Rudman's city: Real dilemma for selling agents

By BRIAN RUDMAN

With our lawyers planning to top up their incomes with Saturday morning open homes, the question arises, will this merging of the two trades raise the reputation of real-estate agents, or drag down that of lawyering?

For those who followed the winebox revelations it's at best a moot question.

Still, whatever the glass tower lawyers got up to, the reputation of your common garden variety neighbourhood solicitor has survived, relatively unscarred, until now.

He or she is still the independent adviser you go to when you need some expert, and hopefully unbiased, legal help on such things as wills and house sales.

But now, with more than 400 lawyers sinking their money into a chain of one-stop real estate shops, that special client-lawyer relationship seems at risk.

From Saturday, participating lawyers will become sales clerks, dangling before their clients cheap commissions and special deals on conveyancing, mortgages and various insurance policies.

We are told that lawyers involved will not receive commissions, that they will benefit only through any new conveyancing work that comes their way.

This seems untrue. In a recruitment letter dated June 6, 2000, from Martin Strong, chairman, Real Management, to "fellow practitioners" other financial benefits are outlined. It lists, for instance, the money to be made acting for a purchaser.

"The average payout to the lawyer during testing of the Real mortgage system pre-launch has been approximately $650. With property insurance the average commission to the lawyer is likely to be in the region of $200 ... and the figure could be much higher when contents and other insurance are also effected."

I don't know how much money each lawyer has to pay to join up but Mr Strong's letter suggests establishment costs have been huge. He talks, for example, of a "blitz-type" pre-launch advertising campaign costing $1.3 million and of subsequent campaigns later in the year.

On top of this comes the setup costs of 28 Real shops by July 1 and more a month later.

Auckland lawyers opposed to the scheme worry that such financial investment will lead to conflicts of interests for lawyers involved.

They are particularly upset that the Auckland District Law Society has, without reference to members, donated $20,000 towards Real's establishment costs and wished Real "success for the future of their operation."

Society president Hannah Sargisson told lawyers in a June 14 letter that an opinion had been sought from a QC and that the council had decided "there was no inherent conflict of interest facing Real lawyers."

Yesterday Mrs Sargisson issued a statement in response to my queries, saying only four letters criticising the donation had been received from a membership of 3200.

"Many members have expressed support." She did not elaborate on the conflict of interest issue.

Opponents say there are many potential areas of conflict. For example, what if the Real agent misrepresents the property your client was selling, forgetting, say, to mention the motorway planned over the back fence?

When the purchaser discovers this and pulls out, do you, as a Real lawyer, sue the Real agent on behalf of your client for fouling up?

Another concern involves non-legal areas like the selling price and length of settlement. Clients often seek advice on these matters.

Where will the real lawyer's loyalty lie. To the sale going through or to his or her client's best interest?

Even if the client's interests do remain paramount, how long will a nagging suspicion linger after the deal is sealed that perhaps more could have been done.

By going into business as estate agents, lawyers leave themselves open to same sort of potential conflicts of interest. They dream of the financial benefits of branching out - though is anyone making money in real estate these days? As to their professional reputations, and that of the neighbourhood law firm, well they've only got themselves to blame for what happens there.