Decision Regulation Impact Statement - Proposal for National Licensing of the Property Occupations

30 August 2013 Queensland Competition Authority National Trade Licensing Reform Review By email: licensing.investigation@qca.org.au Dear Sir/Madam Decision Regulation Impact Statement - Proposal for National Licensing of the Property Occupations Please find attached the submission of the Real Estate Institute of Queensland (REIQ) in relation to the above matter. As the peak body representing the real estate industry in Queensland, we appreciate the opportunity to provide our comments in relation to this important issue. If you would like to discuss any aspect of our submission in greater detail or require any further information, please contact Ms Antonia Mercorella, General Counsel on 3249 7325. Yours faithfully Anton Kardash MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

Response to the Decision Regulation Impact Statement Proposal for National Licensing of the Property Occupations Submission by the Real Estate Institute of Queensland August 2013

Introduction The Real Estate Institute of Queensland has been the peak body for the real estate profession for 95 years. Since our beginnings in 1918, the REIQ has grown to represent about 75 per cent of Queensland s real estate practitioners. Our membership comprises approximately 1,600 agency offices and an estimated 15,000 real estate practitioners across the State. Our membership comprises both small to medium-sized independent agents (64 per cent) and members of franchise groups (36 per cent). REIQ members specialise in all facets of real estate including property management, residential sales, commercial and industrial sales and leasing, auctions, business broking and buyers agency work. Our members are spread across the state in city, rural and regional areas. The REIQ is recognised as the state s leading authority on real estate and property related issues. The Institute also holds an excellent reputation as the provider of high quality nationally recognised training and professional development programs, and as a reliable source of up-to-date market data and information. For many Queenslanders, the REIQ is regarded as the first point of contact on all real estate-related matters. As the peak body for the real estate industry, the REIQ welcomes the opportunity to provide a response to the Decision Regulation Impact Statement - Proposal for National Licensing of the Property Occupations (Decision RIS). We acknowledge attending the public consultation held by the Queensland Competition Authority (QCA) on 9 August 2013 together with other key stakeholders. In this submission, we have sought to reiterate and summarise the statements and representations made by us at the public consultation. We have also included some observations and commentary arising from the QCA consultation process. 2

Summary of key issues The REIQ has identified a series of key issues related to the Decision RIS and the proposed reforms generally: 1. There is relatively minor net economic benefit for Queensland. 2. The predicted increase in labour mobility benefits is flawed and overestimated. 3. The cost benefit analysis in the Decision RIS is flawed and presents an inflated view of the impact of the reforms. 4. Additional costs and transition costs associated with the reforms have not been properly considered. 5. The impact of the reforms on consumer protection have not been given adequate consideration. 6. In the absence of conduct harmonisation, the potential benefits of national licensing laws are undermined. This submission focuses primarily on issues which impact on Queensland. 3

Consumer impact At the core of the comments in this submission is the need for consumer protection. Real estate transactions frequently involve unsophisticated and vulnerable consumers who rely on real estate agents to guide them the through the processes associated with real estate transactions. The critical need for consumer protection in relation to property transactions is well recognised in Queensland and throughout Australia. In Queensland, the Property Agents and Motor Dealers Act 2000 (PAMD Act) governs the conduct of real estate agents and transactions. The objective of the PAMD Act is defined as follows: An Act to comprehensively provide for the regulation of the activities, licensing and conduct of resident letting agents, real estate agents, pastoral houses, auctioneers, property developers, motor dealers and commercial agents and their employees, to protect consumers against particular undesirable practices, and for other purposes (emphasis added). Throughout Australia, real estate related legislation has consumer protection at its core. This is not surprising when one considers the substantial value of real estate transactions in Australia. In Australia, according to ABS statistics, real estate represents the largest asset class with residential real estate investment amounting to $4.86 trillion and commercial real estate, $0.7 trillion. Given the substantial value of real estate assets in Australia, stringent consumer protections are critical. Although we recognise that in some instances, parties involved in real estate transactions may be more sophisticated and have greater access to resources (such as independent legal and financial advice) in the majority of cases in Queensland, consumers tend to be involved in residential real estate transactions. According to data provided by RP Data, in the period from 31 January 2008 to 31 December 2012, there were approximately 556,969 residential property transactions compared with 57,917 non-residential transactions. In percentage terms, about 90% of property transactions were residential transactions. It is well recognised that consumers involved in residential real estate transactions are more vulnerable thereby requiring greater levels of protection. The need for greater levels of protection when dealing with parties involved in residential transactions is highlighted by the additional consumer protection measures established in Chapter 11 of the PAMD Act. Chapter 11 of the PAMD Act exclusively applies to transactions residential property. 1 The purposes of Chapter 11 are as follows: (a) to give persons who enter into relevant contracts as buyers a cooling-off period; and (b) to require all proposed relevant contracts and relevant contracts for the sale of residential property in Queensland to have consumer protection information attached, including information stating that a relevant contract is subject to a cooling-off period; and (c) to enhance consumer protection for buyers of residential property by ensuring, as far as practicable, the independence of lawyers acting for buyers. In summary, Chapter 11 imposes a series of additional obligations on real estate agents (and in some cases, their seller clients) to provide additional documentation and information to potential and actual buyers involved in residential property transactions. Additionally, Chapter 11 provides 1 PAMD Act, section17 4

