Real Estate Agents Bill

I rise to speak in relation to Part 5 of the Real Estate Agents Bill. This part deals with the duties relating to real estate agency work. I will refer to a few issues in relation to this, but not on a clause by clause basis. The first is in relation to clauses 137 to 141, which I appreciate are being deleted, pursuant to the Minister’s Supplementary Order Paper 243. I think it is important, for the record, to know what we are deleting. We are deleting the clauses providing for the bidders record for auctions, the proof of identity for anybody who wants to bid, the confidentiality of the bidders record, and bids being taken only from registered bidders. This shows a huge ignorance of how auctions are conducted. It was so impractical and so unrealistic it was just not going to be workable.

For example, if one turned up to an auction and decided to bid for a property—bearing in mind that it is the auctioneer’s duty to get the best possible price—unless one had filled in the bidders record, one would not have been able to bid for that property, and the vendor might have missed out on the top price. But not only that, bidders also had to fill in details identifying who they were and provide proof of identity, which was limited to a driver’s licence, a New Zealand passport, an overseas passport, or other proof of identity as prescribed by regulations, whatever that might be.

The Real Estate Agents Bill then stated that the person engaged to conduct the auction had to keep the bidders record for at least 3 years. Why on earth would one want to keep for 3 long years a bidders record of unsuccessful bidders who might have been interested in a section or house? At least, in relation to this provision and these clauses, some common sense has prevailed and those provisions will be deleted, with our endorsement, pursuant to Supplementary Order Paper 243.

But I come back to something I mentioned when I spoke about Part 1, the interpretation and definitions clause, because it relates to clause 129 in Part 5, and that is the definition of residential property. I point out to the Minister that residential property has been defined twice. It seems that it has been replicated, both in clause 125 and in clause 129, where it says exactly the same thing. We do not need both of those definitions so, for the sake of saving a few words, maybe one of those definitions—which are word for word the same—could be omitted without seriously affecting the integrity of this part. I see that the Minister in the chair, the Hon David Parker, is looking at the bill with some interest because he, at least, is a lawyer and does know the importance of having sensible, readable legislation that has some sense of professionalism about it.

I asked earlier for the then Minister in the chair, the Hon Clayton Cosgrove, to take a call on the definition of residential property. Residential property has been defined in the interpretation clause as “property used, or intended to be used, exclusively or principally for residential purposes.” It has been further defined, and this is both in clause 125 and in clause 129, where it is replicated, by excluding “property that—(a) has been developed with other properties in a continuous area; and (b) is proposed to be sold or otherwise disposed of by a vendor who also proposes to sell or otherwise dispose of, or who has sold or otherwise disposed of, some or all of those other properties.”

During the select committee process, submitters were concerned about this provision, because the relevance of it is that a sole-agency agreement for residential property can be cancelled 90 days after it has been entered into. This provision deals with residential property such as, for example, subdivisions that may take longer to sell than the 90 days, or staged developments that could take longer as well. It recognises that there are some types of property, like those staged developments, that may take longer than 90 days to sell, and some that will be staged over several years. It recognises that exception to the cancellation of the sole-agency agreement, but what it does not do is adequately define residential property, so we do not know what property can or cannot be included in that sole-agency agreement that can be cancelled 90 days after it has been entered into.

During the debate on Part 1, I gave the example of lifestyle property and asked whether the definition of residential property included lifestyle property. So far I think that question has been too difficult for the Minister to address, but it is an important question because, in relation to agency agreements, as I said earlier, many of the difficulties are that a person will sign up with a sole agent, wanting to sell a property, and may then want to choose another agent further down the track. After 90 days, that person can cancel the first sole-agency agreement and enter into another with a separate real estate agent, but if there is confusion as to the definition of residential property, that person might end up having, in effect, two agency agreements, neither of which is cancelled, and may end up being responsible for paying double the commission. If the Minister thinks that is unlikely, I can tell him that it is not. There have been several disputes that involve two agents or more claiming commission for one sale. One of them is entitled to the commission, not both, but it is a dispute and an action that vendor clients do not want hanging over them, especially if it can be clarified by the Minister in the Committee stage before it is entrenched in legislation.

I think that is an important point; I do not think it is filibustering. It might be too technical for the Minister, who seems just to want to make personal comments about National members, but it is a serious point that should be addressed by the Minister, or perhaps he could get advice from his officials. It is irresponsible to pass legislation through this House that contains uncertainties, especially as to such basic definitions as residential property. I seriously ask the Minister to address this point without being too emotive about it, because it is a sensible point.

