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Real Estate Agents Bill

First Reading

Wednesday 12 December 2007 Hansard source (external site)

CosgroveHon CLAYTON COSGROVE (Associate Minister of Justice) Link to this

I move, That the Real Estate Agents Bill be now read a first time. At the appropriate time I intend to move that the Real Estate Agents Bill be considered by the Justice and Electoral Committee.

This bill will provide long-overdue protection to people buying and selling their homes. It will support the vast majority of good, honest professionals working in the real estate industry who are unfairly tarred with the same brush as the last land shark who ripped someone off. Such people are a minority in the industry.

Hon Member

Oh, land sharks! What’s a land shark?

CosgroveHon CLAYTON COSGROVE Link to this

The land sharks—that is right—who indulge in dubious business practices, have caused great financial hardship and anguish for consumers. That is indeed undeniable. The risks this minority pose to ordinary Kiwi consumers are considerable. The risks include mishandling of funds, poor contractual advice, misleading representations, conflicts of interest, misuse of information, and fraud. When things go wrong it is ordinary Kiwis and their families, as we know, who pay the price. The cost to victims who have been ripped off by careless or rogue agents can run into hundreds of thousands of dollars.

For most New Zealanders their greatest asset is their home. Buying or selling a house is, for most people, one of the biggest financial transactions of their life. That is why this bill, which is about protecting consumers and good, honest real estate professionals, is so important. We are all aware of the succession of cases that have raised serious concerns in the community and in the media. Consumers have turned to the Real Estate Institute of New Zealand’s complaints and disciplinary regime when things go wrong, yet many feel they have been deprived of a fair hearing. It is clear to the public that the current system lacks transparency, openness, accountability, and independence.

The media have picked up on these public concerns. I quote from the Southland Times: “It is almost a test of stamina to see whether the community can muster any sense of actual outrage, rather than just weary sourness, over the alleged misdealings of yet more sharkish real estate agents.” The stated: “It is time for a system that focuses on the customer, rather than protecting patches and quashing competition.” The stated: “Public outrage has been sparked by cases involving agents seeking to buy properties themselves, serious undervaluations, and the concealing of vital information from buyers.” Finally, the stated: “The institute … has regarded its duty of self-regulation for the industry as about just one of those two words, self.”

Members of the public and honest real estate agents alike have complained to me about the way the institute handles complaints—for example, the long delays in processing complaints, the poor quality of investigations, and complainants not being adequately informed. The industry’s actions on occasion have been inexplicable and inexcusable. Members should remember the Ottaway case, where an agent was formally warned by the Commerce Commission and fined a paltry $750 by the Real Estate Institute for marketing a house as being “out of the hustle and bustle” without disclosing that an apartment block was planned for next door. The buyers estimate their losses to be $35,000 of house value, yet that same agent went on to win several awards as being a top real estate agent.

Sitting suspended from 6 p.m. to 7 p.m.

CosgroveHon CLAYTON COSGROVE Link to this

Before the dinner break I was referring to the Ottaway case. The buyers lost $35,000 of house value, yet that same agent went on to win several awards, as we know, for being a top real estate agent, and was hailed as being an example to the community, an example that the community should be proud of.

Members will remember the institute taking action earlier this year against the Joneses, a real estate firm, for publicly saying: “New Zealanders pay way too much money for a fairly indifferent sort of service.” The charge was that the Joneses had brought the industry into disrepute by saying that consumers deserved a better deal. The Real Estate Agents Act 1976 gives the Real Estate Institute the privilege of self-regulation and the power to act as the gatekeeper for complaints. In essence, the institute determines the level at which a complaint will be dealt with, if at all. According to the institute’s own figures, which it sent to me, between 2004 and 2006 it received 507 complaints from members of the public, but only nine of those were referred to the independent licensing board.

But it gets worse. The institute recently advised me that it had also received a number of other serious complaints from bodies such as the police and insurance companies, of which 140 were referred to the licensing board. Who knows how many hundreds of complaints were actually made to the institute by police and the insurance industry but not acted upon? We do not know. The institute’s own journal of 4 December this year said that these complaints “tend to be at the more serious end of the scale”. The need for openness and transparency in this sector cannot be overstated. The industry is seen by many as a closed shop, and that is not good enough.

Last year I offered the Real Estate Institute the opportunity to come back to me with a solid set of proposals that would deliver a complaints and disciplinary system that was independent, accountable, open, and transparent. I suggested that the institute look at the Banking Ombudsman, for example, which achieves those outcomes and is funded by the industry, not by the taxpayer. Sadly, the Real Estate Institute’s proposals, in my view, amounted to tinkering. It asked me to increase fines and, effectively, set up regional disciplinary committees, but its proposals would not deliver on transparency, independence, or increased accountability, nor would they restore public confidence in the sector. It was at that point that I instructed the Ministry of Justice to provide me with advice on options for reform to deliver what the community—not the politicians—is demanding of this industry.

The result is the bill that we are debating tonight, which, at its heart, is about protecting the Kiwi consumer. The Real Estate Agents Bill will provide a modern regulatory framework to protect the consumer when buying or selling property, and will restore consumer confidence in the real estate industry, which is what all those honourable, honest real estate folk want. The bill will make the day-to-day business conduct of real estate agents more open and transparent, will raise the standards of conduct of industry members, and will support honest real estate professionals in their work. The bill addresses the need for more consumer compensation for losses. At present, the Real Estate Institute keeps fines paid by dodgy real estate agents, yet it can legally and morally pass on those same moneys to the victims if it wants to.

What does the bill do? The bill removes the regulatory functions from the institute, as well as removing the compulsory requirement for agents to become members of that institute. It abolishes the Real Estate Agents Licensing Board and creates a new body independent of the industry, called the Real Estate Agents Authority, to oversee compulsory licensing as well as complaints, disciplinary, and enforcement processes. It will also provide information for consumers. It introduces a fit and proper person test for people entering the industry, and requires ongoing professional training. It sets up a public register of real estate agents, branch managers, and salespeople, to record any breach of industry standards, and any disciplinary matters upheld by the authority and disciplinary tribunal, against the names of those involved. It strengthens mandatory disclosure requirements, including possible conflicts of interest, and introduces a cooling-off period for sole agency agreements. It requires agents to provide buyers and sellers with mandatory standard information before they sign a sale and purchase agreement. The new authority will have a wide range of investigative powers, and will be able to order a wide range of penalties and remedies, including censuring or reprimanding an agent, requiring an agent to apologise to consumers, ordering a reduction of an agent’s fees, and imposing fines.

