REA tribunal finds misconduct for not disclosing weathertightness risks

The Real Estate Agents (REA) Disciplinary Tribunal in CAC 2204 v Beale[1] recently found a licensed salesperson (Ms B) guilty of misconduct for failing to disclose to purchasers the potential weathertightness risks associated with a property.

The decision is a timely reminder that a licensee must not only disclose defects that are known but also has obligations of disclosure in relation to potential defects. This is especially where the type of construction and/or materials should be recognised as high-risk. Whether a risk/s should be identified depends on the specific circumstances of each case.  

It is notable that the Tribunal considered the circumstances of this case represented a significant departure from acceptable standards amounting to misconduct, and not mere incompetence or negligence (unsatisfactory conduct).

Case Summary

Ms B, an experienced salesperson, assisted an elderly couple to purchase a new property.  The purchasers were explicit about their needs: they were relocating to be closer to hospital care and wanted a warm, dry home due to their medical needs. The property purchased was a direct‑fix, monolithic, Harditex house built in the 1990s.

While Ms B pointed out the type of cladding in marketing materials and generally spoke about maintenance, she did not explicitly explain the weathertightness risks associated with the cladding which are well‑known in the real estate profession. Ms B recommended a building inspection clause but did not say this was because of the cladding type and associated weathertightness risks. This was despite her awareness of the risks. The purchasers removed the building inspection clause and proceeded with the purchase unconditionally, unaware of the risk. 

Following settlement, a weathertightness report identified the property as being high risk. The purchasers never moved in due to health concerns and ultimately sold at a loss. 

Key findings

The Tribunal noted the obligation in Rule 10.7 requires a licensee to disclose any potential defects actually known and also potential defects. Whether a licensees should recognise the risk is fact-dependent. Considering the facts of this case, the Tribunal found Ms B’s obligations to disclose potential defects were triggered as were corresponding breaches of her obligations in rr 5.1[2] and 6.4.[3]

In reaching the finding that Ms B’s conduct was sufficiently grave to justify misconduct the following factors were relevant:

-        Ms B knew the purchasers were elderly and had health vulnerabilities, and should have appreciated the implications of the cladding type on their purchase decision;

-        Ms B was experienced and was aware of the significant implications of weathertightness issues;

-        The weathertightness risks of the cladding were well-known; and,

-        The conduct had direct implications for the purchasers who had to sell at a loss upon identifying the weathertightness risks.

Ms B did identify the cladding as Harditex and comment that the property had been well-maintained but should have gone a step further to explain the risks of the cladding system. It was not sufficient for Ms B to simply state that the cladding required ongoing maintenance as this did not identify the nature of the risk posed and the weathertightness implications.

Key Takeaways

This decision reinforces that it is not enough for an agent to disclose only what is actually known. Where a construction type had well-known risks, agents must be proactive in disclosing the potential risks to buyers. This requires not merely identifying the type or style of construction but explaining the nature and implications of the risk. Failure to do so could result in a disciplinary finding and/or an award of damages to an out-of-pocket purchaser.

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[1] [2026] NZREADT 17

[2] A licensee must exercise skill, competence and diligence at all times when carrying out real estate agency work

[3] A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client

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