Cosgrove Clayton: Real Estate Agents Bill — First Reading 
Cosgrove Clayton: Real Estate Agents Bill — First Reading 
[Volume:644;Page:13813] 
Hon CLAYTON COSGROVE (Associate Minister of Justice) 
: 
 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? 
Hon CLAYTON COSGROVE 
: 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  
Dominion Post  
stated: “It is time for a system that focuses on the customer rather than protecting patches and quashing competition.” The  
Independent 
 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  
New Zealand Herald  
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 $35000 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. 
Hon CLAYTON COSGROVE 
: Before the dinner break I was referring to the Ottaway case. The buyers lost $35000 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 $40000 for individuals and $100000 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.