We are about 6 weeks out from the Real Estate Agents Act 2008 coming into effect on November 17 2009. Most people would probably say that a replacement of the previous 1976 Act was long overdue and they would probably be right. But as is normal in New Zealand the question always needs asking, have they gone far enough or is this just a band aid for which the unscrupulous among the ‘old boys’ will find a loop hole to avoid the new standards?

Personally, as a business sales person, the new Act has very little day to day effect on me. A good thing now, as a partner in Switch Business, I can now be a Director even though I don’t hold a Real Estate Agents licence. I am a licenced real estate salesperson (even though I have never sold RE) but under the previous Act I was unable to be a Director unless I held at least AREINZ. I have enrolled a couple of times and pulled out of the 3 year course to get my AREINZ because it has absolutely nothing to do with business sales. (There is only 1 small section of the course that applies to business sales).

The other option was to fly to Australia and go through a short intensive course to obtain the Australian equivalent and then use this under the Trans-Tasman Mutual Recognition Act to obtain my AREINZ. (This will still be allowed under the new Act) But again this has nothing to do with business sales. A number of my colleagues in other business sales companies (myself included) will probably head to sunny Queensland in the coming months to complete the Australian course.

The stupidity of it though, when it applies to business sales is, that any RE company can set up a business sales division because they hold a Real Estate Agents licence. Where someone like me, and the colleagues I have previously mentioned, can’t, even though we have years of experience and 100’s of transactions behind us. In recent years several traditional real estate companies have entered our arena and have now seem to have exited and are concentrating on their knitting. They have realised that selling businesses is vastly different than selling properties. My business partner Paul attended the recent seminar introducing the new Act and asked whether there would be a possibility of a separate qualification for Business Sales and the answer was that the authority had bigger fish to fry.

There are some good things that are included in the new Act though. The most important is that an independent authority, Real Estate Agents Disciplinary Tribunal, will hear any future disputes arising from future RE transactions. This will hopefully give consumers confidence that if they have a dispute with a RE salesperson or a RE company, then it will be heard by an independent authority not the old boys’ network. The monetary penalties have also been increased up to $100,000.

Another interesting one is that agents will have to disclose to their clients any ‘kickbacks’ they might receive. This is highlighted best when RE companies take a fee for advertising up front off a client, place the adverts and then receive a discount from the newspaper/agency and they pocket the difference. Under the new Act this will have to be disclosed. To show the true nature of some in this industry one RE person present at the seminar Switch attended piped up saying that members should set up their own marketing companies which they can place between their RE companies and the newspaper/Agency and the kickback can come back to the marketing company, not the RE company thereby circumventing the new Act. This is not applicable to Switch because we only take a success fee and pay for any advertising and marketing ourselves. There is also a provision that any commissions received will have to be disclosed. We have been approached in the past by insurance brokers and finance brokers offering us a fee for any referral (this is quite common in the industry), however we have chosen not to deal with these people as we would prefer to refer purchasers to others based on their competence rather than any fee we would receive.

Well I hope I haven’t appeared to be too cynical but there is a lot of money being made in the domestic and commercial RE markets and there are some very well established companies who, in the main, operate ethically, but there are also deal makers who will continue to look for angles to circumvent the new regulations. The independent authority presiding over disputes is certainly the most positive aspect of the new Act. Anyway that is my two cents worth, see you next week.