Estate Agent Referrals – Punishment and Corruption
OPINIONby Peter Mericka B.A., LL.B
Real Estate Consumer Advocate
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd
I have previously written about estate agents who refer clients to “pet” solicitors and conveyancers in return for payment, and the corrupting effect this has on the industry. An equally insidious form of client referral is the “punishment referral”. This is where the estate agent refers clients away from a lawyer or conveyancer as a form of punishment.
Two separate but related incidents involving two Ray White Real Estate agencies drew my attention to the preparedness of estate agents to punish non-compliant lawyers and conveyancers by interfering in the lawyer/client relationship and referring the clients away to a “pet” conveyancer.
The first involved estate agent Sid Jackson of Ray White Real Estate Hornsby, New South Wales. The second involved Matthew Hurlston of Ray White Real Estate in Carnegie, Victoria. In each case my role as consumer advocate and legal representative of the clients put me on a collision course with the estate agent. In each case, the estate agent took the opportunity to “refer” a potential client away from me, and to a preferred conveyancer as a warning that they will not tolerate non-compliance.
Because my client-base is not confined to my local area I do not rely on estate agent referrals, so the behaviour of these two estate agents was not of any major concern to me or to my firm. However, most lawyers and conveyancers rely heavily on a local client-base for their survival, to the extent that some will even offer gifts and other incentives in order to ingratiate themselves with local estate agents.
Punishment, by way of referring clients to competitors, can devastate the business of a sole practising lawyer or conveyancer. Consequently such a punishment, or the threat of such a punishment, can severely affect the ability of a lawyer or conveyancer to properly represent their client, particularly where the conduct of the estate agent may be in question.
I have known contract-switchers to attempt to refer clients away when their conduct has been questioned, and in one extreme case I was told by an estate agent, “If we lose this sale because of you we’ll make sure that none of our purchasers ever go near you.”
The following examples highlight, not only the preparedness of estate agents to bully lawyers and conveyancers, but also the trivial matters that can trigger such bullying.
Matthew Hurlston of Ray White Real Estate Carnegie
In my opinion Matthew Hurlston could be described as a technology luddite. After having been provided with a full Contract of Sale of Real Estate and Section 32 Vendor’s Statement by way of electronic PDF download, many weeks before the auction date, Hurlston telephoned my office to complain that he had not been provided with hard copies. Hurlston’s complaint was put through to me because the staff member who took his call wasn’t sure that he was serious.
When I spoke to Hurlston he complained that he did not want to be inconvenienced by having to print copies of the sale documents and bind them. According to Hurlston “every other lawyer and conveyancer binds the documents for us, and we don’t see why you should be any different”.
At first I thought the conversation was Hurlston’s way of winding up a lawyer on a Friday afternoon, just a stupid prank. But then he dropped a bombshell – he was serious!
I explained to Hurlston that we have done all we can to modernise the process of preparing sale documents, and we regard our procedures as the best available, whereby sale documents are formatted as PDF documents, sequentially numbered, and made available to the purchaser, the vendor, the estate agent, and anyone else who requires them quickly, easily and electronically.
This was not enough for Hurlston. He insisted that it is the role of the vendor’s lawyer to print the contracts, insert staples through them, and deliver them to the estate agent. (Perhaps on a red velvet cushion accompanied by a glass of champagne?)
I explained to Hurlston that his ridiculous request would not be met, and that he would simply have to delegate the role of document collator to one of his able staff.
Bombshell number 2 – Hurlston wanted to charge my firm for the cost of his time and effort in collating the documents. When I explained to Hurlston that this suggestion was as ridiculous has his first, Hurlston dropped bombshell number 3.
Bombshell number 3 – Hurlston would advise the vendor to terminate the services of my firm. But unfortunately for Hurlston his anger got the better of him, and he added something he really did not intend to add. “You’ve already lost one client, and I can see why you’re going to lose this one too.”
At first I did not believe Hurlston and, thinking that I had caught him out on a lie, I asked him who the other “lost” client was. It was at this point that Hurlston choked and spluttered and refused to divulge the name of the client we had supposedly lost. When I suggested to him that he was making up the story that we had “already lost one client” he became reluctant to discuss the matter further, and abruptly hung up.
Still stunned at the stupidity of the conversation, but puzzled by the suggestion that my firm could have lost a client whose identity we did not know, I thought about the day’s events and realised that Hurlston was referring to an elderly woman from Sydney who had attempted to engage our services through Ray White Real Estate Hornsby.
