Reforms – Theory or Reality?

The Property Stock and Business Agents Act 2002 is shortly to be amended by the Property and Stock and Business Agents Amendment (Property Industry Reform) Act 2018.  Fair Trading have indicated in its draft regulations that the reforms will commence on 23 March 2020.  I don’t intend to discuss the reforms as they have been well and truly covered by many commentators.  Leverage Review will in the New Year run a series on the reforms and how they affect your agency, but that is not the purpose of this article.

The Minister for Fair Trading has widely suggested that the industry needs these reforms because it needs to be better educated and be infused with new standards.  It can only be implied by these statements that, the current industry is crap.  It is under educated and does not comply with good trading standards.  Well let’s accept that Fair Trading is right!  The industry is crap! It lacks education! And it doesn’t comply with ethical standards.

The reforms which are before the Parliament and the regulations which are drafted are confusing if this is the case.  If you want to conduct a business in the future, it will take you three years moving through the various gears of assisted agent and licenced agent before you can become a licensee in charge.  The barriers are not only in terms of time but in terms of Certificates IV and Diplomas.  In short, Fair Trading has set out barriers to entry in terms of time, experience and education.

We here at Leverage are not certain that this will make any change to the industry at all.  Unless the Fair Trading budget has been increased to provide for a greater number of investigators, these reforms will be no more than window dressing.  In theory, it looks a good scheme and protects those people who are already in the industry.  

When introducing new regulatory reform over a current licensing system, Government is required to implement a set of parenting provisions to allow the industry to continue.  You can’t all of a sudden fold an industry up overnight, the Government needs to allow those currently in the industry to continue.  

The grand parenting provisions within the draft regulatory orders allow current certificate holders to provide:-

  • Holders of Certificates of Registration to become assistant agents;
  • Holders of Licences to be granted a Class 2 Agents Licence; and
  • Holders of a current Licence who are Licensee’s in Charge of their own enterprise, to be granted a Licensee in Charge.

What their grand parenting provisions do is to allow this the industry which is crap, uneducated and unethical to be grand parented into the licensing regime.  Therefore, those who the Office of Fair Trading are saying need reform, are granted a free pass into the industry.  

To change the industry the Office of Fair Trading would need to invite new participants into the industry who have a higher educational and ethical standard.  The regulations unfortunately create a three-year barrier to new entrants.  

Fair Trading has retained those who they assess as incompetent and constructed a barrier to those who they wish to attract.  Although in theory the new reforms seem to have some merit, it cannot achieve the outcome of changing the industry.  Those who are already supposedly at a lower standard will be retained whilst those who the Government wish to promote will have a three-year barrier.

Although in theory the reforms look good, the implementation of the reform package will most probably lead to the alternative.  It will retain the bad and repel the good.

Before anyone thinks that Leverage believes the industry is bad, I better make some other comments.  Leverage has always argued that the portrayal of the Real Estate industry as being a pack of shonks and charlatans is a misrepresentation.  We have further indicated that the statistics do not demonstrate that this is an industry that requires massive overhaul.  There are other organisations which have far worse statistics, but Fair Trading has chosen to do nothing about it.  An industry can always be made better, but we here at Leverage do not accept that this is a bad and decaying industry.  Undoubtedly, it does have its shonks and charlatans and those people need to be eradicated.   Interestingly enough, they will be grand parented in to the new regime.

I was asked the other day what I would have done with the reforms if I had a clean hand.  My response was “Give me twenty more investigators and we will achieve a better result”.  Criminology studies prove that changing laws does not change conduct.  Rudolph Giuliani changed the crime problem within New York by putting seven thousand police on the beat.  All he did was to enforce the existing laws: there was no need for new laws.  

The current regime may have its problems, but it is not as deficient as people think.  If Fair Trading was properly resourced in terms of investigative power, industry standards would have changed by fear of capture rather than by new legislation.

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

Get in touch with Bailey:

1300 438 538