to advise the client that full disclosure is required by law. The licensee must inform all prospective purchasers of this material fact proactively, not just when asked. If the client refuses to consent to this disclosure, the licensee cannot continue to market the property and would have to cease acting for that client, as it would be impossible to fulfill their duties to both the client and potential customers simultaneously.

The core principle in preparing a comparative market appraisal (CMA) is to reflect the most current market conditions as accurately as possible. In a rapidly declining market, the recency of sales data is the most critical factor. Therefore, the sale from one month ago is the most significant piece of evidence, as it provides the most up-to-date indication of what a buyer is willing to pay in the current climate. The sale from seven months ago, which occurred during a market peak, is now largely irrelevant for establishing a current price but serves as a useful historical benchmark to illustrate the market’s shift to the vendor. The Rating Valuation (RV), being eighteen months old and calculated during a different market phase, holds very little weight and is often misleading in volatile markets. A licensee’s professional responsibility under the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 is to provide an appraisal that is substantiated by the best available evidence and is not misleading. The most professionally sound approach is to anchor the appraisal heavily on the most recent comparable sale, making careful, documented adjustments for any physical differences between that property and the subject property. The older sale and the RV should be presented as secondary, contextual information to explain the market’s trajectory, rather than as primary valuation inputs.

The logical deduction proceeds as follows. First, identify the core issue: a gully trap is overflowing when a fixture is used. A gully trap’s function is to receive wastewater from fixtures like sinks, showers, and washing machines, and direct it into the sewer or septic system while providing a water seal to prevent sewer gases from escaping. An overflowing gully trap is a clear sign of a malfunction. The malfunction is almost certainly a blockage or partial blockage in the drainpipe downstream from the gully trap. This prevents wastewater from flowing away at the required rate, causing it to back up and overflow. Second, classify this issue in the context of a property transaction. While the overflow itself is visible (a patent defect), the underlying cause—the blockage, its location, its severity, and the potential cost to remedy it (which could range from a simple plunge to extensive excavation and pipe replacement)—is not readily apparent. This makes the underlying problem a potential latent defect. Third, connect this to a salesperson’s professional duties under New Zealand law. The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, particularly Rule 10.7, obligates licensees to disclose known defects to customers. A persistent overflow is a known issue indicating a defect. Ignoring it or simply advising the vendor to perform a temporary fix without disclosing the underlying problem to buyers would be a breach of these rules. The salesperson must treat this as a material fact that could influence a purchaser’s decision to buy the property or the price they are willing to pay. Therefore, the most critical implication is the legal and ethical requirement for disclosure to all potential purchasers.

Under the Real Estate Agents Act 2008 and the associated Professional Conduct and Client Care Rules 2012, a licensee has a fundamental obligation to act with fairness and honesty towards all parties in a transaction, not just their client. Specifically, Rule 6.4 prohibits a licensee from misleading a customer or client, providing false information, or withholding information that should, by law or in fairness, be provided. This is reinforced by the Fair Trading Act 1986, which broadly prohibits misleading and deceptive conduct in trade. In a situation where an agent uncovers information that contradicts a vendor’s statement, their duty of care is heightened. The agent cannot simply repeat the vendor’s claim, even with a disclaimer, if they have reason to believe it may be inaccurate. This would be considered negligent misrepresentation. The agent’s professional responsibility requires them to disclose all material facts they are aware of. This includes disclosing both the vendor’s representation and the conflicting evidence found, such as in a council property file. By presenting both pieces of information, the agent is not stating either as fact but is transparently providing the full context to the potential purchaser. Furthermore, the agent must strongly advise the purchaser to undertake their own due diligence by obtaining an independent expert report, such as a building inspection. This recommendation for independent verification is a critical part of the agent’s duty, but it does not absolve them of the initial responsibility to disclose the conflicting information they already possess. Failing to disclose the contradictory evidence from the council file would be a clear breach of their duties.

Under the Real Estate Agents Act 2008 and the associated Real Estate Agents (Professional Conduct and Client Care) Rules 2012, a licensee has overlapping duties to both their client (the vendor) and to customers (potential buyers). A key obligation is the duty to deal fairly and honestly with all parties and to not mislead or deceive. When a potential buyer raises a question about a property’s condition, such as a visible crack, the salesperson must act with skill, care, and diligence. They are not qualified building inspectors and must not provide an opinion or assessment on matters outside their expertise, as doing so could constitute misleading conduct. Downplaying the issue or offering a personal, unqualified opinion is a serious breach of these rules. The most appropriate and professional course of action is to be transparent about the limits of their knowledge, clearly state that they cannot provide an expert assessment, and strongly recommend that the customer seek independent, professional advice, such as obtaining a builder’s report. This approach protects all parties: it ensures the buyer can make a fully informed decision based on expert analysis, it protects the salesperson and agency from liability for giving poor advice, and it upholds the integrity of the transaction, which is in the best interest of the vendor. Documenting this recommendation is also a crucial part of good practice.

