Land and Business (Sale and Conveyancing) (Beneficial Interest) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 29 March 2017.)

Mr WILLIAMS (MacKillop) (16:02): I am certainly not the lead speaker for the opposition, and I will not take too much of the house's time. The relevant sections of this measure impose significant restrictions on land agents and connections between land agents and/or representatives of a land agent in the sale of a parcel of land. I raised this issue at the time we first debated these measures, which are largely under section 24. There are a number of subsections, and I am particularly referring to 24G.

I want to reiterate to the house the problems that this creates for those conducting the business of land agents, or acting as land agents, in small regional communities. In my hometown of Millicent, which has a population of about 5,000 people, there are not a lot of land agents. On more than one occasion, I have been approached by one of the land agents, or one of the people working for a land agent in that community, because one of their employees or an associate—the definitions are quite wide here—has wanted to purchase a piece of land that has been listed by that agent and, all of a sudden, that has become almost impossible.

There was one case, in the early days of this part of the act being enacted, where one of the agents unwittingly fell foul of this and was deprived of the commission for selling a property because there was some connection between one of this particular woman's employees and the eventual purchaser. It was not a direct relationship. From memory, it went through almost a couple of steps, but the relationship was established. The agent applied to the commissioner for an exemption and that exemption was refused.

Again, in relatively small regional communities land agents are not listing hundreds of properties. Sometimes they might only have 10 or a dozen properties listed at any one time. Their opportunity to be a sustainable business is obviously dependent on their ability to turn those properties over at the earliest opportunity. When the marketplace is restricted, as it is with this particular part of the law, there is a restriction and a number of the potential interested parties are virtually cut out of the opportunity to make an offer on a property. This makes it much more difficult for such agents to run a sustainable business.

I understand that it was this minister who brought this matter to the attention of the house some years ago and had it implemented into our law. I accept that in the metropolitan area and in some country areas there may have been cases where vendors and/or purchasers required the protection that these measures bring, but the reality is that there are unintended consequences of this piece of legislation in small rural communities. I have experienced that, as have a number of my constituents.

I think the clear answer to this is that, where such people who come up against the provisions of the act that would prevent the market working openly and properly, they should have a very ready avenue to seek an exemption. Indeed, the commissioner or the person charged with the responsibility of being able to offer such exemptions should act in a very sympathetic way. I can only inform the house that that has not been my experience in the cases that have been brought to my attention.

The only contribution I want to make is that there are circumstances in small communities in regional South Australia where these restrictions on the activity of land agents, which I obviously accept are well intended, have unintended consequences that make life difficult for the agents, for their employers and for their associates, and limits the market for the vendor. I suspect that we have unintentionally created significant problems in some sectors of the real estate agents space.

I hope that the minister will take this on board, and he may come up with some solution that would not only satisfy his desire to make sure that the real estate market operates in an open and fair manner but also cater for those people operating in a relatively limited market space.

Ms HILDYARD (Reynell) (16:08): I rise today to support the passage of this Land and Business (Sale and Conveyancing) (Beneficial Interest) Amendment Bill 2017. This is an important bill as it increases protections for South Australians in the sale of their property. As members would know, across South Australia for many members of our community so often the family home is the only and almost always the most valuable asset that people own. It is literally the asset that South Australian families often put a lifetime of earnings into purchasing. It is crucial that we make every aspect of the sale of these assets both fair and transparent.

Section 24G of the Land and Business (Sale and Conveyancing) Act 1994 specifies that a real estate agent or sales representative cannot obtain a beneficial interest in land or a business without the approval of the Commissioner for Consumer Affairs. This section of the act was introduced in 2008 and was aimed at preventing the type of behaviour where agents would intentionally undervalue a property and then either purchase the property themselves or have an associate or family member buy the property for significantly less than its market value.

This type of behaviour is, of course, only engaged in by just a few; however, this type of behaviour is illegal and it is deeply unethical. People selling property must be able to rely on and believe that an agent is acting in their best interests and, with those best interests in mind, obtaining the maximum sale amount possible for their home or land. In some situations, not only does the vendor's associate receive a benefit by purchasing the property but the real estate agent also receives a commission.

The proposed amendments are designed to close the loopholes that currently exist by expanding the categories of associates and holding directors and managers of real estate agencies liable in certain circumstances. On this side of the house, we will always support increased consumer protections, protections that safeguard ordinary South Australians, and we will continue to improve our regulatory framework. As part of this improvement, parents, children, siblings and in-laws will all fall under the definition of a relative, and this will include step relations and half siblings.

In one scenario that we are aware of and that this legislation will address, a real estate agency sold a property to the stepson of one of its directors, creating a couple of issues. First, the director was not the listing agent or sales representative for that property, and, secondly, the relationship between a step-parent and stepchild is not currently captured by the definition of a relative and therefore there was no breach. However, under the new provisions, this transaction would constitute a breach of the act as the relationship between the stepfather and son would be captured and the stepfather would be captured in his capacity as a director.

