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The Complaints Assessment Committee set up by the Real Estate Authority alleged that the agency’s failure to meet its obligations amounted to gross negligence or gross incompetence in real estate agency work.
Violations occurred in 2019, 2020, and 2021.
The agency pleaded guilty to the amended charge and admitted its conduct amounted to gross negligence or gross incompetence in real estate agency work.
UHY Haines served as the auditor of the agency until his resignation in August 2019. IRCS then took over as auditor.
But in July 2018, UHY Haines released its audit report for the financial year ending March 31, 2018, which stated that Leading Edge had not submitted its reconciliation statements for a month.
This settlement comes a little late.
In June 2019, UHY Haines released its audit report for the financial year ending March 31, 2019, finding that Leading Edge had breached audit regulations.
With the exception of December 2018, all monthly statements for the year ended March 31, 2019 are delayed.
In October 2019, the Real Estate Authority wrote to Leading Edge asking it to provide an explanation within five working days.
Leading Edge said the late provision of the statements “was due to the transition of management and directors, relocation to a new suburb, lack of effective and reliable processes and procedures, and changes in administrative staff”.
the problem still exists.
In 2020, the IRCS auditors published a report for the financial year ending March 31, 2020, which stated that the company provided monthly reconciliations for August, November and December 2019 on time, but all other reconciliations were provided late.
Leading Edge said the documents were late because administrators did not submit them in time.
But a year later, IRCS released its March 2021 report and again stated that the reconciliation report was provided too late.
The authorities again sought explanations and mentioned that similar violations had occurred before.
Leading Edge said the reconciliation had been delayed for the third time due to the pandemic and Auckland being in lockdown.
The committee cited aggravating factors in the case. The first was the length and scope of the crimes – 25 separate incidents over three financial years.
The commission said institutions operating trust accounts for clients are in a fiduciary position and should have procedures in place to safeguard the funds.
Leading Edge failed to establish adequate systems to ensure the proper administration of its trust accounts.
This meant that there was no way to ensure that monthly reconciliation statements were submitted within the correct timeframe and reviewed by the auditors.
The committee said this impacted the authority’s ability to ensure trust funds were held and used appropriately.
Once problems with trust accounts were identified, they should have been fixed immediately. The commission submitted its report to the court, saying it posed a significant risk to the public and that regulations were designed to prevent this from happening.
Leading Edge’s attorney said the appropriate penalty would be a fine of $3,000 to $5,000.
Factors that influenced this included Teague taking over the company from his son, a lack of communication with UHT and the departure of executive staff.
His attorney said Teague regretted the action, but auditors said he did help correct the problem immediately.
The lawyer said that only three times were the monthly statements not prepared and signed in a timely manner.
Although Teague signed the statement on time, Leading Edge was unaware that the administrator had delayed sending the statement.
His lawyers said Leading Edge did not have an effective system in place to ensure the proper management of its trust accounts, as the commission alleged.
The trust account was properly managed. There was no suggestion it was ever overdrawn or mismanaged. Teague’s lawyers said the problem was the timing, which needed to be improved.
She said there had been no violations in nearly three and a half years.
“Leading Edge is in financial distress in the current market and a fine in excess of $5,000 would likely cause it to go bankrupt,” the judgment states.
Teague’s attorney asked that the fine be paid within three months.
But the tribunal said that while the agency faced staffing issues and changes in licensed agents, it should have taken steps to prevent the breaches from happening again.
The court said the agency acknowledged responsibility and cooperated, had no previous record of violations and no subsequent reports of violations, and acknowledged that there were indeed difficulties related to the epidemic.
The court upheld charges of misconduct – that the real estate agent worked in a grossly incompetent or negligent manner – and censured the agency.
Taking all factors into consideration, the court decided to impose a fine of $7,000.
Anne Gibson The Herald‘s real estate editor for 24 years, has written books, and has covered real estate issues extensively both domestically and internationally.
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