Real Estate Agents Bill

CHARLES CHAUVEL (Labour) Link to this

I am pleased to take a brief call in the second reading debate of this extremely important and useful piece of consumer protection legislation, the Real Estate Agents Bill. The purpose of the bill is a very good one. It is to deliver on the Government’s promise to bring accountability, transparency, and openness to the real estate sector, and those three things are sorely needed. Legislation has been in place for some time, and it needs to be updated with the interests of the consumer in mind. This legislation does that. It establishes a very good independent complaints system, it will protect consumers, and it will support honest real estate professionals, who constitute the vast majority of the real estate industry. The bill will put an end to the industry’s self-regulation. It introduces a range of important new consumer protection measures, including compensation for consumers who have not been well served by the system.

The Government believes that reform of the real estate industry is sorely needed. Buying a house may be the biggest single financial decision people make in their lifetime, and they need to have full confidence in the professionals who help them make that decision. In that regard, this legislation is part of the suite of consumer protection measures that has been so ably pioneered by this Government, including Ministers such as Judith Tizard and Lianne Dalziel. One thinks of the Reserve Bank of New Zealand Amendment Bill (No 3), which brought in prudential supervision requirements for non-bank deposit takers, and the financial providers and financial advisers legislation, which is about to be reported back to the House from the Finance and Expenditure Committee, which I have the honour to chair.

I acknowledge the robustness of the select committee process. I would like to pay tribute to the Green Party and the New Zealand First Party, because they played an incredibly responsible role in supporting a fair process at the select committee.

I would also like to thank those who made submissions to the select committee. This point was touched on by the earlier speaker. Really, we were, I think, in a position where the process could have gone either way. There were intemperate debate and anger involved in the process following the introduction of the bill. Lynne Pillay, my Labour colleague, chaired the committee with enormous sensitivity. I remember the hearing we held in Auckland, which many, many members of the industry attended. They were grouped very logically as far as their submissions to the committee were concerned. They were treated with respect, and they responded in kind, so that we got the maximum benefit from what they had come to say to the committee. I think they went away feeling that they had a proper hearing from us, which is a very important part of the process.

In that regard, I note there has been some criticism of some of the submitters. It has just been said that some of them simply filled out a standard form and spoke to it. Well, I think we have to make allowances for the fact that, to many people, the select committee process is a bit of an alien one. It is not necessarily the easiest one to engage in. I think that those of us in Parliament who are used to dealing with the process every day underestimate the mystery that ordinary people sometimes encounter when they want to interact with Parliament’s processes. Yes, it is true that some people filled out a standard form submission, and that when they were asked particularly technical questions—cross-examined—by certain members, they did find it a bit hard to respond. But those of us who took the select committee process seriously tried to move beyond the written form submission and talk to those who came before the committee about their experience of the industry, and tried to work out how we could deliver back to the House the best bill that it was in our power to deliver. I think we have done that. The report of the committee speaks for itself.

I would also praise the measures that are set out in the Minister’s Supplementary Order Paper 243, because I think that, taken with the select committee report, they really do comprise a suite of measures that will make this industry into one that consumers can have real confidence in, and one that the vast majority of real estate agents out there who are honest and hard-working can also feel a great deal of confidence in.

I thank the officials for their assistance. It was always extremely timely and extremely helpful, and when assistance was required on tricky technical matters it was really on point. I will speak a little bit more about that later.

In conclusion, I want to express a bit of regret at the position that seems to be being set out by the National Party on this legislation. I have had a look at National’s minority report, such as it is, in the commentary on the bill, and it is quite apparent, when we look at the Supplementary Order Paper that the Minister has tabled, that every substantive concern raised by the National Party in that minority report has been addressed. It is simply not right to say that an increased transitional provision of 14 months for the hard stuff, if you like, in the legislation is not long enough. It makes no sense to compare the real estate industry with the legal profession, and any comparison between the Lawyers and Conveyancers Act and the Real Estate Agents Bill is inapt. We are really talking apples and oranges here. It is quite clear that 14 months’ lead-in time for some of these complex matters is more than enough as far as reforming the industry is concerned. Consumers should not have to wait any longer than that, and it is a real shame that the National Party wants to make them do that.

As to the complaint that this is bureaucracy gone wild, that is just nonsense, as well. I hope that those who espouse that excuse are ashamed of themselves. There is no bureaucracy gone mad here; there is simply an adequate complaints mechanism being set up to make sure that consumers have the protection they need. Yes, it will cost a bit of money, but probably not a whole lot more than what the current system costs. The costs that will be passed on to those who participate in real estate agent transactions will not be much greater, but we will have a far better system to protect those who participate in those transactions. For anyone to say that that is not a desirable goal is a real shame.