I have had 28 years of conveyancing experience, so I have read several agency agreements and I have had several conveyancing transactions, and I have to say that the signing of agency agreements is one of the most fraught issues that vendor clients have. There is fine print in the agreement and people are often confused as to whether they have a sole-agency or a multi-agency agreement, who works in with whom, how to cancel that agreement, and, after the cancellation of the agreement, whether the sale has been affected because of what that agent did, and whether the agent is still entitled to the commission. A very important practical point from the point of view of selling one’s property is what the agency agreement entails and what the definition of “residential property” includes and excludes.

I have become kind of immersed in this bill. It is a fascinating over-prescription. In a lot of ways it is a bit like using a bulldozer to weed the radishes, with a heap of prescription and overbearing high-handedness. We are on Part 5, “Duties relating to real estate agency work”, and I am drawn firstly to clause 119, which requires that any money in respect of any transaction be held for 10 working days. But what if both parties do not want it to be held for 10 working days? In the last transaction that I was involved in—a rather modest transaction—both the vendor and the purchaser wanted a much quicker turn-round. On the one hand the vendor wanted to go unconditional on another option and needed the money, and on the other hand the purchaser—moi—wanted to avoid having money sitting in a GST situation for 6 months until it could be retrieved. In this bill we have a prescription that would totally write off the opportunity for common sense when both the vendor and the purchaser want an alternative. No doubt the Minister in the chair, the Hon Clayton Cosgrove, will now seek some advice and come forth with a very good explanation as to why that is there.

Then I am drawn to clause 121, “Agents’ trust accounts to be audited”. That is a really good idea. If I was a real estate agent and I had an audit account called, say, the “Spencer Trust” or something like that, I would really want it to be audited, because of its association with other names that might not be quite so wholesome. So I am quite in favour of that.

Then we come to the latter part of Part 5. I was interested to learn from the comments made by my colleague Kate Wilkinson that all of the provisions in regard to auctions are to be withdrawn. I ask the Minister whether that is right—he could perhaps nod.

💬 Hon Clayton Cosgrove: Yes.

Thank you; I commend the Minister for a sensible outcome. I am not sure why he did not seek some advice before those provisions were put in.

This is where I have had some trouble with this bill; it has been thrown together with all kinds of aspersions cast about skulduggery, shysters, and every other kind of wrong involvement in the real estate industry, when in reality there have been some serious overstatements. Can I confess to actually being an auctioneer? I was going to have some very stern words to say about those provisions if they had not been withdrawn.

I will make this point for a start. There are a series of mechanisms by which a person can sell a property, and it is up to the vendor to decide what mechanism to use. The vendor may not want an auction; there is sale by tender, private treaty, or negotiation. There is a whole range of things, so I have to say that I was very, very disappointed in the Minister when I saw those heavy-handed requirements about auctions included. The very nature of an auction is that it is about nuance and entertainment, and it is actually about engagement in a process of negotiation verbally, so it was disappointing to have had these prescriptions about bidders records, times at which people cannot arrive, etc.

I tell the Minister that if I were selling something and an auction was underway, and someone rolled up in a Rolls Royce—or, let us say, a red Hummer or something like that—and wanted to bid, and went on the bidders record, I would have been distressed if that provision removing the opportunity for someone to bid in that way had not been withdrawn. Then, of course—

💬 Hon Clayton Cosgrove: But you’re a happy man.

In this little regard. I commend the Minister for dropping out his absolutely hopeless and heavy-handed series of prescriptions about auctions. Auctions do not play a huge part in sales. Quite often they are set up to draw some attention to a property, and identify those people with whom negotiations can take place. But I was just wondering what the mischief was. I mean, how many people do a runner and are not around after they have had the bid? I think the Minister would struggle to come up with some numbers on that. He was happy to give us some examples before—two only—on another part of the bill, when we were asking—

💬 Hon Clayton Cosgrove: If you yield, I’ll give you a lot more examples.

I ask the Minister which people do runners. I am not sure that that actually is the case.

What an appalling speech from the previous speaker. I will take a very short call on this part. Opposition to it comes from the party that is not a party of compulsion. What are we seeking to do with this regulation? We are seeking to have some transparency, some clarity, and what is wrong with that? But, again, from the party opposite, anything that puts any duty for any clarity for consumers is seen as over-regulation. As I have said before, to treat protection for consumers so flippantly, in relation to the most important and biggest purchase they will ever make in their lives, is just downright appalling.