The correct procedure for a property manager when a tenant disputes a landlord’s claim against the bond is dictated by the Residential Tenancies Act 1986. When a tenancy ends, the landlord and tenant should ideally agree on how the bond is to be refunded and sign a bond refund form reflecting this agreement. However, if there is a disagreement, such as the tenant refusing to consent to deductions, the tenant has the right to apply directly to Tenancy Services for a full refund of the bond. Upon receiving the tenant’s application, Tenancy Services will notify the landlord or their agent. This notification triggers a specific obligation for the landlord. The landlord must then file their own application with the Tenancy Tribunal within 14 working days to formally state their claim against the bond. This application initiates a formal dispute resolution process, which may involve mediation or a hearing. If the landlord fails to lodge this application with the Tribunal within the stipulated 14-working-day period, Tenancy Services is legally required to refund the entire bond amount to the tenant as per their initial request. The property manager’s professional duty is to be aware of this process and advise their landlord client accordingly to ensure their claim is not forfeited due to a procedural error. The bond itself is held by the Bond Centre (part of Tenancy Services), not in the agency’s trust account, during the tenancy and this dispute period.

The core issue in this scenario revolves around the principles of the New Zealand Privacy Act 2020, specifically Information Privacy Principle 3 (IPP3) concerning the collection of personal information and Information Privacy Principle 10 (IPP10) regarding the use of that information. When Anika collected email addresses from sources like open home registers or ‘contact us’ forms, the purpose of collection was implicitly or explicitly limited. For an open home, the purpose was likely to provide follow up information about that specific property. For a website enquiry, it was to answer a specific question. Uploading this personal information to a third party platform like a social media site for the purpose of targeted advertising constitutes a new and different use of that data. IPP10 states that an agency must not use personal information for a purpose other than the one for which it was obtained, unless it believes on reasonable grounds that the individual concerned has authorised the use for that new purpose. Therefore, before Anika can legally use these email addresses for a ‘Custom Audience’ campaign, she must have a sound basis to believe she has the consent from each individual for this specific type of marketing activity. A general sign-in sheet does not automatically grant this broad consent. This is the primary and most critical compliance hurdle. While other obligations like including an unsubscribe option under the Unsolicited Electronic Messages Act 2007 or ensuring ad content is compliant with the REA Code of Conduct are important, they are secondary to the fundamental legal right to use the personal data in this manner in the first place.

No calculation is required for this question. The Real Estate Agents (Professional Conduct and Client Care) Rules 2012, established under the Real Estate Agents Act 2008, set out the standards of professional conduct for licensees in New Zealand. A critical aspect of these rules is the distinction between a licensee’s obligations to their client versus their obligations to customers. A client is the person who has engaged the agency, typically the vendor. A customer is any other party to a transaction, such as a potential purchaser. While a licensee owes fiduciary duties to their client, including acting in their best interests, they owe a duty of fairness and honesty to all customers. In a situation where a customer seeks advice or assistance, such as a recommendation for a service provider, the licensee must navigate these duties carefully. Providing helpful information is part of good service, but it must not compromise the licensee’s primary obligation to the client or create an undisclosed conflict of interest. Rule 9.8 specifically requires a licensee to disclose in writing any financial or other benefit they stand to gain from any person in connection with the transaction. This includes referral fees from mortgage brokers, valuers, or other professionals. Therefore, recommending a single provider, especially one that provides a financial benefit to the licensee, without full disclosure, would be a breach of conduct. The most professional and compliant approach is to provide impartial assistance, such as offering a list of several reputable service providers, and to be transparent by disclosing any existing referral arrangements with any of them. This ensures the customer is treated fairly, is able to make their own informed choice, and the licensee maintains professional integrity.