statutory cooling off rights to buyers of residential property (subject to some restrictions). These additional legislative burdens (in the case of sellers and real estate agents) and rights (in the case of buyers) demonstrate the Queensland parliament s awareness of the need for enhanced consumer protection in the residential property sphere. Consumer protection in real estate transactions can only be achieved by setting appropriate competencies, educational requirements and qualifications that reflect the significance of the work facilitated by real estate agents. Real estate agents are involved in the sale and management of the populations largest assets; their homes, investment properties and businesses. Consumers require and demand professional advice and assistance from real estate agents to: understand the current real estate market and property values understand and comply with applicable legislative requirements negotiate effectively to obtain the best outcome possible for them manage contractual processes and complete accurate and legally binding documentation effectively and responsibly manage their investments. Given the nature and scope of a real estate agents role and the substantial value of real estate assets, it is critical that training and educational requirements are set at an appropriate level which reflect the significance of their responsibilities and duties. As outlined in further detail below, the REIQ does not support the educational requirements proposed under the Decision RIS. It is fundamental to consumer protection that appropriate educational requirements and qualifications are developed in line with the importance of the work facilitated by real estate agents. In our view, this objective has not been achieved. 5

Proposed educational requirements for key licence and registration categories As outlined above, it is critical that educational requirements and qualifications appropriately reflect the nature and importance of the work performed by real estate agents. As outlined below, we have concerns relating to three key licence and registration categories. Agent s representative registration The REIQ does not support the proposal to reduce the educational requirements for eligibility for an agent s representative registration. The proposed reforms in relation to agent s representative represent a substantial lowering of the relevant educational standards which presently apply in Queensland. The Decision RIS proposes that only 4 units be completed for qualification to become an agent s representative. If the reforms are implemented as proposed, the current units of study will no longer apply: CPPDSM4015B Minimise Agency and Consumer Risk CPPDSM4012A List Property for Sale CPPDSM4010A Lease Property CPPDSM4022A Sell and Finalise the Sale of Property by Private Treaty Major inadequacies would result from the removal of these units which span across critical areas of real estate practice such as: contract negotiation and documentation listing document preparation complaints management processes for disbursement of trust monies recording client instructions tenant selection and property inspections preparation of lease documentation property management trust account transactions. Detailed below are extracts from the unit descriptors and performance criteria that relate to critical areas of legislative compliance and consumer protection. CPPDSM4015B Minimise Agency and Consumer Risk Descriptor: This unit of competency specifies the outcomes required to minimise risk to all aspects of agency business and to consumers. It includes identifying potential risks to the agency and its clients, analysing the causes and potential impact of risks, and implementing agency policies and procedures to minimise risks to the agency and consumers. In particular, the performance criteria pertinent to consumer risk in this unit include: Options for minimising risks, including legislative measures, are determined and assessed for strengths and weaknesses. Risks are continuously monitored in line with agency practice. 6