There were many submissions on the bill, and the Justice and Electoral Committee did a lot of work on it. Kate Wilkinson contributed quite a bit of common sense to the bill, but at the end of the day National members see some political gain in opposing it. What is so terrible about a provision whereby parties want the money held for 10 working days? This is about accountability in the system, but I expect nothing more from members opposite, who are members of a party that in no way believes in compulsion of any kind. They just leave it to the free market.

I will address Part 5 of the Real Estate Agents Bill. The previous speaker from this side of the Chamber, the very learned Eric Roy, who is a very capable auctioneer—he is very capable at whatever he does—addressed the piece that I will start on, which is the amendment on Supplementary Order Paper 243 in the name of the Hon Clayton Cosgrove that removes the provisions relating to auction requirements, from clause 136 through to clause 141 of the bill. But I will approach that amendment from a slightly different angle. It tends to leave behind the footprint, culture, and attitude in which this bill was drafted. It clearly relitigates the situation when the Minister was very much on the front foot and deliberately attempting to capture a public perception, but that effectively faded away very quickly and was not there.

I will take a moment to move people away from the massive body we hear about: the approximately 20,000 real estate agents. In this case we are talking about the auction system. But in a region like Marlborough, if a person puts a foot out of place and does not perform with integrity, that person is out of that town. That was really brought home to me when this bill was in its early stages of gestation and was being spoken to in its first reading, and I was approached by the real estate principals who operate out of Blenheim. When one stops to think about them, one realises they are business owners. They were First National, Bayleys, Harcourts, LJ Hooker, Ray White, PGG Wrightson, and CRT Real Estate. Those companies have incredible recognition and a very high profile in Marlborough, including in Blenheim, and they are actively involved in many, many transactions, so I find it very, very difficult to understand how the Minister could have so simply and effectively alienated the members of those businesses from his line of thinking.

💬 Hon Clayton Cosgrove: Only the bad ones.

We had no bad ones in Marlborough. Those business people were very, very offended. They come across as very genuine people. They were quite concerned that they were being vilified, and all of the comments that have come from this side of the Chamber, in a way, should be seen from the point of view that there was huge angst amongst those people.

That is referred to here, in Part 5 of this bill. There is the mere fact of the need to have so many amendments come forward on the Supplementary Order Paper. A lot of the amendments are common sense, but a lot of those provisions should have been there in the bill in the first place. Sure, we can go on about the odd person who does get things wrong and who has done things wrongly. We realise that there needs to be a process, but, as is illustrated by Part 5, the intention to so accurately prescribe the registration of bidders, the keeping of records for 3 years, and the requirement to give bidders something to wave so they are identifiable is indicative of the whole approach that was taken to this bill. As we go through this Committee stage, it has been very clear that the chairperson of the Justice and Electoral Committee, Lynne Pillay, feels that in this Parliament we legislate and get things incredibly right—that we are the experts. But what we often do not have is the ability to connect with the coalface, where these matters are sorted out. What will come out of this legislation will be a bundle of law that, when it hits the ground, will turn considerably pear-shaped.

I will talk for a couple of seconds about an incredible competition I saw when I was with the Real Estate Institute of New Zealand. It was the Australasian championship of auctioneering, and it was an incredible experience. The competitors were at a really nice hotel in downtown Auckland, and they had got themselves into a competition that was very similar to a Golden Shears final. There were six finalists, and they had to auction off a property, which they did very well. It was incredible to see the detail that those people had to keep in mind and to manage. I take my hat off to those auctioneers, who see themselves as professionals, and who see themselves as adding an amazing amount of flair and as getting the very best explanation and description of a property. They are able to market a property in a way that draws out the people who are interested in that sort of property and value, and then, on the day, just like a wonderful chef does—a Jamie Oliver deal—they are able to get the very, very best outcome.

All I have to say to the Minister is that the road to hell is paved with good intentions. Sadly, the Minister started off by trying to vilify those people, and he tried to maximise the political opportunity. Unfortunately, the perceived support that he thought would be out in the population for his position evaporated away, and I have noticed a considerable back-down from him. Thank you very much.