Step 1: Identify the primary ethical principles at play. The scenario involves a direct conflict between the agent’s personal interest (potential for future lucrative business) and the agent’s fiduciary duty to their current client. The governing rules are found in the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. Step 2: Apply Rule 6.1, which states a licensee must act in the best interests of a client. Anaru’s primary duty is to secure the best possible outcome for his client, Mei. Step 3: Apply Rule 9, which deals with conflicts of interest. Rule 9.1 requires a licensee to be aware of the need to avoid conflicts of interest. Rule 9.2 prohibits a licensee from engaging in conduct that would place their interests in conflict with their client’s interests. The prospect of future business from the buyer’s relative is a clear personal interest that conflicts with the duty to provide unbiased advice to Mei. Step 4: Determine the required course of action based on the rules. When a potential conflict of interest arises, the licensee has an obligation to disclose it. Rule 9.7 mandates that this disclosure must be made to the client in writing before the client agrees to the transaction. The disclosure must explain the nature of the conflict. Step 5: Synthesise the steps into a single required action. Anaru’s most critical and immediate obligation is not to simply ignore the conflict or cease acting. It is to be transparent with his client. He must inform Mei, in writing, about the conversation with Chloe and the potential for future business. This disclosure ensures Mei is fully aware that Anaru’s advice could be perceived as influenced. This allows Mei to give informed consent and to assess Anaru’s advice with full knowledge of the situation, thereby upholding the principles of fairness, transparency, and acting in the client’s best interest.

A split mortgage structure is a financing arrangement where the total loan amount is divided into two or more separate parts, each with different features. This approach allows borrowers to tailor their mortgage to their specific financial situation and risk tolerance. A common combination in New Zealand involves splitting the loan between a fixed-rate portion and a variable-rate portion, such as a revolving credit facility. The fixed-rate component provides certainty and stability, as the interest rate and repayment amount are locked in for a specified term, typically one to five years. This protects the borrower from potential increases in market interest rates on the larger part of their debt. The revolving credit component operates like a large overdraft against the property. The borrower’s income can be paid directly into this account, and funds can be drawn out up to the agreed limit. Interest is calculated daily on the outstanding balance, meaning any extra funds deposited, even temporarily, immediately reduce the interest cost. This structure offers maximum flexibility, allowing for significant lump-sum repayments without penalty and the ability to redraw funds for purposes like renovations or emergencies. For a borrower who desires both security against interest rate volatility for their main loan balance and the flexibility to make aggressive principal repayments with fluctuating income while also needing access to funds, combining a large fixed-rate loan with a smaller revolving credit facility is the most strategic approach. It balances the need for predictable payments with the advantages of flexible debt management.

The situation involves a third party (a potential buyer) suffering a bodily injury (a broken wrist) on a property during an open home conducted by a salesperson. The key factor is the allegation that the injury resulted from the salesperson’s negligence—failing to address a known hazard (the wet patch). This scenario directly engages the purpose of Public Liability Insurance (PLI). Public Liability Insurance is specifically designed to protect a business from the financial risk of liability claims for causing bodily injury or property damage to third parties (such as clients, visitors, or the general public) in connection with its business operations. An open home is a core business activity for a real estate agency and its salesperson. The salesperson, acting on behalf of the agency, has a duty of care to ensure the reasonable safety of visitors. By noticing the hazard and not taking steps to mitigate it (e.g., drying it, placing a warning sign), the salesperson has potentially breached this duty of care, creating a liability. This must be distinguished from Professional Indemnity (PI) insurance. PI insurance covers claims arising from professional negligence that causes a client to suffer a financial loss, such as errors in advice, misrepresentation, or a breach of professional duty. It does not cover bodily injury to a third party. While the vendor’s own public liability cover (often part of their home insurance) might also be relevant as they own the property, the direct, active negligence of the salesperson in controlling the open home environment makes the agency’s PLI the primary and most appropriate policy to respond to a claim against the salesperson or their agency.

This is a conceptual question and does not require a mathematical calculation. A licensee’s professional obligations are primarily governed by the Real Estate Agents Act 2008 and the associated Real Estate Agents (Professional Conduct and Client Care) Rules 2012, often referred to as the Code of Conduct. A core tenet of these rules is the duty of confidentiality owed to a client. Rule 9.1 of the Code of Conduct explicitly states that a licensee must not disclose confidential information relating to a client to any other person. This duty is fundamental to the fiduciary relationship between a licensee and their client. In this situation, the vendor’s reason for selling, particularly when it involves sensitive personal health information, falls squarely under the definition of confidential information. It is not information about the property itself, such as a known defect, which would require disclosure to a customer. The duty of confidentiality to the client is paramount and continues even after the transaction is complete. The only circumstance under which such information could be disclosed is with the client’s express, informed, and preferably written, consent. Without this specific authority, the licensee must protect the client’s privacy. A professional response to the buyer’s inquiry would be to state that the vendor’s motivations are personal and private, thereby respecting the client’s confidentiality while maintaining a professional and honest relationship with the potential buyer. This action upholds the licensee’s obligations under both the Code of Conduct and the Privacy Act 2020.

