STATUTES AMENDMENT (REAL ESTATE REFORM REVIEW AND OTHER MATTERS) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 30 April 2013.)

The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for the Status of Women, Minister for State/Local Government Relations) (15:34): I thank honourable members for their most important contributions. The buying of property is obviously the biggest financial investment most people will ever make. It is important that the legislation supporting the protection of consumers in their dealings with the land agent is robust and effective so that both vendors and purchasers are confident that their transactions are handled professionally and ethically. It is also important that land agents are able to conduct their businesses with as much flexibility and the least amount of red tape as possible without compromising that level of consumer protection. It is that balance that is so important, and the government consulted extensively with industry and members of the public to make sure we get the balance right.

The proposals in this bill will accomplish three principal objectives: strengthen the rights of consumers; increase the level of transparency, particularly in auctions; and reduce the administrative burden on real estate agents, auctioneers and sales representatives. I am disturbed that the opposition seems hell-bent on opposing the government's reforms designed to stamp out underquoting. These are important provisions which will allow a purchaser to go to an auction and have a reasonable expectation of what the vendor is willing to accept.

There will be many fewer instances where a purchaser has outlaid money on, for example, a building inspection report, goes to an auction and then finds that the property is sold or passed in at a price well above what is advertised. These reforms are real protection for the consumer and I am amazed that the opposition would rather kowtow to the couple of rogue elements of the real estate industry than support the government in delivering meaningful reform and protections.

The Hon. Terry Stephens asked me to inform him how many agents have been prosecuted over the last few years. The government has already provided the opposition with detailed information on complaints received and enforcement actions taken, but I will go through that again for the benefit of the honourable member. The answer, as the honourable member knows all too well, is zero and that is exactly why this bill is needed.

Underquoting is not defined in the legislation and technically only occurs when an agent advertises a property at less than the prescribed minimum advertising price. This is a very rare occurrence because it is easily picked up by Consumer and Business Services officers in an audit of sale files, but the legislation makes it difficult for CBS to do anything about other cases of underquoting such as collusion between the agent and a vendor, setting the reserve well in excess of what is in the sales agency agreement and agents engaged in the 'quote low, watch it go' scenario.

This is due to the following factors: the enormous difficulties in proving that an agent's estimate is genuine; the ease with which an agent can cite external factors, such as buoyancy of the market, uniqueness of property, number of bidders, etc.; the ease with which the agent can selectively manipulate the RP data to justify their estimate; the likelihood of collusion between the agent and the vendor; and the vendor's unwillingness to cooperate in an investigation due to their pleasure at the eventual price received; and, of course, the right of the vendor to change their reserve price at any time during the auction process.

This bill will put an end to all of that. If the industry is prepared to accept this bill—and it is—then so should the opposition. It makes no sense for the opposition to offer less protection to consumers than the industry itself is prepared to give, so I commend this bill to the Legislative Council.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. T.J. STEPHENS: I have a question for the minister but, first, thank you for the information that you gave us about attempted prosecutions. I would like to know how many complaints OCBA has had in the past 12 months? I ask the question because I have been here for 11 years and I interact with a lot of people. I have canvassed my side of the chamber—I am not talking about the Greens—and we have never had a complaint about anything to do with real estate. I am wondering how many other members in the council have had complaints.

The Attorney-General heads off on his little crusades against the real estate industry but I am interested because I have never really had anybody say to me that the system is wrong or the system is bad and is not working. A lot of transactions happen and I am wondering if the minister can tell me how many complaints OCBA have had and have had to follow through.

The Hon. G.E. GAGO: I have been advised that during the last five years CBS has received a total of 572 complaints relating to real estate agents and salespersons.

The Hon. T.J. STEPHENS: How many of those complaints have had anything to do with the changes that you want to make this legislation?

The Hon. G.E. GAGO: I have been advised that there were 43 that pertained to or related to allegations of under quoting.

The Hon. T.J. STEPHENS: So you have had 43 complaints but how many of them have been verified as being correct?

