You should have known this …

The Estate Agency Affairs Board (EAAB) has castigated some estate agents for colluding with conveyancers, a practice that puts house consumers at a disadvantage because it results in higher conveyancing fees.

In response to Moneyweb questions, board CEO Clive Ashpol said the EAAB has teamed up with the Association of Law Societies and set up a special task team with a view to stamping out these bad practices.

According to Ashpol, the “insidious problem” of conveyancers offering inducements to agents in return for the securing of conveyancing work has manifested itself in a variety of ways over and above the usual offering of, for instance, free advertising and cellphones, the payment of office rentals and overseas vacations.

“A number of offending estate agents have been found, for example, to have used pre-printed sale agreement forms where the name of the selected conveyancer is already pre-printed on the agreement,” charged Ashpol.

Clearly this kind of malpractice should have caught the attention of the industry body, the Institute of Estate Agencies (IEA), and the institute should be co-operating with the board to cleanse the industry of these rogue elements.

But despite all these startling claims by the board, IEA president IEA Bill Rawson did not offer the embattled house consumers any hope. Speaking on Moneyweb Power Hour Show on Friday, Rawson claimed that he is not aware of kickbacks that agents get for securing conveyance work for lawyers.

Rawson added “we (the IEA) don’t really have the authority over our members to go and regulate anything like that with them at all.” Rawson also claimed that he does not know of “any estate agency that I’m aware of that actually has a pre-printed agreement with a pre-printed nominated firm of conveyancers in that agreement.” But according to Ashpol, this is one of the things the board has uncovered in its investigations.

“Certainly, through our regions, and into our board members, this (collusion) has never been put forward as a problem in the industry. If this were the case, that there are hundreds of estate agents doing this with legal firms, I would like to challenge that information,” Rawson fought back.

In a strident defence of the industry, Rawson said: “But we do sympathise with estate agents, in that the estate agents in marketing property incur tremendous costs.” He added that while the property market might be in a boom, “our costs of marketing are still very, very high”. Rawson added “we really see ourselves as the marketing front for the legal fraternity”.

But Ashpol charged that it is self-evident that unacceptable behaviour of this nature can no longer be tolerated as it impacts negatively on the both the credibility and standing of the industry as a whole and, also, on the integrity of the legal profession in general.

He added that if estate agents can be prevailed upon - without the board having to resort to disciplinary intervention - to act in an ethically acceptable manner and to refuse to accept inducements, “it is likely that the problem would be effectively resolved to the ultimate benefit of all”.

Ashpol added that the whole purpose of deregulating conveyancing fees, as the board understands it, was to encourage competition and reduce the costs of transfer. “This goal is currently being defeated by the offering of inducements,” said Ashpol.

That all is not well in the estate agency industry is beyond question. Last month the Competition Commission slapped estate agents with a fine for engaging in uncompetitive practices. The commission ruled that the 7,5% tariff recommended by the Institute of Estate Agents is uncompetitive because it eliminated the competitive process in the industry.

Some estate agents have also been accused of stealing money from trust accounts and not disclosing the true state of the property to prospective buyers. This leaves the buyer in a precarious of having to fix whatever defects the property might have had.

Most of these problems have been blamed on the fact that the entry requirements in the estate agency industry are too lax. According to Lynette Malan, the vice president of the Institute of Estate Agents, you just complete the forms and pay a fee of R120 to become a candidate agent. As a result, in the last two years the number of agents has doubled from about 25 000 to 50 000.

According to the board, to date it has received 14 108 claims against the fidelity fund, totalling an amount of R404-m. Of the value of the claims lodged, R189-m has been approved for payment and R174-m has been rejected.

This year 493 claims have to date been lodged amounting to a value of R14-m and of the amount lodged claims to a value of R3,8-m were approved and R3,5-m were rejected.
To date 28 436 complaints have been heard by the board, of which 11 666 resulted in convictions.

Claims lodged against the estate agents fidelity fund relate to either the theft of trust money or a contravention of the statutory provisions dealing with trust accounts and trust money received by an estate agent from a member of public.

Clearly all is not hunky-dory.

Article by: Chris Nthite -