Report On Lawyers And Conveyancer Bill Welcomed
Real Estate Institute Welcomes Select Committee Report On Lawyers And Conveyancers Bill
The Real Estate Institute of New Zealand (REINZ) has welcomed the Justice & Electoral Select Committee’s report on the Lawyers and Conveyancers Bill which has recommended an amendment that would expressly prohibit lawyers and conveyancers from charging a commission when acting as agents for their clients selling real estate or a business.
“The Institute had numerous concerns about this Bill, which prompted our comprehensive submission to the Select Committee. Their recommendation regarding lawyers undertaking the work of real estate agents has recognised our principal issue with the Bill and will, if adopted, resolve an untenable situation from occurring.
“Permitting lawyers and conveyancers to undertake the work of real estate agents could lead to the role of lawyers as independent professional legal advisers being compromised,” said REINZ National President, Mr. Graeme Woodley.
Lawyers are currently able to sell real estate and businesses on behalf of their clients and charge for the costs they incur regardless of whether or not the property sells, but are prohibited from being remunerated by charging a commission or success fee. The Bill as drafted, would have removed this prohibition, and the Select Committee have recommended in favour of retaining the status quo.
“REINZ presented the argument to the Select Committee that, were the Bill to become law in its current form, then the commission lawyers earned on the sale of real estate would exceed the fee that they earned on the conveyancing for that same transaction. This clearly had the potential to compromise the independence of the lawyer’s advice to a client in respect of the wisdom of entering into or completing a transaction.”
The REINZ submission stated that ‘the possibility of a commission income from a sale is likely to lead any person in a position of owing both fiduciary obligations and obligations to provide a client with professional advice into an area of conflict of interest. A legal practitioner is potentially more exposed to this type of conflict of interest because of the high fiduciary obligations that normally arise in favour of a person seeking professional legal advice.’
“We felt that the Bill
was likely to promote a conflict of interest that was
contrary to recognised best practice in the current
commercial environment and one that public policy should
actively seek to avoid. ….
“Another concern was that the Lawyers and Conveyancers Bill had the potential to create two different categories of ‘real estate agent’, each operating under its own regulatory regime. This would inevitably create confusion for those members of the public who had a dispute with the advice or service they had received from a lawyer or real estate agent.”
The Bill will now be set down for its second reading in Parliament, at which point the main debate on the proposed legislation will take place.
REINZ believes New Zealand consumers are currently well served by the regulatory regime governing real estate and fails to see the need for far-reaching change.
“Real estate is arguably the most competitive sector of the economy and we don’t believe fundamental changes are required as the present regulatory structure has proved to be effective and efficient.
“We are encouraged
that the Select Committee has taken on board our concerns
regarding this proposed legislation. We now trust that the
Parliament will adopt the recommendations of the Select
Committee when enacting this Bill,” Mr Woodley