Historical cases have suggested that it is often senior members of our community who are unfairly taken advantage of, particularly when they are also suffering from tragic illnesses such as dementia through which their capacity to effectively negotiate may be impaired. They may also be under pressure to sell, particularly as they are moving into an aged-care facility and are under time constraints. By introducing an aggravated offence for vendors aged 60 years or over, a clear message will be sent to the real estate industry that offences against these people will, rightly, be taken seriously.

Another instance of an agent receiving benefits at the expense of a vendor, which again will be fixed by this legislation, is one where an agent conducted the sale of a property for an elderly lady who, sadly, was suffering dementia and sold the property to his brother's company for $190,000. As the purchase was made in a company name, an associate relationship could not be established. The property was sold very shortly after by the same agent for $239,000 and commission was received.

In another case, the sons of an elderly woman, who was preparing to transition into a nursing home, approached a real estate agent to sell their mother's property. During the course of the sale, the vendor passed away and it was not until after this had happened and the sons had made inquiries that the agent disclosed that the purchaser of the property was actually the agent's brother-in-law. Of course, if the vendors were to start afresh with a new agent, considerable delays and expenses would have been involved. In this situation, although there was no significant financial detriment, the actions of the agent showed a lack of integrity. It is this type of behaviour that can severely undermine confidence within the real estate industry and, of course, the South Australian public.

I commend the Attorney for introducing these amendments. I am certain that these changes will increase consumer protection, particularly providing support for some of our more vulnerable community members, and instil confidence when a person or family takes that enormous step to seek to sell their most valuable asset.

Mr TARZIA (Hartley) (16:14): I rise today also to support the Land and Business (Sale and Conveyancing) (Beneficial Interest) Amendment Bill 2017 and indicate that I am the lead speaker for the opposition. The bill was introduced by the Attorney on 29 March this year and amends the Land and Business (Sale and Conveyancing) Act 1994. CBS and Commissioner Soulio claim that there are cases where various complaints have been received, especially, as we have heard, where there are people who have been unfairly taken advantage of in dealing with a real estate agent, a sales representative or an associate.

We on this side of the chamber are in favour of a free, transparent and open real estate market, of course. However, as we have seen, there are instances where, because of a few who choose to do the wrong thing and take advantage of the frail and the vulnerable, we need to ensure that certain consumer protection mechanisms are in place. That is what this bill aims to do. Currently, the act makes it an offence to receive a benefit from a land sale; that is, for example, a land agent arranges for his brother or someone to buy a property cheaper than its market value whilst presenting as the representative for the vendor.

The government has put forward claims that some cases have not been prosecuted because the offending party may be outside a strict definition of related person. In addition, the current penalties are not contemporaneous and are inadequate relative to penalties for second-hand car sales. The government considers that the time for prosecution, which is two years from the offending act, is also inadequate and should be extended.

The bill does the following: firstly, it provides for an extension of the definition of those who may be guilty of an offence, particularly extending to persons related to agency employees, associates of a corporate entity, directors of real estate agencies—otherwise known as vicariously liable—and also general managers and managers of individual real estate branches. Also, the definition of associate is extended to include a relative of an employee. I understand that the penalty for obtaining a beneficial interest in selling or obtaining a property, currently a $20,000 fine or imprisonment for one year, will increase to $50,000, which obviously is much more of a deterrent.

Additionally, there will be a new aggravated offence if the victim is over 60, under a guardianship order or suffering a mental incapacity, which at the moment has a fine of $100,000 or imprisonment for two years. It also creates offences for a body corporate, the same as the penalty imposed for the principal offence, unless the director could not exercise due diligence to prevent it. It will also extend the time to prosecute to up to five years from the date of the alleged offence or, with authorisation of the minister, this can be extended to seven years.

The government has conducted much consultation, as have we on this side of the chamber. A government briefing was held on 6 April this year by the commissioner and the Attorney-General's Department. The government has also informed us that it has consulted with REISA and Elders Real Estate, and both are supportive of the government's position. We have had comments made to us by the Australian Institute of Conveyancers, which is generally quite supportive but considers that the potential victim should be over the age of 70 to attract an aggravated penalty. I thought we might talk about that at this point.

I would say that at age 60, on average most people are clearly quite competent. They can still read and write without any issues whatsoever, and so to have an age of 60 under this provision is, I think, a little low. In fact, I would say that when the Attorney is 60 eventually, he will still be sharp as a tack without any doubt whatsoever.

Mr van Holst Pellekaan: Sharper than he is now, anyway.