Sid Jackson of Ray White Real Estate Hornsby
When I received the telephone call from Sid Jackson it was clear that he wanted me to know from the outset that he was the man in control. His client required conveyancing for a property she was selling in Victoria, and had told Jackson to contact my office to arrange things.
According to Jackson, although the property was in Victoria, he was looking after everything and all correspondence relating to the matter was to be sent to his office and not to the client. Jackson’s pompous and overbearing manner rang alarm bells for me. Why was an estate agent in NSW “representing” a woman who was wanting to sell a property in Victoria? Why did he want all correspondence to be sent to him, rather than to the client?
I questioned Jackson about the transaction, and he explained that he was arranging the sale of the client’s property in Melbourne through estate agent David Silcock of Ray White Real Estate Carnegie. I expressed concern that an estate agent in NSW was purporting to represent a client whose property in Victoria was being sold through a Victorian estate agent, and I told Jackson that I would need to speak with the client personally. Jackson informed me that everything was “above board” and that the client was with him in the office. Jackson explained to me that the client was an elderly lady, and implied that she would be relying on him for assistance. He then passed the telephone to her.
I spoke to the lady and gained the impression that she was certainly being influenced by Jackson. I told her that I was concerned about Jackson’s involvement, and particularly his demand that all correspondence should be sent to him. I also told her that I was concerned about her paying a commission to Jackson, when she would probably be liable to pay another commission to Silcock of Ray White Real Estate Carnegie. I explained to her that I would like to speak to her without Jackson being present, and that perhaps she could call me later from home.
Jackson came back on the line, he told me that the lady had been “signed up” and that he would be sending the documentation through to Silcock shortly. I asked Jackson if he could send me a copy of the documentation to which the lady had been “signed up” and gave him my fax number. Jackson told me he would fax the documents through immediately. The documents did not arrive, but it was close to 5 p.m. so I decided to wait until the following morning.
When I rang Jackson the following morning he was at first apologetic, but then worked himself up into a state of extreme anger, saying “I’m getting the Law Institute onto you…you’ll be hearing from my lawyer…you’re trying to take my client from me and as far as I’m concerned you’re just shonky…” The call ended quite abruptly when Jackson slammed the phone down.
In a later email to Jackson I told him,
“I told you that I had genuine concerns that you were acting as some kind of self-appointed broker for the client, that you have intervened to prevent her from obtaining the legal advice she needs, and that you did not want to lose the opportunity to obtain payment for a “nothing service” by merely providing a referral to another Ray White estate agency in Victoria.“
Jackson responded with denials.
In a further email to Jackson I asked him about his receiving a commission:
“Please admit or deny that you will be receiving any form of reward, whether by way of commission, payment or gift from any person in relation to your role in the sale of the property in Victoria.“
Jackson’s response did not address the issue of commission or payment, but he did indicate that he was coy about discussing the matter:
“Any further emails from your company will be kindly put in the bin (sic). Do not send us any more emails, letters or phone call. We will only deal with people we want to talk to.”
Another Punishment Referral
On 24 September, 2008 Matthew Hurlston had written to my firm stating, “I have been instructed by your client…to submit the property for sale…” but the letter did not include the client’s contact details. When a member of my staff contacted Hurlston’s office she was informed that the client had been referred to another conveyancer.
I wrote Hurlston, who is also the Managing Director of Ray White Real Estate Carnegie, and put the following to him,
“It has come to my attention that your office has interfered in the solicitor/client relationship between our firm and our client by diverting a client of ours to a conveyancing business that could be described as “friendly” with your office.
I understand that your conduct in interfering with the solicitor/client relationship is related to a recent incident involving my having advised a potential client of your office that there we some irregularities in the way she had been referred to your office by another Ray White Real Estate agency in New South Wales.
I regard your diverting of clients to “friendly” conveyancers as not only corrupt and highly improper, but also detrimental to the integrity of the real estate profession in Victoria.“
Hurlston chose not to respond.
Conclusion
The real estate industry in Victoria has a sorry history of corruption, much of which is perpetuated by estate agents who refer clients to “pet” lawyers or conveyancers in return for kick-backs, or away from non-conforming lawyers or conveyancers as a form of punishment.
The carrot/stick control strategies used by estate agents to control those whose role it is to protect consumers must be addressed if the real estate industry is to shake off its corrupt image. It is time for the industry regulators to thoroughly investigate this issue.
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