Real Estate Agents Bill

Thank you for allowing me to take a brief call on Part 6, the final part of the Real Estate Agents Bill. This part relates to the miscellaneous provisions. It includes the offence and penalty provisions, provisions regarding civil remedies, provisions for regulations to be made by the Governor-General, and some transitional provisions, such as those concerning the Real Estate Agents Fidelity Guarantee Fund, existing claims, and applications that are pending.

I will start by talking about the penalties regime. The penalties regime is interesting, in the sense of its relativity with that in other legislation. I think, sadly, it indicates that there has been a bit of a personal vendetta against the real estate industry. If we look at the penalties in this legislation and compare them with those in other legislation, we see that there is not a lot of relativity. I refer, for example, to the penalty for failure to notify the registrar of a change of circumstances. Under this bill the penalty for an individual is $25,000 and for a company it is $50,000. That is just for changing one’s address and not notifying the registrar in time. It could be a mere administrative slip, which, of course, New Zealand First knows about. But the fine under the bill for that is $25,000, which I say does seem to be a bit excessive.

That is not to demean whatsoever the importance of making sure that changes of circumstances are notified. But under the bill the penalty is $25,000. If we compare that situation with, for example, the penalty for failure to notify the registrar of a change of circumstances under the Motor Vehicle Sales Act 2003, we find that the fine in that Act is only $2,000. There is a big difference between $2,000 and $25,000. Yes, one piece of legislation relates to selling cars and the other to selling property, and they have different Ministers in charge of them. Perhaps we should also go to the Plumbers, Gasfitters, and Drainlayers Act, which is a recent Act. The fine for failure to notify the registrar of a change of circumstances under that Act is $500, as opposed to $25,000 under this bill. The fine provided for in the Immigration Advisers Licensing Act is more in keeping with that in this bill; it is $10,000 for failure to notify the registrar of a change of circumstances. But, again, that is significantly less than the penalty provided for in this bill.

There is a penalty for failure to provide information, and again I will look at that from the point of view of relativity. Under this bill the fine is $25,000 for an individual and $50,000 for a company. If one compares that again with a similar offence under the Motor Vehicle Sales Act 2003, one finds that the fine for failing to provide information under that Act is $2,000—not $25,000 for an individual, as it is under this bill. In the Plumbers, Gasfitters, and Drainlayers Act, and also in the Immigration Advisers Licensing Act, by way of comparison, the penalties under both Acts are $10,000 for the same offence, which is still significantly less than the $25,000 fine or penalty that is proposed to be imposed under this bill.

There are also offences set out in the bill that are not comparable with offences in the other Acts that I have used for the purpose of comparison. The failure to provide an approved guide again carries a fine of $25,000 for an individual and of $50,000 for a company. The fine for failure to provide a copy of a contractual document is, again, $25,000 for an individual and $50,000 for a company.

I really would be interested in the Minister in the chair, the Hon Clayton Cosgrove, taking a call—although I am not particularly optimistic about that—and telling us how he has calculated and assessed the quantum of penalty for offences that, in some situations, can be just the result of a mere administrative oversight. I would also like the Minister to take a call even just to answer one question, which I have asked three times so far today. It is a very simple question: does the definition of residential property include, or does it not include, lifestyle properties? I will ask it again, because I really would like to receive an answer to it. Although I did say this would be a short call, I have got carried away, obviously, in relation to the penalties.

I turn to the provision in Part 6 relating to the winding up of the Real Estate Agents Fidelity Guarantee Fund. We questioned the submitters on whether it should be wound up, and most of the submitters mentioned for a start that the two claims in recent history on the fund have related to property management, and not to real estate agency work itself. If one looks at the purpose of a fidelity fund, one sees it is a fund of last resort, so one first has to go through the courts. The fund is available in relation to theft, of course, and the ability of real estate agents to misappropriate money is possibly limited to the extent that they hold the deposit—this is normally monitored by both the vendor’s solicitor and the purchaser’s solicitor—during the conditional period of a contract, until it becomes confirmed as unconditional, and thereafter, perhaps, for the statutory period of 10 days, which was mentioned by previous speakers, unless, of course, that 10 days has been waived, which quite rightly can be done by agreement. The opportunity for an agent to actually misappropriate the funds is quite limited, so from that rationale it is possibly sensible to wind up the fidelity guarantee fund.

But from the point of view of property management, for which the claims have been made against the fund, it does not make the same sense, because sometimes the funds are being held for overseas owners of property who might perhaps not check their accounts more than once a year, when they have to do their tax returns. So property managers have more scope than real estate agents to misappropriate the money of clients. None the less, Part 6 does provide for the winding up of that fidelity fund.

There are other transitional provisions, as well, that cover things where there are pending disciplinary proceedings, and that cover the effect of agency agreements that have been entered into before the new legislation comes into effect. The law that is applicable to them is the old 1976 Real Estate Agents Act. That provision had to be inserted in the bill at the behest of the Justice and Electoral Committee, because it had not been thought of by the Minister. And there are other miscellaneous provisions in Part 6.

I think Part 6 is generally fairly uncontentious, except for the quantum of the penalties, which seems to be somewhat high. One does have to wonder about the motivation behind setting such a high penalty for what is, in some cases, purely and merely an administrative oversight.

💬 Nathan Guy: Another tax?