The vendor’s instruction constitutes discrimination on the prohibited ground of family status, as defined in Section 21(1)(l) of the Human Rights Act 1993. The vendor is expressing a preference for buyers who are “settled professionals” and a bias against “students or first-home buyers,” which can be indirectly discriminatory based on age or economic status. Section 53 of the Human Rights Act 1993 makes it unlawful for a person, on their own behalf or on behalf of others, to refuse to dispose of land to another person or to impose discriminatory conditions based on any of the prohibited grounds. By instructing the licensee to filter potential buyers based on these criteria, the vendor is asking the licensee to engage in an unlawful act. Under the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, a licensee has a primary duty to their client (Rule 9.2), but this duty is subject to their other obligations, including the duty to comply with all relevant New Zealand laws. Rule 6.2 requires a licensee to deal fairly, honestly, and in good faith with all parties involved in a transaction. Rule 6.4 prohibits a licensee from engaging in any conduct that is misleading, deceptive, or likely to mislead or deceive. Following the vendor’s discriminatory instruction would breach these rules and the Human Rights Act 1993. Therefore, the licensee’s correct course of action is to identify the instruction as unlawful, explain the legal implications to the vendor, and refuse to implement the discriminatory filtering. The licensee must treat all prospective purchasers equitably and present all offers, unless instructed otherwise in writing on non-discriminatory grounds.

The situation described involves a licensee facilitating the acquisition of a client’s property by a person with whom the licensee has a relationship, specifically a sibling. This scenario is governed by multiple rules within the Real Estate Agents (Professional Conduct and Client Care) Rules 2012, primarily concerning conflicts of interest and procedures for transactions involving connected persons. First, Rule 9.7 states that a licensee must not continue to act for a client if a conflict of interest arises. The potential for the licensee’s sister to purchase the property is a clear conflict of interest. However, Rule 9.8 provides an exception if the licensee notifies the client in writing that they can no longer act for them due to the conflict and obtains the client’s written consent to proceed. Second, the licensee has a fundamental duty under Rule 6.2 to act in the best interests of their client. To uphold this, when such a conflict arises, it is standard practice and an implicit requirement of professional conduct to recommend that the client seek independent legal or other professional advice to ensure their interests are protected. Third, and most critically, Rule 12.2 specifies the requirements when a licensee or a person with whom they have a relationship acquires an interest in a client’s property. Before the client enters into any agreement, the licensee must provide the client with an independent valuation of the property from an independent registered valuer. This is a non-delegable, mandatory step designed to protect the client from being disadvantaged in the transaction by ensuring they are aware of the property’s market value, as determined by an impartial third party. Therefore, the complete and compliant process involves a sequence of written notification, obtaining written consent, providing an independent valuation, and recommending independent advice.

The core of this problem lies in distinguishing between ‘Market Value’ and ‘Fair Value’, two concepts that are often used interchangeably but have distinct meanings and applications, especially in corporate finance and accounting contexts governed by International Financial Reporting Standards (IFRS). The scenario involves a corporate acquisition where the valuation is for financial reporting, specifically for consolidated financial statements. This context mandates the use of ‘Fair Value’ as defined by IFRS 13. Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is an exit price from the perspective of market participants, considering the highest and best use of the asset. In contrast, ‘Market Value’ is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. This is the most common valuation basis for sale and purchase agreements on the open market. For a specialised, purpose-built property like a bio-tech laboratory, there may be a very limited or non-existent open market. Therefore, a standard market appraisal might not accurately reflect its value to potential market participants who could put it to its highest and best use. Fair Value assessment might involve different methodologies, such as an income or cost approach, that a standard market appraisal might not prioritise. The critical distinction is that Fair Value is determined by a specific accounting standard for a specific purpose (financial reporting) and is focused on the perspective of market participants, whereas Market Value is a more general concept for a hypothetical open-market sale.

