Consumer Affairs Victoria – Protecting Estate Agents

OPINION
by Peter Mericka B.A., LL.B
Real Estate Consumer Advocate
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

Who do the estate agents of Victoria turn to when their lucrative monopoloy is threatened? None other than their monopoly maintenance partner, Consumer Affairs Victoria.

Consumer Affairs Victoria (CAV) has proven on many occasions that its relationship with the real estate industry is like that of “head of the family”. If estate agents misbehave as individuals, and thereby cause embarassment to the rest of the real estate “family”, CAV will step in and take them to task.

However, if the interests of the real estate “family” itself are threatened, then CAV will step in to face threat, and to ensure that the family’s interests are protected.

The latest example of CAV protecting the interests of real estate agents at the expense of consumers can be found in the interim report of the Estate Agents Council Licensing System Review 2006, available from CAV’s website.

It must be remembered that it is the role of CAV to know and understand the Estate Agents Act 1980. After all, CAV is supposed to be enforcing compliance.

So, wouldn’t you think that CAV would be aware that all lawyers in the State of Victoria who negotiate the sale and purchase of real estate on behalf of their clients are already estate agents according to the definition of “estate agent” at Section 4 of the Act?

Has it dawned on anyone at CAV or the Estate Agents Council that every time a lawyer is asked by a client to prepare a contract of sale on behalf of a client who is selling real estate to another person without the involvement of an estate agent, that the lawyer is performing the role of the estate agent as defined in Section 4? And that lawyers perform this role because it has always been the role of the lawyer?

But let’s assume for a moment that Section 4 of theEstate Agents Act1980 doesn’t exist, that lawyers never involve themselves in the negotiation of real estate sales or purchases, and that real estate cannot changed hands under any circumstances unless an estate agent is somehow involved.

Have a look at what CAV has to say about “One-Stop-Shops”interim report:

“One-stop-shops

• If lawyers, accountants or other relevant professionals were able to become licensed estate agents more easily than at present, they could set up one-stop-shops without involving proven estate agency specialists
• While this may appear attractive to customers, it may not be in their best interests as they may not get the best advice free of ‘conflicts of interest’.
• Estate agents would be at a disadvantage to lawyers and accountants as they would not be qualified to perform the legal aspects of a conveyance or provide financial advice as a financial service provider.”

“If lawyers, accountants or other relevant professionals were able to become licensed estate agents more easily than at present, they could set up one-stop-shops without involving proven estate agency specialists.”

Without telling us what it is that an “estate agency specialist” is or does, CAV suggests that there is something dangerous about not including one in a real estate transaction. What is CAV on about?

“While this may appear attractive to customers, it may not be in their best interests as they may not get the best advice free of ‘conflicts of interest’.”

This one tells us that consumers may like a one-stop-shop, and that CAV is concerned about “conflicts of interest”. But what is a conflict of interest? CAV isn’t very helpful here, but we can come up with some examples:

• Where an estate agent acting for a vendor arranges finance for the purchaser.
• Where the estate agent acting for the vendor inserts a gazumping clause into the contract when preparing the purchaser’s offer.
• Where estate agents “value” a vendor’s property, and then advise the vendor to drop the price in order to bring about a sale – and a commission.

Can CAV or its estate agent “family” come up with any examples as blatant as these? CAV allows this type of behaviour to flourish, apparently regarding it as normal estate agent behaviour.

“Estate agents would be at a disadvantage to lawyers and accountants as they would not be qualified to perform the legal aspects of a conveyance or provide financial advice as a financial service provider.”

Bingo! Now we’re getting closer to the truth. The estate agent’s monopoly would be broken by legally trained professionals who can provide a much broader service, at a higher standard, resulting in estate agents losing market share.

Why is CAV so concerned about estate agents being disadvantaged by those who can offer consumers more? Perhaps we need a better definition of “CONSUMER”.

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