A salesperson owns 50% of a company that owns a rental unit her agency is selling. She tells a buyer about her interest only verbally, and he signs the agreement. Later he learns the details and wants to cancel under s 136. What is the position?
Correct Answer
C) He cannot cancel for this breach alone, but the salesperson has breached s 136.
Section 136 requires a licensee to disclose in writing to every prospective party whether the licensee or a related person may benefit financially from the transaction, before or when contractual documents are provided. A company in which she holds an interest is related under s 137(2)(i). Section 136(5) says the contract cannot be cancelled merely because of the breach, though disciplinary action may follow.
Why This Is the Correct Answer
Section 136(5) rules out cancellation for the breach alone, while verbal disclosure breaches s 136(1).
Why the Other Options Are Wrong
Option A: He can cancel, because any breach of s 136 makes the sale agreement voidable by the buyer.
Section 136(5) says a contract made in breach of s 136 may not be cancelled merely because of the breach.
Option B: There is no breach, as verbal disclosure before signing is enough.
Section 136(1) requires disclosure in writing, before or when contractual documents are provided.
Option D: There is no breach, because her company, not she personally, owns the rental unit.
Section 137(2)(i) makes an entity in which the licensee has an interest a related person.
Background Knowledge for Agency Practice
Source: https://www.legislation.govt.nz/act/public/2008/0066/latest/whole.html
Exam Tip for Agency Practice
Section 136: written disclosure before contractual documents; a breach does not let the buyer cancel.
Common Mistakes to Avoid on Agency Practice Questions
- •Thinking verbal disclosure is enough, or that a s 136 breach lets the buyer cancel.
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?
People Also Study
Property Law & Legislation
56 questions
Sale & Purchase Process
63 questions
Professional Conduct & Ethics
46 questions
Property Management
85 questions
Related Study Resources
Previous Question
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?
Next Question
A salesperson's nephew wants to buy a house the salesperson has listed. The vendor is happy to go ahead and says she doesn't need a valuation. Under ss 134–135, what must happen?