Tuesday, November 8, 2016

Regulated real estate agents

On the weekend, Fair Trading NSW released a list of recommendations to reform the real estate and property services industry. The Minister for Innovation and Better Regulation, Victor Dominello, has called it "the most significant review in 20 years" and said "the profile of the property sector has changed considerably over that period."

"Because only one thing counts in this life: Get them to sign on the line which is dotted."
Alec Baldwin as "Blake", Glengarry Glen Ross (1992)
It certainly has. In fact, even in the last five years, the change to the sector has been pronounced. More and more people are living in rented homes for longer, and - on current housing policy settings, at least - many of us can expect to rent for life.

So we might assume an Industry Reform Paper will have a strong focus on the relationship between real estate agents and tenants, right?

Well, no, actually.

The primary role for a real estate agent is to act in the interests of their client, and that's not you. It's your landlord. But agents do play a role in shaping landlords' expectations and experience of your housing, and this informs their instructions. This in turn affects your expectations, and how you experience your housing as a tenant. So the rules that apply to real estate agents do have an impact on you, in a round-about sort of a way.

And just as there's a growing number of tenants in New South Wales, there's also an increase in landlords and the services that cater to them. So let's take a quick look at the proposed reforms to see what use they might be...

There's a strong focus on licensing and qualifications, and continuing professional development for real estate agents. This would impact agents at all levels, regardless of the work they are engaged in. From the outset, a certificate of registration would require more training than is currently the case - from 4 "units of competency" to 7. Holders of such a certificate would not be able to enter into contracts or authorise trust account transactions, so would not be able to manage tenancies without the assistance of a more qualified supervisor. At the other end of the scale a new "licensee in charge" category would be established, under which all other agents within a real estate business would need to be supervised.

On this, the Reform Paper says:
[A] training review found that, although the Property, Stock and Business Agents Act clearly requires licensees in charge to properly supervise staff, in practise such supervision is often non-existent, and certificate holders frequently work with little or no supervision or support. The review found that the unsupervised activities of certificate holders pose a risk to consumers, and recommended that the education requirements for certificate holders be increased from 4 to 7 units. The review recommended that the extra units should focus on minimising risks to consumers and improving knowledge of and compliance with relevant laws.
Thus, there is potential for real estate agents to become better equipped with knowledge and understanding of tenants' rights. But the downside of that is that tenants' rights could, in many respects, be a whole lot better... so - it's good news, really, but we won't be getting too carried away about it. We'll use it to fuel our advocacy for stronger renting laws.

There's also some focus on greater accountability for real estate agents. This would include requirements to publish and update agency fee structures - good for landlords and home-buyers - as well as improved provisions about disclosing "material facts". This means telling potential buyers about quirks and quibbles with properties they have on their sales lists - such as whether there are any known health and safety risks, whether a property has been the scene of a violent crime within the last five years, or ravaged by fire or flood.

This would make it harder for the landlord of a newly acquired property to breach their obligation to a prospective tenant under the Residential Tenancies Act, not to "knowingly conceal a material fact" of a similar kind - although currently that obligation is not enforceable. We've been given some hope on this after the review of the Residential Tenancies Act recommended a sensible change to fix this, but we're yet to see it introduced... (we've got our fingers crossed that this and some other changes will be introduced sometime in the first half of next year).

Under the rubric of "conduct and accountability" is an interesting suggestion that developers who engage in property sales off-the-plan, but who are not required to be licensed real estate agents, could be regulated by reference to the number of properties they sell in a year. Such an approach could also be applied to self-managing landlords who could be exempt from consumer claims on the basis that, as housing investors, they are not "engaged in business or commerce" and are therefore not subject to consumer claims law beyond the Residential Tenancies Act.

Finally, the proposed reforms would allow Fair Trading to temporarily suspend a real estate agent's license or certificate of registration while an investigation against their conduct is underway. If this one gets through - and we hope it does - it would give each and every real estate agent in New South Wales pause to stop and think about their behaviour before doing something very silly. That's assuming Fair Trading makes full use of their powers, of course.

All in all, the proposed reforms look sensible and sound - as far as this sort of thing goes. We're happy to give them a polite nod on their way through, and we'll keep an eye on what comes of them.

No comments:

Post a Comment

Please keep your comments PC - that is, polite and civilised. Comments may be removed at the discretion of the blog administrator; no correspondence will be entered into. Comments that are abusive of individual persons, or are sexist, racist or otherwise offensive will be removed, so don’t bother leaving them.