The bill also creates a fully independent disciplinary tribunal to deal with serious cases. The tribunal will have the ability to order the cancellation of licences, award compensation, and impose fines. It will not cost consumers anything to lodge a complaint, and they will not be required to hire lawyers, because the authority, through its complaints assessment committee, will represent their case if it is referred to the disciplinary tribunal. Penalties for criminal offences under the bill are greatly increased. Dishonest agents will now face fines of up to $40,000 for individuals and $100,000 for companies.

The bill does not make any changes to the employment status of salespeople within the industry. The Government will review this provision after 5 years to consider whether there is any justification for the real estate industry not being subject to the same employment law as other industries.

These reforms will not be funded by the taxpayer but will be funded by the industry from the over $1 billion in commissions collected each year through licence fees and levies.

I will quote from one of a handful of letters I have received since I foreshadowed these reforms: “On behalf of Bayleys Realty Group I would like to extend and reiterate our support for the requirement for change and improvement in the regulation of the real estate industry. Both John Bayley and I believe this is an important opportunity to bring positive change to the industry which will in turn elevate levels of consumer protection and confidence in our sector. Mark Grant, CEO, Bayleys Group.”

In conclusion, as I said at the start, this bill is about protecting consumers as they buy and sell their biggest asset, and supporting the vast majority of the people in this industry, who are good, honourable, honest, hard-working real estate folk who do a good job every day, but are tarred by the same brush as the last land shark that ripped somebody off. I commend the bill to the House.

PowerSIMON POWER (National—Rangitikei) Link to this

I thank the Minister, Clayton Cosgrove, for his opening comments in respect of the first reading of the Real Estate Agents Bill, and I will address some of the comments he made during the course of the debate. The Minister is right: the Real Estate Agents Act of 1976 does need reform. The legislation does need to provide transparent and accountable governing bodies and disciplinary tribunals. All of those things are true. He quoted a letter from the chief executive officer of Bayleys Real Estate towards the conclusion of his remarks, where the chief executive said that this was an important opportunity to bring positive change.

Unfortunately, National does not believe that the way this bill has been handled brings positive change. The Minister had an opportunity to deal with this issue in a rational and considered way. In my view, and in the view of the National Party, Mr Cosgrove, in his capacity as the Minister in charge of this bill, has overshot somewhat in the way that he has dealt with this particular legislation. In fact, from recollection, this reform has been announced more times than even the economic transformation we are still waiting for from the Government.

We know, for example, that the most common phrase Mr Cosgrove has uttered since he first announced this change in May of this year is “land shark”, which is a phrase he uses at every opportunity. Unfortunately, that type of approach has actually vilified thousands of land agents who have never done anything other than to go about their business selling properties on behalf of customers—vendors who are satisfied with the process, who have paid their commission, and who have got on with their lives.

National agrees with the Minister that an independent authority to deal with complaints and disciplinary issues is needed. We are in favour of transparency and accountability, but we are not in favour of the vilification of an entire industry off the back of some scattered examples the Minister has used. The Minister came to the House today and started talking about the “honest folk” in the real estate industry but, unfortunately, since May of this year that is not a phrase that has carried the same amount of mentions as the phrase “land shark”.

What worries me most about this particular piece of reform is that it is actually a missed opportunity, because there is need for reform, and on that I agree with the Hon Clayton Cosgrove. But here we are going to miss the opportunity to found a system that is based on the customer—on the consumer, and on his or her right to be treated fairly. Rather, the opportunity is being taken to pound an industry into submission. When the Lawyers and Conveyancers Bill came to the House, we trusted the lawyers to come up with some suggestions that would make their industry more user-friendly. I suggest that the rational, calm approach adopted in that instance would have been a good model to use in this instance.

I tell members that on this side of the House we are concerned about several things. First, bureaucratising is not the answer, and we have seen that with the Department of Building and Housing. That particular department was an answer to a problem that could have been solved in quite a different way, and we need to be convinced that the costs associated with the new process the Minister has described this evening are not going to be passed on to the very consumers the Minister purports to protect with the introduction of this legislation. I have followed this debate very carefully for the last 8 or 9 months, as the Minister knows, and one of my favourite things that I found very interesting in the original discussion document, which was tucked away in the middle of the document under an innocuous bullet point, was the issue of changing the employment status of real estate agents from independent contractors to employees, and all the legislative implications that that would have for that industry. Of course, the Minister backed off that suggestion once people said to hang on; they began to ask: “Where’s the evil?”, “Where’s the harm?”, and “What is it that the legislation is trying to address?”.

CosgroveHon Clayton Cosgrove Link to this

A listening Government.

PowerSIMON POWER Link to this

The Minister says he is part of a listening Government. It is a pity he was not in the Chamber for the Committee stage of the Electoral Finance Bill. But what I can say is that to impose in legislation a 5-year review of the employment status of 20,000 New Zealanders is to hang the sword of Damocles over those particular individuals, so that the Minister, whoever that may be at the time, retains the power and the authority simply to change the employment status of a group of people at whim. It is unacceptable to leave an industry in an uncertain state for that entire 5-year period; all those prospective agents, who like the freedom of being independent contractors, and who do not put demands on their employers with legislative requirements, now do not know what their employment status could be in 5 years’ time. That is a bad way to draft law. It lacks certainty and it lacks clarity. It is not a good way to propose to deal with that issue.

I tell members of the House that I have read through this debate, and I cannot in fact understand why, if the Minister is so determined to reform the negatives in the real estate industry, property management is excluded from this legislation. Why is an industry that holds trust account moneys on behalf of clients excluded from this legislative framework? Why are residential tenancies excluded? Who is not being protected in those two instances? It is the consumer who is not being protected, yet the Minister comes to the House and says that this bill has nothing to do with promoting his own political prospects; this bill is all about the consumer. Well, actually, if it were about the consumer, property managers and the like would be included.