Finally, with regard to the issue of property managers, as the previous speaker acknowledged, the Minister will put in place a review. We heard some evidence on that point. I think that the select committee members by and large were persuaded that there was merit in looking further at the issue of whether property managers should come within a comprehensive regime. There are issues of scope in terms of including them in this legislation, but there will be a calm and measured review of that issue. That is appropriate, I think, given the evidence we heard.

Here we are, with this minority report from the National Party, which maintains its opposition to what is very good consumer legislation. It is spurious opposition—it really is. National must be a party that does not actually care much about the interests of consumers; it maintains opposition just for opposition’s sake. It is just like the so-called six principles for opposing the emissions trading scheme—absolute nonsense. This is very good legislation, and it ought to be progressed with speed.

KATE WILKINSON (National) Link to this

I appreciate the opportunity to rise and speak in the second reading debate on the Real Estate Agents Bill. When the industry itself wants reform and modernisation—it has been asking for reform for some 10 years—when all the parties, to a greater or lesser extent, and in a reasonably non-partisan way, support such an opportunity for positive change to the industry, and when consumers want reform and modernisation of the industry, how, then, can such a meal be made out of this legislation?

The bill went to the Justice and Electoral Committee for scrutiny, and I appreciated the opportunity to sit on that select committee during that scrutiny and certainly enjoyed that experience to a certain extent. The bill went to the select committee for scrutiny under the Minister’s banner of vilification of an industry, of his having to “drag land sharks kicking and screaming into the spotlight” and to “drop the hammer on them”. I suppose we then have to wonder whether it is any wonder that such a meal has been made of this legislation.

The select committee process was as expected. We had many submissions. Some submitters were given a couple of minutes; some were given 20 minutes or even more. I do not need to elaborate further on this for people to be able to guess which submitters were given a considerably longer time to submit and which ones understandably felt short-changed. However, I echo the concerns raised by my colleague Chris Finlayson regarding the standard form submissions. They were not particularly helpful, especially when it appeared that some submitters had merely ticked the boxes without even knowing the substance of their own submission. But after such vilification, one can understand their concern to protect their livelihoods.

It is pleasing that we have a Supplementary Order Paper produced by the Minister that is certainly an improvement in certain respects. There are some 70-plus amendments. Admittedly, it is not of the scale of the emissions trading scheme bill, which had over 700 amendments; and, again, it is not of the scale of the meal breaks bill, which had a sneaky amendment not even related to the original bill. But we do now have an improved piece of potential legislation.

I want to make it clear that National supports, absolutely, the purpose of this bill: “to promote and protect the interest of consumers … and to promote public confidence in the performance of real estate agency work” by “regulating agents”, “raising industry standards”, and “providing accountability through a disciplinary process that is independent, transparent, and effective.” We support absolutely the purpose of this bill. We welcome an update of the real estate regulatory framework, and so does the industry. We welcome the need for strong consumer protection and strong consumer confidence, and so does the industry. However, what we do not welcome is an unworkable, bureaucratic regime that will add costs to consumers without enhancing their confidence in an industry that, like most industries, does have some bad players but where the majority are not bad.

This reform should have been welcomed by all. It should have brought the real estate industry with it into the 21st century. After all, that is what everybody wants. But instead, this is a missed opportunity. For no matter what reason can be attributed to how this bill has been handled, it is a missed opportunity. Certainly, some of our original misgivings have been addressed, both in the report back from the select committee and also in the Supplementary Order Paper—such as concerning the removal of the 5-year review of the employment status of salespersons. But other misgivings have not been addressed. Property management is still excluded, and when we look at the failures of Blue Chip and others, it makes one wonder why it has still been excluded.

PITA PARAONE (NZ First) Link to this

Tēnā koe, Mr Assistant Speaker. On behalf of New Zealand First, I stand to make a contribution to the second reading of the Real Estate Agents Bill. We certainly support this bill. It is about bringing more accountability, transparency, and openness to the real estate sector while at the same time establishing an independent complaints system to protect consumers and provide support for real estate agents. The bill replaces the Real Estate Agents Act 1976, and I think it is timely. Some people will say the bill is overdue, and I tend to agree. I think it addresses some of the concerns that come from having on our statute book legislation that is so old.