Mr TARZIA: Much sharper than he is now—exactly. I would not have thought that we should presume that anyone over the age of 60 is incapable of being alert to this kind of exploitation. I think that the age of 60 should be raised to age 70. We consider that the age of 60 for this provision is far too low. The age of 60 still captures quite a significant portion of the market, most of whom would be more than capable of entering into a contract and understanding the kind of relationship that would exist between an agent and a purchaser.

We believe that 70 would be much more appropriate age for the purpose of this section. That, I am informed, is also the position of the Australian Institute of Conveyancers (SA Division). They have also had that view. I understand that the government is also looking to weed out dodgy managers following a flood of complaints to the state's consumer watchdog, Consumer and Business Services. Anything we can do to stop these dodgy operators operating, the better.

We will support the bill; however, we would like to move an amendment to increase the threshold for the aggravated offences of the victim's age from 60 to 70, but we will be supporting the bill with or without amendment. If that amendment is not successful in this house, we hope that the Attorney will give it due consideration between the houses. I commend the bill to the house.

The Hon. J.M. RANKINE (Wright) (16:21): I stand to support the Land and Business (Sale and Conveyancing) (Beneficial Interest) Amendment Bill 2017. The amendments in this bill are designed to increase consumer protection when a real estate agent is engaged by a vendor to sell a property. It was initiated in response to past incidents where people have been unfairly taken advantage of. I remember when someone near and dear to me was working in the fraud squad. There were dreadful examples of people being taken advantage of, and the time it took to bring those complex investigations to an end caused many older people dreadful trauma.

Under these proposed amendments, directors are held vicariously liable for the actions of their agency—so no more out there—and will also be taken to receive a beneficial interest even if they are not directly involved in the sale. The existing general defence in the act will provide for circumstances where the director took reasonable care to avoid the commission of the offence.

To protect older persons who may feel pressured by real estate agents into accepting offers and may be required to sell their home within a short time frame the bill classifies offences against individuals over 60 years of age suffering from a mental capacity or under guardianship as aggravated offences with higher penalties. The maximum penalty of $100,000 or imprisonment for two years signifies the gravity of these offences and is anticipated to serve as a deterrent to industry members. All other penalties have also been increased to ensure that they are proportionate to the offence in other similar legislation.

We can all imagine circumstances where someone needs to go into some sort of supported accommodation and there is a requirement to sell the home. Some very helpful real estate agent comes in and gives them a very low quote for their house and sells it to a relative or friend and they clearly gain some benefit. Other key changes include the expansion of existing associate categories to ensure that all individuals and corporate entities with an influence over the transactions are held accountable. Again, it is very important.

One major issue with the current provisions is that only the agent or sales representative who has listed the property and their associates can be classified as receiving a beneficial interest. This provides a somewhat easy avenue to circumvent section 24G because any other person, such as a director, manager or a sales representative, will not be connected to the transaction. The amendments ensure that directors and managers of individual real estate agencies and general managers responsible for overseeing multiple branches will have a level of responsibility in relation to both their own actions and the actions of their employees and associates. Without these amendments, it is very easy to play, 'See no evil, hear no evil, speak no evil.'

Employees of agents, sales representatives, directors and managers are considered associates, as are the employees' relatives. Siblings and stepchildren are now also classed as relatives, which will assist in situations where a person's spouse and their family members are involved in a transaction. In one example, the brother-in-law of a sole director of a real estate agency was not deemed to be an associate of the sales representative, the agency or the director's wife. It just does not pass the common-sense test.

As I am sure members can see, there are many instances where the community would undoubtedly say that there had been a conflict of interest but where the offenders have avoided liability due to a legal technicality. The government has the view that the period of time for a prosecution to be commenced must be increased due to the lengthy nature of these transactions. The standard time frame for a prosecution will be five years, or up to seven years in certain circumstances.

As I have said, these investigations can be very complex and very difficult. I am confident that this bill is a vast improvement on the current legislative regime and I commend its passage to the house.

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice Reform, Minister for Planning, Minister for Industrial Relations, Minister for Child Protection Reform, Minister for the Public Sector, Minister for Consumer and Business Services, Minister for the City of Adelaide) (16:26): What a refreshing debate this has been. I would like to thank everybody for their participation.

Mr van Holst Pellekaan: Because there was no debate.

The Hon. J.R. RAU: No, there was and it was pithy, it was to the point, it was—

The Hon. J.M. Rankine: One of the best from the opposition.

The Hon. J.R. RAU: —intelligent.

The Hon. J.M. Rankine: Succinct.

Mr van Holst Pellekaan: We get your point. We know exactly where you're going with this.

The DEPUTY SPEAKER: Order! It is only Wednesday and you are all being a bit silly.

The Hon. J.R. RAU: It was devoid of hyperbole. In fact, it was refreshing. Can I say to the member for Hartley—and I have often thought this, but he has reinforced this today—that he is an unrecognised and unrewarded contributor.

