An Auckland real estate agent is facing disciplinary action after he took the bulk of a couple's $25,000 house purchase deposit as commission even though the sale failed to settle.
The Real Estate Agents Disciplinary Tribunal found that Virendra Jhagroo of CT Realty was guilty of "unsatisfactory conduct at a concerningly high level" but it dismissed a charge of "disgraceful" conduct.
The tribunal heard that in July 2007 Pukekohe couple Sylvester and Tafadzwa Kamhara had agreed to buy a house in Dannemora, Auckland for $505,000.
The Kamharas said Jhagroo had advised them there was a mortgage to Westpac and two additional finance caveats from Southland Finance and No Deposit Home Finance registered against the property.
However, Tafadzwa Kamhara said Jhagroo told her this was not an issue because the first mortgagee would be covered by the offer price.
"He led us to believe that it did not matter about the second and third mortgages and that what we were offering was sufficient," she said.
When the agreement became unconditional a few days later the Kamharas paid a deposit of $25,000 to Jhagroo's CT Realty trust account.
But a few days later the settlement stalled when the second mortgagee, Southland Finance, refused to release its caveat on the property.
In October the Kamhara's solicitor notified Jhagroo that the agreement was cancelled on the basis the vendors could not settle and that the deposit should be refunded.
However, in December Jhagroo paid himself $20,925 of the deposit as commission and $3514 for marketing costs. Jhagroo also paid $560 to the vendors' solicitor but the cheque was not cashed.
Jhagroo told the tribunal that he had transferred these funds on the advice of his lawyer. He also denied that he had discussed the issue of the second and third mortgages with the Kamharas at any time.
In its judgment the tribunal noted that real estate agents commonly deducted commission from purchaser deposits, usually as an agreement became unconditional. While the agreement in this case did become unconditional, it was soon cancelled and the vendors instructed that the deposit should be returned to the Kamharas.
"In those circumstances, he was not entitled to take his commission from the funds to be returned to the [Kamharas] who, of course, had no obligation to pay his commission," the tribunal said.
A penalty hearing would be set following submissions from Jhagroo and his solicitor, the tribunal said.
- Fairfax Media