A first read of the bill reveals that it also fails to remedy an oddity under the Auctioneers Act: a real estate agent cannot hire the services of a registered auctioneer unless that real estate agent is also a registered auctioneer. That situation is not addressed in this wide-sweeping reform with which the Minister proposes to protect the consumer. So I say to the Minister that we come at this issue determined to see accountability and transparency, and an independent body put in place. What we will not agree to—and the reason that we will not be voting for this legislation today—is a half-baked effort, with truly poor work having been done on legislation that is to protect consumers.

We are going to hear more rhetoric from the Minister over the next short while, and he should bear this in mind: every time he opens his mouth to promote himself and his so-called destruction of land sharks, he should think of those thousands of land agents who have done nothing wrong, and of the entire industry that is at risk of being vilified by a piece of legislation not comprehensive enough to deal with many of the proper issues it should be dealing with—many of the issues that, in fact, National members agree should be dealt with.

SamuelsHon DOVER SAMUELS (Labour) Link to this

Kia ora tātou, Mr Assistant Speaker. I would like to take a short call on this Real Estate Agents Bill, because when somebody mentions the word “shark” my ears prick up. Why? As a diver who has been diving for many years, and as a fisherman, it has been my experience during my life to encounter many kinds of sharks, starting from the Carcharodon carcharias, which is the white pointer or the “white death”, the mako shark, the thresher shark, the orca, the blacktip shark, the whitetip shark—you name it; I have dealt with them all both as a fisherman and head-on as a diver taking photos.

I am very interested in Simon Power’s analysis in terms of land sharks.

PowerSimon Power Link to this

Have you read the bill?

SamuelsHon DOVER SAMUELS Link to this

Yes, I am speaking to this bill. That member has mentioned land sharks on many occasions, and I think it is appropriate that I get up in reply. Simon Power said in his presentation that my colleague has offended thousands of real estate agents. Having read the bill, I found no provision in it that would offend me, except—

PowerSimon Power Link to this

Have you read the bill?

SamuelsHon DOVER SAMUELS Link to this

Yes, I have. I listened to the member. The advantage of becoming a diver is that one goes into a silent world, and one observes—

PowerSimon Power Link to this

You got that right.

SamuelsHon DOVER SAMUELS Link to this

Absolutely, I got it right. In that silent world one observes, with wisdom, what is actually happening.

I say to that member and to the House that this bill is not directed at law-abiding, decent land agents—and that member knows it. I ask whether anyone has tried to extract teeth from a mako shark, and I challenge that member. To say that this bill will wipe out a number of legal, law-abiding land agents, is a lot of humbug. I will invite that member, perhaps the next time I go diving off the Cavalli Islands, to come with me. I will look after him, and I will take him into the land of real sharks—real sharks. In my area of the Cavalli Islands and Matauri Bay, the sharks love legs that look like milk bottles We see flippers, half a wetsuit, and those white legs, and that is when we understand what sharks are all about. They will hone in, without any prejudice and discrimination. But I will offer that member, that colleague across the Chamber, an invitation to come diving with me in the Christmas period. It will be “Pokare Kare Ana” for him.

To suggest that this bill will cut across the intelligence and the rights of real estate agents who are going about doing their job—come on; get a life! When someone mentioned the word “sharks”—and that member mentioned the word several times—I thought that I had had a lot of experience with sharks. I compliment my colleague Clayton Cosgrove, because he has the courage to be able to decide who the real sharks are, and who are in between. At the end of the day, this legislation is designed to protect the public of New Zealand, those hard-working families, who are out to purchase a decent house—genuinely—or a piece of land, and it will protect them from people who are going to exploit them.

At this time of the year, when there is goodwill to all men and women, and a time of sharing and greetings, perhaps my invitation to the colleagues across the other side is kei te pai—be of good cheer—even though there are a few sharks swimming around here. Nō reira. Mihi atu ana ki a koutou. Kia ora koutou katoa. Mere Kirihimete; happy New Year.

RichKATHERINE RICH (National) Link to this

It is a pleasure to speak to the first reading of the Real Estate Agents Bill. I very much enjoyed the last contribution about sharks, and the long list of different types of sharks, but I have to say that it did not have anything to do with the bill tonight.

If we are looking for a reason why real estate agents are so exercised and upset about the way in which these reforms have been handled, we find that one of the things comes down to the use of that word “shark”. For good, honest people who take their work seriously and conduct their work professionally, being called a land shark is incredibly emotive and deeply insulting. I think that the Minister Clayton Cosgrove needs to go and talk to some agents in order to understand how deeply insulted they have been by being called not only land sharks but rogues and cowboys. The board of the Real Estate Institute certainly did not enjoy being called a B-grade Goon Show.

These people take their work extremely seriously and conduct it with a high level of professionalism, but by the way we hear the Minister talk about the industry, in that kind of John Wayne meets Buzz Lightyear style—he is there to shoot up the town, to reform this industry, and to drag it kicking and screaming into the new century—it is as if he is on a crusade to tidy up a range of issues that are purely and simply not there for by far the majority of those hard-working Kiwis who work in this area. The crusade is certainly designed to build the Minister’s own profile and to build a platform—which has been successful—to elevate his position in the Labour Government. But it bears no relation to what is going on out there in the industry. If we look at what is happening in the real estate industry, we find that in any given year there are about 200,000 transactions. Most of those go well, without incident. This year there have been only 57 complaints. I have been told today that about one deal in 10,000 goes wrong, so what we have here is a sledgehammer to crack a walnut.

The Minister wants to give the impression that he has dragged the industry kicking and screaming into reform, but that is not true. The industry has been calling for reform for years. The industry has been saying that its Act needs to be updated, and that it needs to have a modern Act that reflects today’s situation. But that has not happened. The Government has actually dragged its heels and it has not updated the Act. But it now wants to give the impression that the industry has been against these reforms, and that it is somehow being dragged into a modern century.

I think the Minister has also overlooked the fact that some of the changes being called for—and some are in this bill—are exactly what the institute has been asking for, for years. The Minister said that in the event that something went horribly wrong and there was a crook in the industry, the fine would be “a paltry $750”. Well, it is $750 because that is what it says in the Act. And the agents themselves have been saying: “Let’s increase it. Let’s increase it dramatically, so that when crooks are found they can be pinged for $10,000, $20,000—$50,000—and we can really make a difference and send a strong message.” But, once again, the Government has dragged its heels in updating the reforms.