It could indeed be another tax, but it is just another way of taking a personal vendetta against real estate agents and the real estate industry. The offences for which a real estate agent could be fined $25,000 or $50,000 are such that the circumstances would rarely affect the integrity of a transaction or actually have much of a detrimental effect on clients. In terms of relativity, certainly, we have concerns about the quantum of those penalties. I think, Mr Chair, that I will probably leave my discussion of Part 6 at that.

I want to make a few brief points about Part 6. I endorse what Kate Wilkinson has said, and I certainly do not intend to repeat her comments about the strange level of the fines for some offences that simply do not seem to warrant it. During the select committee stage she undertook a very careful comparative analysis with other regulatory legislation. As she said, under the plumbers and gasfitters legislation a fine might be $500, but under this legislation it is $10,000. So it is out of kilter, and it would be good if the Minister in the chair, the Hon Clayton Cosgrove, would take a call. If he does not want to talk about the generality of the legislation, I ask him to just take a look at clause 150, which deals with offences that will be committed if one fails to notify a change of circumstances.

What is a change of circumstances? Well, if one refers to what is still clause 66, we see that one has an obligation to notify the registrar of any change of circumstances, and that will mean, as subclause (2) states: “(a) any change in the information recorded in the register; and (b) any change in the real estate business for which the agent, branch manager, or salesperson works (if any); and (c) any change that may be prescribed.”

If one looks at the purpose of the register, set out in clause 63, one sees that, again, it really is a consumer protection mechanism to enable the public to determine, for example, whether a person is a licensed agent or a branch manager, and how to contact that person. So in the overall scheme of things it is pretty low-level regulation. So it does seem rather strange that clause 150(2) has these penalties, up to $10,000 in the case of an individual or $50,000 in the case of a company. I could go through each of the offences provisions in some detail, but I think Kate Wilkinson’s excellent overview should suffice, and my particular reference to clause 150 enables the Minister to come to grips with it if he chooses to.

The second point I want to make concerns the insertion of new Subpart 2A in Part 6, which makes it clear that the civil remedies a person may have against an agent, branch manager, or salesperson are not affected by the passage of the legislation. This bill, as we have said, is consumer protection legislation. Although there are compensation provisions, it is primarily a disciplinary matter if there is misconduct of any sort, but civil remedies are preserved, and they will include claims against an agent under the Fair Trading Act, or for breach of contract or negligence if we have concurrent liability in this country now, and we probably have.

The third point I make concerns the regulations. We have not yet had an answer from the Minister to the points Dr Worth raised in relation to clause 155(aa), and 155(2) and (3), and I hope that before the Committee stage draws to a close we will be able to hear from the Minister on those points, because the whole regulation-making power of the bill is important and needs a response from him.

I would just observe in passing—and it is in the category of a minor slip—that although there are references to subclauses (2) and (3), in clause 155, there is no subclause (1), so that may need to be tidied up. The major changes that were made to the regulation-making power dealt with moving into clause 155 the provisions relating to exemptions that were formerly contained in clauses 12 and 13. There is still the rather strange reference in clause 11 to exemptions that may be granted under regulations; as I said, some inquiries were made and it seemed to relate only to a very few agents in the central North Island.

What are the other changes contained in the regulations? The regulations relating to audit have been tidied up. More detail is provided about the content of regulations regarding an audit. There are better regulations relating to the prescription of offences, so we have an amendment to clause 155(k), which sets the maximum penalty for any offence at, in the case of an individual, an amount not exceeding $25,000, or, in the case of a company, not exceeding $50,000.

Then there is a change relating to compensation. One sees that clause 155(m), which has been deleted, stated that regulations could prescribe the maximum amount of compensation payable under section 107. We had a useful discussion about that, and indeed we sought the advice of the Regulations Review Committee on the appropriateness of allowing such a matter to be set by regulation. Dr Worth and his committee reported to us, as a result of which we have acted on their recommendation, and the maximum compensation the tribunal can award is contained in the bill itself.

So there are a couple of inconsistencies in the regulations, which the Minister may care to address. As Ms Wilkinson said, much of Part 6 is unexceptional and is in fact quite sensible, but there are the issues we have raised, and it would be good if the Minister would condescend to provide us with an answer.

I rise to make one point, and it concerns the point Ms Wilkinson made about residential property. She will know that clause 4 states: “ ‘residential property’ means any property used, or intended to be used, exclusively or principally for residential purposes”. Of course, it depends on the principal use. In case she is thinking of concocting some fear amongst the owners of lifestyle blocks in my wonderful electorate of Waimakariri, I just say that the only impact of whether their properties are deemed to be commercial or residential is that if they are commercial, the agent of which those people are a client does not have to provide them with a guide as to their rights and responsibilities and bits and pieces, and the maximum 90-day provision does not apply. Just in case Ms Wilkinson is thinking of banging out a press statement and frightening all the lifestyle blockers in Swannanoa, where she lives, and in other places, I say to her that there is no material effect on them, at all. If their property is deemed to be commercial, they are dealt with in the same way, effectively, that they are dealt with now. If their properties are deemed to be residential, then they sign up for 90 days, and they are protected because they have the option of pulling the pin on the sole-agency agreement. Also, the agent must provide them with a guide in respect of their rights and responsibilities.

Just in case any scaremongering was about to happen—as the member is wont to do from time to time in my patch—those comments should allay her fears.

The question was put that the following amendment in the name of the Hon Peter Dunne to clause 155 be agreed to:

to omit clause 155(a).