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Bill's Law - Estate agents - 5 Apr

Overhaul of real estate law

The government has announced an overhaul of the law governing real estate agents because of a lack of accountability and transparency within the industry and the need for an independent complaints system to protect consumers.

What are some of the problems in the industry?

One of the main problems is the fact that complaints about real estate agents are handled "in-house" by the Real Estate Agents Institute.
Both the public and real estate agents have problems with the current "in house" approach to handling consumer complaints and the Government feels its time that consumers had a better deal.

What are the problems with the current system?

Problems with the current "in-house" complaints system include:-
1. lack of information available to consumers on the complaints process
2. consumers aren't kept informed of progress of their complaints;
3. unnecessary time delays;
4. low penalties imposed on offending agents;
5. lack of compensation for consumers;
6. perception that the system is "stitched up" by the industry.

In 2004 the Real Estate Institute received 132 complaints which were all dealt with "in house".
None were referred to the Real Estate Agents' Licensing Board which has the power to fine real estate agents and even exclude them from the industry.

What are the options for improving things within the industry?

Three possibilities are:-
1. Total regulation and control by government; or
2. An independent complaints scheme (eg. Banking Ombudsman);
3. Industry self-regulation (ie. the status quo)

The Government has said that last option isn't on as far as consumers are concerned as the current system is perceived as more a form of industry protectionism rather than consumer protection.
Industry will work hard not to have government take full control of the process so option 1 is also unlikely to proceed.
What we will probably see is a complaints system that develops along the line of the Banking Ombudsman and the Electricity and Gas Complaint Commission. These schemes are funded by industry but comprise an independent complaints body, governed by a board made up of both consumer and industry representatives.
The Telecommunications industry is currently putting together such a scheme in response to the governments call for better consumer protection and the threat of regulation if nothing is done.

How could an industry funded scheme protect consumers?

Ideally there would be a code of best practice agreed between consumer representatives and the Real Estate industry against which consumer complaints could be determined.
Real estate agents would be encouraged to have their own internal complaints process but they would also be required to publicise the independent scheme and tell consumers that if they are unhappy with the internal complaints process, they can take the complaint to the independent scheme.
This Real Estate "ombudsman" would then investigate the complaint and try and get the parties to agree on a settlement. Where agreement isn't possible, the "ombudsman" would have the power to make a binding decision on the real estate agent. The scheme should be at no cost to the consumer and could be funded from the interest earned on Real Estate agents trust accounts.

What are some of the other areas that the review will look at?

A: Whether compulsory membership of the Real Estate Institute of New Zealand (REINZ) should continue;
B: The effectiveness of the current licensing regime including entry and annual licensing requirements;
C: The effectiveness of the current discipline and regulation of real estate activity.