The Hon. G.E. GAGO: I have been advised that, as I indicated in the second reading summary speech, CBS was not able to prosecute any of those 43 for the reasons that I have outlined. I am not too sure what question the Hon. Terry Stephens has asked. They were investigated but, as I have indicated in my second reading reply, no prosecutions and final proof was able to be determined because of things like the enormous difficulties in proving that an agent's estimate was genuine, the ease with which an agent can cite external factors, the ease with which an agent can selectively manipulate data, the likelihood of collusion between the agent and the vendor, and the right of the vendor to change the reserve price at any time. These are impediments, if you like, in the system that currently enable us to prosecute under the current provisions.

The Hon. T.J. STEPHENS: Minister, you are saying there are about eight complaints a year (and you cannot verify whether they are correct or not) and, again, we have a go at the real estate agents and try to make out that they are all crooks and they are doing a terrible job. How many real estate transactions did we have over that particular period? What are we actually trying to fix and why are we heading down this path? There is always a vendor, there is always a buyer who try to meet in the middle somewhere. Why does the government seem to constantly make it more difficult?

You made the point, in your summary, that you could not understand why the Liberal Party was taking this approach because, supposedly, the real estate industry is happy to fall into line. I can tell you that our position was formed in consultation with the real estate industry. They may well feel like they have been bullied into submission, but just at this particular point in time I am not sure that the Liberal Party feels like it should be bullied into submission.

The Hon. G.E. GAGO: I just do not know where the Hon. Terry Stephens has been. I find it incredible; as an ordinary member of the public I know the sorts of challenges that my friends and family express around these sorts of issues when they are out in the real estate marketplace. I do not know which rock the Hon. Terry Stephens lives under.

Members interjecting:

The Hon. G.E. GAGO: I have just outlined the reason. We have 572 complaints, 43 of which relate to underquoting. We know that many members of the public do not bother to make complaints because they know that agents can and do operate in these ways; they do not bother to complain. It is just incredible. The real estate industry itself accepts these changes; it has even indicated general support for these changes. I cannot believe that the opposition is opposed to these really simple, basic protections for consumers.

The Hon. D.G.E. HOOD: I have not made a second reading contribution to this particular bill, and I want to put Family First's position on the record. Family First supports the legislation. We are concerned that the issues raised by the Hon. Mr Stephens are valid, and I think it is probably fair to say that, like every industry, the real estate industry has an overwhelming majority of people who do the right thing and a very small minority of people who do the wrong thing. I think that is true in all professions, perhaps even including politics.

I would like to say that we have had extensive consultations with Greg Troughton, the chief executive officer of the Real Estate Institute, who I find a very friendly and easy to deal with type of person. He has indicated to me, on behalf of REISA, if I can put it that way, that they are supportive of this legislation. In fact, he was quite unequivocal to me in that he said he had been dealing with this for four, nearly five, years and would just like to see it go through.

There are some issues with this bill, there is no doubt about that, and there are amendments to deal with those, so we look forward to those being debated and, ideally, passed. However, I am aware that the single price statement by an agent has caused much consternation in the real estate profession. The concern is that, despite providing comparative sales, the single price, rather than the traditional 10 per cent range previously permitted, may be seen by vendors as a firm valuation of the price a property will fetch. For all those vendors—and perhaps even the courts, should it get that far in a dispute—who may interpret that single price as such, a firm valuation, I will say this to make it clear: it is the marketplace that will determine the price achieved. The agent is providing an appraisal only, and it is not an evaluation in any way, shape or form.

Importantly, and I understand that this issue is unequivocally supported by the Real Estate Institute of South Australia—indeed, they have told me that it is—and the real estate profession at large, the requirement for this single price is included in the bill to assist Consumer and Business Services to regulate the industry; in particular, to prevent the insidious practice of underquoting. We support that position, but I want to re-emphasise that this single figure, which has caused quite a lot of debate between the government, the opposition, Family First and the other minors and Independents, is a contentious issue. I do not think it is reasonable to expect real estate agents to be able to put a single figure on any property; they vary so much, and it depends on the market situation that may prevail at a given time.

I want to state firmly, for the record, that it should not be taken by any later body adjudicating this bill to be deemed as a valuation but rather an estimation. Having said all that, Family First will support this bill. It has the strong support of REISA, as I said, and I look forward to the ensuing debate.