Although some people have been very critical of the real estate profession, in my view the profession is an honourable one—one that is under some duress here in New Zealand as a consequence of a depressed market brought about by high interest rates and other economies. However, this profession is not exempt from having amongst its number—and I am glad to say it is limited to a very small minority—those who have brought it into disrepute. I suspect that because of that small minority, we heard from a number of submitters who expressed their concerns to us that the present Act was inadequate in meeting their concerns. I acknowledge the Justice and Electoral Committee, which heard these submissions. I understand it received more than 1,300 submissions. Just over 600 of those were heard personally by the committee, or by video link. I especially want to say to the committee that it has done a fine job. The report it brought back to the House, I think, addressed many of the issues that submitters were concerned about.

The report back suggests a number of changes, and I am glad to see that the Minister has taken it upon himself to make the necessary amendments by way of Supplementary Order Paper 243, and that he has also given some consideration to the concerns that my colleagues and I had about the bill. These include the points of amendment regarding the rescinding, the requirement to review the employment status of sales persons, the rescinding of the decision to regulate the conduct of auctions, the experience criteria required before agents or branch managers are entitled to have their licences raised from 2 out of 10 years to 3 out of 10 years, and the Real Estate Institute of New Zealand being consulted on first-term appointments to the authority and disciplinary tribunal.

I think those changes may give some relief to the present leadership of the Real Estate Institute in terms of the concerns it expressed during this whole process being taken on board. I know there has been some exchange of views between the principals of the institute and the Minister, but without their compromising their positions, I think. Both parties have agreed that the protection of the consumer and the strengthening of accountability is the most important thing that comes out of this bill.

I know that the Real Estate Institute might still have some concerns, but I think the bill goes a long way towards not only giving back to the consumers more confidence in the institute but also giving a sense of security to members of the New Zealand public who may need the services of the real estate profession now and into the future.

Some comment has been made about the fact that property management has not been covered by this bill. I agree with the select committee that the issue of property management was outside the scope of the bill. However, the Minister has indicated that a review will be made in the future.

SUE BRADFORD (Green) Link to this

The Green Party will be supporting the Real Estate Agents Bill and associated Government amendments through all final stages in the House today. We were aware from the start of the contentious nature of aspects of this new law. How could we avoid it, given the powerful and effective voices of real estate agents and auctioneers, and the somewhat combative statements of Minister Clayton Cosgrove in the earlier stages of the process?

The consideration of the bill by the Justice and Electoral Committee was intense but informative, and I would like to acknowledge all of the more than 1,300 submitters for the effort they put into participating in this particular democratic process. I would like especially to thank Barfoot and Thompson in Auckland for showing several of us on the committee around its operations, so that we could get a better feel for aspects of the sales, human resources, accounting, and auctioning side of the business. The complexities of those backroom functions are not normally visible to a vendor or a purchaser—my only contact with the industry in the past being in that role, albeit on a number of occasions.

One of the key achievements of this bill will be the establishment of a new Real Estate Agents Authority, which will have the power, among other things, to investigate complaints from people about things like real or perceived conflicts of interest on the part of agents, commissions and fees, and generally shoddy or inadequate practices. The new authority will investigate complaints on behalf of the consumer for free, and is an independent body with the ability to set penalties and award compensation. It will also be responsible for administering the licensing system for real estate agents, setting standards, establishing fees and levies, and providing information for consumers. The Greens believe that having all those functions carried out by a statutory organisation independent of the Real Estate Institute, unlike the existing situation, will inspire confidence in all those for whom buying or selling a house is often the biggest financial decision of their lives.

This bill also incorporates the establishment of a separate Real Estate Agents Disciplinary Tribunal, whose functions will be to deal with matters referred to it by the complaints assessment committee—a committee appointed, in turn, by the new Real Estate Agents Authority. During the course of the Justice and Electoral Committee consideration, we heard many concerns from industry submitters about their fears that the representation on those new bodies would not include people with a long track record of working in the sector—people who would hold the confidence of agents and their professional association. This concern was shared by the Greens and by other parties, and we have been pleased to see improvements to the bill in this regard. During the select committee process we supported changes that mean that, firstly, the Minister will be required to appoint at least two members of the Real Estate Agents Authority who are licensees or former licensees, and, secondly, in relation to the disciplinary tribunal, at least one member must be a licensee. In addition, there is a Government Supplementary Order Paper before the House that will further amend the bill so that the Minister now is required to consult the Real Estate Institute when making the first appointment of licensees and former licensees to the authority and the disciplinary tribunal. The Green Party has backed all these changes because we think it critical that the expertise of real estate agents and their own professional body should be brought to bear, if these reforms are to have credibility with the industry, and so that the reforms will find support among those whose standards and quality of work we are expecting to improve as a result of these measures.

