Mike Pero agents failed to disclose deathly party wall, fined $25,000

Oriental Parade, looking up to Mt Victoria. Photo / Mark Mitchell

Two Wellington Mike Pero Real Estate agents who failed to tell buyers about a potentially deathly brick party wall between properties have been fined $25,000.

Wayne Kemp and Marina Scoble were earlier this year found guilty of charges of misconduct over their lack of disclosure about the wall. They were each fined $10,000 for hushing up the potential problem.

The Real Estate Authority said today the fine for not telling about the defect was a timely reminder to the sector of their obligations to consumers. Belinda Moffat, authority chief executive, cited the case today where the agents were fined $10,000 each over the wall and a further $2500 each over a pipe issue.

On January 22, the tribunal found two licensees guilty of misconduct for not disclosing to a buyer that the party wall was at risk of collapsing in an earthquake.

On May 5, they were issued with a formal censure and ordered to pay $10,000 each.

"They discussed whether to disclose the party wall issue and the cancelled offer to prospective purchasers and made a joint decision not to make any disclosures unless directly asked about the party wall," the tribunal decision said.

The two are licensed salespersons at Mike Pero Real Estate and have been real estate business partners for many years.

They marketed the Mt Victoria property but a potential buyer expressed concerns to Kemp about a party wall between that place and an adjoining place.

An engineer had told the prospective buyer it would cost about $50,000 to fix if it required strengthening.

Belinda Moffat, Real Estate Authority chief executive. Photo / supplied

Today, Moffat commented on the case. Asked why, seven months after the penalty decision had been released was she speaking out, a spokesperson said it was due to the pipe issue.

"In separate proceedings concerning the same sale and purchase transaction, following a tribunal finding of unsatisfactory conduct, the licensees were also ordered by the tribunal to pay fines of $2500 each as they failed to disclose Dux Quest piping to the purchasers," the authority said.

Homeowners have been warned about the piping which has failed in other homes.

"The total fines of $12,500 are significant given that maximum fine able to be imposed is $15,000. The purchasers were also successful in their application for costs to be paid by the licensees," Moffat's statement out today said.

On the wall issue, Moffat said: "The Code of Conduct is quite clear. A licensee must ensure that a buyer is informed of any significant potential risk of hidden or underlying defects in a property so that the customer has the option of seeking expert advice to assess the issue before they make an offer.

"A licensee must not continue to act for a client who directs important information to be withheld from a potential buyer. It is a critical part of the regulatory framework that promotes and protects the interests of buyers and gives all consumers trust and confidence in the real estate system," she said.

"The tribunal's decision is a valuable reminder to the industry of the importance of its disclosure obligations, particularly where a potential safety risk has been identified," she said today.

"After this decision in May, there were further related matters addressed by the tribunal relating to costs, and various appeals which prevented us from publicising this sooner. We had further engagement with the parties on the last phase of the case, completing those steps in recent months," Moffat said.

The case highlighted the importance of disclosure and the consequences where licensees fail to meet their obligations.

"As a Crown entity it is important for us to highlight these issues so that other licensees are aware of and benefit from the guidance from the tribunal, and for consumers to be aware of the standards that licensees must work to as well as the steps that can be taken through the REA process if they fail to do so," Moffat said.

"This was a complex and lengthy case, but raises vital issues, that we determined needed to be reported, in line with our role as the conduct regulator."