KEY POINTS:
Government reform and regulation of the real estate industry will increase charges and drive agents out of business, says an industry leader.
But Associate Justice Minister Clayton Cosgrove says the proposed new regime will better protect consumers and bring higher skill levels to the sector.
Paul Slatin, chief executive of the 105-agency First National Real Estate, said consumers would pay higher fees if proposals announced in May went ahead.
"The move to ensure that all individuals working in the real estate industry are employed on a fulltime basis as opposed to contract is ultimately anti-competitive and will mean higher fees for consumers," Slatin said.
Cosgrove said this was untrue. "The consultation paper proposes that the real estate industry be subject to the same employment laws as any other industry or business.
"In practical terms, this means real estate agents can choose whether to engage salespeople as independent contractors or to employ them. Such decisions will be subject to scrutiny from the courts as to whether a person is genuinely a salesperson or an independent contractor," Cosgrove said.
Slatin predicted a big drop in the number of real estate agents, saying many would leave the sector.
"The move will put a huge strain on smaller offices, particularly in provincial areas. It will make them less viable, meaning less choice and higher fees for consumers," he said.
But Cosgrove said the changes were far from anti-competitive and would improve the public's confidence in the sector, the transparency of discipline and the complaints procedure, so strengthening the sector.
Slatin said the changes threatened property managers. "Under Cosgrove's proposals, property managers will no longer have to be regulated under any piece of legislation.
"This will be a bad move for the profession as basically anyone - irrelevant of experience or qualification - will be able to take on the role of a property manager.
"Practising auctioneers will have the power to also take on the role of a licensed real estate salesperson."
He said this would mean a real lack of clarity when it came to auctions, as currently the salesperson existed to represent the best interests of the buyer and seller.
But Cosgrove said Slatin was wrong about property managers.
"The consultation paper has suggested excluding letting and leasing of land and property management from the scope of activities covered by the licensing regime because they pose smaller risks to consumers," he said.
"This is primarily because leasing and management of properties typically involves smaller sums of money than in buying and selling property.
"Letting and leasing is a relatively frequent transaction for most landlords and tenants, and the greater level of experience means they are less vulnerable to the risks involved.
"In addition, various [pieces of] consumer protection legislation apply to those involved in property management: the Fair Trading Act 1986, the Consumer Guarantees Act 1993, and the Residential Tenancies Act 1986. It is therefore not correct to say that property managers will not be regulated by any piece of legislation," Cosgrove said.
Slatin said the new regime meant a new real estate authority would be responsible for regulation, complaints and education.
"This adds confusion but also an unnecessary layer of bureaucracy," Slatin said.
The changes consolidate functions now split between two organisations. Regulatory functions are split between the Real Estate Agents Licensing Board and the Real Estate Institute of New Zealand.
The educational standards and the training syllabus is determined by Real Estate Institute and delivered by an industry training organisation, Cosgrove said.
"Under the Government's preferred options for reform, transferring these functions to the proposed Real Estate Agents Authority would ensure that training and standards are more transparent, and independent of industry control.
"And yes the goal is to lift educational standards, which includes ethical standards," he said. "An independent and impartial authority will improve consumer confidence in the regulation of the real estate industry by reducing perceptions of bias and industry control."
Submissions on the consultation paper are due in by July 10.