Another area of much contention during consideration of this bill was the proposal to review the employment status of sales people after 5 years. The Greens had supported this proposal because we have ongoing concerns about the exploitation and low pay of some vulnerable workers and contractors within the industry. However, a Government amendment will remove the relevant 5-year review clause. Although we will be supporting the change, we also hope that anyone working in the industry who has concerns over his or her employment or contracting conditions, or lack of them, will not hesitate to avail himself or herself of the remedies available now through existing employment law. At a time when the industry is seeing a major shake-out as a result of the downturn in the housing market, it is more important than ever that the employees and contractors who remain are treated well and are able to stand up for themselves, with my concern here being especially for some back-office people, as well as some agents, who run the risk of carrying the can financially for a sector that is going through difficult times.

The whole area of auctioneering was another difficult issue for the select committee. As the auctioneers who made submissions to us quickly found out, this is not an aspect of the housing market with which I and, I think, some other MPs on the committee had any familiarity whatsoever. I was struggling to grasp what the purpose of the original changes to the auction system were in relation to the rest of the bill, especially after receiving repeated assurances that after some admittedly shonky episodes in the past, there are now enough safeguards in place in the auction process to protect the ethics and the interests of all involved. Although I think perhaps it might have been a good idea to find a way to enshrine or append an auctioneer’s code of ethics to the legislation, in the meanwhile the Greens support the proposed amendment, which will leave things with the status quo in regard to auctions.

One other matter of major dispute during our dealing with this bill was the question of whether property managers could or should be included in the legislation. I was convinced by numerous submitters that it would have been better if we could incorporate property managers within the legislation—for example, through regulation of activities such as leasing, letting, collection of rentals, and so on—as this area of work is also a key part of the real estate sector and, in fact, often forms part of the operation of real estate firms themselves as well as other firms. However, in the end there was clear advice to the committee that to try to amend the bill to include property managers was outside its scope. The Green Party therefore welcomes the commitment the Government has made to review with some urgency the regulation of property management in a way that will be coordinated to be simultaneous with the commencement of this bill. The fact that the commencement of most of the provisions of the bill will be extended out from 1 year to 14 months should also mean that this review, and resulting legislation, will have time to happen effectively and well, in full consultation with all concerned. I trust that, whatever form our next Government takes, that commitment about property managers will be actioned.

The Real Estate Agents Bill got off to a really rocky start, and I think it was unfortunate that such important legislation for consumers and for all stakeholders in the real estate area became more of a political battlefield than was really necessary. I believe that the reforms contained in this legislation are necessary and well worked through, and that all the MPs on the committee listened hard to the many concerns expressed to us, including issues beyond those I have had time to deal with today. I was particularly pleased, after earlier episodes, to see a media release from the Real Estate Institute on 30 July this year that welcomed the new bill with amendments and stated: “We are committed to working with the legislators to ensure that the final result is the best consumer legislation possible.” I think that is a commendable attitude on the part of the institute, and hope it is one that will be shared by all parties in this House, and by all involved in the industry.

We have seen, and will undoubtedly continue to see, examples of rip-offs, cons, shabby treatment of customers, and exploitation of workers in the industry. However, it will be in the best interests of everyone if the reforms enacted here are carried out with goodwill and commitment on all sides, so that we see a steady improvement in quality, accountability, and protection for all concerned. As I said on an earlier occasion, this bill is about justice not only being done but being seen to be done.

I thank everyone who has had some role in getting the bill to this stage, including our committee chair, Lynne Pillay; Minister Clayton Cosgrove; and all the submitters. But I would also like to say a special thankyou to the hard-working Government officials and select committee staff for all their work, because they really had quite a hard time of it, I have to say, during the select committee process. I believe they did a fantastic job on very difficult and complex legislation, and I thank them.

I commend the bill to the House.

Hon TARIANA TURIA (Co-Leader—Māori Party) Link to this

Tēnā koe, Mr Assistant Speaker. Tēnā tātou katoa. It could not be a better time to be introducing a new regulatory framework for the real estate industry to help it shape up to the expectations of the consumer client base that it services. Statistics from the Real Estate Institute of New Zealand revealed a dramatic reduction in residential sale volume over the year end. Sales registered in July 2008 were down by a massive 33 percent. It would be simplistic to suggest that the Real Estate Agents Bill will single-handedly reverse a perilous economic downturn, but then again one never knows what may turn the tide in encouraging homeowners to take a gamble on the current market. What we do know is that concerns with issues such as misleading representation, poor contractual advice, and mishandled funds have been making more and more New Zealanders risk-averse to the real-life monopoly board.

