Real Estate Agents Bill

I have great pleasure in moving, That the Real Estate Agents Bill be now read a second time. The Real Estate Agents Bill has its origins with ordinary Kiwi consumers. They have written to me and to others in droves, expressing their frustration about how the current complaints and discipline regime is being operated by the Real Estate Institute of New Zealand. They are frustrated by the current regime’s lack of accountability, openness, and transparency, and about its complete lack of independence from the industry.

I have also heard from many honest, decent, and honourable real estate agent professionals, who are tired of their reputation being tarnished by a few unscrupulous members—more than a few, recently—of the industry. Under the current system the only disciplinary body with any independence from the industry, and with any power to suspend or strike off registered agents and salespersons, is the Real Estate Agents Licensing Board. However, the board receives complaints only if they are referred to it by the Real Estate Institute itself and, indeed, this seldom happens. According to information provided to me by the institute, only 10 of the 583 public complaints it received between 2004 and 2007 were referred on to the licensing board. This bill will correct that situation by providing rigorous, robust protection for Kiwi consumers.

The new authority will provide independent oversight of the industry. Where agents deliberately rip off consumers, the bill will provide appropriate sanctions and penalties. Most important, it will also provide an avenue for consumers to seek redress in the form of compensation. I have been criticised by some, both in this House and in other places, for exposing real estate agents who have ripped people off, but I make absolutely no apology for doing that. I have always said in every press statement I have made—and they are on the record—that the vast majority of people in this industry are honourable, fair-minded, good, professional, honest people. This Government will not allow, though, the reputation of the vast majority of agents, who are, as I have said, decent and professional, to be tarnished by those who abuse the trust of consumers.

The Justice and Electoral Committee received over 1,300 written submissions and heard directly from over 700 people. Nearly all, I have to say, were from the real estate industry, and I welcome the industry’s impressive level of engagement. The committee also heard from consumers affected by the actions of unscrupulous real estate agents, and from Consumer New Zealand, which fully supports the aims and objectives of this bill. The committee has reported back to the House with recommendations that address the concerns that have been raised, and it has enhanced the bill by improving and clarifying certain provisions while not altering the key reforms therein. The Government supports those recommendations. I was pleased to note that the majority of submissions supported the new independent authority, and supported the enhanced protections for ordinary consumers as they seek to buy or sell their most valuable asset, their house. It was also pleasing to note the Real Estate Institute’s recent comments on the bill. In a press statement on 30 July 2008 the president, Mr Cleland, stated: “We support the independent complaints authority and the increase in penalties.”

We on this side of the House are determined to provide robust protection in this area for decent, hard-working Kiwi consumers. The question, though, is whether the National Party will continue to oppose consumer protection. The National Party, of course, did not do anything to improve the real estate industry whilst it was in Government, and it should be noted that National did not even support this bill’s referral to a select committee so that New Zealand consumers and real estate industry members could have their say. The question is: why? Even now, when the Real Estate Institute itself has had somewhat of a positive change of heart in respect of this bill, I ask what the National Party will do now. Will it continue to support leaving consumers exposed as they put their biggest asset—their house—at risk, or are we about to witness yet another flip-flop from National? I sincerely hope that sense is prevailing over there and that it will be the latter option, but we will soon see.

I turn now to the key recommendations made by the select committee. The committee has recommended amending the commencement date so that the Act will come fully into force 1 year after its enactment. I propose to amend this provision, through a Supplementary Order Paper, to 14 months after the Royal assent, which will allow more time for the establishment of the Real Estate Agents Authority and for the industry to gear up for these reforms. It has always been the Government’s intention that the necessary industry knowledge and experience will be available—that is common sense—on the authority and the disciplinary tribunal, and I welcome the committee’s recommendation that the bill be amended to specify industry representation on both that authority and tribunal.

For the avoidance of doubt, I intend to bring forward a further amendment through the Supplementary Order Paper, to make it explicit that for first-term appointments to the authority and the disciplinary tribunal, the Real Estate Institute will be consulted. I have reassessed the experience requirements for real estate industry licences and I intend to bring forward an amendment through the Supplementary Order Paper that will increase the requirements from 2 years’ industry experience in the previous 10 years to 3 years’ experience.