Likewise, industry representatives have been calling for changes to the way that agents are educated. They have wanted to add a lot more rigour to their education, and to make sure that the hurdles are significantly higher for agents to get into the market. Once again, the Minister has dragged his heels. We know that he has, on his desk for sign-off, a new education regime for agents, but he is refusing to sign it.

So while the Minister is channelling a Clint Eastwood - type character, our message from this side of the House is that he is not Clint Eastwood, actually; he is a Minister in a responsible position, and it is not his job to use emotive language to highly politicise an issue that could have been straightforward. It should have been a genuinely straightforward reform issue, but the Minister has made it a highly political issue and has done 20,000 agents a disservice. He has done their families a disservice but, more important, he has created the impression that all real estate agents are crooks, that they are all land sharks, and that they are sort of Herb Tarlich goons who are there just to rip people off. He actually used the phrase “ripping off” in his speech. If we bring some common sense to the discussion and the debate, and if we bring the debate back down to a more reasonable level, we find that that is not the situation.

There are tens of thousands of agents who work extremely hard. They are small-business people. They pay their taxes. They take their own risks. They put bread on their families’ tables, and they take their jobs extremely seriously. They see what they do as being a profession. They see what they do as being something really important. But that has been lost now in this debate, because we have had this hysteria created that they are all a pack of crooks—that they are all out there to rip off Kiwis. And that is a deep insult.

I have been speaking to some real estate agents, and many of them, the Minister might be interested to know, voted Labour. I do not know why, but they voted Labour in the past and they feel deeply insulted by what the Minister has said. He has used this bill as a platform for his own profile; he has not looked at this issue in a common-sense way. While he has talked about tarring agents with the same brush, he is the one who has done that. He is the one who has used that emotive language to create the impression that all agents are crooks. Had this been handled in a different way, I think our side would probably have supported the majority of these reforms.

In terms of what needs to be done, we think there are some significant areas to tidy up. Who knows why property managers are left out of this bill—

RichKATHERINE RICH Link to this

It is utterly and totally bizarre, when one in five complaints is as a result of some kind of property management issue, not the real estate aspect, at all. We have 200,000 transactions in a year, and only about one in every 10,000 of those goes bad. This Minister is pretending that it is the norm for real estate transactions in this country to go bad. Well, I do not think that Kiwis buy that kind of rhetoric. I hope they understand that the debate here has been very misleading, it has been hysterical in parts, and it is a method of building a platform for the Minister to build his own profile as opposed to doing a service to New Zealanders by putting forward reasonable reforms.

Real estate agents themselves have been calling for many of these reforms, so although I think that the Minister wants to create the impression that he has corralled these outlaws and that he is the one who is bringing some professionalism back into the industry, that is not true. It is a deep insult to those agents who have worked extremely hard, have built up a professional background, and have done work in our communities over the years. That is one of the things in this bill that we think needs to be tidied up during the select committee process. We want to see things like the issue relating to property managers debated during the select committee process.

We want to see some changes, but more than anything we want the Minister to peg back the politicisation of this issue. We want him to bring back some common sense, to get these reforms through, and to update some of the laws relating to this industry in a common-sense, reasonable way, because the politicisation of the issue has been deeply insulting to the professionals who work in the industry and to their families, and it has done a disservice to the community.

CosgroveHon CLAYTON COSGROVE (Associate Minister of Justice) Link to this

I raise a point of order, Mr Speaker. I will not labour this, but I just ask your indulgence and advice. I have been accused time and time again in this debate of characterising all real estate agents—

PowerSimon Power Link to this

It’s a matter for debate.

RichKatherine Rich Link to this

That’s not even a point of order.

CosgroveHon CLAYTON COSGROVE Link to this

I ask the members to excuse me, but this is a point of order, and I ask whether I could be heard in silence. I thank the members. I have been accused of characterising all real estate agents as rogues, land sharks, or evil people. For the record—and I am quite happy to provide it to all members—in the last 12 months, in every interview and every press statement on this issue, I have said repeatedly that the vast majority of the industry are honourable, hard-working, honest folks. That is a fact.

RobertsonThe ASSISTANT SPEAKER (H V Ross Robertson) Link to this

I thank the member. That is a debatable issue.

BrownPETER BROWN (Deputy Leader—NZ First) Link to this

It is not my job to defend the Minister, but I have to say that in the discussions I have had with the Minister he has always recognised that most real estate agents in this country are honest, law-abiding, genuine people. I know that from time to time he has used the words “land sharks” and perhaps some other stronger terms, but he has normally clarified that with a specific case, as he did in his opening speech tonight. I know a number of real estate agents. I know them personally and I know them professionally, and I have not had one of them complain to me about this bill. I have had several mention that they are concerned about the industry and say that it needs a tidy-up, as the two National Party speakers have said.

I have listened to the National Party contribution thus far with a good deal of interest. I thought that Simon Power made some very good points and that Katherine Rich made some good points at the end. But the underlying point that seems to come across from National members is that they will not vote for this bill because the Minister has upset a few real estate agents. Katherine Rich said at the end of her speech that she wants the bill to be tidied up at the select committee and that she recognises that some technical amendments could make it a better bill. That is in essence what she said, but she summarised that by saying, in effect, that as the Minister has upset a significant number of real estate agents, National cannot see its way to supporting this bill.

The real estate industry is, to all intents and purposes, a closed shop and it needs to be opened up. It needs to be opened up and—

PowerSimon Power Link to this

Anybody can join it.

BrownPETER BROWN Link to this

Everybody can join it, but they have to join it, and they have to abide by rules and standards that are pretty much second-rate. The underlying point is—[ Interruption] Should I sit down, Mr Assistant Speaker, while the members have an exchange?

RobertsonThe ASSISTANT SPEAKER (H V Ross Robertson) Link to this

I say to the member on my left and to the member on my right who are interjecting on each other that that is totally out of order.

BrownPETER BROWN Link to this

Thank you, Mr Assistant Speaker. The underlying purpose behind this bill is to give some protection to people who buy houses and homes. Having one out of 10,000 being ripped off is not good enough. It is not good enough. The member Simon Power shakes his head. He thinks it is OK for one in 10,000—

PowerSimon Power Link to this

The bill doesn’t do that. Read the bill.