Agency procedures and systems for controlling risks, including handling complaints, are identified and implemented, as required. Risks to consumers engaged in business dealings with the agency are identified and assessed in line with legislative requirements and agency practice. Consumer risks are continually monitored in line with agency practice. Agency procedures and systems for minimising consumer risk are identified and implemented as required. Personal skills in identifying and assessing consumer risk are reviewed, and where appropriate, strategies are implemented for improving this aspect of professional practice. CPPDSM4022A Sell and Finalise the Sale of Property by Private Treaty Descriptor: This unit of competency specifies the outcomes required to sell and finalise the sale of all types of property by private treaty. It includes qualifying buyers, arranging for potential buyers to inspect listed properties, delivering effective sales presentations, submitting offers and negotiating property sale with sellers and buyers and maintaining communications with sellers and prospective buyers. It also includes monitoring the process between exchange of contracts and settlement for all types of property and businesses and preparing documentation for agency disbursements. In particular, the performance criteria pertinent to consumer risk in this unit include: Relevant sale of property documentation is explained to seller and buyer in line with agency and statutory requirements for finalisation of the property transaction. Documented, agreed price and conditions of sale are made accessible that provide an accurate record of agreement and meet agency and statutory requirements for finalisation of the property transaction. Settlement requirements are identified and checked with relevant parties to minimise misunderstanding or breaches of contract in line with agency practice and legislative requirements. CPPDSM4012A List Property for Sale Descriptor: This unit of competency specifies the outcomes required to list all types of property and businesses for sale. It includes prospecting for listings, establishing client requirements, planning and delivering property listing presentations, finalising listings for the sale of property, and recording and acting on client instructions. In particular, the performance criteria pertinent to consumer risk in this unit include: Client agreement to list property with agency is confirmed. Statutory and agency listing documentation is explained to client in line with agency practice and legislative requirements. Listing documentation is completed in line with client instructions, agency practice and legislative requirements. Client instructions are recorded to meet sales or auctioneering legislative requirements and agency record-keeping requirements. CPPDSM4010A Lease Property Descriptor: This unit of competency specifies the outcomes required to administer the leasing of all types of property. It includes screening tenant enquiries, conducting inspections, obtaining and 7

reviewing tenancy applications, completing tenancy agreements or lease documentation, placing tenants in property and recording tenancy arrangements. Enquiries from potential tenants are screened to determine their preferences, needs, financial limits and capacity to pay and care for the property in line with agency practice and legislative requirements. Procedure for property inspections, including key control, orientation of prospective tenant to property and strategies for ensuring security of managed property, is implemented in line with agency practice. Agency documentation associated with inspections is completed in line with agency practice and legislative requirements. Tenancy applications are reviewed to ensure that they have been completed in a full and accurate manner, consistent with legislative requirements and agency practice. Applicants' references are checked and results recorded according to legislative requirements, ethical standards and agency practice. Application processes are reviewed to ensure compliance with ethical standards and legislative requirements. Procedures for gaining landlord approval for tenancy are implemented in line with legislative requirements, ethical standards and agency practice. Tenancy agreement or lease documentation is produced and completed in line with agency practice, legislative requirements and landlord instructions. Procedures for placing new tenant in property are implemented in line with legislative requirements, ethical standards and agency practice. Security deposits are obtained, deposited and recorded as required by agency practice and legislative requirements. Tenancy agreement or lease documentation is served to relevant parties in required timeframes. Trust account transactions are accurately recorded to show moneys taken in and disbursements made in line with agency practice, tenancy agreement or lease documentation, and legislative requirements. It is highly concerning that a single unit of competency that focuses on Minimising Consumer Risk (CPPDSM4015B) has been deemed unnecessary for those individuals who engage most frequently with consumers agent s representatives (currently known as salespersons in Queensland). The number of registered real estate salespersons in Queensland far outweighs the number of licensed real estate agents in Queensland. In 2010/2011 there were 18,185 registered individual salespersons in Queensland and 10,564 individual real estate agent licensees. Consequently, if the proposed reforms are implemented, the majority of real estate practitioners in the Queensland will be required to meet substantially diminished educational requirements to obtain this category of licence. The Decision RIS claims that the economic benefit to Queensland licensees for the changes to the agent s representative qualification is $4.32 million for one year (or $28.10 million over 10 years), representing the lion s share of the claimed benefit for Queensland. The four units of competency selected for the agent s representative registration are taken from the Certificate IV in Property Services versus the seven units of competency for the current salespersons registration course. However, the Decision RIS does not recognise the proposed units are different units with different learning outcomes and performance criteria and therefore do not necessarily represent a 8