The Hon. J.A. DARLEY: I have a question of the minister: is it true that the information agents use concerning comparable sales originates from RP data, which is not comprehensive—and in some cases quite misleading—and originates from the government itself? Secondly, is it true that CBS officers are not qualified to interpret this data in the first place?

The Hon. G.E. GAGO: I am advised, in relation to the first part of the question, that, yes, agents do use RP data, but all we want is for agents to provide a reasonable guide for how they came to their estimate. In relation to the second question about officers not qualified to interpret data, I am not sure what is the underlying concern for the honourable member because they do not need to be. I am not too sure why he believes that to be an issue.

The Hon. T.J. STEPHENS: With regard to the Hon. Dennis Hood's comments about the real estate industry being supportive of the bill, the real estate industry I understand is very comfortable with a number of aspects of the bill, but a number of real estate agents have enormous concerns about the things we have talked about. For the statement to be made that the Real Estate Institute and industry are quite comfortable with the bill is a long way from the truth.

I thank the number of real estate agents who have spoken to me about this and put their thoughts to me. I read out a letter from Steve von der Borch, a very competent auctioneer, and I know that the Society of Auctioneers is very disappointed with this. I did not think it is a lay down misere that the industry is very comfortable with this at all. We do know that the minister has said that if there are any changes he will pull the bill. There are a number of things in this bill with which the real estate industry are quite comfortable. If the Attorney-General does not get his way, it is the highway. This is why we are being pressured into proceeding.

The Hon. G.E. GAGO: I want to respond very briefly to the Hon. Terry Stephens and the sort of rationale he is trying to give to kowtow to those few in the industry who do the wrong thing. I agree with the Hon. Dennis Hood that it is not the bulk of the industry. The bulk of the industry does the right thing and operates with a great deal of integrity. However, there are those who do not, and this bill is about preventing those rogue operators doing over consumers—doing the wrong thing.

I am surprised at the honourable member's concern about the 43 complaints. Is he not prepared to do something about those 43 complaints? I find it absolutely outrageous that the opposition has taken this position. Not even the real estate industry itself supports the opposition's position. The Real Estate Institute is the peak body that represents the vast majority of the real estate industry—and we accept that these bodies are never able to achieve unanimous decisions. We are not saying it is unanimous because there are always dissidents. Nevertheless, it is the peak body and a high level body. It has a high level of membership, it consults extremely well—so, all its processes internally are at a high level—and it is supporting this bill. It is accepting this bill as it stands.

There are about 20 provisions in the bill, of which the real estate industry supports about 15, so there are five provisions that the real estate industry has indicated some concern with. We have been in intense negotiations with them but, nevertheless, the real estate industry has accepted the overall bill as it stands. The Hon. Terry Stephens can try to twist and distort this in as many ways as he likes but that is how it stands. There are people out there doing the wrong thing and this provides simple protection to consumers.

The Hon. T.A. FRANKS: Similarly to the words of Family First previously and, as the Greens did not give a second reading speech, I want to briefly indicate that we are generally supportive of this bill. We are also cognisant of the words of Greg Troughton, CEO of the Real Estate Institute, on 10 April on talkback radio FIVEaa when he said:

Look, when it comes to these negotiations we're at a point where we want this legislation to go through. We've negotiated with the Attorney-General for a long period of time and we've obviously been keeping all the parties in the loop on that. We've got what we wanted and that was more money to actually prosecute this very small minority of people who are doing the wrong thing, so we've achieved that. The Attorney has a review as to the pricing mechanisms.

Clearly, it does not explicitly say there what the CEO believes about that particular aspect of the bill, but he continues:

The bottom line is we can live with it and we all support it. We just want to get on with it now.

The Greens echo those words. We do believe there are many amendments to this bill that we are yet to debate in the committee stage but, in general, we express our support and recognise that, while there has been a lot of consultation and, indeed, a lot of consternation, we are in a position where we can progress this debate.

The Hon. J.A. DARLEY: Mr Chairman, am I able to answer the question the minister asked of me?

The CHAIR: Yes.

The Hon. J.A. DARLEY: The reason I asked that question is I would imagine in the first instance it would be CBS officers who would be looking at these things and reporting to the commissioner. If none of those people has any experience in the real estate industry, how can they possibly come to a conclusion that there is any element of misuse of the information?

