A salesperson lists a 1998 house with monolithic plaster cladding and no eaves. The vendor says there have been no leaks and has no reports. Under rule 10.7, what must the salesperson do?
Correct Answer
A) Get evidence from the vendor that there is no defect, or tell buyers of the risk.
Rule 10.7 says licensees need not discover hidden defects, but where it would appear likely to a reasonably competent licensee that land may have one, the licensee must either get confirmation from the client, backed by evidence or expert advice, that there is no defect, or ensure buyers are told of the significant potential risk. REA's weathertightness guidance identifies late-1980s to mid-2000s monolithic cladding as high risk.
Why This Is the Correct Answer
Rule 10.7 gives two options where defects are likely: evidence of no defect, or telling buyers of the risk.
Why the Other Options Are Wrong
Option B: Nothing, because licensees are not required to discover hidden or underlying defects.
Rule 10.7 requires action where a defect appears likely to a reasonably competent licensee.
Option C: Arrange and pay for a building inspection before the property can be advertised.
Rule 10.7 does not require the licensee to commission an inspection; it gives two other options.
Option D: Decline the listing, because leaky-era homes cannot be marketed until reclad.
Such homes can be sold; the licensee must confirm with evidence or ensure buyers know of the risk.
Background Knowledge for Agency Practice
Source: https://www.rea.govt.nz/real-estate-professionals/industry-guidance-and-information/disclosures/weathertightness-issues/
Exam Tip for Agency Practice
Leaky-era monolithic cladding triggers rule 10.7 even if the vendor reports no problems.
Common Mistakes to Avoid on Agency Practice Questions
- •Relying on 'no duty to discover hidden defects' when the risk is obvious from age and cladding.
More Agency Practice Questions
A real estate agent receives two offers on a property at the same time. What is their primary obligation?
Which of the following situations would create a conflict of interest requiring disclosure by a real estate licensee?
Sarah is a licensed salesperson working for ABC Real Estate. When showing a property to buyers, who does she primarily represent?
Under the Real Estate Agents Act 2008, what is the primary duty that a real estate agent owes to their client?
Which licence allows a person to carry out real estate agency work for an agent, but only under supervision?
- → Under section 126 of the Real Estate Agents Act 2008, what must happen after the client signs an agency agreement for the agent to be entitled to commission?
- → A licensed agent discovers that their salesperson has been providing advice about tax implications of a property investment without appropriate qualifications. What is the agent's responsibility?
- → An agency agreement contains a clause stating that the agent's commission is payable even if the property is sold by the vendor directly to a buyer introduced by the agent during the agency period, but the sale settles after the agency expires. Is this clause enforceable?
- → What must a real estate agent disclose to a potential purchaser when showing a property?
- → Under a sole agency agreement, when is the vendor still liable to pay commission to the agent?
- → Sarah holds a salesperson's licence and works for ABC Real Estate. When presenting an offer to a vendor, who is legally responsible for ensuring all disclosure obligations are met?
- → A real estate agent discovers that a property has a leaky roof after the agency agreement is signed but before any offers are received. What is the agent's obligation?
- → Which of the following allows an agent to end an agency agreement before its expiry date?
- → Under the Real Estate Agents Act 2008, what is the primary fiduciary duty that a real estate agent owes to their client?
- → What must a licensee do when they become aware of a material defect in a property they are marketing?
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