Such was the level of concern, in fact, that some 1,328 submissions were received from the public. This in itself should warrant this bill being accorded particular attention, to facilitate the smooth passage of law in the most efficient time possible. However, when we think about the foreshore and seabed legislation, which received 3,946 written submissions and 234 oral presentations, we find that that process was not given serious and responsible attention, so let us hope that the net is cast differently for this Real Estate Agents Bill.

The impact of any legislative changes to promote public confidence in the performance of real estate agency work must not be underestimated. An analysis of the number of New Zealand computers visiting real estate websites found an average of 325,000 sessions per week. As of July 2008 there were 60,150 residential properties for sale on the market, being put up for offer by approximately 1,500 real estate agents and over 20,000 sales people, so it is a huge industry and it requires that we take seriously the importance of consumer protection in real estate transactions. This bill is about protecting and promoting the interests of consumers in these transactions. That is a worthy ideal and one that we hope will be taken up as a priority by all parties in this House, and it is beginning to look that way.

There has been much said about the need to regulate agents, managers, and salespeople to ensure that consumers receive a quality service from an agency that adheres to industry standards. There is no denial that an upgrade has been sorely needed. The 1976 Act, for instance, included, as a maximum penalty, that the institute could impose a fine no greater than $750. But, more significantly, there had already been moves afoot within the industry to upskill and improve. The Real Estate Institute had itself realised the urgent need for consumer protection and had contracted none other than consumer affairs advocate David Russell to carry out its own review of its internal code of ethics and rules of practice.

This bill, then, emphasises moves already in place to enhance industry standards and to provide accountability through a disciplinary process. The changes that will be made to an operational code of conduct will ensure that any progress is independent, transparent, and effective. Those are all values that we, as the independent voice of Māori in this Parliament, are adamant must be upheld in all spheres of Government, including this House. Consumer New Zealand outlined this case clearly to the Justice and Electoral Committee. It told the committee that a significant number of complaints fielded by its advisory service came from people who have had problems with real estate agents. For too long, people have had to accept quite a poor service from real estate agents and operators, even though I would say also that there are some very good real estate people. The legislation will level the playing field and allow consumers to take action if they have been poorly treated.

It was pleasing to see the Real Estate Institute of New Zealand giving support to the reforms, and its agreement that professionalism will be enhanced and consumers protected, through lifting industry standards. It particularly supported the creation of an independent and transparent complaints and disciplinary process. A key initiative put forward by this bill is the recommendation to amend the functions of the Real Estate Agents Authority, particularly ensuring that there is consultation with the sector. So we are pleased to see the call from so many of the submissions from real estate agents has been taken up and that the membership of the authority and of the Real Estate Agents Disciplinary Tribunal will be broadened to ensure that industry expertise is represented. We support also the move to ensure that agents who employ independent contractors are liable for their actions as if a contractor were an employee. That will give better protection to consumers.

However, there are a couple of areas that we believe require further work as the bill proceeds through the House. The first of these was presented by the Whitireia Community Law Centre. Its view was that consumers faced with detailed agency contracts and complex statutory rights need far more than “educational information” as provided for in the bill, to assist them in understanding their rights to make a complaint. Consumer advocacy should be recognised as an important way of maintaining industry standards and setting in place processes to achieve client care. As a corollary to this, the Whitireia Community Law Centre also recommended that the functions of the authority should be expanded to include funding negotiation, and conciliation or mediation of consumer complaints.

The second issue is the contentious one of property management. This is an area of special relevance to Māori. The Māori Party is, of course, aware that the relatively low Māori homeownership rate would suggest a relatively high Māori renting rate. We know that 56 percent of the Māori population are not in owner-occupied dwellings, as opposed to 31 percent of non-Māori. In real numbers, two-thirds of our population do not own their residence. The importance of having an effective oversight of the entire industry is crucial. In effect, whether one is renting or owning is irrelevant. The key thing is that the process is transparent, and, of course, that all steps have been taken to ensure that people are not exploited by unscrupulous traders or misleading representation. To this effect, we will be looking with interest at any Supplementary Order Papers that may come into the House at the Committee stage, which may address the issue of property management.

We are happy to support the bill at this stage, in that we support any developments that can lift standards and achieve better protection for New Zealanders in dealing with real estate agents. We join with the Green Party in commending the officials for the way in which this bill has been managed at select committee. Kia ora.

