KEY POINTS:
The Real Estate Institute - which referred none of the 132 complaints it received in 2004 to its licensing board - is facing a major overhaul at the hands of the Associate Minister of Justice.
Clayton Cosgrove is scathing about the organisation, which in 2005 referred only seven
of the 163 complaints it got to the disciplinary board - a panel that can expel agents by taking away their licence to practise.
Mr Cosgrove yesterday criticised many aspects of the institute, saying consumers had little confidence in the industry.
The freedom of self-regulation granted by the Real Estate Agents Act 1976 was perceived as industry protectionism rather than giving the consumer safeguards, he said.
So in May, he will seek public comment on legislation he hopes to introduce to the House this year.
The Real Estate Institute has hired high-profile lawyer Mai Chen, who said yesterday that agents welcomed change and had wanted the law updated for many years. They had sought higher fines and a more transparent system, she said.
Institute president Murray Cleland said agents were delighted with the changes. "No one has a bigger interest in ensuring public confidence in the industry and in the industry's reputation than do we. We will be happy to co-operate with the Government in securing the necessary legislative change to ensure this. We have been doing a lot of work off our own initiative, including the appointment earlier this month of consumers advocate David Russell to chair a review of our code of ethics to raise standards, but the existing act is an impediment to structural change.
"But Chris Taylor, head of real estate agency The Joneses - which promises a flat fee of $7995 to sell a house regardless of the asking price - complained bitterly about the institute yesterday and said he welcomed sweeping changes.
He said his firm was compelled to be an institute member, yet the very same institute was taking action against The Joneses for breaching a code of ethics that barred it from criticising other agents in public.
The Joneses promotes itself by saying "within the real estate industry, you will generally get poor service and pay way, way too much money".
Deb Leask, whose complaints about the system were partly the spark for the changes, praised the overhaul.
"I am happy Mr Cosgrove has taken the situation on board and had the Ministry of Justice officials look into different ways to improve the system. I agree that agents should not investigate other agents. Complaints should be dealt with by an independent body."
An overhaul will ensure that the consumers are protected from real estate agents who could take advantage of them. There will also be more accountability on agents to do the right thing, or they will be without their livelihood."
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Two major cases forced Associate Justice Minister Clayton Cosgrove into action:
1. Deb Leask v Bayleys in Napier
Deb Leask listed her two Napier townhouses with Bayleys. Real estate agent Graeme Sawyer was found guilty of knocking down her price to almost half the asking amount in an attempt to buy the properties himself. His firm was fined the maximum by the industry - $750 on each of three charges.
If that wasn't bad enough, the institute initially refused to take any further action against Mr Sawyer, who was found to have acted unethically and unfairly. John Payne, also of Bayleys Napier, was found to have broken institute rules too. It was only after the Crown Law Office reviewed the case that it was referred to the licensing board, which is yet to hear the matter. Deb Leask, who lives in Australia, complained directly to the Government and called for a system overhaul.
Mr Cosgrove agreed that the system needed changing and yesterday he acted. Mr Sawyer said he would defend his actions because he had done nothing wrong.
2. Mark And Deborah Stevens In Auckland
Premium was found to have engaged in misleading and deceptive conduct after Mark and Deborah Stevens sold their Milford house in 2004 for $2.5 million, only to see the buyers, Mahoenui Valley Trust, sell it five months later for $3.2 million.
Last year, Justice Patricia Courtney ruled in the High Court at Auckland that Premium had failed to declare a conflict of interest by not disclosing an agent's relationship with Mahoenui. Premium agent Pamela Riley had acted for Mahoenui on many other deals and family members had worked for the trust. The judgment in favour of the Stevens cost Premium $900,000.
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Why It Matters
For most New Zealanders, their house is their largest asset. New Zealand has 1.4 million houses worth about $460 billion.
Every year, about 18,000 agents sell more than 100,000 properties for about $65 billion, making commissions of around 4 per cent, which earns them about $2.6 billion.
Home owners and buyers place their trust in agents, but a few agents try to get rich by dealing in property themselves.
Some try to buy the property themselves at knockdown prices. Others do not disclose for whom they are acting.
When consumers have complained, many have felt fobbed off by the Real Estate Institute's response.
The institute has wide-ranging powers to refer offending agents to its licensing board, but few cases go there - none in 2004.
What Could Change
Agents are expected to lose their power to investigate themselves. The role is likely to go to a new real estate ombudsman.
Agents may no longer be forced to join the Real Estate Institute, which now dominates the industry because membership is compulsory for all agents.
