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Estate agents see feast for lawyers under new rules

Consumers may need to arm themselves with lawyers to do battle against rich real estate agents and their firms under the new system unveiled by the Government yesterday.

Peter Thompson, director of Auckland's largest agent, Barfoot & Thompson, said the new compensation provisions of the proposed law would raise the stakes for both sides.

His firm would be exposed to much higher risks under the changes, which allow consumers to claim compensation, he said.

In the most radical part of the Government's plan, consumers will be able to claim money for deals that go wrong - a move now barred if cases get to the most authoritative body, the Real Estate Agents Licensing Board.

Mr Thompson said Barfoots would need to bring lawyers to any hearings under the new system simply because the firm's insurer would demand it to fulfil professional indemnity cover.

He expects consumers would also need legal representation in cases involving more than $40,000.

"There's more risk and the public will need lawyers," he said, although he generally backed the reforms, saying they were a big improvement.

Associate Justice Minister Clayton Cosgrove wants the new system to save consumers the expense of lawyers, intending it to be a no-cost alternative to the courts.

Under the changes, consumers will complain to the Real Estate Agents Authority in the first instance but a new disciplinary tribunal will hear more serious offences and companies could be fined up to $100,000, as well as being forced to pay compensation.

Mr Cosgrove's central concern is the low number of complaints referred by the Real Estate Institute to the more-powerful and independent Real Estate Agents Licensing Board.

Although the institute got at least 507 complaints between 2004 and last year, the institute referred only nine to the board, he said.

Specialist real estate barrister John Waymouth said he hoped consumers would not need lawyers to take their case through the new system, which he said should operate like the Disputes Tribunal with no direct involvement of lawyers or judges.

But Mr Waymouth, who has represented more than 10 agents in the past year, expects agencies to push the use of their lawyers, which he said could potentially leave consumers exposed.

"In the more serious cases, I'd expect agents to bring lawyers butit will be up to the new tribunalto determine if a complainantshould be represented by a lawyer. There may be a threshold set."

The biggest complaint from agents yesterday was over property managers and letting and leasing agents being excluded from the new regime.

Mr Cosgrove said the new law would not cover this sector because it was less risky for consumers and there were other laws to protect people.

But Bryan Thomson, chief executive of the country's largest agency chain, Harcourts, said it was wrong for the Government to deregulate a sector which was now covered by the law.

The Government did not perceive a big risk to the public, yet vast amounts of money flowed through agency trust accounts which collected cash for landlords, he said.

The largest payout from the institute's $2 million fidelity guarantee fund this decade was for the failed Platt Property Management where rent went missing and the institute paid landlords about $100,000.

Barfoot's Mr Thompson was also concerned about this, saying the biggest sums in Barfoot's trust account were money held for landlords, so the stakes were extremely high.

Paul Slatin, First National's managing director, also complained at the exclusion of property managers and said the changes would be a financial burden for agents and consumers.