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

United Future will be opposing this Real Estate Agents Bill as being unnecessary and insidious. It is unnecessary because the concerns that it seeks to deal with—namely, bad performance by real estate agents—could have been dealt with by two key amendments to the 1976 Act, which this bill repeals. Firstly, the provision relating to the maximum fine—$750—could have been substantially increased to bear much more relationship to today’s realities. Secondly, we could have actually, for the first time in 30 years, appointed the regional disciplinary committees that the 1976 Act established. That would have given some teeth to the concern, and would have made this legislation completely unnecessary.

But it is more serious than that. This legislation is also insidious, because the real message that it sends is that industry sectors, be they the real estate sector or any other industry sector, are now on notice from the Government that statutory regulation of their activities is just round the corner. For the last 20-odd years in this country we have put the onus on industry sectors to self-regulate, to self-administer. Now the Government is turning that on its head and saying we are moving back down the path of, essentially, a Government takeover of regulation of those industry sectors. Here is the rub: the costs of that administration will be borne by the consumers. Young homeowners buying their first home will not have any greater protection as a result of this bill’s passing; they will face increased costs from the cost of administration of the new bureaucracy that is being established, ostensibly to give them greater protection than they already have. It is a nonsense and it is a con.

But the whole way in which this bill has been handled reeks of those two comments. I heard, on 30 July this year, an announcement in the media that agreement had been reached with New Zealand First over the content of the Real Estate Agents Bill, and that it would proceed as a result of that agreement. Then there was a statement from the Real Estate Institute welcoming the changes that had been made. I was somewhat perplexed, and immediately contacted the institute to find out what had been agreed, only to be told two things. First, the institute did not know of, had not seen, and had not been party to any of the discussions about, the amendments to this bill, but thought it appropriate to make a conciliatory statement. Second, the institute’s understanding was that the discussions between New Zealand First and the Government came down, in the end, to a real estate agent in Tauranga who is known to the former member for Tauranga offering some advice and some drafting, which became the basis of the amendments, which at that stage were not known.

This House can draw its own conclusions about the insidious tie of relationships between external parties and people within New Zealand First, and what might well have been transacted as a result of that. That is for another place; I will not go there. But I will make the observation that it was not until 2 September, over a month later, that the Minister actually tabled the amendments that were being sought to be made. So we had the ludicrous situation of the Justice and Electoral Committee completing its work and reporting the bill back to the House, a political deal then being struck somewhere else, and the outcome of that deal being announced a month or more after the announcement that the agreement had been struck. That does not give any confidence to anybody about the credibility of this process, let alone the worth and vitality of the legislation that is being passed. This is not about a better deal for consumers in terms of their interactions with real estate agents; this is all about satisfying the political bluster and the bullying that we heard from the Minister in the lead-up to it. In the old Mike Moore language, every cliché known to man is being trotted out by “Mini-Mike” to justify this sort of thing. That is not the basis on which to make law; it simply makes a farce of this place.

Let me turn to the next issue: the question of property management. I have heard it said right throughout this debate that property management could not be dealt with within the context of this bill because it was outside the scope of it. I want to refer to a case that was disposed of by the Real Estate Agents Licensing Board in June of this year. It was presided over by the Hon Bill Jeffries, a former Labour Minister of Justice—and a very good one. It involved Paul Ronald John Romanos, trading as Paul Romanos Real Estate, and it was brought under section 94 of the Real Estate Agents Act, and was accompanied by a section 98 application, and one or two other provisions of section 33, as well. The upshot of that case was that Mr Romanos was struck off as a real estate agent. His licence was cancelled because of misappropriation of some $44,000 relating to a body corporate of which he was the property manager.

To suggest that dealing with property management is outside the scope of this bill is ludicrous when the Real Estate Agents Licensing Board already, within the provisions of the Act that is being repealed, deals with matters relating to the conduct of real estate agents who trade as property managers. I find it incredible that what is happening here is that, in effect, very shady operators like Mr Romanos and his company are being protected by the absence of reference to property management in this bill. It is no consolation to people for us to say that it is down for another review; the Romanoses of this world will continue to rip off their clients in the interim, and all the brave words from the Minister about land sharks, and every other ridiculous phrase that he used, look absolutely hollow when we see that this type of behaviour is not addressed but implicitly condoned in this new bill.

I want to know what the status of hearings by the Real Estate Agents Licensing Board of similar complaints will be in the wake of the passage of this legislation. Does it simply cease to be? Is it overtaken by the new, Government-imposed statutory agency? What other complaints in train at the moment about property managers will be left to die and to falter?