quicker or cheaper option. Consequently, the figures stated in the Decisions RIS artificially represent the potential benefits. Additionally, the Decision RIS does not take into consideration the additional training that will invariably be required as a result of the deficient entry level training that is being proposed. Training relating to consumer protection and agency risk management are fundamental and cannot be simply removed from the induction process. It is inconceivable that an agent s representative can commence work without understanding the process of contract negotiation and preparation and listing documentation. Similarly, a property manager cannot commence work without having learned the principles of tenant selection and application processes, property management listing documentation and basic trust accounting transactions. Real estate agent licence In our experience, most persons seeking to obtain a real estate agents licence intend to establish and manage a real estate business and therefore require a series of additional skills such as, human resource management, financial management skills and trust account management skills. For this reason, we do not support the educational required for a real estate agent licence. The REIQ has long advocated the introduction of a Diploma level education requirement to be eligible for a real estate agent licence. Real estate agents have a responsibility to exercise high levels of knowledge, expertise and professionalism particularly when performing the role of an agency principal or a nominee. Lack of adequate licensing training has the potential for serious financial ramifications for consumers, employees and business owners. Consideration must also be given to the intention of the Australian Qualifications Framework (AQF) when it refers to the outcomes of Certificate IV and Diploma level qualifications. The AQF states that, in terms of application of skills and knowledge, a person who has completed a Certificate IV level of study would demonstrate the application of knowledge and skills: to specialised tasks or functions in known or changing contexts with responsibility for own functions and outputs, and may have limited responsibility for organisation of others; and with limited responsibility for the quantity and quality of the output of others in the team within limited parameters. In contrast, graduates of a Diploma will demonstrate the application of knowledge and skills: with depth in some areas of specialisation, in known or changing contexts to transfer and apply theoretical concepts and/or technical and/or creative skills in a range of situations with personal responsibility and autonomy in performing complex technical operations with responsibility for own outputs in relation to broad parameters for quantity and quality with initiative and judgement to organise the work of self and others and plan, coordinate and evaluate the work of teams within broad but generally well- defined parameters. The CPP50307 Diploma in Property Services (Agency Management) requirements set out the skill set needed by a licensed real estate agent. It indicates that, rather than being regarded as a trade performing repetitive work, real estate agents are professionals that must apply both: 9

technical expertise that is, expertise in relation to the delivery of professional services utilising the skills of negotiation, communication and analysis of the property market; and the theoretical knowledge (i.e. understanding of the legislative requirements for each type transaction in the sale, lease and rental of residential, rural, commercial, retail and industrial property) to achieve an outcome that provides maximum return to clients and minimum risk to consumers and to ensure that all staff within the agency are performing to the same standard of professionalism. If a real estate business is not appropriately managed, the risks are substantial. Such risks include, trust account defalcations and other trust account offences, mismanagement claims from clients and consumer complaints and claims. Given that real estate agents are dealing with the largest investment of the typical person s life, the financial and business skills provided in the Diploma course provide an immense public benefit to the Australian community. Notably, financial planners who, like real estate agents provide advice in relation to important assets, are required to undertake training of key knowledge, skills and competencies that are broadly equivalent to the Diploma level in the Australian Qualifications Framework. 2 Exemption for Resident Letting Agents The Decision RIS proposes an exemption from licensing for a person who is carrying out regulated work that consists of only leasing residential real property for less than three months - resident letting managers. The Decisions RIS notes that resident managers are currently only licensed in Queensland and New South Wales. The Decision RIS suggests that because payments to resident letting managers are usually paid by credit card transaction, the risks relating to the activities carried out by resident letting managers are minimal. We do not understand the justification for this conclusion. In the event of the introduction of national licensing, resident letting mangers would still be required to conduct their business in accordance with the trust account requirements under the PAMD Act. While the customer in the transaction is the tenant (or holiday maker), the client is the individual whose investment is being managed by the resident letting agent. Consequently, the risk is not only to the person paying for the booking by credit card but also exists in relation to the owner of the relevant property. Importantly, accommodation bookings, irrespective of how they are paid, will continue to be paid into trust accounts managed by the resident letting agent, and disbursed as required under the PAMD Act. The quantum of the funds held by resident letting managers must also be taken into account. Using the example of a typical holiday apartment building at the Gold Coast with 80 apartments that are part of the letting pool (i.e. with a resident letting agent in place managing the property on behalf of an investor), a unit may be let for $2000 per week in peak season. Assuming 80% occupancy rates, a resident letting agent will have upwards of $120,000 their trust account in one month. Whilst an individual consumer may be at risk to the extent of the value of their booking ($2,000), the client (the apartment owner) may be exposed to a loss of up to $8000 per month in the event of trust account defalcation. There is substantial risk in short term letting operations considering the high number of short term rental accommodation in Queensland and substantial sums of trust moneys held by resident letting agents. There are over 2500 management rights operating in Queensland, and it is estimated that at least 25% of these are holiday and short term letting complexes which will be affected by the removal of licensing under the proposed system. 2 ASIC REGULATORY GUIDE 146: Licensing: Training of financial product advisers July 2012 10

