KEY POINTS:
Rogue real estate agents will be booted out of the industry if a new organisation unveiled by Associate Justice Minister Clayton Cosgrove yesterday gets support.
Announcing a series of sweeping proposals, Mr Cosgrove said self-regulation was plainly inadequate and consumers needed more protection.
A new Real Estate Licensing
Authority is proposed to regulate the industry.
Real estate agents sell houses valued at about $35 billion every year.
"This is an industry that has forecast commissions this year of $1.2 billion ... You would have to say how greedy do some of these land sharks have to be to go and rip people off when they're pulling in that sort of money," Mr Cosgrove said.
The Real Estate Institute will be stripped of its disciplinary powers, which will be handed to the new licensing authority if the proposals are adopted.
Mr Cosgrove wants to remove the institute's compulsory membership, threatening the power base of the organisation that represents about 18,000 agents.
Those agents will instead be required to join the new licensing authority and be scrutinised by its panel, which will include former Consumers Institute chief David Russell.
The board will have wide investigative powers and the ability to impose penalties on agents and compensate house buyers or sellers who have lost money.
The board will strip rogue agents of their licences and establish a public register so people can find out which agents have broken the law.
Gone too will be the Real Estate Licensing Board, replaced by the authority to be headed by former Labour Party justice minister Bill Jeffries.
Submissions are being called for by July 10, but Mr Cosgrove said these changes were the Government's preferred options for reform of the sector.
He wants to introduce amendments to the Real Estate Agents Act 1976 this year and promised to raise education standards. Real estate salespeople and agents should undergo continuing education, the minister said.
The eligibility requirements for being licensed as an agent, salesperson or branch manager would also be changed.
Mr Cosgrove criticised the institute for its lack of action when, last December, he asked for big changes. The institute's proposals left control largely in its own hands and it failed to come up with a complaints structure that was independent, transparent or responsible to consumers, he said.
"I'm not punishing anyone. I think the community may be, but you have to assess the role of the Real Estate Institute. I gave them a shot at it. I said, 'Hey, why don't you have a go and see if you can save the taxpayers some money, and go and do it yourself and we will have a look at it and maybe we will endorse it if it's good enough,' like Sir John Anderson did with setting up the Banking Ombudsman."
Mr Cosgrove also criticised the institute for referring so few cases to the licensing board.
Most complaints instead went to a subcommittee, delegating action against one agent to fellow agents. The quality of investigations was poor, the process was dogged with delays and agents were banned from criticising other agents, he said.
"What is the price of not doing this?" Mr Cosgrove asked. "Because the overwhelming evidence from consumers is that they feel they do not get a good deal today.
"Many feel they have been ripped off by the small minority of sharks in the system, and they want to know when they go to a real estate agent to broker a deal to buy or sell the biggest asset they are likely to have in their life, that they will get a professional service, which they pay a fair bit now for. The question is whether they get a professional service for that.
"I don't think that the costs will be in the order of magnitude that will suddenly ramp up house prices, but I do believe that the industry should pay that, not the taxpayer."
National justice spokesman Simon Power said the present in-house complaints process was not good enough, but it was not clear if the cost of the proposed clean-up of the industry would be passed on to home buyers.
"With home owners already paying more for their mortgages under Labour, the last thing National wants to do is put the dream of home ownership further out of reach for Kiwi families.
"We will be looking closely at the fine detail of any proposed legislation because our number-one concern is the consumer."
