November 17 2009
Clayton Cosgrove, The past Associate Justice Minister, introduced a new real estate agents bill into Parliament last year. The law was passed early bringing stronger consumer protection, an independent complaints system and much harsher fines for agents. Firms will face penalties of up to $100,000, whereas now they can be fined either $750 or $5000, depending on which regime hears a complaint.
What’s wrong with the existing system?
It is almost entirely in-house. The Real Estate Institute of New Zealand has not made a payout from its $2 million fidelity fund for years and the Government says agents aren’t hard enough on their mates when people complain. Only nine complaints out of 507 received in the past three years went to the independent Real Estate Agents Licensing Board for resolution. That board has big teeth. It can boot agents out of the industry and levy fines of up to $5000. But most complaints went to low-level institute subcommittees. Maximum penalty at present: $750.
There has been an outcry from the public against what Cosgrove calls “land sharks”. A campaign for justice was led by Deb Leask, the Australian-based woman who sees herself as something of an Erin Brockovich-type consumer advocate. In 2003, the lippy Leask tried to sell her two Napier townhouses through Bayleys. Agent Graeme Sawyer who worked there at the time tried to buy those places for just above half her asking price. The firm was fined the maximum – $750 – on three charges, to which it had pleaded guilty. Leask stayed mad and complained to Cosgrove, a willing listener to widespread calls for a clean-up of the $30 billion-plus industry.
What does this mean if you’re buying or selling a house?
If you have a problem next year, you’ll receive free, easy and fast justice – at least theoretically. Instead of being only able to take your case to the REINZ (the agents’ own lobby group), you’ll lay a complaint with a new real estate agents authority. That body will oversee licensing of agents, complaints and the disciplinary and enforcement process. Consumers won’t necessarily need to complain to the agent, agency or licensee initially, says Cosgrove. They will be able to go straight to the new authority. But officials have yet to iron out these finer details.
What type of problem would draw a complaint?
If an agent has misled you, acted dishonestly or misrepresented anyone, there could be a case to answer. Problems with sole agencies, written contracts, when the term of an agency expires, open homes, auctions, fixed-price sales or the less-than-transparent tender process all draw complaints, many rejected by the Institute at the first hurdle which leaves people feeling powerless. Complaints are frequently over potential or actual conflicts of interest where an agent has a financial stake in a property or is not acting for the vendor. Consumers also complain about commissions and who should be paid what. Agents must meet minimum standards and be a fit and proper person to be in the industry. They can lose their right to practice if they break the law.
Where are the rules to base a complaint?
At the moment there are three sets of rules: The current Real Estate Agents Act 1976, about to be repealed and replaced with the updated 2008 version; the institute’s Code of Ethics; and its Rules of Practice. See www.reinz.co.nz for in-house rules.
But beware: many of these rules protect agents, not you. For example, rule 5 of the code says agents cannot whine about other agents, hence the high-profile and ill-fated case the Institute brought then later dropped last month against The Joneses. That agency said we were all getting a bad deal from the industry.
What will be the steps for me to make a complaint?
First, go to the new real estate agents’ authority. It will investigate on your behalf free, acting as a prosecutor. And Cosgrove says you won’t need a lawyer at that stage, because the authority will take the matter forward. That authority will be able to order penalties and remedies. If the case is more serious – like fraud – the authority will refer the matter to a new disciplinary tribunal. That body will be able to strike an agent out of the sector and award you compensation. Big agencies have vowed to bring lawyers to the tribunal and Cosgrove has said you might need a lawyer at this stage, but the system has been established so you won’t be forced to.
What penalties will agents face under the new system?
The authority will be able to fine an agent $10,000 and an agency $20,000, order terms of a settlement on a house deal, censure or reprimand an agent, demand you get an apology, slash the agent’s commission or demand they get more training.
The new tribunal has more teeth. It will be able to fine an agent $15,000 and an agency $30,000, plus award you financial compensation. If criminal offences are committed, agents can be fined $40,000 and agencies $100,000. Now, the maximum is just $2000. The compensation is the kicker. At present you can’t get any, unless you go to court. How much can you get under the new system? Unknown.
So what does the institute say about the changes?
It welcomed them, which Cosgrove said was totally disingenuous given that he asked it to clean up the industry initially. It suggested only minor engine tinkering. So he seized the day – and the ball. Now he’s Rugby World Cup Minister and has emerged on top of the estate agent scrum, even if he is tempted to say “land sharks” a little too often.
Can I complain about anything an agent does?
Many vendors complain after accepting a price they thought reasonable at the time of sale, then subsequently discovering the buyer flicked the place on for much more. Vendors often feel the agent talked them down or conditioned them. Vendors want to unwind contracts for many reasons.
But most of these protests fail because the signed contract was legal and the agent did nothing wrong. Beware of buyers’ remorse.
November 17 2009