The proposed licence exemption for resident letting agents involved in short-term letting will result in the removal of basic entry level training relating to trust account management. This will create enormous risk in the Queensland community given the size of the management rights market. The potential risks of this reform are evidenced by the high number of trust account prosecutions in Queensland since 1 July 2012 involving resident letting managers. In late 2012, in response to trust account management issues and other compliance issues, the Office of Fair Trading (OFT) delivered resident letting agent compliance training sessions throughout Queensland. This further highlights the significance of the role and risks associated with resident letting management activities. 11

Conduct harmonisation the missing piece One of REIQ s primary concerns is that the national licensing proposals are seeking to impose a one size fits all set of licensing requirements to property occupations despite the lack of uniformity and consistency which exists at a legislative level around Australia. In Australia, each jurisdiction has its own state or territory laws governing the conduct of real estate transactions and of real estate practitioners. The vastly different legislative and conduct requirements which exist in Australia will mean that real estate practitioners moving or working in another jurisdiction will not have the requisite knowledge and skills to work effectively in that new jurisdiction. Consequently, these individuals will have to expend additional time and further monetary resources to familiarise themselves with the legislative and conduct requirements specific to another jurisdiction. The National Licensing Authority (NOLA) have themselves conceded that the benefits of national licensing is undermined in the absence of conduct harmonisation: Due to varying conduct requirements between jurisdictions, licensees will still need to understand and comply with the conduct requirements of the jurisdiction they are operating in. This will require significant effort on the part of a licensee as they move between jurisdictions and reduces the productivity, efficiency and economic gains from national licensing arrangements. Industry representatives consistently raise concerns about the lack of national conduct harmonisation. For some occupations, such as property, the full benefits of the national system will not be realised until conduct requirements are harmonised. The policy decision to retain jurisdiction based conduct requirements again highlights the complexity that has been introduced into the national licensing system. The hybrid model that has eventuated, as the system has evolved, has eroded the maximum benefits achievable, and increased the implementation costs from the ideal streamlined approach. 3 It is clear that the exclusion of conduct harmonisation from the national licensing process will result in the benefits of national licensing being limited and not fully realised. We are also concerned that the Decision RIS has not taken into account the additional costs and other imposts associated with the conduct harmonisation gap identified above. From the outset, it has been the REIQ s view that conduct harmonisation must be undertaken contemporaneously with the national licensing process. If the objective of labour mobility is truly to be achieved, this is of critical importance. REIQ strongly recommends that national licensing be suspended until such time as conduct requirements are harmonised for the property occupations. 3 NOLA submission to Productivity Commission in relation to Geographic Labour Mobility Issue Inquiry, 21 August 2013, p.18 12