BrownPETER BROWN Link to this

I think that the member should read the bill, and I remind the member what the purpose of the bill is. The bill states: “The purpose of this Act is to”—[ Interruption]

PowerSimon Power Link to this

I raise a point of order, Mr Speaker. The Minister opposite knows what I am going to say; I have let the comment go three times so far. It is completely inappropriate, under the Standing Orders, to suggest that any member of this House is under the influence of anybody outside this Chamber, and I want him to withdraw and apologise.

CosgroveHon Clayton Cosgrove Link to this

I didn’t say that.

RobertsonThe ASSISTANT SPEAKER (H V Ross Robertson) Link to this

Can I just say that I never heard anything like that, but members know that they cannot indicate that anyone is under the influence of any outside person. All members here are honourable members and their word is their bond. I would suggest that we get on with the debate. The Minister said that he did not do that.

BrownPETER BROWN Link to this

Thank you, Mr Assistant Speaker. I was about to read the purpose of the legislation, which is in clause 3 in Part 1, for the benefit of the National Party. It states: “(1) The purpose of this Act is to promote and protect the interests of consumers in respect of transactions that relate to real estate. (2) The Act achieves its purpose by—(a) regulating agents, branch managers, and salespersons: (b) raising industry standards: (c) providing accountability through a disciplinary process that is independent, transparent, and effective.” To New Zealand First that all sounds like very good news. This industry needs a tidy-up, and this bill will go some way to achieve that. I accept that when it goes to a select committee it will be amended, changed, and adjusted, but at the end of the day it will come out as a bill that one hopes will address the problems of consumers.

Real estate agents are a service industry. They service the public. I can say to the honourable members opposite that the most expensive asset an individual, or in particular a young married couple, purchases is a home. Those people need to know that they will get a fair and reasonable deal out of the whole thing, and they do not need to go away thinking that they have been ripped off. This bill attempts to do that. It puts in place a number of rules, which those members have referred to and that will possibly be subject to some change at the select committee, but they are relatively minor amendments. They are not a reason for National Party members to shake their heads and say that they will not support this bill.

Simon Power opened his speech, and I thought he was going well, by saying that the current legislation, the 1976 Act, needs updating and needs to be brought into the 21st century. This bill attempts to do that, and with his willingness—I know he is a lawyer and he knows the ins and outs and the intricacies of legal matters—and his positive contribution, I am certain this bill could be improved to the point that it satisfies him.

New Zealand First is comfortable with the way the bill reads now, but we recognise that we are not the experts on the real estate industry and that some concerns will probably need to be addressed as the select committee progresses with the bill. But we think this is something that needed to be done a long time ago. I note that the Minister did call the real estate industry to account some time ago. He asked agents, on a voluntary basis, to tidy up their act—putting it in finer words. That opportunity was declined, so the Minister had to make the choice of either doing something or sitting on his hands and doing nothing. Thankfully—and New Zealand First thanks him—he has come to grips with this issue and has produced this bill that will go a large way towards addressing the concerns of people who purchase houses and homes. That is the purpose of this bill. Those people have to get a fair and reasonable deal. New Zealand First supports this bill going to a select committee.

BradfordSUE BRADFORD (Green) Link to this

The Green Party welcomes this bill and will support it going to the select committee. Like the Government and many people in the community, we too have concerns about whether homebuyers and sellers currently have adequate rights and protections in relation to the activities of unscrupulous or incompetent real estate agents.

Buying or selling a house or other property is the biggest commercial transaction many ordinary citizens undertake in their lives. Often people do not fully understand what they are getting into when they sign agreements with agents, even if they have been in the property market before. It is an even more perilous exercise for the many people for whom this is the first time. Buyers and sellers can, and do at times, become the innocent victims of wheeling and dealing at a level of which they have little or no comprehension. As non-professionals in the world of real estate, most of us tend to take real estate agents at their word and when something goes wrong we have only a dim notion of what, if any, remedies are available to us. Some of the more notorious cases, for example, that of Deb Leask in Napier, have appeared in the media but many never see the light of day. All too often people do not make a complaint at all because they do not understand the processes involved and/or because they have no faith that they will receive any redress, at least without having to take on potentially expensive litigation, which would undermine the purpose of the action in the first place.

We appreciate the effort the Government is taking to reform real estate law and institute a range of new consumer protection measures, including the establishment of an independent Real Estate Agents Authority that will oversee licensing, complaints, and disciplinary and enforcement processes, and provide information to consumers. The new authority will have broad investigative powers, along with the ability to order a wide range of penalties and remedies. The bill before us tonight also includes the establishment of a Real Estate Agents Disciplinary Tribunal that will be separate from the authority. This tribunal will investigate all charges laid by another new body, called the complaints assessment committee, whose job it will be to sort out which complaints are serious enough to go forward and, where necessary, refer them to other bodies too, like the police or the Commerce Commission.

At the moment the system is run almost entirely in-house by the Real Estate Institute of New Zealand. The Government says that only nine complaints out of the 507 received by the Real Estate Institute in the past 3 years have actually gone to the independent Real Estate Agents Licensing Board for resolution. Although these figures may, for all I know, be contestable—I have not extensively researched this—it is still of concern that so few complaints reach any independent body for action. Most complaints, meanwhile, go to subcommittees of the institute where the maximum penalty is $750, rather than the $5,000 that can be applied by the licensing board. The new authority will be able to fine an agent up to $10,000 and an agency up to $20,000 and will have the power to publicise its findings and the sanction imposed. It will be able to demand an apology, order terms of settlement on a house deal, and if a criminal offence is committed the fines rise to $40,000 and $100,000 respectively.

Further major measures contained in this bill include the establishment of a public register of real estate agents and sales people, recording any breaches of industry standards on their part, a requirement that licensed agents have ongoing professional development training, and an obligation on agents to give consumers educational information about their rights, plus a written statement disclosing any conflicts of interest they may have.