The analysis of this scenario involves weighing a licensee’s duties to their client against their broader obligations to customers and the integrity of the industry under New Zealand law. The core issue is the conflict between the client’s instruction and the licensee’s professional conduct obligations. 1. Identify the primary conflict: The developer’s instruction to actively counter “rumours” and exclusively focus on positive aspects conflicts with the licensee’s duty not to mislead customers under Rule 9.2 and Rule 10.7 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. 2. Evaluate the nature of the information: The salesperson, Anaru, has received information about potential systemic defects in the developer’s past work. Even though this information is “off the record,” it constitutes knowledge of a matter that could be material to a prospective purchaser’s decision. A developer’s track record is a relevant factor for a buyer. 3. Assess the legality of the client’s instruction: An instruction to conceal or misrepresent material information is an instruction to act unlawfully. Rule 6.2 states a licensee must act in accordance with a client’s instructions, but this is explicitly qualified with “unless it is contrary to law”. 4. Determine the licensee’s primary duty: While Rule 6.1 requires a licensee to act in the best interests of their client, this duty does not exist in a vacuum. It is superseded by the requirement to act lawfully and ethically. Advising a client against a course of action that could lead to legal challenges or findings of unsatisfactory conduct is, in fact, acting in their long-term best interest. 5. Synthesize the correct course of action: The most professional and legally sound approach is to address the issue directly with the client. The licensee must explain their obligations under the Rules, specifically the prohibition on misleading conduct. They must clarify that while they will market the property’s positive attributes, they are legally bound to answer direct questions from potential buyers truthfully and cannot conceal material information. This upholds their duty to the client by providing correct advice and upholds their non-negotiable duties to customers and the law.

The correct course of action is determined by the salesperson’s duties under the Real Estate Agents Act 2008 and the associated Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, often referred to as the Code of Conduct. Specifically, Rule 6.4 prohibits misleading or deceptive conduct, and Rule 10.7 requires a licensee to disclose any known defects to a customer. In this scenario, the salesperson has been made aware of a material fact: a past leak that was repaired without professional documentation. Although the vendor claims it is fixed, the history of the leak itself is a known defect that must be disclosed. Relying solely on the vendor’s word or a generic disclosure form is insufficient and exposes the salesperson to liability. The most professionally responsible action is to advise the vendor of their legal obligation to disclose this specific information. The salesperson must then ensure this disclosure is made clearly and in writing to all potential purchasers. Furthermore, to fulfill their duty of care and to mitigate risk for all parties, the salesperson should strongly recommend that purchasers conduct their own thorough due diligence, which would typically include obtaining an independent and comprehensive building inspection report. This approach ensures transparency, meets the legal requirements of disclosure, and protects the licensee, the agency, and the vendor from future claims, while providing the customer with the critical information they need to make an informed decision.

The core legal requirement is that any proposed alienation of Māori freehold land must first follow the Right of First Refusal (RFR) process stipulated by Te Ture Whenua Maori Act 1993. The primary duty of a licensee is to advise the vendors of this mandatory, non-negotiable legal process. Te Ture Whenua Maori Act 1993 has as its primary objective the retention and use of Māori land by its owners, their whānau, and their hapū. To support this, the Act places significant restrictions on the alienation, which includes the sale, of Māori freehold land. Before a sale to a person who is not a member of the preferred class of alienees can be confirmed, the land must first be offered to that preferred class. This class is defined in the Act and typically includes the children and descendants of any owner, other owners of the land, and members of the hapū associated with the land. A licensee’s professional and ethical responsibility is to ensure their clients, the vendors, are fully aware of this legal obligation. The existence of a high commercial offer from an external party does not override this requirement. The Māori Land Court will not confirm a sale to an outsider unless it is satisfied that the RFR process has been correctly followed and that the members of the preferred class have had a genuine opportunity to acquire the land. Advising a client to proceed directly with an external offer without fulfilling this prerequisite would be a serious breach of a licensee’s duties and the provisions of the Act.