The committee is concerned that introducing a new, transparent complaints and disciplinary regime will lead to a surge in complaints. This may be the case. Consequently, it has recommended allowing the Real Estate Agents Authority to establish as many complaints assessment committees as will be necessary in order to ensure that complaints are investigated and expedited in a timely manner. The committee has also recommended that both the authority and the complaints assessment committees should be able to investigate allegations on their own initiative. This will allow proactive investigations where there are allegations of unsatisfactory conduct or misconduct, and I welcome that recommendation.

Many industry submitters supported strengthening the bill’s compulsory continuing education requirements. The Government agrees with the committee’s recommendation that the completion of ongoing continuing education requirements be a condition of licence renewals. This will raise industry standards.

One of the major wins for consumers in this bill is the right to seek adequate redress. The committee has recommended that the disciplinary tribunal be able to award up to $100,000 in compensation. This reflects the significant financial harm that disreputable agents may inflict on consumers.

Concerns have been raised that the requirement for a review of the employment status for salespersons has the potential to create too much uncertainty within the industry at a time when it will be required to deal with a whole new regulatory regime. Therefore, I will put forward an amendment through the Supplementary Order Paper to remove this requirement.

The committee has made improvements to provisions relating to the duties imposed on real estate agents. In particular, it has recommended that the ability to cancel sole agency agreements after 90 days should apply only to the sale of residential property, as commercial and rural properties typically take longer to sell. The committee has also recommended ensuring that the cooling-off period cannot be used to avoid paying an agent commission if the agent negotiates a sale during that time.

Many within the real estate industry have been concerned about the effectiveness of the auction provisions in the bill. After further consideration on this issue, and taking into account the steps already taken by the industry to address the risks posed to consumers when buying and selling real estate at auction, I intend to bring forward amendments through the Supplementary Order Paper that will remove from the bill the provisions regulating the conduct of auctions.

In conclusion, I say that this bill has the protection of the consumer at its heart. Kiwi consumers, as they seek to buy or sell their most valuable asset—their home—have demanded a regulatory regime overseeing the process that they can be confident is fair, open, transparent, and accountable. They have demanded that. If things go wrong, then there should be a system they can rely on to deal effectively with rogue agents, and to compensate them for any losses. This Government has listened. It has listened to the very good recommendations of the committee and others.

💬 Hon Tony Ryall: You have not.

The member should have a look at the press statements. The Real Estate Agents Bill will provide the protection and confidence that Kiwi consumers are demanding. It will also support good, honest agents, who do indeed—as I have always said—comprise the majority of this industry. The select committee process has added value to this bill. Its recommendations reflect the views of the majority of the committee, and I welcome them.

I thank the hundreds of submitters and the highly paid lobbyists, very expensive as they are, who made submissions to the committee and approached their task diligently. I also acknowledge and thank the Green Party and New Zealand First for their work and support in ensuring that this bill achieves the benchmark that has been set by our communities and consumers for openness, transparency, accountability, and independence in the real estate industry. I have much pleasure in commending the bill to the House.

Minister Clayton Cosgrove is certainly not Theodore Roosevelt, who used to say that he would walk softly and carry a big stick. This Minister yells and screams, but in the end carries a twig, because Supplementary Order Paper 243 indicates there will be many changes to this bill that will water it down and change it. I must say that many of the changes proposed make quite a lot of sense.

💬 Hon Clayton Cosgrove: Will you support the bill?

I will come to that. I say to the Minister he should put some Sellotape over his mouth and sit there quietly and listen, because he may learn something.

The first point I want to make is that I thought the Justice and Electoral Committee worked very well on this bill. I had some real concerns because of the number of submissions that we had received. As the Minister said, we received about 1,300. I thought it would be pretty chaotic to try to deal with all those submissions. But, generally, I thought the select committee worked very well indeed. We met in Auckland and in Wellington. We dealt with submitters by videoconference and also by telephone. By and large the submissions were very good. But I do say, and perhaps it is applicable not only to this bill but also to some other bills, that standard form submissions were generally most unhelpful. I did not derive much assistance at all from a standard form, 15-page submission that may have been generated in some head office. When I asked certain submitters particular questions on particular aspects of the submission I was disappointed to find on occasion they had not even read their own submission. My advice to submitters is that if they make submissions—and we on select committees, as we all know, derive a great deal of benefit from the select committee process—it is helpful to make the submissions reasonably short and focused on particular points. Standard form submissions were unhelpful.