The Real Estate Institute and its members are, of course, affected hugely by this bill. I note that the institute “welcomes those reforms in the bill which remedy real problems in the current regime but is concerned that the bill goes too far in changing the law where there is no problem and not far enough in other areas which require more regulation.” The Real Estate Institute appears to endorse the purpose of the bill in further protecting consumers’ interests, raising industry standards, providing an independent and transparent disciplinary process, and introducing compulsory continuing education for agents. The Real Estate Institute also appears to be happy that the bill makes no change to the employment status of salespeople within the industry, although I note that this will be reviewed within 5 years of the legislation becoming law—a measure that the Green Party definitely welcomes.

However, the institute, as the National Party has pointed out, also has a number of major issues with the bill, including what it sees as its failure to include property management and letting within its scope, a perceived lack of industry consultation on the setting of levies and fees, the aforesaid requirement to review the employment status of agents within 5 years, and the proposed changes to the education of real estate agents—an issue where I have a particular concern about what is going on. I look forward to hearing further from the institute on these matters and the other matters it raises, along with hearing from all the other submitters who will, I am sure, come forward with all viewpoints during the parliamentary process ahead.

In summary, I think the bill is about justice not only being done but being seen to be done. In this day and age most of us are keen on some real independence and transparency in complaint and review functions, whichever body of Government we are dealing with—something, by the way, I would love to see applied to the operations of the Ministry of Social Development. Meanwhile I think there are some aspects of the bill before us that may need tidying up. Although fundamentally supporting the bill, the Green Party will, as ever, remain alert to the possibility of helpful amendments during its passage through the House.

FlavellTE URUROA FLAVELL (Māori Party—Waiariki) Link to this

Tēnā koe, ki a koe anō Mr Assistant Speaker, kia ora tātou katoa e te Whare. Let me open this kōrero with something that I found fromMargaret Mahy: “These days it seems to me that when I look at the world I see many people including politicians, television readers, real estate agents and free-market financiers, librarians too at times dressing as sharks, eating leaves and drinking out of puddles, casually taking over the powerful and dangerous images that the imagination presents, eager to exploit the fictional forms that haunt us all …”. How awesome is that! In other words, the operation of truth is exercised with a certain amount of freedom.

As anyone who regularly has a look at the real estate magazines would know, real estate agents have a pretty remarkable talent at being enormously creative in the way they describe the state of property. A derelict, rundown shack can be branded as “needing a lick of paint”, an ugly throw-back to the 1970s with colours thrown together during a late-night dope session or acid trip is promoted as “funky”, and a house that breaches every building code under the Act is labelled as “DIY delight”. The reality is that disturbing mistruths, poor contractual advice, misleading representations, and outright lies have all entered the environment in which we consider this bill—a bill to protect and promote the interests of consumers in real estate transactions, and the Māori Party says it is about time. I think the ultimate irony of the state of the real estate industry was revealed earlier this year when Harcourts sought to honour one of its real estate agents who deliberately misled consumers.

The Māori Party welcomes the advent of a new regulatory framework for the real estate industry for another very important reason: the correlation between discrimination by real estate agents and limited accommodation options for Māori has long been a part of the scene. In 1991 the Māori Women’s Housing Research Project reported that non-Māori or Pākehā families will have more choice of housing because landlords, letting agents, real estate agents, and mortgage lenders will feel more comfortable interacting with them and will believe their families to be more reliable, trustworthy tenants or mortgagees.

Just 2 years ago, in October 2005, in my own electorate a Māori woman was reported to have been told by a Tauranga real estate agent from First National that the rental property did not want Māori tenants. Kelly Lovett subsequently lodged a complaint with the Human Rights Commission and the Race Relations Commissioner, Joris de Bres, and they confirmed that such discrimination was illegal. Illegal or not, Tokoroa landlord Walter Pellikan quickly came in to support the taking of such a stand. His view was that “banning Māori tenants makes good business sense and should be allowed”. Just to put this in some context, the Real Estate Institute of New Zealand eventually came out with a very strong statement encouraging members to “actively work against racist policies by rental property owners”. It also advised that such actions went against the institute’s code of conduct. Yet 6 months later, despite the advice of the industry leaders, another report, this time in Nelson, Tasman, and Marlborough, confirmed that discrimination in the home ownership market was still being delivered by some real estate agents. The Centre for Housing Research described comments from social service organisations in Marlborough that spoke of difficulties in working with real estate agents to house Māori clients, concluding that Māori were being discriminated against by racist practices that act as barriers to Māori accessing rental housing.

I rise to give this context to provide some perspective on how Māori consumers have experienced real estate agents, managers, and salespeople for decades upon decades of encounters. We are well aware that the industry’s disciplinary procedures and processes have not worked in ways that exude transparency and accountability. The sales psychology has dominated over industry standards. Consumers have faced real risk from agents who have mishandled funds, given poor contractual advice, misused information, or have undisclosed conflicts of interest. The home truths of the industry have been far from acceptable.

We will support this bill to ensure that the administration of licensing, complaints, disciplinary and enforcement processes, industry standards, and practice rules are enabled to take place and restore the reputation of the real estate industry. The bill sets out the specifications by which anyone engaged in real estate agency work must be licensed and act within the scope of that licence. That is extremely constructive and well worth supporting.

There is one issue we are hoping the select committee stage will advance. The bill enables certain exemptions for the licensing processes for real estate agency work. Amongst the exemptions are Landcorp and its employees. This issue is one that we are keen to receive further advice on, particularly in light of the issues that we have been raising over the past 2 years in regard to Landcorp sales.

We have brought to this House, and to the attention of the Ministers, concerns raised by Hauraki and the Tainui Waka Alliance, Ngāti Kahu, Ngāti Tūwharetoa, the New Zealand Maori Council, and other iwi regarding Landcorp activities in relation to the sale of lands subject to Treaty claims. We all remember the noble advocacy put forward by Ngāti Kahu to try and stop the sale of the repossessed Rangiputa station on the Karekare peninsula. We remember the concerns over the sale of the Taurewa land blocks and the proposed sale of a $10 million block of prime Coromandel land at Whenuakite, which should have been the subject of negotiation with the Hauraki Māori Trust Board.