The Hon. D.G.E. HOOD: While the minister is considering her response to the Hon. Mr Darley, very quickly I want to put on record quite firmly that I have asked the direct question of the chief executive officer of the Real Estate Institute in South Australia if they support this bill and his response to me was, 'Yes.' I said, 'Are there any of your members who do not support the bill?' He was honest enough to say, 'Yes, there are some.' In his view, it was a small minority. That is why we have taken the position we have.

I have no reason to doubt the word of the Hon. Mr Stephens—I am sure he is putting forward his position in an honest way—but that has not been my experience with the Real Estate Institute. The CEO has certainly made it clear to us that he wants this bill to progress, and that has been our discussion with him.

The Hon. G.E. GAGO: I thank the Hon. John Darley for clarifying his concerns and I hope I can provide assurance. There is no formal qualification for that sort of data interpretation per se. It comes from years of experience and firsthand knowledge and understanding and I can absolutely assure the honourable member that those officers involved in handling this data are highly experienced and generally really highly regarded in the industry. So, if the honourable member was concerned and went out and spoke directly to the industry, he would find that these officers are highly regarded and I doubt that he would find any shadow of doubt about their competence in this area.

The Hon. J.A. DARLEY: If we are talking about RP data, first of all I mention it comes from the government itself. There is a qualifier for the government that the information may not be accurate to start with. Secondly, the data that is provided provides no details of names and addresses of owners or purchasers or vendors and that is significant. It does not provide the details of the contract date. It provides the settlement date which could be months apart and, in addition to that, you can always have the situations we have experienced in the past where the sale price that is quoted is not correct—not often, but it does occur. Unless people are aware of all those situations they are not really in a position to make any comment at all.

The Hon. G.E. GAGO: Real estate is not an exact science. RP data and comparative sales are not exact sciences. All that we are asking is that agents are able to show a reasonable estimate of what a property is worth. It is not the job of CBS to examine RP data, but the job of the CBS is to investigate a complaint and to try to determine if an agent has played by the rules, so I hope that helps.

Clause passed.

Clause 2.

The Hon. T.J. STEPHENS: I move:

Page 3—

Line 2—Delete 'This Act' and substitute: Subject to subsection (2), this Act

After line 2—Insert:

(2) A day fixed by proclamation under subsection (1) must not be earlier than 3 months after the day on which this Act is assented to by the Governor.

I did mention in my second reading contribution that we are concerned that this act is passed. The Attorney has given an indication that he wants these changes implemented on 1 July. We actually think that that is quite reasonable given that we are now in May, and it is fair to agents with regard to training, giving them the opportunity to make the necessary changes. Given that I am sure the government's intention is not to be punitive with this, these amendments basically indicate that there is a three-month period from the time of assent for people to ensure that they have it exactly right and that there is no chance of prosecution. I do not think that it is an unreasonable request.

The Hon. G.E. GAGO: I rise on behalf of the government to oppose both of these amendments. I actually do not understand why these amendments have been filed given that the Attorney-General has already given his commitment in the other place that the act will not commence during this time frame. It is simply grandstanding on behalf of the opposition, to ostensibly show their support for one of the Real Estate Institute's proposals, but it is misguided and shows a complete lack of understanding of the parliamentary process.

Any novice would know that there is no possibility that the act could commence within three months of assent. Regulations need to be drafted and consulted on and an education campaign needs to be planned and implemented. All this will take well over three months. Instead of amending, I am happy to place on the record confirmation that the start date for the act will definitely not be within three months of assent.

The Hon. T.J. STEPHENS: That means that we have to trust the minister's word. Why not just agree to the amendment? Why does she not, in good faith, agree to the amendments so that there is some surety for real estate agents? Is this an all-out assault on real estate agents or are we actually trying to get something workable for all parties?

The Hon. D.G.E. HOOD: Again, the advice I have from REISA is that it does not support these amendments. I would say that effectively the opposition appears to be achieving the same end and, for that matter, we see no reason to support the amendments.

Amendments negatived; clause passed.

Clauses 3 to 11 passed.

Progress reported; committee to sit again.