Rebuilding our trust in real estate agents

There are calls for a re-evaluation of the way agents deal with complaints. Picture / Reuters

It's time to move house. Unless you decide to sell your home yourself, you'll need to choose a licensed real estate agent.

Expect accolades as they troop down the hallway and praise your excellent property which they want to list. They call the house "a home", admire your exquisite taste and offer various options to maximise your price.

Open homes begin - and continue. Days, then weeks, go by. You feel rejected. That nice agent begins referring to "the house". He seems less friendly, somewhat distant.

He warns you that market feedback is largely negative. The road which a month ago offered that great bus service is now too noisy.

The house once described as having great character now evidently has many disguised faults. Besides, the market has turned. You're advised to drop your price.

A rather insultingly low cash offer comes in, but without a single condition. The agent cautions against instant rejection. The market has spoken, he says, emphasising the deal's advantages. You sign up and shift out but you're not happy.

Perhaps you believe the agent is in breach of the institute's rules, which demand good conduct, honesty and fairness.

What are your options? A call to the Real Estate Institute will direct you to place any initial complaint with the principal officer or licensee of your agency. This person is charged with upholding standards, rules and ethics.

Agents' behaviour falls under three separate frameworks: the Real Estate Agents Act 1976, the institute's code of ethics, and its rules of practice. These rules state agents must be honest, behave in a fair way and know and adhere to the law.

If a complainant is still dissatisfied, the institute will ask for details to be sent to its Parnell headquarters and will decide how to handle the matter.

The subject of your complaint may be found not to have breached any rules or codes, but if it has the institute will investigate. You and the agent will have to submit all written documentation.

Next, the institute can put the matter before one of its five regional disciplinary sub-committees (RDSC), which consist of licensees - usually senior real estate agents. The RDSC will test your complaint against the institute's standards.

If it decides charges should be laid, the matter will go to the institute's national council. A hearing may be held, at which the parties can put their case, show evidence and call witnesses.

If the agent or agency is found to have offended, it could be fined up to $750 on each count.

If the matter is more serious, it may be referred to the Real Estate Agents Licensing Board in Newmarket, the authority which issues and renews agents' tickets to practise.

The board will hear charges of fraud or dishonesty which are relevant to the character of the agent. At worst, an agent could lose his or her licence. Agents can appeal a board decision via the courts, although this is rare.

Regardless of how the institute handles the matter, the drawback of this system is that it is essentially in-house - agents policing themselves, a system Australian ethics crusader Neil Jenman, Devonport barrister John Waymouth and the Consumers' Institute's David Russell all want changed.

Jenman compares the industry's power to police itself to handing law and order to the mafia. Waymouth believes agents should still police themselves, but says there are problems with the way the system works. He wants more transparency and agents to be allowed lawyers at disciplinary hearings.

Associate Justice Minister Clayton Cosgrove has called for the institute to impose harsher penalties, saying he was "surprised" and "disturbed" by its decision not to take further action in a recent case, and has asked officials to report back to him on it.

Russell says the institute should be stripped of its power to handle complaints.

Napier National MP and former real estate agent Chris Tremain wants a separate body to hear complaints. The industry must regulate itself to protect consumers and promote a sense of trust, he says.

Complainants who use the current system can claim no monetary compensation and the institute warns that it can't award damages.

Institute president Howard Morley defends the system, denying it is a kangaroo court. He agrees the fines are too low, but says it is a robust and transparent process. Cases are published in the institute's journal and he says the institute might consider posting them on its website so they are accessible to the public.

Unhappy clients can choose a second and entirely separate avenue by complaining to the Commerce Commission under the Fair Trading Act.

The commission has brought charges against agents, especially for misleading or deceptive conduct, using district courts. If the commission is dealing with a case, the institute will take no action until it has reached a decision, Morley warns.

As in any monetary dispute, a third avenue exists: engaging a real estate lawyer to take the matter to court to get compensation. The litigant faces the prospect of losing and paying costs, a punitive deterrent.

