Obtaining a ‘beneficial interest’ includes:

• purchasing property
• obtaining an option to purchase property or
• being granted a general power of appointment in respect of property.

An agent or salesperson is considered to obtain a beneficial interest if the interest is obtained by: 

• the agent or salesperson or a close relative (including a spouse or de facto partner, child, grandchild sibling, parent or grandparent)
• a corporation, firm or partnership in which the agent or salesperson or a close relative is involved
• a discretionary trust of which the agent or salesperson or a close relative is a beneficiary
• a person involved in a business relationship with the agent or salesperson or a close relative.

A real estate agent or salesperson is prohibited from obtaining a beneficial interest in the property in respect of which they are acting unless:

• their client has given written consent
• the agent or salesperson has acted fairly and reasonably in obtaining the interest
• if a commission or other reward is payable to the agent by the client, the client has consented in writing to the commission or other reward being paid.

The client’s consent must be given in writing in an Office of Fair Trading approved form.

A recent case study in New Zealand:

A high-flying real estate agent known as 'million-dollar-Marnie' has appeared before a disciplinary tribunal to defend claims of misconduct over a mansion in Auckland's eastern suburbs. Margaret `Marnie' Adams appeared before a hearing of the Real Estate Agents Disciplinary Tribunal yesterday (Monday) to answer allegations she listed and sold the house without disclosing she helped buy it.

After an investigation by the Real Estate Agents Authority, she was charged with misconduct consisting of "wilful or reckless contravention'' of the laws governing the profession. She lent the buyer almost $190,000 to complete the sale and is accused of planning to renovate the property so it could be resold "for a quick profit''. If found guilty, she could have her real estate licence suspended or removed and face fines of up to $15,000.

Adams was once the golden girl of Bayleys, making millions in commission and earning a place among the company elite by becoming its top seller. She left the company abruptly last March and weeks later started work with Sotheby's International. The Sotheby's website boasts she "has sold over 700,000,000 dollars of premium real estate consistently marking her out as one of the leading realtors in New Zealand''.

Questions about her behaviour at Bayleys were raised in January last year after she sold a home in Palmer Cres in Mission Bay. Adams had been listing and selling agent for the property, which has four bedrooms and a large family room overlooking a private pool surrounded by lush gardens. Bank records show she lent buyer Geoff Harriman $187,250 to ensure the $1.7m sale went through in September 2010. They were subsequently listed as registered owners along with a trust, JMAR, of which Adams was a trustee.

Bayleys director Michael Bayley told yesterday's hearing that on a standard form asking whether she had anything to declare about the sale, Adams circled `no'. When called into a meeting in February last year, she initially denied any involvement, Mr Bayley said. "She continued to talk in a roundabout manner and say she was not involved.'' But later in the meeting she admitted her involvement, he said.

Bayleys terminated her contract and, as legally required, advised the agents authority of their concerns. After an investigation, the authority's complaints assessment committee found her guilty of professional misconduct. Adams had denied the allegation. The committee referred the matter to the tribunal because of the seriousness of the allegations.

Prosecutor Brent Stanaway told the hearing Adams made the loan to Mr Harrington in two transactions she described as "acts of friendship''. The authority alleges Adams and Mr Harrington "discussed the property and renovation plans'' at the time of the auction. Mr Stanaway said notes from Adams' banker Martin Farrell indicated the pair planned to "put $100k into (the property) and try to sell it for over $2m ... for a quick profit''.

Mr Farrell also said Adams told him it was important she "was seen to be kept at arm's length for the purchase of the property''. The property was renovated and sold by JMAR Trust a year ago for $2.1m. Through her lawyer, John Billington QC, Adams admitted her conduct was unsatisfactory, but disputed it was wilful or reckless. She made an "unintentional mistake, albeit for the right reasons, to conclude a transaction in the best interests of both vendor and purchaser,'' he said. Mr Billington said she had no plans to get involved in the sale and didn't lend Mr Harrington the money until it had gone unconditional.

The hearing was due to last three days but proceedings were adjourned unexpectedly yesterday afternoon. It's understood negotiations between representatives of Adams, Bayleys and the authority took place in private.

*Source Otago Daily Times

Related Information 

Real Estate Qualifications