KEY POINTS:
Real estate agents are easy whipping boys for public criticism. They are salesmen and women. They deal in and profit from most New Zealanders' most costly and treasured assets. Often, they interact with both sides of a transaction in which they are being paid by only one, the
vendor. Some among them have not acted ethically, others have been less than forthcoming with the truth in deals that may have gone wrong and been publicised. They are variously characterised as fast-talking, flash-dressing, gold-digging bounty hunters. And it is these caricatures, real only among a small minority, that the Associate Justice Minister, Clayton Cosgrove, seems to be targeting with his crackdown on the real estate industry.
Mr Cosgrove has been lining up this sector for some time. In a variant of the "Going once, going twice, and for the third and final time ... gone" mantra of the auction room, he sought proposals from the Real Estate Institute that might tighten controls and sanctions on agents who dupe or deceive consumers. The response was for minimal change, and that invited the minister to lower his gavel with some force. He proposes now to remove the institute's regulatory and disciplinary roles by creating a Real Estate Licensing Authority with power to suspend or remove agents and to order compensation be paid for victims of unethical practices. One positive spin-off from creation of the licensing authority will be that membership of the institute will no longer be compulsory.
Mr Cosgrove highlights an industry estimate of $1.2 billion in commissions this year to emphasise what he sees as greed by "land sharks" seeking to rip off consumers for even more. The language is strong and the measures, which are up for public consultation for the next six weeks, are far-reaching. Politically, the reforms are a no-brainer. There are no votes to be gained by backing an industry with such a poor image, however misstated that might be.
The institute, as much as agents on the ground, ought to wear much of the blame for the Government's intervention. It has regarded its duty of self-regulation for the industry as about just one of those two words, self. It has referred few complaints to the moribund Real Estate Licensing Board and devolved most others to its own membership to handle, slowly and cosily, to the consternation of aggrieved vendors or buyers. It did not act when the political signals were clear: change or be changed.
In forcing the minister's hand, the institute has damaged the concept of self-regulation for other industries. Bureaucrats bristle at the thought that government agencies or government-controlled appointments do not rule over certain sectors of the economy. This Government seems sceptical of self-policing, despite the clear eradication of red tape and cost in having industry bodies, with independent members, empowered to deal with consumer complaints. The institute has failed to act sufficiently strongly against bad agents and, in so doing, has permitted their actions to tarnish its wider membership.
Reaction to the proposed changes is mixed. Some major real estate firms worry about the cost to the taxpayer of Mr Cosgrove's new apparatus and accuse him of over-reaction. Others, equally well known, accept that law changes are inevitable and will clear their industry of a poor image in which some instances of deceit have been compounded by suspicions of cronyism and self-protection. The latter view is probably correct but it says much about the industry's leadership that it allowed matters to get so bad that the Government had to scratch, so forcefully, its regulatory itch.