Mr van Holst Pellekaan: That's not true. He is highly recognised.

The Hon. J.R. RAU: Well, he should be recognised more because today he got to the point. We did not get a lecture about the big bang and then move forward in real time. We got right to the point, so well done. To be slightly more particular, because I do not want to blow him up too much: well done, member for Hartley. I do not want blow him up too much because it might appear in a pamphlet in six months' time.

There are two points here; the first is the point made by the member for MacKillop, and I agree with the point made by the member for MacKillop. He makes a very good point, that if you are dealing with a very small community where everybody knows everybody and, let's face it, by reason of marriage or something else everyone is often connected in some way or another, it is a legitimate point to say that there are going to be enormous circumstances in which there is going to be some connection between the person selling the land and the potential purchaser. I get that.

The answer to that is not to water down the requirement of disclosure, because that is important. The answer is to improve the ease with which the exemption can be sought and obtained. To that end, I would like to reassure the member for MacKillop that CBS is currently preparing a comprehensive package to support these reforms. It has already been reviewed and a streamlined approach to the exemptions is being incorporated in it. This will categorise the applications into low, medium and high risk using a point-based system.

CBS is also seeking to create an online digital place where these applications can be dealt with. Instead of having to go through a lengthy process or whatever, a land agent or their staff will be able to go online and make these applications online. That is the purpose of it. The CBS staff are also in consultation with REISA with a view to improving education by REISA of their members and staff so that this new system, which will not in any way take away from the reform, will minimise the adverse potential impact of the type that was described by the member for MacKillop. That is the first point. He makes a good point, but I think we understand that point and we are doing something about it.

The second point is the point made by the member for Hartley in his very succinct and compelling speech—that not everybody at the age of 60 is infirm. I have neither been to the mountaintop nor yet seen the promised land, but it is not that far away. It is another couple of decades for me—at least I hope that is the case. Maybe 'decades' is the wrong word. The point is that we have a federal constitution that states that judges of the High Court can be there until they are 70. Many people in the legal profession, as the member for Hartley would know, say that it should be 75 or something. I think that in some states Supreme Court judges are there until they are 73 or 75.

As I said, even though I have not been there personally, I am very taken by the propositions being advanced by the member for Hartley about people who turn 60 not automatically thereby being befuddled. That said, apparently there is a national scheme where the number around the country is 60. I am the last person to say that that is a good reason for us to pick 60 because I do not necessarily think that because it is in a national scheme it is necessarily right.

I am going to oppose it here with a big caveat around it that I want to look at it further. We only got it the other day, and I would need to be persuaded that there is some vast eternal plan that would be totally disrupted were we to change from 60 to another number because, frankly, I do not think everybody by reason of being 60 is necessarily befuddled or incapable. Of course, there are befuddled or incapable people over 60, as there are under 60, and I will not go back to the previous debate to identify people at 3 o'clock in noisy venues with mirror balls. Can I leave it at that. I know that that may not please everybody.

What got me was the compelling nature of the way in which the member for Hartley went right to the point. The member for Hartley has obviously studied what goes on in here very carefully and has seen what works and what does not work. He is obviously a keen learner, and he has worked out that if you go to the point and stick to the point, and you do not embroider it with hyperbole and vitriol but you just talk about what you have to talk about and then in a dignified manner resume your seat, the world is your oyster.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 3 passed.

Clause 4.

Mr TARZIA: I move:

Amendment No 1 [Chapman–1]—

Page 4, line 6 [clause 4(7), inserted subsection (10a)(a)]—Delete '60' and substitute '70'

Mr TARZIA: To reiterate, the current bill relates to protecting obviously vulnerable people from being exploited by unscrupulous land agents and it is quite distinguishable. We believe that we should surely not presume that anyone over the age 60 years should be presumed to be incapable of being alert to possible exploitation.

The Hon. J.R. RAU: Again, that is how it is done. Can I just correct the record briefly. I mentioned before about 'around the country'. I have been corrected and I want the record to show that I am acknowledging and correcting myself immediately. It is in other acts of the parliament here where it is an aggravated offence, for example, to assault somebody over that age and those sorts of things. I think that is a different context and I do not wish to add anything.

The CHAIR: You are being consistent.

The Hon. J.R. RAU: Yes. That is all we would be doing. Until I heard from the member for Hartley, I was completely in one camp, but he has dragged me in.

Amendment negatived; clause passed.

Remaining clauses (5 and 6) and title passed.

Bill reported without amendment.

Third Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice Reform, Minister for Planning, Minister for Industrial Relations, Minister for Child Protection Reform, Minister for the Public Sector, Minister for Consumer and Business Services, Minister for the City of Adelaide) (16:36): I move:

That the bill be now read a third time.

I thank everybody for the debate. This is how parliament should be done. This is good.

Bill read a third time and passed.