Continuing Professional Development (CPD) The Decision RIS recommends that CPD should not be mandated. The alternative option proposed in the Decision RIS is not completely understood by the REIQ. It appears that it is proposed that NOLA could work with the relevant jurisdictions to understand issues as they emerge and to develop appropriate strategies such as the development of guidelines or one-off training requirements 4. Respectfully, such an approach to CPD training is impractical and fails to recognise the fundamental principles and objectives of CPD. The objective of CPD training is to: ensure real estate practitioners maintain up to date with legislative and industry knowledge minimise the risks of errors, potential claims and costly litigation maintain professional competence enhance consumer protection on account of the above. Given that real estate law is jurisdiction specific and most legislative issues affecting real estate transactions are state or territory specific, the content of CPD should be determined at a local level rather than when NOLA determines it may be warranted. REIQ has long been an advocate for mandatory CPD. Our view is that CPD is critical to ensure that real estate practitioners maintain a current knowledge and are required to keep abreast of legislative and industry changes. Keeping up to date with rapidly changing laws and requirements is critical from a risk management and consumer protection perspective. In today s complex legislative landscape and highly litigious society, it is naive to assume that initial training to obtain a licence will suffice and that no further or ongoing training is required. It is disappointing to note that the Decision RIS has sought to justify its recommendation against mandatory CPD on the basis that it represents significant ongoing costs to practitioners and regulators 5. It is further asserted that the removal of mandatory CPD represents an annual benefit of approximately $37million 6. The REIQ concedes there costs are associated with mandatory CPD. However, the benefits associated with CPD are significant and have unfortunately, been overlooked in the Decision RIS. As highlighted above, CPD is designed to minimise risk to both the consumer and the real estate business. The potential costs associated with a real estate related complaints or legal claims are immense. An error or omission made by a real estate practitioner in the course of providing property management services or whilst facilitating a real estate transaction can lead to claims worth millions of dollars depending on the nature of the claim. In extreme cases, serious injury or fatalities may even occur. It is for this very reason (amongst others) that the real estate industry is amongst the most strictly regulated in Queensland and around Australia. A reduction in the number of potential real estate related complaints and legal claims is a core benefit of mandatory CPD. For real estate practitioners, consumers and regulators, the positive returns are immense; significant time savings, substantial cost savings (including reduced compliance costs and legal fees) and lower potential injury or fatality rates. The Decision RIS asserts that there is limited evidence to demonstrate the benefits of CPD. Two examples of the benefits are highlighted below. 4 Decision RIS p.54 5 Decision RIS p.55 6 Decision RIS p.55 13

In Western Australia, mandatory CPD was introduced for licensees in 2007 and for sales representatives in 2009. For the five years up until and including 2009, the average number of written concerns raised by the public to the Real Estate Institute of Western Australia (REIWA) was 143 per year with a high of 196 in 2009. Meanwhile, in 2010, the year immediately after mandatory CPD was introduced for sales representatives, the number of written concerns dropped to 58 a 70% reduction over the previous year. The average for the three years to 2012 has been 55 or a 61% reduction from the five years 2005 to 2009. Further evidence of the potential risks associated with removing the requirement for ongoing training can be seen in the high level of trust account prosecutions in the last 12 months in Queensland. Alarmingly, since 1 July 2012, there have been a total of 38 trust account related prosecutions in Queensland as shown in Attachment 1. Collectively, the maximum potential penalties for the abovementioned trust account prosecutions amount to more than $1.6 million and 112 years in potential imprisonment terms. Approximately 94% of these prosecutions have involved real estate practitioners and business operators who are not REQ members. Trust account breaches constitute some of the most serious breaches of the PAMD Act. Many trust account breaches have high penalties associated with them and/or potential imprisonment terms. For this reason, REIQ provides members with regular CPD training and information updates on trust account management issues. The obvious benefits of this are reflected in the very low number of REIQ members involved in trust account prosecutions. 14