Part 5 deals with the duties relating to real estate agency work, and I want to take a call on just a couple of matters. The first is clause 117A, which requires the agent to display certain information. That provision is picked up from section 53 of the 1976 Act. It requires that every agent must clearly exhibit a notice of his or her name and the fact that he or she is a real estate agent licensed under the Act, at his or her place of business. One issue that arose is what happens if people do not have an office as such. If they have an office, clause 117A(2)(a) requires that that information be provided there. What if they operate out of a car and they simply have signs that they put up outside an apartment block, if they are selling an apartment block, or outside a house—and we see all these signs around the place at the weekends? Are they required to comply with clause 117A? My understanding is that they are required to do so, so some changes may need to be made to the notices that they put up if they are working out of their car at the weekend.

The purpose of this clause is to require this information to be shown on notices, advertisements, and other publications that are issued by, or on behalf of, the agency or the agent. As the report of the Justice and Electoral Committee says, this will, hopefully, promote transparency and help to protect consumers by ensuring that information about the agent is readily available. So that is why that provision was inserted, and on its own we have no particular problem with that.

The second point I want to make is to reiterate the excellent points made by Mr Roy and Mr King about the requirements where the land is sold by auction. There were a number of submissions on those particular provisions, and I am referring to clauses 136 to 141. As can be seen from the clauses, some of them are derived from the Property, Stock and Business Agents Act 2002 of New South Wales. The evidence we received from submitters was that these were designed for a particular problem that had occurred in New South Wales some years ago, thus necessitating the legislation, and they did not really fit into the New Zealand legislation. We made that point, and if one reads the National Party minority report, one will see that we said we thought the auction bidders record was impractical. We have heard this afternoon from several of my colleagues that this regime would not have worked at all, and that it would have been cumbersome and, frankly, silly.

Even though we are concerned about various aspects of the bill that remain, we are pleased that the Minister has heard what we were saying and has ignored his colleagues on the Justice and Electoral Committee. This proposal would not have worked and we are very pleased that it has been deleted. Because we need to get on with other parts of the bill and deal with the title and the third reading, I will not detain the Committee any further on Part 5. I just wanted to bring the Committee’s attention to those two matters.

This legislation is opposed by the National Party, not because we do not want good legislation to apply to the industry but because I can assure members that the majority of the real estate agents in my Wairarapa electorate are seriously opposed to many of the provisions of this bill. They also took considerable umbrage at being invited by the chair of the Justice and Electoral Committee, Ms Pillay, to come and make representations to the committee, and, after driving for an hour and a half from Masterton, being invited to appear before the committee for 5 minutes, only to face another hour and a half drive back to Masterton. That is, at best, totally rude and arrogant treatment by a Government that I hope our community will be putting the skids under.

In my view, the legislation in Part 5 is faulty, and reflective of our typical nanny State over-prescriptive attitude to developing legislation in this country. Let me give the example of clause 119, “Money to be held by agent for 10 working days”. As someone who has bought and sold the odd property during his life, I can say that it is often absolutely out of the question that one would want to enter into a transaction that leaves the money sitting dead in an account for 10 working days. GST, for example, may apply to the transaction, and because of the phasing-in of GST income and payment arrangements it may be entirely inappropriate to keep this requirement for money to be held by the agent for 10 working days.

However, it is entirely appropriate that agents’ trust accounts should be audited, as provided for in clause 121. I have no difficulty with that, at all. But I turn to the provisions concerning agency agreements—in particular clause 124, “No entitlement to commission or expenses without agency agreement”. As in my colleague Colin King’s electorate down in Marlborough, a lot of transactions in my electorate of the Wairarapa are made on the basis of word-of-mouth trust between people who know each other. Very many transactions are never actually put on paper. At the moment I am involved in a transaction with a land agent that has nothing on paper. Each party entirely trusts the other to act in an honourable way. We do not need the over-prescription that is coming from a Government that is trying to prescribe the detail around every breath of every individual for his or her life, and his or her behaviour in that life.

It also strikes me as very strange that a client can cancel a sole-agency arrangement by 5 p.m. on the next working day. What would be the difference between cancelling it then and cancelling it on the spot? Why are we engaged in interfering in the multitude of possible transactions between people and between individuals? The law cannot ever prescribe in detail the behaviour between two people. This legislation is attempting to over-prescribe and over-regulate behaviour.

It is of concern to National that auctioneering is removed from this legislation. Many transactions around property in the Wairarapa involve auctioning; it does not matter whether we are dealing with farm properties, residential properties, business properties, livestock, or other bits and pieces of agricultural material.