Step 1: Identify the agent’s specific action. The agent, Matiu, reviewed his clients’ financial summary and explicitly recommended they seek a loan with a specific feature (interest-only for the first two years) from a particular type of lender (a non-bank lender). Step 2: Analyse this action against the definition of “financial advice” as regulated by the Financial Markets Conduct Act 2013. Recommending a particular type of financial product (an interest-only loan) and a specific class of provider (non-bank lender) based on a client’s personal financial situation constitutes giving a financial recommendation or opinion. Step 3: Evaluate the action against the agent’s obligations under the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. Rule 6.4 mandates that a licensee must recommend that a client seek expert advice on matters that are outside the licensee’s expertise. Complex mortgage structuring and lender suitability are explicitly outside a real estate salesperson’s licensed expertise. Step 4: Conclude the nature of the breach. By making a specific recommendation rather than providing general information and referring the clients to a qualified expert, Matiu has overstepped his professional boundaries. He has engaged in activity that likely constitutes providing unlicensed financial advice and has concurrently breached his professional duty under the Code of Conduct to direct clients to appropriate specialists. A real estate licensee in New Zealand operates under a strict set of professional and legal obligations designed to protect consumers. A critical boundary exists between providing real estate services and providing financial advice. The Financial Markets Conduct Act 2013 defines financial advice broadly, and it includes giving a recommendation or an opinion about a financial product, such as a mortgage. An agent who suggests a specific loan structure, term, or type of lender based on a client’s circumstances is moving from providing factual information into the realm of personalised financial advice. This action requires a specific license which real estate salespersons do not hold. Furthermore, the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, specifically Rule 6.4, imposes a positive duty on licensees. This rule requires them to recommend clients seek professional advice on matters outside the agent’s area of expertise. Financial planning, tax implications, and mortgage structuring are prime examples of such matters. The correct and professional course of action is to provide a list of qualified mortgage advisors or financial planners and strongly recommend the clients consult with one of them, without endorsing any particular individual or firm.

The legal position is determined by the implied covenants within the Property Law Act 2007 (PLA 2007), which apply when a lease agreement is silent on a specific matter. In this scenario, the absence of a clause regarding alterations means the provisions of the PLA 2007 are automatically incorporated into the lease. Specifically, Schedule 3, Part 2, Clause 10 of the PLA 2007 addresses alterations. This clause implies a covenant that the lessee (the tenant) will not make any alterations to the premises without first obtaining the written consent of the lessor (the landlord). Therefore, the tenant cannot simply proceed with the planned work without seeking permission. However, this is not an absolute prohibition. The same part of the Act imposes a crucial qualification on the landlord’s power. It stipulates that the landlord’s consent cannot be unreasonably withheld. This means the landlord must have a valid, objective reason for refusing the request. A blanket refusal without justification, especially for an internal, non-structural alteration that does not affect the building’s integrity or value, would likely be deemed unreasonable. The tenant’s obligation is to request consent, and the landlord’s obligation is to consider that request fairly and not deny it without a substantive, reasonable justification.

Logical Process to Determine Correct Action: 1. Identify the legal framework: The situation is governed by the New Zealand Residential Tenancies Act 1986 (RTA). 2. Identify the breach: The tenant is in rent arrears, which is a breach of the tenancy agreement. 3. Determine the prescribed remedy process under the RTA: Section 55 of the RTA outlines the process for a tenant’s breach. For rent arrears, the landlord or their agent must first give the tenant a written notice to remedy the breach. This notice must allow the tenant at least 14 days to pay the outstanding amount. 4. Evaluate the agent’s duties: The property manager, as a licensee, has a primary duty to their client (the landlord) to act in their best interests. This includes taking timely and legally correct action to resolve the arrears. They also have a duty under the Real Estate Agents Act 2008 and its Code of Conduct to act professionally and deal fairly with all parties, including the tenant. 5. Synthesize duties and legal requirements: The agent must follow the RTA’s mandatory process. Simply following a landlord’s unlawful or premature instruction (e.g., immediate eviction) would be a breach of the agent’s professional obligations. The most effective and legally sound action is to formally start the resolution process by issuing the 14-day notice to remedy. This protects the landlord’s position by starting the legal timeline required before any further action, such as applying to the Tenancy Tribunal, can be taken. Under the Residential Tenancies Act 1986, a specific and non-negotiable process must be followed when a tenant falls into rent arrears. A property manager, acting as a licensee on behalf of a landlord, must adhere strictly to this legislation. The first formal step is to issue a 14-day notice to remedy. This written notice informs the tenant of the breach, specifies the amount owed, and provides them with a clear 14-day period to rectify the situation by paying the arrears. It is a critical legal prerequisite. An application to the Tenancy Tribunal for termination or a monetary order cannot be made without first allowing this remedy period to expire. Taking alternative, more aggressive actions, such as changing the locks or attempting to physically remove the tenant, is illegal and constitutes an unlawful act, which can lead to significant exemplary damages being awarded against the landlord and disciplinary action against the licensee. While maintaining open communication with the tenant is good practice, it does not replace the need for this formal notice. Failing to issue the notice promptly can be detrimental to the landlord’s interests, as it delays the ability to take further legal steps if the tenant fails to pay. A licensee’s professional duty is to advise their client on the correct legal pathway, not to follow unlawful or ill-advised instructions.

