Property management cowboy: agent withholding $52,000 rent shows gap in law

The case of an Auckland property manager and real estate agent who failed to pass on $52,000 rent throughout three years has raised questions in the sector.

John Waymouth, a real estate barrister said Desmond Kan being found guilty of misconduct after not paying $52,000 rent from 2016 to 2019 clearly illustrated a gap in the law.

“Any cowboy can become a property manager. They’re not subject to a police check, licencing, any regulatory body or training. If he hadn’t been a licenced agent, there could be no formal judicial action taken against him by the sector,” Waymouth complained.

“This is a shocking indictment on the failure of the system, doing nothing to stop the way some property managers act. It’s not just losing the rent. Property managers can deal in an appalling way with tenants and there’s no comeback. It goes much wider.”

The Herald reported on Monday how the Real Estate Agents Disciplinary Tribunal found Kan’s conduct withholding the rent was “disgraceful” and found him guilty of misconduct after how he treated homeowners living overseas.

Police were called after rent was not paid on the Browns Bay home he was managing for owners in the United States.

A solicitor at Browns Bay’s Stephenson Campbell acting for the owners complained to the Real Estate Authority and reported Kan to the police who investigated the shortfall, the decision said.

A sum of $52,0000 was owing for the rent from 2016 to 2019.

After his actions were discovered, Kan repaid far more – $72,000, the tribunal said. He handed back the $52,000 rent from 2016 to 2019 plus he paid an extra $20,000 to the owners for interest, costs and refunding his fees.

Waymouth cited the solicitor’s actions on behalf of the homeowners.

“Had Kan not been a licenced agent, all Stephenson Campbell could do is sue in the District Court and that might have cost $20,000 to take proceedings if it went to a hearing and it would have been maybe six to nine months away, even on summary judgement,” Waymouth said.

“That’s the consequence of the failure. Neither the landlord nor tenant has protection under this law,” he said.

Joanna Pidgeon of Pidgeon Law said Unit Title Act reforms would impose rules for body corporate managers “but there is still no protection for consumers if property managers don’t have a real estate licence.

“In this case as the agent had already surrendered his licence there wasn’t much the Real Estate Authority could do, but at least a decision has been published which people can Google. Otherwise it is difficult for people to find out who the bad operators are if they don’t have a licence, which they’re not required to have,” Pidgeon said.

Waymouth said the February 11 reforms last year did not overhaul property management.

“One of the principal failures of the Real Estate Agents Act 2008 is that the definition ofreal estate agency work which it regulates does not include property management. That means property managers are effectively unlicensed and not subject to any mandatory licensing, controls, regulation. The public has no right to complain or make disciplinary allegations to any regulatory body unless the property manager is also licensed as a real estate agent as was Kan – luckily,” he said.

The upshot was that any person could be a manager without any training of any sort, any experience, regulation or licensing, or mandatory police checks imposed on real estate agents when they apply to be licensed, he said.

“The Government has taken direct action to help tenants by regulations introduced last February but they have still refused to amend the Real Estate Agents Act to include property managers to further protect tenants against improper practices by property managers,” Waymouth complained.

One of the drawbacks of the law is that if the property manager is also a licenced agent as with Kan, the disciplinary action against him can only be for misconduct, not unsatisfactory conduct, he said.

“That means it’s got to be really serious for the tribunal to be able to discipline him, as in this case.

“I’ve done cases where the property manager also being licenced was charged with misconduct and I’ve been able to convince the tribunal was not misconduct but unsatisfactory and therefore they have jurisdiction. The party has to be let off scot free.

“One of the cases was similar to Kan, but not as bad and there was a lot of personal circumstances involved. The tribunal accepted that it was unsatisfactory not misconduct and because of that, the tribunal could take no action,” Waymouth said.

Josh Doherty, Real Estate Authority head of regulatory services, said the Kan case was unusual.

“This sort of offending doesn’t happen often, which is a good thing. From our perspective, we haven’t seen many cases like this.”

But the Kan case did serve as an important warning.

“The authority welcomes the tribunal’s decision, finding the real estate licensee guilty of misconduct for his actions as a property manager. The authority says the case is a reminder to all licensees to act with integrity and professionalism in all their work,” Doherty said.

“The tribunal’s decision is a valuable reminder to all licensed real estate professionals that when they operate as a property manager, they need to adhere to the same high standards as when they are conducting real estate transactions,” he said.

Licensees need to conduct themselves with integrity and professionalism even when engaging in tasks that are not real estate work. As the regulator of real estate professionals, it is authority’s job to ensure licensees are held to account where their conduct fails to meet the high standards expected, which so many licensees work hard to achieve, he said.

On Kan’s lack of engagement with authorities when the case was heard by the tribunal, Doherty said the manager had responded initially to the investigation process.

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