I think it is also of concern that we should be winding up the Real Estate Agents Fidelity Guarantee Fund, because I was caught up in this sort of problem myself 20 years ago with the lawyers’ fidelity fund, where a particular lawyer who was representing me banked some money that was owed to me as if it was his own. When one comes to seek the guarantee of these funds, it is actually quite hard to extract the payments from these bodies, even though one has been done down by a professional person. I think it is quite appropriate that there should be some arrangement so that if agents transgress, the small people in the community are able to recover some sort of compensation for being done down by somebody else. I will finish at this point, but I reiterate that there is strong opposition to this bill amongst the real estate agents in my electorate, and I do not support voting for it.

I will take a very short call to answer quickly a couple of questions members have raised.

I think Mr Roy and Mr Finlayson, and latterly Mr Hayes, had a question around clause 119. They asked what would happen if the two parties do not want the money to be held for the 10-day period. Well, clause 119(2) makes it clear that the parties can sign an authority requiring the agent to pay the money before the 10-day expiry, if there is mutual agreement. It is quite simple, quite logical. I do not think many people would disagree with it.

There were two other points. Mr Hayes lambasted my colleague Lynne Pillay in respect of the Justice and Electoral Committee, and said that people who had come from Masterton had had only 5 minutes before the committee. Mr Hayes has been on select committees for a few years now, and should know what happens—and I think Mr Finlayson, who was a member of the select committee, quite rightly made reference to this matter. I am advised that as there were a large number of submissions, the members of the committee agreed that where submitters were going to make exactly the same point over and over again, they would be taken as a group. That is not unprecedented in the life of this Parliament or of other Parliaments, and it even occurred under a National regime some years ago.

Similarly, having chaired a select committee myself, I agree—and I think most other members would agree—with the observation made by Mr Finlayson that where a committee receives hundreds of xeroxed submissions with different people’s names on them but saying exactly the same thing—either that one supports a proposition or that one is agin it—then hearing all those submitters is possibly not the most effective way to deal with the political process. Those submissions are noted, of course, but they are treated in a similar vein to a petition, which is very valuable but serves a different purpose in a different process. I think that where submitters come in simply to make a point that is going to be made over and over again, they should be grouped in order for the parliamentary process to be used in an efficient way. Maybe Opposition members of the committee would not say so publicly, but I suspect some of them appreciated Ms Pillay’s management of the situation.

The final point I want to make is that Mr Hayes waxed lyrical about the fact that he is in a professional relationship when he is doing a deal with a real estate agent, and does not need any protection at all.

💬 Hon David Parker: Waxed dissonant.

He waxed dissonant, says my legal colleague—I was going to say my learned friend, but he is a lawyer and I am not—about the fact that he was in a professional relationship with a real estate agent over a property, he did not need any protection, and all would go well. Other members have asked about caveat emptor; what about buyer beware? To heck with it if something goes wrong, and to hell with the fact that some people in our society, through no fault of their own, do not have the legal qualifications or the professional skill to deal with these commercial arrangements; the market will sort it out. The market will sort it out, Mr Hayes said.

💬 John Hayes: If the market can’t, the nanny State will.

I would just make this final observation to Mr Hayes. He railed against our having any protection for the poor folk who may actually be done over—and there are many examples of that happening. I bet that Mr Hayes would have a completely different attitude if he were on the receiving end, if he were being done over by an unethical person. I bet that Mr Hayes would stroll—I was going to say sprint—into the House and demand protection for consumers.

If he does not demand protection for consumers, what does he say to his constituents who come to him with exactly the same proposition, saying that they did not think they needed any protection, because they felt confident that all would go well? They will ask Mr Hayes, as their local MP, to help them, because they have been dealt to, and Mr Hayes will turn round and say: “Oh, it is nanny State to provide any protections for you lot—my constituents in Wairarapa. Ii is nanny State. Go and fix it yourselves. It is your fault; you messed up.” I wonder what his constituents would then say to him, or whether he could look them in the eye.

It is a sort of global cliché to say that having any protection for consumers amounts to having a nanny State. Well, if that is the case, we would not need a legal system, would we, I say to Mr Hayes. We would not need a legal system or a court system to protect people. We would not need a small claims tribunal, where people can take small issues—under a monetary limit—to have them sorted out, because that would be nanny State, would it not? I look forward to hearing what happens when Mr Hayes fronts up to his constituents. Well, he will be protected now, because we will have brought in this legislation, but I look forward to his telling us what he would do if he were in that situation. Even with his great academic prowess, his diplomatic career, and his experience, there is still a possibility that somebody in a professional relationship with him might act inappropriately.

The question was put that the amendments set out on Supplementary Order Paper 243 in the name of the Hon Clayton Cosgrove to Part 5 be agreed to.