Changes in real estate law take effect from 16th November 2009

Posted: 5 Jan 2009

The New Zealand Parliament’s passing of the new Real Estate Agents Act heralds the arrival of a new era in the industry as self regulation disappears. An independent Real Estate Agents Authority is to be established to oversee licensing, complaints, disciplinary and enforcement processes, and provide information to consumers.

In addition, a Real Estate Agents Disciplinary Tribunal will be formed to deal with serious disciplinary cases. The Tribunal will have the ability to impose fines, order the cancellation of licences and award compensation to consumers up to $100,000. At the “coal face” the Act introduces a wide range of mandatory compulsory disclosure requirements, e.g. disclosure to vendors of other rebates, discounts or commissions payable to the agent. Vendors will be granted a cooling off period for sole agency agreements and an automatic right to cancel residential sole agencies after 90 days. Prescribed wording may be introduced for agency agreements. There will also be a requirement to provide information to buyers and sellers prior to them entering into an agreement. Many of the Act’s “coal face” changes appear to be based on New South Wales legislation. The Authority will have extensive investigative powers and will be able to order a wide range of penalties and remedies. There will be no charge for consumers to lay a complaint. The Authority will investigate and filter out vexatious and frivolous complaints. Where a complaint is regarded as robust the Authority will refer it to the Tribunal and advocate on behalf of the consumer, at no charge, before the Real Estate Agents Authority.
The implications are far reaching for those in the industry who, under the present regime, see cost benefits in breaching the rules and the law, and/or who operate on the border of the law. At present enforcement procedures and penalties under self regulation are widely regarded as minimal. That will change significantly when the new legislation takes effect in November 2009. The ability for an aggrieved consumer to take a complaint to the Authority, and to be represented at no cost in the recovery of alleged losses, will remove the cost benefits of breaching and replace it with a high degree of accountability and monetary penalty. On the other hand, “Best Practice” agencies and sales staff have everything to gain and nothing to fear from the changes. Consumers are being offered strong protection from misconduct, misleading practice and incompetence of agents and unfair competition in the industry will sharply diminish. However, there are traps for the unwary and the uninformed. All sales staff, and management, will need to more fully understand the real estate transaction, the law, the nature of relationships with real estate consumers and the product they are marketing. They will also need to be competent in qualifying buyers and sellers to ensure that they do not transfer their legal exposure to the agent.
It would be sound risk management for those who have not pursued formal study beyond the Salespersons Certificate to enroll now in further real estate studies. There is time, for example to complete the National Certificate in Real Estate before the changes take effect in November 2009.
For more inforamtion speak with Graham Crews.