Agent Anna, the new NZ television comedy series, is a satire centred on Auckland real estate agents. It stars Robyn Malcolm working in a world of "lying, back-stabbing, and cheating" real estate agents. The show certainly has not received a favourable reaction from real estate agents in the same way that iconic American shows such as "Mad Men" did from advertising executives or "Suits" did from lawyers. If a television series is an expression of public perception, then it is understandable that the real estate industry is concerned about this portrayal.
Such sensitivity towards Agent Anna can be traced to the industry's efforts in recent years to raise ethical and professional standards through legislative reform, by putting in place rules, processes and regulations around such reforms and promoting awareness in buyers and sellers.
It is timely then, that this show coincides with more reform relating to improving ethical and professional standards for real estate agents in the form of a tweaked code of conduct.
Improving ethical and professional standards
One of the key areas of focus of the Real Estate Agents Act 2008 is to hold licensed real estate agents accountable for their actions. A key way to facilitate this accountability is through section 14 of the Act. Section 14 of the Act provides that:
14 Code of professional conduct and client care
(1) The Authority may, by notice in the Gazette, make any practice rules to enable it to discharge the duty imposed on it by subsection (2).
(2) The Authority must have rules that include or provide for a code of professional conduct and client care, which will be a reference point for discipline and which will focus on, but need not be limited to, the duties of agents to their clients.
The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 has become that reference point for discipline. The code of conduct is used by the Complaints Assessment Committee and the Real Estate Agents Disciplinary Tribunal when establishing if a real estate agent's conduct has been unacceptable. The code of conduct came into force over two years ago. The Real Estate Agents Authority reviewed the code of conduct through public consultation in late 2011 and early 2012.
Coming out of that public consultation is a new code of conduct: the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. The new rules come into force on 8 April 2013 and this FYI sets out, briefly, the content of the current code of conduct and the changes real estate agents and those dealing with real estate agents should be aware of in the new rules.
The code of conduct in brief
The code of conduct is, perhaps necessarily, a broadly worded set of rules that covers standards of professional competence and conduct, duties on real estate agents to report misconduct, and duties on real estate agents to promote awareness of the rules with their clients or prospective clients.
Since its inception, the code of conduct has been wide enough to capture behaviour ranging from the practice of "death knocking", where an agent offers to help a new widow or widower sell their home (the agent was not sanctioned in that case), to out and out fraudulent behaviour by a real estate agent. There have been cases where an agent used an associate to buy a property from a genuine vendor and then immediately on-sell that property to a genuine buyer for a higher price. There have also been cases where real estate agents have advertised properties for sale without any authority from the owner.
Naturally, a large part of the code of conduct focuses on the interface between real estate agents and clients or prospective clients. Appraisal and pricing, conduct around being clear on agency agreements and contractual documents, and marketing, are dealt with in detail by the code of conduct so that clients or prospective clients are not exploited by real estate agents.
It is also worth noting that the code of conduct and the new rules apply not only to land but to "transactions" as defined in the Act. "Transactions" in the Act includes "the sale, purchase, or other disposal or acquisition of any business (either with or without any interest in land)." Indeed, anyone reading the code of conduct or the new rules should read it together with the Act to ensure a consistent understanding.
Tweaks in the new rules
The new rules do not bring about any radical changes to the code of conduct but rather tighten, clarify and tweak the code of conduct to reflect experience over the years since the code of conduct first came into being.
Areas that received the most attention in the consultation process were definitions, appraisals, double commissions, disclosure of defects, and changes to the code for non-residential real estate sectors.
We highlight three main changes brought about by the new rules on 8 April 2013:
- In the new rules, a real estate agent must explicitly recommend that a client or prospective client obtains legal advice. This is a more express obligation than in the code of conduct, where a real estate agent was to simply ensure that a client or prospective client is aware that they may need legal or other technical advice.
- The new rules introduce rules specific to an agent working for a buyer. The buyer's agent rules relate to what information must be explained to the buyer before an agency agreement is signed, restrictions on working within the terms agreed with the client, submitting offers, and record keeping obligations.
- The disclosure of defects rule in the new rules changes the standard of disclosure on a real estate agent. Now an agent must make disclosure to the standard of a "reasonably competent licensee" whereas in the old code of conduct, the standard is linked to the "licensee's knowledge and experience of the real estate market." This change is a result of the submissions commenting on the ambiguity of the current standard. We, for one, question if the change has achieved more clarity.
It is notable that more sector-specific rules were not introduced. Submissions commented on the specific nature of certain sectors ie commercial real estate where long term agency agreements are more prevalent, and rural real estate where price variations can occur with stock being valued only a few days before settlement. It was suggested that specific rules should be promulgated for these scenarios.
Not all of the changes are related to substantive content either. Some provisions remain exactly the same but are reordered in different parts so that there is a better flow in the rules from higher level obligations to more detailed ones.
So, while there is an emphasis on tightening the rules in favour of greater consumer protection and lifting the industry standard, there remains a focus on making the rules accessible to both real estate agents and those who use them.
What do these changes mean?
The media has been positive in its response to the changes heralding it as another step towards a consumer-oriented industry. From an industry perspective, The Real Estate Institute of New Zealand welcomed the review when it was first proposed, and the Authority, understandably, has been positive about the changes. They are useful in further defining the benchmark against which licensee behaviour is assessed. The new rules have also been made more consistent with the Act itself, for example, in the definitions section.
Whether more sector-specific rules will develop in the future will be an interesting area to keep an eye on. This was certainly something widely commented on but no new changes were introduced.
Post 8 April 2013, when the new rules come into force, we will be able to monitor whether the tweaks promote greater awareness and standards and lead to less complaints, or whether the rules will capture a greater range of behaviour not meant to be captured. Whatever the outcome, it will be interesting to see whether a series like Agent Anna picks up on any changing standards and express, some would say, a more positive image of the real estate industry than the one it began with.
While some would argue that real estate agents and executives simply fail to see the lighter side of a good old NZ comedy, one could also question whether those behind Agent Anna are fully aware of the efforts being made to strengthen professional behaviour in the real estate industry.
Another argument may be that Agent Anna, despite criticism and its loose depiction, may inadvertently in the long run, be promoting public awareness to a wider audience than has previously been possible.