Morley and the institute's legal counsel Vernon Tamatea agree that the system as it stands today is not perfect. Fines of $750 at RDSC level should be raised to $10,000, Morley says.

Fines at the licensing board level should be raised to $30,000. The makeup of the RDSCs should also change, they say.

The institute has already moved to enhance the RDSCs, deciding that more independent legal experts should be appointed to the five sub-committee entities, with a high court barrister or solicitor acting as their chair, and that the Government should appoint two independent experts.

They say licensees from the region where the complaint originated should be members.

Morley defends the industry, saying most agents are honest and good.

"As an industry, we transact well in excess of 200,000 properties a year, and with more than 17,000 members the ratio of complaints made, at around 150 a year, represents a failure rate of less than 1 per cent."

About 30 to 40 complaints are upheld against agents or agencies annually, he said, a low number considering the total number of sales.

But the institute's critics still want the system overhauled. David Russell says the Ministry of Economic Development or Ministry of Justice should take charge of policing agents and hearing cases, removing it from agents' - and the institute's - grasp.

In Australia, disputes are handled differently. Take a complaint against a Sydney agent. The state-funded New South Wales Office of Fair Trading hears the complaint. This office administers the Property, Stock and Business Agents Act 2002, licensing agents and investigating grounds for disciplinary action. It also holds the investigations.

Jenman says Australian consumers have a higher level of protection and New Zealand needs to distance the complaints disputes system from the agents.

"The Victorian Government set up the Estate Agents Resolution Service because consumers who were complaining to the Real Estate Institute were getting nowhere," he said.

New Zealand architect Colin MacGillivray noticed the differences when he worked in Australia for five years. Adelaide's rules were much tighter, right from the point of listing.

"Agents there are obliged to certify that the information about a property is correct. This includes the age and area of the building - often a floor plan is provided - and possible work such as road widening to be carried out in the future," he said.

"The slight downside for the vendor is that the purchaser has a three-day cooling off period after the contract is signed."

The good and the bad

Last week's report on disciplinary proceedings in the real estate industry has brought a strong response from readers.

Here is an abridged selection.

* I have had dealings with real estate agents now for 15 years, being one myself for that time. All were honest, diligent people working to obtain a happy outcome for both buyers and sellers, often under difficult circumstances. Wouldn't it be great if you could headline something positive for the 99.9 per cent of us? It seems to me that you are waging a one-person war against the industry.

- Gerald Petrie, Premium Real Estate, Takapuna.

* I am relieved that finally the Real Estate Institute is being recognised for the shambolic, overly protective governing body that it is. I have been in the industry for 11 years and am constantly amazed at shoddy work practices displayed by individuals and companies which are constantly either overlooked by the institute or at worst given a wet slap over a limp wrist for grave wrongdoings.

- Anonymous.

* Cowboys. This industry needs a thorough clean-up pretty quick smart.

- Frank van der Zwaag.

* What a joke, $750 fines are peanuts. Their licences should be cancelled.

- Dave Terangi.

* Just once, I would like to see real estate agents supported in the media instead of black-listed. It is just too easy to focus on the negative. There are agents who are only in it for the money and the status, but there are also other agents who are absolutely fabulous and don't deserve to be black-marked constantly by the ill actions of those who don't behave.

- Michelle.

* I have had excellent experiences with real estate agents in Adelaide. They are obliged to certify that the information about a property is correct. The New Zealand equivalent needs a shakeup.

- Colin MacGillivray.

* The institute cannot levy higher fines than those already given without the Government changing the legislation that sits behind the whole disciplinary process.

- Anonymous.

* I was the victim of illegal practices in the course of trying to purchase a property. The matter made its way to a regional disciplinary hearing and the agent was fined $2000. It was deemed he did not have to go before the licensing board, even though he was found guilty of a contractual offence. It was suggested to me by the institute that I take the matter to the police but it was hardly worth it, because of his influence in local circles.

- Fiona.