That example proves the nonsense of this legislation. This is not about a better deal for real estate agents and their clients. This is not about protecting the public interest. This is about, as the Minister so aptly said right at the beginning, bringing the hammer down; this is vengeance politics. If he were really concerned about the battlers on “Struggle Street”—I am sure he used that phrase—whom he professes concern for, then he would have amended the 1976 Act and he would have done it over a year ago. The great need for change—the urgency of it—to prevent these poor people from being exploited and ripped off looks incredibly hollow when we see that it has taken us over a year to get to that point, and when we see that two simple amendments to the primary Act would have dealt with the concerns that were expressed, would have ensured that the fewer than 100 out 19,000 real estate agents each year against whom complaints are lodged would be able to be disposed of or to be disciplined adequately, and would have reinstated public confidence in the industry.

This bill is a mighty big sledgehammer to crack a very small nut, and the sour taste in the mouth that the nut leaves is that the poor, long-suffering consumer will yet again bear the cost of this ministerial obsession. This is not the way to make law; this is appalling legislation, and it deserves to be opposed with vigour.

LYNNE PILLAY (Labour—Waitakere) Link to this

It is a pleasure to stand and speak in support of the Real Estate Agents Bill. Had the previous speaker been on the select committee, he would have listened to the submissions—the compelling submissions—about people who have had really bad experiences in the industry and how they were really not well treated in terms of seeing complaints handled and upheld.

Firstly, I thank the officials who have worked incredibly hard on this legislation, because the very constructive submissions that we heard had a number of themes and the officials were able to give us very sound advice on them, and amendments were made in the Justice and Electoral Committee to ensure that the issues raised were addressed. I also acknowledge Sue Bradford. Sue talked about the visit undertaken by me, Labour colleagues, and Sue to Barfoot and Thompson, who took us right through the whole process of real estate and explained how it worked. It was a very, very fruitful visit.

I note that there were two types of submissions from firms. There were the firms who came along and who had put a tremendous amount of work into their submissions. That was very constructive. They supported many parts of the bill. In fact, many supported independent regulation over self-regulation because, I think, they went to the purpose of the Act. That is why we made an amendment. The original purpose was to promote and protect the interests of consumers relating to real estate. That was the primary purpose, but it was also to promote public confidence in the performance of real estate agency work. I thank those firms who came along. I feel that their submissions were very constructive.

I also note that there were many, many other submissions that were standard form submissions. We are all pragmatists here; we know how it works. The Real Estate Institute had a very, very strong view about self-regulation and about the status quo and produced a form submission that it encouraged many of its members to sign. That was perfectly pragmatic; that is what happens. But, at the end of the day, when we sat and talked to people about protection, there was very much a meeting of minds with many of those submitters about the need for protection but, more important, for independence and for a system that the public has confidence in.

I am absolutely appalled at the games the National Party members are playing. I have to say that they were there, they knew what the issues were, they were not in disagreement with many, but, at the end of the day, they held the old finger up in the wind to see where they thought they would get a lot of support from in terms of the people who were important to them in an election year. They made a very pragmatic decision—and certainly a decision that I do not respect—not to support this bill. There is absolute nonsense coming from National members around the issue of property management. National knows that it was outside the scope of the bill. We heard from independent people who do not work in the real estate industry but who work in property management. They came to the committee and said: “We support regulation but we won’t be covered. We support looking into this and covering the whole industry around standards.” And we say: “Good on you for doing that.” That is why there is a commitment to review the status of property management, and should legislation be required—and I believe that will be the case—then that will come into effect. The Minister has made the commitment that it will come into effect at the same time as this legislation comes into effect.

All of the nonsense about how this legislation does not meet needs is absolute rubbish. Thank heavens National does not have the numbers, because it wants the status quo whereby people who have a complaint are at the mercy of the industry, there is no independence whatsoever, and there are no fines of any impact that give people who are investing in the biggest investment of their lives the protection they deserve. This is a fantastic bill. It has been dramatically improved by the select committee process and I am proud to stand in this House to commend it.

Dr RICHARD WORTH (National) Link to this

I cannot empathise on any basis with the comments that the previous speaker, Lynne Pillay, made. I think a very good starting point for looking at this type of legislation is to gauge the reactions of both the public and the industry organisation to what has occurred. Just by way of contrast, I look for a moment at the Lawyers and Conveyancers Bill. In the passage of that legislation a very committed effort was made by the Law Society and the policy advisers in the Ministry of Justice to come up with legislation that would provide a workable framework for the future and would also enable a high level of consumer protection to be offered to the public and society more generally.