Step 1: Identify the key information from the scenario – a two-storey house built in 1975 with significantly low water pressure, particularly on the upper floor. Step 2: Correlate the construction era (mid-1970s) with common plumbing materials used for water supply in New Zealand. Galvanized steel pipes were a prevalent choice for water reticulation in homes built during this period. Step 3: Analyse the primary aging characteristic of galvanized steel pipes. Over several decades, the protective internal zinc coating erodes, exposing the steel to water, which leads to internal rusting and the accumulation of mineral deposits (calcification or scale). Step 4: Connect this material degradation process to the observed symptom. The buildup of rust and scale inside the pipes reduces their internal diameter, thereby restricting the flow of water. This restriction manifests as reduced water pressure at the taps. Step 5: Evaluate why the symptom is more pronounced upstairs. The effect of reduced flow is exacerbated by gravity and the increased distance from the mains supply, meaning upper-level fixtures are often the first to show significant pressure loss. Step 6: Conclude that the most probable cause is the age-related internal corrosion and scaling of the original galvanized steel pipes. Galvanized steel piping was a standard material for residential water supply lines in New Zealand for much of the mid-20th century, including the 1970s. This type of pipe is steel that has been coated with a layer of zinc to protect it from corrosion. However, this protection is not permanent. Over a lifespan of 40 to 50 years, the zinc layer can wear away, especially with certain water chemistries. Once the underlying steel is exposed, it begins to rust from the inside. This corrosion, combined with mineral deposits from the water supply, forms a rough, thick layer of scale on the pipe’s interior surface. This process, known as calcification or tuberculation, progressively narrows the internal diameter of the pipe. Consequently, the volume of water that can flow through is significantly reduced, leading to a drop in water pressure at the fixtures. This pressure loss is often most noticeable at the highest points in the plumbing system, such as an upstairs shower, because the water must overcome both the pipe friction and gravity. A real estate salesperson should be aware of this common issue in older homes as it can be a significant latent defect requiring costly re-piping and must be considered for disclosure purposes under the Real Estate Agents Act 2008.

The correct course of action is to advise the vendor that both the initial positive screening result and the subsequent detailed laboratory assessment report must be disclosed to all prospective purchasers. Under the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, a licensee has a fundamental obligation of fairness and honesty to all parties in a transaction. Specifically, Rule 10.7 requires a licensee to disclose any known defects of a property to a customer. While the property’s contamination level is below the remediation threshold set by New Zealand Standard NZS 8510:2017, the history of a positive test is considered a material fact or a latent defect that could influence a prudent purchaser’s decision to buy the property or the price they are willing to pay. Withholding this information could be construed as misleading or deceptive conduct under Rule 6.4. The detailed assessment does not erase the initial positive result; rather, the entire testing history becomes part of the property’s narrative that must be transparently communicated. The agent’s duty is to ensure potential buyers are fully informed to make their own assessment of risk, regardless of whether the contamination levels meet the official standard for habitation.

The agency, Coastal Realty Ltd, is required by the Real Estate Agents Act 2008 and the Real Estate Agents (Professional Indemnity Insurance) Regulations 2009 to hold a compliant professional indemnity insurance policy. This policy is designed to protect consumers from financial loss arising from the actions, errors, or omissions of the agency or its licensed employees. When a claim is made due to a salesperson’s error, the claim is directed at the licensed agency that employs them. Therefore, Coastal Realty Ltd’s PI insurance policy is the primary instrument that will respond to the claim made by the developer, Keira. However, these insurance policies include an excess, which is a predetermined amount that the insured party must pay before the insurer’s coverage begins. The agency, Coastal Realty Ltd, is responsible for paying this excess for the claim. While the PI policy protects the agency from the larger financial claim, the agency may have provisions within its employment agreement with the salesperson, Anaru, that hold him accountable for his error. It is common practice for agencies to require the salesperson responsible for the error that led to a claim to reimburse the agency for the cost of the policy excess. This ensures individual accountability while maintaining the integrity of the consumer protection framework provided by the mandatory insurance.