While we were pleased that in raising these issues the Minister for State Owned Enterprises eventually announced a review of Crown land disposal, a review reported back in September that we must never leave a stone unturned when considering the vital significance of whenua, of land, to tangata whenua. We will be looking at the select committee process for clarity around the exemptions from the regulations proposed in this bill, particularly the fact that Landcorp will be exempt from the regulations around disclosure of conflicts of interest. We in the Māori Party believe we need robust processes for the sale of land subject to Treaty claims by Landcorp, and we will definitely be interested in the debate as it unfolds.

Finally, urgency can be long and hard work without too much let-up or moments of light relief. In thinking about where these problems have come from in the recent real estate industry debacles, I came across this poem by Andrew Chiu-kit Tsang of Manukau that I thought I might add to the debate. This poem, this waiata, this kōrero, is called “During the Real Estate Boom”, and I am sure Mr Power will be interested in this, because he listened to my first waiata—

FlavellTE URUROA FLAVELL Link to this

Thank you very much. It goes something like this:

During the real estate boom

Everyone becomes a real estate agent

No wonder

There are 13,000 real estate agents

8,000 police

and 3,000 soldiers in our country

I went to my favourite sandwich shop in Manukau

The boss wished to sell me his listing

But I only wanted a sandwich!

I went to Papatoetoe to get a fresh chicken

The boss wished to sell me her listing

But I only want a fresh chicken

I ring up my best friend in Howick hoping for a good chat

He also wished to sell me his listing

But I only want a good chat!

Some say a good man should be able to buy his own castle

Gimme a break!

I’m not yet a good man!

That is deep and meaningful. It is food for thought, honourable members. Tēnā koutou katoa.

DunneHon PETER DUNNE (Leader—United Future) Link to this

There can be no argument that as service providers, real estate agents ought to be accountable for their actions and for the service they provide. We will be supporting the reference of this bill to a select committee for one reason, and one reason alone. In the debate that has unfolded over the last year, the one organisation that has not, in our view, had a significant opportunity to put its case forward and to be examined and tested upon that case, is the real estate industry. We think that an opportunity before a select committee for those issues to be teased out is the appropriate way forward, because when we look at this bill, we see that it takes us a long way from what we would regard as an acceptable regime for the regulation of the real estate industry.

The Real Estate Agents Act dates back to 1976. It is outdated. It does need to be reformed, but this bill goes way beyond that. This is not a reformation; this is a complete replacement. It is a revolution, and it is an unnecessary revolution; the case has not been made for the measures that this bill contains.

For example, there is no doubt that there needs to be in place an adequately structured and resourced disciplinary regime for real estate agents. Under the existing legislation, for 30 years there has been a provision for the appointment of regional disciplinary committees, but none have ever been appointed. So the Minister has said that because no Government has ever implemented this Act, the Act is not working and it should be replaced. Worse still, the Government will veer away from what has been a long-established principle when it comes to industry regulations in New Zealand, and that is the principle of industry self-regulation. We hold industries accountable for the activities of their members. The Law Society, the Institute of Chartered Accountants, and any other professional body has its own internal rules, procedures, and accountabilities. In this instance, this bill effectively nationalises the real estate industry, because it says “We do not trust you to regulate your affairs and the conduct of your members in a way that is appropriate. We will therefore put in place a statutory environment that you will not have control over but that will be independent”—and that is a double-edged word at the best of times—“so that we can ensure”, allegedly, “a standard of public performance.”

The Minister said tonight that we should not worry, as the taxpayer will not pay for this; the industry will pay for it. What that means is that the consumer will pay for it. People have spoken tonight, Mr Brown and others, about the young couple going out to buy their first home, but I say that every time they buy a first home or shift up to another home they will be paying for the regime put in place by this bill.

We have around 19,000 or 20,000 real estate agents in New Zealand. By my count, the so-called bad eggs—and I am not going to use the language the Minister has, because I do not think Ministers should use extravagant language to describe situations—or the non-performers would be, by the most charitable of counts, fewer than 100, and probably around 50 out of 19,000. So here we are, putting in place a regime to curb the excesses of the few by controlling the many. But we are going to go beyond that and say that we no longer trust the industry to regulate its affairs. We are going to impose statutory regulation on its affairs, and the costs will be borne by the users. If we think about any other set of professions in this country and apply the same yardstick, we know there would be uproar. It is totally unnecessary.

As I said, the only reason for supporting the introduction of this bill is to allow the real estate industry the opportunity to put its case before a select committee, to be examined in public, and to be able to answer some of the charges and allegations that have been made, by innuendo in the main, over the last 12 months. I say very clearly that if this bill emerges from the select committee looking as it is today, then we will not be supporting it any further because it is simply a step too far.

The good real estate agents that we have heard referred to tonight provide an immense community service for a large number of people. I know from my own electorate that a number of real estate agents are involved in local service clubs, and their companies are involved in funding or supporting a myriad of local activities, because they need to be part of their communities in order to provide a service to those communities. They need to know about schools, community organisations, and neighbourhood set-ups, in order to advise clients and give them confidence when they are buying in a particular area. People want to know about the type of neighbourhood they are buying into and what facilities are available to them—how the system basically runs. So it is in the interests of real estate agents to be in tune with their communities. It is in their interests to provide a good service, a professional service, and an ethical service to the people they serve.

I repeat that there will be bad eggs in all cases, and there does need to be an effective disciplinary regime put in place. Everyone agrees with that point. But the way to do it is to update and modernise the existing legislation, not to throw it out and impose a State-controlled bureaucracy, in terms of the way in which this industry is to be regulated in future. I am not going to speculate upon the Minister’s reasons for what he is doing, but I think they are grossly excessive. I do not think they are necessary, I think they go way beyond the types of steps that need to be taken, and unless the measures in the bill are radically reformed, then it will not be worthy of further support.

But I say to members of the real estate industry that over the years I think they have, in many senses, been their own worst enemy. I think they have been complacent in terms of the representation of their interests. I think they have believed that basically they could just drift along. They do need to put their case, they do need to be heard, and they do need to be tested. At the end of the day, I am certain that the process will show that the best way of dealing with the issues that consumers, politicians, and, I suspect, the general public are concerned about—and good real estate agents in relation to the credibility of their industry—is through far less Draconian measures than are contained in this bill. If this bill proceeds in this form, then it will do so without United Future’s support.