The chair of the select committee and the committee clerk entered into an arrangement whereby submitters were grouped together, and I thought that that procedure worked very well indeed. Generally there was good discussion and good debate as we teased through the various issues. At the end of the day, my concerns about the way in which the select committee would work given the number of submissions were not borne out. I thought it went pretty well indeed. Although it is late in election year and perhaps Lynne Pillay would faint if she heard praise from me, I would say I thought the chair did a reasonably good job, certainly in comparison with her performance over the Electoral Finance Bill, which, as the president of the Electoral Commission says, has a chilling effect this year on the electoral system.

Let me say something about the Real Estate Agents Bill. As the Minister said, it creates an independent real estate agent’s authority. This body will be responsible for overseeing licensing, complaints, discipline, the general enforcement processes, and, importantly, providing information to consumers. The authority will have very wide investigative powers and widened powers to order penalties, and the Minister has mentioned some of those, and various other remedies. The bill creates an independent disciplinary tribunal to deal with serious cases referred to it by the authority, and in that respect the bill mirrors to a large extent the kind of procedures introduced to the Lawyers and Conveyancers Act. The authority will be able to cancel licences and to award compensation. The authority will represent complainants before the tribunal, and, importantly, establish a public register of real estate agents and sales people recording any breaches of standards, because that, of course, is important.

The bill removes certain regulatory functions from the Real Estate Institute of New Zealand, and removes the requirement for compulsory membership. It makes people convicted of dishonesty offences ineligible for licences. It increases entry requirements, and requires licensees to undergo certain professional development training. That is the kernel of the bill, and the National Party certainly is in favour of improvements to the Real Estate Act, but it continues to have some very grave concerns about this legislation. I will go through those now.

The first concerns the transitional period, which, as the Minister said, is set out in clause 2. Certain sections come into force on the day after the date on which the bill receives the Royal assent. The rest of the Act comes into force on a date that is 1 year after the date it receives the Royal assent. The Minister indicated this morning that Supplementary Order Paper 243, which he will introduce, will extend that period from 12 to 14 months. I still think that is too short. The Lawyers and Conveyancers Act was passed in 2006, and it had a 2-year transitional provision. It is only now coming into force, following the intensive work undertaken by the New Zealand Law Society. When dealing with new codes of conduct for barristers and solicitors and new structural arrangements that that legislation introduces, and so on, it is no easy task. There will be major structural changes to the way in which the real estate industry is to be regulated on the day after this Act comes into force. We continue to maintain our concern about the relatively short transitional period, especially compared with the Lawyers and Conveyancers Act.

The second concern we have relates to the bureaucracy, especially the complaints assessment committees, the costs of which we are concerned will be passed on to the consumer. We have no problem in principle with the idea of complaints assessment committees, but there are a great number of complaints that do not even get to the threshold because they are so minor. Our concern is that the cost of setting up what could be three or four complaints assessment committees will be excessive.

The third concern we have, which came through many of the submissions before the select committee, is that property management is not included, although, in fairness to the Minister, it was acknowledged that there is an agreement to review and to address issues of property management at a later date. It could well be that will proceed fairly quickly, although I do not think the Minister addressed the issue in his second reading speech, so that needs to be addressed.

The fourth point is that the Minister made a couple of sensible comments about auctions, and certain provisions in Supplementary Order Paper 243. I must confess that in my quick reading of it I had not picked it up, but certain provisions of the Supplementary Order Paper will delete references to auction requirements. I think we are talking about clauses 136 to 141. It removes provisions relating to auction requirements. I think it is high time that the Auctioneers Act 1928 was reformed, so perhaps I will look at that more closely in the Committee stage.

Fifthly, the experience required for a licence has been increased to 3 years in the previous 10 years, and we are not so sure that that is the right way to go. We think it should be 3 years in the previous 5 years, but we can look at that at the Committee stage.

There are still problems with this bill. I have problems with the ability of lawyers to be engaged in real estate work. I think lawyers should be lawyers and real estate agents should be real estate agents. Lawyers get themselves into trouble when they start mixing professions in this way, but that is not a party view—it is a personal view—and that will probably go through anyway. It is contained also in the Lawyers and Conveyancers Act, but it is not good. So some concerns with this bill remain, particularly in regard to the relatively short transitional period. Although the bill is greatly improved on the bill as introduced to the House, and although the select committee certainly did a great deal of work on it, the bill remains inadequate, so National will continue its opposition to it.

Debate interrupted.