No more hidden savings on house sales

Agencies throughout the country are preparing to comply with the Real Estate Agents Act 2008. Photo / Martin Sykes

Real estate agents will no longer be able to siphon off discounts related to selling a client's home when a new law governing their behaviour comes into effect in November.

Agencies throughout the country are preparing to comply with the Real Estate Agents Act 2008 from November 17, and part of that is how they will disclose to vendors the various discounts, rebates and commissions they receive from suppliers such as printers, sign-makers and advertisers, including the Herald.

Agents usually take out bulk business with such firms, but until now the deals have been secret and vendors are in the dark about whether discounts given to the agent are passed on to them.

In a Heraldhomes supplement on the new law in today's paper, Auckland barrister David Bigio says he believes the discounts will now need to be disclosed. He notes that while the law demands disclosure, it does not demand that the discounts be passed on, although common law principles would provide that they should be unless the agent has specific authority to keep them.

His interpretation of the disclosure rules is backed by the chairwoman of the new Real Estate Agents Authority, Kristy McDonald, QC.

She says the requirement to disclose discounts aims to promote transparency in the dealings between agents and clients in situations in which agents incur expenses for work undertaken for clients.

"Examples could include the agent getting a discount on the cost of advertising from a newspaper, or the agent receiving commission from a home-staging service for referring clients. In all cases, the agent will be required to attach a simple form to the agency agreement detailing any rebate, discount or commission received."

Some large real estate firms take a different view. The managing director of Bayleys Real Estate, Mike Bayley, says the disclosure section of the law is ambiguous and requires clarification, including a definition of "rebates, discounts or commissions".

His view is that the requirement relates only to the relationship between the agent and the vendor or purchaser, and not to third parties such as sign-makers or newspapers.

"Our interpretation is that sales consultants have to be impartial and transparent in their transactions with all parties and we support this. That's why, at Bayleys, our scale of charges is transparent right from the very first meeting with a client, and why all marketing costs are clearly set out when the sales consultants present their business plans to the vendor at the outset of any campaign."

Barfoot & Thompson director Peter Thompson says his firm is seeking clarification from the Real Estate Agents Authority on what exactly has to be disclosed.

He questions why his company, which pays its bills on time and might accordingly receive a discount, should be penalised for this when some in the industry are not good payers. If his firm receives a slightly different rate from that paid by other agencies, that is not relevant to consumers.

The new act was drafted by the former Labour Government after a series of cases in which rogue agents were accused of mishandling funds, giving poor contractual advice, misleading representations, conflicts of interest, misuse of information, and fraud. The REINZ was seen to be ineffectual.

Associate Justice Minister Nathan Guy says the Government believes the independent Real Estate Agents Authority, and the greater transparency and accountability demanded by the act, will boost consumer confidence in the real estate industry.

TIGHTER CODE

* A new more onerous Code of Professional Conduct and Client Care.
* The establishment of the independent Real Estate Agents Authority to oversee licensing, complaints, disciplinary and enforcement processes and provide information for consumers.
* Increase in the compensation available to the public to $100,000.