Going once, going twice. Have your say on the real estate sector reforms

Clayton Cosgrove Justice

A Bill to reform the real estate sector is currently before the Justice and Electoral Select Committee, and Associate Justice Minister Clayton Cosgrove urges Kiwi home owners and sellers to make a submission.

For most Kiwis, the biggest asset we will ever own is our home. So when it comes time to buying or selling property, it is crucial that we get our biggest financial transaction right. 

The current situation

Unfortunately, for too many people, the experience hasn’t been a positive one. We have seen a succession of cases through the media and courts where people have been ripped off by unscrupulous real estate agents or salespeople. And that cost to victims can be very high, with some damages running into hundreds of thousands of dollars, not to mention the emotional damage from the stress.

Associate Justice Minister Clayton Cosgrove hosts a public meeting in Christchurch about proposed reforms for the real estate sector.

My decision to radically overhaul the legislation governing the real estate sector has been driven by communities’ call for change. I have received numerous letters and phone calls from members of the public, and from honest real estate agents, who are disgusted with the current system of dealing with complaints and disciplining rogue agents.

Examples of complaints include:

  • poor quality investigations,
  • long delays in processing complaints and
  • complainants not being kept informed.

And when agents are disciplined, it is often no more than a smack on the hand with a wet bus ticket.

It is true that the Real Estate Agents Act 1976 is outdated and its fines are too low. But that is not the root of the problem. The main problem is that the tough provisions in this Act – namely the ability to suspend or permanently strike off agents or salespeople who run amok – are seldom used. The reason they are seldom used is that the vast majority of complaints are not referred by REINZ to the Real Estate Licensing Board which has these powers. REINZ is the gatekeeper for complaints, and despite my advice to it last year that it refer all cases to the Board, it does not do so.

According to the REINZ’s own figures, between 2004 and 2006, the REINZ received 507 complaints from members of the public. But only 9 of these were referred to the independent Licensing Board.

But it gets worse. REINZ recently advised me that it has also received a number of other serious complaints from bodies such as the Police and insurance companies and others, of which 140 were referred to the Licensing Board. Who knows how many hundreds of complaints were actually made to the REINZ by Police and the insurance industry – but not acted upon. The Institute’s own Journal (Dec 4 ‘07) said these complaints “tend to be at the more serious end of the scale." 

Working towards a solution

Last year I offered the Real Estate Institute the opportunity to come up with solid proposals that would deliver a complaints and disciplinary system that was independent, accountable, open and transparent. REINZ failed to offer any such proposals, preferring to keep the complaints and discipline system effectively in-house.

Since that time we have seen other disgraceful actions that reinforce that this industry should no longer have the privilege of self regulation. For instance, the agent who won several awards for being a top performer despite being fined for breaching the REINZ’s code of ethics and being formally warned by the Commerce Commission for failing to disclose information. And remember the Institute taking action earlier this year against ‘The Joneses’ real estate firm for publicly saying that “New Zealanders pay way too much money for a fairly indifferent sort of service.” It is disturbing that REINZ allowed its disciplinary procedures to be hijacked by these sorts of antics, when genuine cases of concern were being side-lined, sometimes for years. 

Clearly we need a system that puts consumer protection and ethics above pure dog-eat-dog monetary gain.

I have been accused by REINZ of using colourful language when talking about this industry, but if you have to talk tough to get justice for Kiwi home buyers and sellers, then I am guilty as charged. My use of terms such as “land sharks” to describe the few rogues in this sector is not nearly as colourful as the language used by their victims who have described to me their bad experiences.

The Real Estate Agents Bill is essentially about consumer protection. The Bill delivers a dispute resolution system that is free, fast and fair for consumers, and introduces compensation for people for get ripped off. Fines will no longer end up in the REINZ’s coffers.

The Bill also supports the good honest real estate professionals who are the vast majority working in this sector, and who are sick of being tarred with the same brush as the last land shark who ripped someone off.

This Bill spells an end to industry protectionism and privilege, and a new era where good honest real estate professionals can thrive.

Having your say

I urge all New Zealanders who have an interest in buying or selling property to make a submission to the Justice and Electoral Select Committee.

If you are interested in making a submission on the Bill, you can do this online at the following web address: http://www.parliament.nz/en-NZ/ (go to Select Committees, Submissions Called For, Real Estate Agents Bill) or by writing to: Secretariat, Justice and Electoral Committee, Parliament House, Wellington.