Real estate agents fight back over new fees

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The Government's real estate agent organisation has hit back at Real Estate Institute claims made about its proposal to nearly double the fee agents pay to the regulatory body.

Kristy McDonald QC, chair of the Wellington-headquartered Real Estate Agents Authority said the institute was wrong on its claims about money and complaint numbers.

The institute claimed the authority wanted to hike its levies from $495 to $760 a year and that income from operating levies and applications for 2011 would need to more than double from $2.8 million to $6.6 million and then double again to $12 million in 2012.

Rosanne Meo, institute chair, said the authority's fee rise would help off-set an assumed increase in complaints as well as a shortfall of income due to an unplanned decline in the number of licensees.

But Kristy McDonald refuted this.

"REINZ has claimed that income to the authority will more than double in the next financial year. This is not correct.

In a message to licensees this afternoon the authority said:

The bulk of the authority's income was received when licensees renewed their licenses leading up to March each year, which meant only a quarter of its income was recognised in the financial year (ending June) it was paid.

The remainder was deferred to the subsequent financial year, the authority said.

"REINZ has also claimed that complaints numbers have dropped from an average of 55 to 14 per week. That too is not correct," McDonald said.

"In fact, since its inception, the authority has steadily recorded an average of around 14 complaints about licensee conduct per week."

The 55 complaints about licensee conduct were recorded across one week in March, the authority said.

"The authority is the only licensing and complaints body of its type in New Zealand, fully third party funded, with wide ranging responsibilities and a requirement to repay Government for the costs of setting up and implementing the new regulatory regime," she said.

"We are committed to keeping any costs increase to the industry sustainably low. The forecast increase in costs reflects the high number of complaints, the amount of work required to manage them and the requirements of the legislation. We are confident we have the balance right," McDonald said.

"The authority's first priority is making sure that consumers are protected and well-informed in what for most, is the most significant purchase they will ever make," she said.

More than 700 complaints and allegations about licensees were received by the authority up until the end of September and Complaints Assessment Committees had issued more than 250 decisions, she said.

Meo cited an independent benchmarking analysis by Grant Thornton which she said showed that when compared to other regulatory bodies, the cost of processing a complaint through the authority was five to 24 times more expensive.

"In fact one organisation is able to process its complaints up to 72 times cheaper than the REAA. The cost of processing a complaint through the REAA seems high. The economic climate has placed a huge strain on our industry. The REAA's focus needs to be on managing costs rather than simply passing on more costs through further levy increases," Meo said.

The Real Estate Institute said the levy not only paid for the complaints' management process, but for the licensing regime and the cost of keeping the system running.

The cost of managing 1040 complaints was forecast to be $3600 per complaint. The authority anticipates it will investigate about 90 per cent of those at an additional cost of $2700 per investigation.

This compared to the report from Grant Thornton which estimated the cost to be $9,297.63, the authority said.

REINZ is encouraging all members to make submissions against the proposed increase in levies because the industry has not sufficiently recovered from the global economic recession and the industry wants the REAA to undertake a cost efficiency analysis of the complaints process prior to any increase, an institute statement said.

Consultation with the industry began this week and runs until October 31.