This bill certainly did not have that intent in mind. It immediately put the Minister in a situation of conflict and confrontation with the industry. He believed quite clearly that there was massive rorting and fraud going on the sector, and he decided he would make an example of this particular occupational group. I have had the good fortune as a practising lawyer for perhaps 30 years to have a close involvement with the industry, and I can certainly make some comments that, although not exactly insider comments, reflect an understanding of its operations. One of the things one could say about those involved in the sector, particularly those in leadership positions, is that they have a passionate concern about the sector, and they have in many cases given thousands of hours of time to seeking to improve the lots both of those who work in the sector and of those who seek to take advantage of its services.

We saw clearly when the bill was introduced, where the Minister and his advisers were coming from, because the explanatory note to the bill had in it a general purpose statement that started off by noting that “The Real Estate Agents Act 1976 is over 30 years old”. That in itself seemed to the Minister and his advisers a reason for making change. Yet I reflect on the Crimes Act 1961, which is old legislation in respect of which there is no necessary warrant for change. The Crimes Act 1961 would be—what—some 47 years old. So in itself the fact that legislation might be 30 years old is not significant.

The policy advisers also said in the general policy statement that the shortcomings of the Real Estate Agents Act included that “It provides for a system of industry self-regulation that lacks independence, transparency, and accountability. This, combined with the significant risk posed to consumers from real estate activity such as mishandling of funds, poor contractual advice, misleading representations, conflicts of interest, and misuse of information, make it essential to provide a regulatory framework that affords consumers an adequate level of protection.” So battle was joined. The end result in a setting of confrontation, I believe, has not been to produce a statute that has those key elements of consumer protection that may be required.

What was the response of the institute to all of this? Well, it had a number of concerns, and I would identify them in two broad categories. First of all, it saw—as must be readily apparent—that the bill lacked consistency. It exposes thousands of people to new risk through its failure to include property management and residential letting and leasing within the new regulatory framework. I think it is right to say that the fall-out from the Blue Chip collapse clearly demonstrates the need for these activities to be regulated. I have heard the comments of the previous speaker, but here an opportunity to effect significant change and make a significant advance to improve the merit of this legislation was not taken. It is all very well to say that these issues may be addressed in the future, but the reality of the shortage of parliamentary time is that it will be some considerable period—certainly if this Government lingers in office for another term—until any appropriate change is made.

So there was a criticism of lack of consistency. But I think there is a stronger criticism that can be made, and that is basically that the bill lacks balance. I do not doubt that the Minister has done his very best, but in a setting where he has no basic knowledge of what the problems are, it is an exercise fraught with difficulty. So I am not criticising the Minister—he has done the very best he can with his intellect and with the advice that he has had available to him. That a shortfall has emerged is quite understandable. The Minister should not feel bad about that as he shouts across the House. He should not feel embarrassed. I certainly do not feel embarrassed in making comments about the challenge that he has had to face and, in fact, the failure that has so sadly occurred.

I was saying that the bill lacks balance, and I would just like to develop that for a moment. The 1976 Act has been completely dismantled. Even those parts of it that have worked really well over the past 32 years have been thrown out. There has been this substantial transfer to the authority or to the Minister of a raft of regulatory functions. I note that in its submission the Real Estate Institute spoke about a scorched earth approach. Maybe those are heavy words, but I think they can be justified because a number of things have happened here, including putting at substantial risk a very cost-effective system of conveyancing at a time when housing affordability, as we all know, is a significant concern. If this bill is to pass, we will also have produced significant avoidable expense, some of which will quite clearly be passed on to consumers.

We will see significant delays to the establishment of the framework, and that, of course is associated with the issue in the Supplementary Order Paper of an extended period for the transitional provisions. We have compromised the workability and practicability of the new regime by denying input to those with direct industry experience. So the outcome is less satisfactory legislation than might have been expected.

I think it is appropriate to respond directly to comments that the Minister may make at a later stage, in connection with National’s perspective on the bill. I have pretty much summarised where the institute and those in the industry stand, but National took a full part in the bill as it was reported from the Justice and Electoral Committee. It noted that some of the concerns that it had expressed had been the subject of patching, but it continued to oppose this bill. I think we do so for reasons that are soundly based. Are they based on an industry perspective? Sure. But they are also based on the perspective of the community.

I think we would say that a new independent authority with industry representation is required to give consumers confidence that there is effective oversight of this industry. I am bound to say that there are circumstances—fortunately only a few—where fraud and resultant loss have occurred. But this bill is not adequate; it is not up to the task of achieving the objective that should have been set. I have spoken about the fact that a majority of submitters were concerned that property management was not included in the bill, and I think we all know that the last claims in respect of the fidelity guarantee fund were in relation to property management. The committee was told that about one in five complaints relates to property management.