Editorial: Tougher estate agent rules help everyone

Opinion

The rules governing the way we buy and sell real estate are about to change for the better and, as many will rightly say, about time, too. For too long the real estate industry has lived with the reputation that it was far too soft on those of its members who transgressed and duped or deceived their customers.

The shortcomings of the existing regulatory system for real estate agents was epitomised by the story of Deb Leask which featured in the Herald three years ago. An agent tried to knock down the price of two units owned by Ms Leask to almost half their asking price to buy the properties himself.

The penalty was the maximum, a mere $750 imposed under the industry's self-regulation mechanism. It was a serious ethical breach punished with a sanction so light as to be scarcely noticeable for the offender and his company.

When confronted with such stories the industry traditionally made the right noises about the need to deal firmly with unethical practices. Unfortunately, its words were not matched by actions. Not even when former Associate Justice Minister Clayton Cosgrove put it on notice to come up with more realistic suggestions for self-regulation or face the consequences.

When the industry responded with suggestions for minimal changes, the Government of the day introduced the much more rigorous measures of the Real Estate Agents Act, which come into force on November 17. Not only does the act incorporate a clear code of conduct but it establishes a truly independent authority, headed by a Queen's Counsel, to deal fairly and firmly with complaints. It also increases the compensation limit to a respectable $100,000 and, importantly, creates a public register of agents where buyers and sellers will be able to check who has had disciplinary findings against them in the previous three years.

These measures should go a long way to restoring the public's confidence that they will at least get a fair hearing of their grievances. It was much to the industry's credit that leaders of the top real estate firms were generally positive in Saturday's HeraldHomes supplement on the new law and how it is expected to work.

The only hint of a discordant note was the suggestion that litigation is likely to increase with a system that is more formal than might have been expected under self-regulation. The result, as always, will be greater costs that will, ultimately, have to be passed on to the customer.

This could be an unfortunate outcome of the new law, and if so the industry should reflect that it might well have averted it if it had come up with a robust self-regulation system in response to the original demands for reform.

However, anxiety about soaring legal costs is probably misplaced. As the industry has always protested, the number of bad apples is relatively small. between 2004 and 2007 there were 507 complaints. If it seems a large number at first glance, it rapidly diminishes when compared against the tens of thousands of transactions completed every year.

Moreover, if the rest of the scheme works as intended - with higher standards and severe penalties for those who fall short - it is reasonable to expect that the problem children of the industry will lift their game or move on.

But even if costs in some individual cases do rise the changes still should be worthwhile. In the long run a clear standard of conduct rigorously enforced by an independent authority should, on balance, be good for the industry and all of the people who work in it. But more importantly, it should be good for their customers, too.