The core issue is that the physical structure on the land no longer corresponds to the legal description registered on the title. In a cross-lease arrangement, each owner holds an undivided share in the underlying fee simple estate as a tenant in common, and simultaneously leases their specific flat from the other co-owners for a long term, typically 999 years. The extent of each flat and the common areas are defined by a legal document called a flats plan, which is deposited with Land Information New Zealand (LINZ). When a physical alteration, such as building a deck, extends the exclusive use area beyond what is shown on this deposited flats plan without the consent of all other co-owners, the legal title becomes defective. This is because the lease, which refers to the flats plan, is no longer an accurate representation of the property being occupied and exclusively used by the owner. This discrepancy creates a legal vulnerability for a new owner. Lenders may be hesitant to provide finance against a defective title, and the other co-owner could potentially take legal action to have the unconsented structure removed. While obtaining a building consent from the council is a separate and also important requirement under the Building Act, the primary property law problem is the defect in the title itself caused by the inconsistency with the registered flats plan. The remedy usually involves either obtaining retrospective consent from the co-owners and depositing a new, updated flats plan, or undertaking a full conversion of the title to a fee simple estate, both of which involve significant legal and surveying costs. A licensee has a professional and ethical obligation under the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 to disclose such known defects to potential purchasers.

This question requires conceptual analysis, not a numerical calculation. A real estate salesperson’s primary tool for estimating market value is the comparative market analysis (CMA), which relies heavily on the sales comparison approach. This method’s accuracy is contingent upon the availability of recent sales data from properties that are highly similar to the subject property. In the scenario presented, the heritage-listed property’s unique architectural character and the scarcity of recent, comparable sales create a significant challenge. This lack of direct comparables undermines the reliability of a standard CMA. While a salesperson must provide an appraisal that is realistic and substantiated by evidence under the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, the available evidence is weak. A Registered Valuer, operating under the Valuers Act 1948, is not solely limited to the sales comparison approach. They can employ more complex methodologies like the cost approach, where they would assess the land value and add the depreciated replacement cost of the improvements, including the unique heritage features. This allows for a more structured assessment when market data is sparse. The salesperson’s fundamental challenge is therefore the limitation of their primary appraisal method in the face of a unique property, highlighting the distinct and more rigorous analytical scope available to a Registered Valuer.

The assessment of the situation is based on a logical progression of legal principles. Step 1: Identify the specific breach of conduct. The licensee failed to provide the vendor with the approved New Zealand Residential Property Agency Agreement Guide before the agency agreement was signed by the vendor. This is a direct contravention of Rule \(10.4\) of the Real Estate Agents Act (Professional Conduct and Client Care) Rules \(2012\). Step 2: Determine the legal implication of this breach on the agent’s ability to claim commission. Under Section \(126\) of the Real Estate Agents Act \(2008\), a licensee cannot sue for or recover remuneration unless the agency agreement is in writing and signed by the client. While the agreement here is signed, a significant procedural failure linked to its proper execution has occurred. Step 3: Consider the legal remedy available to the licensee. The Act provides a pathway for relief. A court can order the payment of commission despite a failure to comply with the statutory requirements if it is satisfied that the failure was inadvertent and that the client was not substantially prejudiced by the failure. Step 4: Synthesise these points to form a conclusion. The licensee’s right to commission is not automatically extinguished but is rendered unenforceable without a court order. The licensee must initiate legal action and convince the court that their failure was an unintentional mistake and that the client, having received the guide immediately after signing, was not materially harmed or misled. The outcome depends entirely on the court’s discretion after weighing these factors. The legal framework in New Zealand is designed to protect consumers while also providing a mechanism to address minor, unintentional errors by professionals. The requirement to provide the approved guide before an agency agreement is signed is a crucial consumer protection measure, ensuring the client understands the implications of the agreement. However, the Real Estate Agents Act \(2008\) acknowledges that minor procedural errors can occur. Section \(126\) creates a high bar for licensees to claim commission, requiring a valid, signed written agreement. If a licensee fails to meet all ancillary requirements, such as the timing of providing the guide, their claim becomes vulnerable. The provision for a court to grant relief is a critical balancing act. The court will scrutinise the nature of the failure—was it a deliberate omission or a simple, inadvertent error? It will also assess the impact on the client. If the client was not disadvantaged by the timing, the court may be more inclined to grant relief, thus allowing the licensee to pursue their claim for the agreed commission. This prevents clients from using minor technical breaches to unfairly avoid their contractual obligations.