KEY POINTS:
Consumer New Zealand has thrown its weight behind a proposal that interest accrued on real estate agency trust-accounts should help fund a new complaints system.
The money, as well as funding a new disciplinary body for real estate agents, could also be used to provide education for agents
and for would-be homebuyers, Consumer told Parliament's justice and electoral select committee yesterday.
MPs are considering reforming the Real Estate Agents Act, laws dating back to 1976 which govern many property transactions. More than 800 submissions have been made on the bill - many from real estate agents - meaning MPs have had to work overtime to hear from all parties.
Wellington's Whitireia Community Law Centre has already proposed that interest on the millions in real estate agents' trust accounts should be used to fund consumer services.
Yesterday Consumer enthusiastically supported the Law Centre's suggestion, and backed the new legislation as a whole.
"For too long consumers have had to accept a poor service from real estate agents and operators. The legislation will level the playing field and allow consumers to take action if they have been poorly treated," Consumer chief executive Sue Chetwin said.
Concern about the security of trust accounts was raised by many people - including several real estate agents otherwise opposed to the bill - who made submissions to the committee.
Several people raised the example of the collapse of businesses connected to investment company Blue Chip to support tighter regulation.
Consumer said the foundering of Blue Chip might have been averted or picked up much earlier if residential property managers were subject to the same trust account auditing rules as real estate agents, and called for that law change to be made.
"While property managers do pose less risk to consumers than other real estate services, it seems sensible when there is a major redrafting of the law to include them."
HOW IT COULD WORK
* Whitireia Community Law Centre estimates there are 2000 real estate firm trust accounts, which hold around $100 million at any one time. It says banks effectively benefit from the interest on funds for which they do not pay.
* If invested at a 90 day bill rate of 7.5 per cent, the money would net banks over $7.5 million a year.
* The centre proposed 40 per cent of that interest payment could be returned to the banks for transaction costs, which would leave more than $4 million to fund licensing of agents, a new disciplinary process and other services.