WilkinsonKATE WILKINSON (National) Link to this

I am very pleased to follow on from what the Hon Peter Dunne has said. I have to say that there is not much in the content of his argument that I can disagree with—just the conclusion. At first glance it may certainly seem prudent to vote for this Real Estate Agents Bill at its first reading and subject it to the proper scrutiny of a select committee, but it needs such an extreme makeover and such amendments in terms of property management and other integral issues that have been omitted, that any proper amendments should well be outside the ability and scope of the select committee to make the meaningful changes that would be required. Basically, we need to start again. We need to do it once and do it properly.

On reading the explanatory note of the bill, one could be led to the conclusion that a huge problem regarding real estate agents has just recently surfaced and that this “remedial sledgehammer to crack a nut” bill is the only solution. The explanatory note states that in March 2007 Cabinet noted a range of problems with the Real Estate Agents Act and agreed to a full review of it. What I want to know, though, is what happened in July 2003 when according to the Associate Minister of Justice, who I understand was Minister Barker, Cabinet made decisions on the Real Estate Agents Act review. Suddenly, 4½ years later, we need to consider this bill—and now, under urgency. Associate Minister of Justice Clayton Cosgrove unfortunately has vilified the industry. He said he had to take the real estate agents—the so-called land sharks—“kicking and screaming”. The Minister was going to drag land sharks “kicking and screaming” into the spotlight and “drop the hammer on them”, in order to impose a new regulatory regime. We have heard references by the Minister to land sharks, rogue agents, and carnage in the sector.

I want to ask why, if it was so bad, nothing was done about this back in 2003. What happened back in 2003, which is over 4 years ago? At the time the Real Estate Institute welcomed the opportunity for public consultation on how the real estate agency industry should be regulated. It said that it had been well aware for over 10 years that a number of elements of that regulatory regime needed updating, particularly in areas of licensing procedures and enforcement of obligations. That is hardly “kicking and screaming”. It was aware then of a significant number of detailed issues that needed be addressed. Those issues had been drawn to the attention of successive Ministers and discussed with officials, and the work was set aside for over 4 years.

That is what the institute said then and what it wanted then. What did Minister Barker do 4 years ago? It appears he did absolutely nothing. Unfortunately, there is now a real risk that this review of the real estate industry has lost its objectivity, and that it has been hijacked by hyperbole, by emotive labels such as “land sharks” and “carnage in the industry”, and by exaggerated claims that have not necessarily been sustained. For example, we heard in the select committee from the Minister, who said: “I was accused of taking a cheap shot when I referred to the premium case where a High Court judge ruled against a real estate professional. I think it was to the tune of $3.2 million.” I had a look at that case; the amount was $900,000, not $3.2 million as the Minister alleged. Although I admit that it is a significant amount of money, I think the important thing about this case is that, on appeal, it was won and the real estate agent was vindicated. The real estate agent was vindicated, not vilified.

Unfortunately, this is the sort of example that does nothing to inspire confidence in the process of this review. We have heard of delays waiting for complaints to be heard. Yet in the most public example of this, where the appropriate forum for that complaint was a regional disciplinary committee—and we have heard about regional disciplinary committees—that committee had to be established under the existing 1976 legislation. Its establishment had to be ratified by the Minister, who had to approve both its establishment and the members. Was he asked to establish it? Yes, he was. Did he do so? No, he did not. It is dangerous to look at only one side of the story and to vilify an industry, when the papers have been on the Minister’s desk for over 4 years.

Having said that, it is important to support absolutely the purpose of the bill, which is to promote and protect the interests of consumers by regulating agents, raising industry standards, and providing accountability through a disciplinary process that is independent, transparent, and effective. Indeed, the real estate industry itself totally supports this objective, as do we. If one reads the Real Estate Institute’s views it is important to note that it supports, and indeed welcomes, the reforms that remedy real problems in the current regime, but the institute is concerned that it goes too far, changing the law where there is no problem, and not far enough in other areas that require further and more regulation.

This is not an industry being dragged kicking and screaming; this is an industry that has been asking for years for the laws to be updated. This is an industry that is welcoming the update of its regulatory framework. This is an industry that welcomes the independence of the complaints investigation and disciplinary process. This is an industry that welcomes the introduction of compulsory continuing education. This is an industry that wants to be respected, wants accountability, and wants transparency, but it is an industry that deserves good law. It is vital that New Zealanders buying and selling probably their most substantial asset have confidence in the professionals they are using to assist with such a significant financial transaction. There needs to be strong consumer protection and there needs to be strong consumer confidence.

Real estate involves not only buying and selling property. An important part also relates to property management, and this has been totally ignored by this Government. An integral part of property management is the handling of funds. The Minister himself has highlighted the mishandling of funds as one of the rules that should be applied. So why on earth, then, is it not addressed in this bill? The Government believes that property managers pose less risk. The institute believes, however, that one in five complaints relate to property management groups. Way back in 2003 the institute advised the Minister it was concerned about property managers operating outside trust account control and an audit regime. Now, in 2007, it is still concerned, but what has the Minister done? The Minister has ignored the institute.

Property management involves holding significant funds in an account. Hundreds of millions of dollars pass through the bank accounts of property managers. What happens to missing rent moneys? The institute, under this bill, has no jurisdiction to deal with complaints about missing rent moneys. There is no requirement to hold the moneys in a trust account. There is no fidelity fund. If residential property managers are not covered by the new regime, then gaps in the current laws will leave consumers vulnerable. If anything goes wrong, the only recourse for consumers may be via the courts. This is contrary to the purpose of the bill, which, of course, is consumer protection.

There are concerning parallels between the latest bureaucratic system proposed and the Department of Building and Housing. Consumers can still be protected without having to bear the costs of senseless bureaucracy—that is what will happen. The industry will not bear the cost; the cost will be handed down to the consumer, and housing affordability will get harder. For these reasons and the uncertainty, as mentioned by my colleague Simon Power, of whether in 5 years’ time salespeople will be able to work as independent contractors, or whether they will be regarded as employees, National opposes the bill. We welcome and support the industry’s view that transparency and accountability are welcomed. But, unfortunately, this is a wasted opportunity. Proper reform is welcome, but this is not proper reform.

Link to this

A party vote was called for on the question,

That the Real Estate Agents Bill be now read a first time.

Ayes 70

Noes 49

Bill read a first time.


Dec 2007
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