Labour mobility assumptions We question the reliability and accuracy of the mobility related assumptions contained in the Decision RIS. It has been acknowledged in the Decision RIS itself and during the QCA consultation, that that the improved mobility benefit estimates are not reliable and are based on certain assumptions. Although the Decision RIS does acknowledge that stakeholders have raised doubts in relation to the labour mobility for property services, no adjustments have been undertaken in connection to this. Given that labour mobility is the key driving force for national licensing, it is disappointing that the reliability of these estimates not been more robustly tested and explored. REIQ does not believe that there is sufficient evidence to suggest a need for improved labour mobility in Queensland. In our experience, local knowledge is central to success in real estate. It is common for real estate practitioners to focus on pockets or sections of Queensland and to promote local expertise and knowledge. Unlike in other occupations, there is no shortage of real estate practitioners in Queensland and recruiting new staff is not difficult. In fact our experience is that turnover rates in real estate are high especially in the area of property management. To suggest that employers will benefit from improved mobility is therefore misguided. In addition, given the inconsistency in laws and requirements in the various jurisdictions, employers are not likely to be attracted to prospective employees from external jurisdictions. The REIQ sees minimal (if any) potential benefit for real estate employers associated with improved mobility rates. According to the REIQ membership database, only 24 of 1,568 accredited agency members have addresses outside of Queensland. In our view, the current Mutual Recognition system works well with the majority of licence and registration certificate holders able to transfer their qualification to another jurisdiction without national licensing. 15

Age issue The Decision RIS recommends that no minimum age barriers should apply. To suggest that a minor has the capacity to undertake the responsibilities and functions of a real estate agent is totally unreasonable and frankly, highly irresponsible. The risks associated with the removal of an age barrier requirement are substantial. In Queensland (and in other jurisdictions), real estate agents are entitled to prepare property sales contracts. It is our experience that the overwhelming majority of property sales contracts in Queensland are prepared by real estate agents rather than solicitors. In addition to property sales contracts, real estate agents are required to prepare a range of other contractual documentation such as business sales agreements, letting and management agreements and appointment forms to act for clients. Real estate agents are also responsible for establishing and managing trust accounts in accordance with strict legislative requirements. At any given time, a real estate agents trust account can hold millions of dollars. This is an enormous and important responsibility for a real estate agent. This is reflected in the severe penalties and potential imprisonment terms in the PAMD Act associated with trust account offences. In addition to contractual facilitation and trust account responsibilities, real estate agents are expected to possess excellent negotiation skills and to have an insight into the property market. It is simply absurd to suggest that age barriers constitute discrimination in this context. It is critical that this issue be addressed and that a minimum age of 18 years be established. 16

Other issues and considerations The REIQ is concerned that additional costs associated with the national licensing reforms have not been properly considered. Administration costs Administration of national licensing is likely to cause major administrative problems because of the confusion and difficulties associated with determining originating jurisdiction. It also became apparent at the QCA consultation that the information technology (IT) related costs associated with the national licensing reforms have been understated. We understand that News South Wales will be responsible for building the master IT infrastructure and that other states will be required to build IT systems that talk to this as dictated by New South Wales. It was evident from feedback given by the OFT that this will be a difficult and very expensive task and that the cost estimates in the Decision RIS are underestimated. The potential for cost blow outs and time delays in relation to the development of new IT systems is well known. The Queensland health payroll system roll-out is an obvious example of this. Other examples include the delayed introduction of the National Personal Property Securities Register. In NOLA s submission to the Productivity Commission in relation to the Geographic Labour Mobility Issue Inquiry, NOLA referred to the establishment of a single computer system for national licensing. It has been claimed that this will result in savings of about $70 million taking into account the $85.8 million that it currently costs 8 jurisdictions and 21 regulators to administer licensing for occupations proposed to be covered by national licensing. The REIQ questions the validity of these alleged savings given that regulators will presumably need to retain their existing systems for other areas of licensing that will not be covered by the licensing reforms. For example, in Queensland, we understand that OFT will need to retain their current computer systems for licensing of second hand dealers, credit collection agents, travel agents and pawnbrokers. Licensing related costs and safeguards At the QCA consultation, OFT licensing representatives raised an important issue relating to the proposed changes to licensing applications. It has been proposed that under the reforms, licence applicants would be required to order and obtain their own police checks and to provide these to OFT these with their licence applications. Currently in Queensland, the OFT are responsible for facilitating the order of these checks. There are obvious cost and time efficiency benefits associated with this process. If individuals are required to order and obtain their own checks, it is likely that this process will become more expensive and take longer. The Decision RIS has failed to take these cost and time factors into account. Additionally, it has been proposed that police checks should only be required at the time of an initial licence application. Subsequent to this, licensees will not be required to undergo police checks but will be responsible for reporting any relevant offences. The risks associated with this proposal are obvious. The REIQ does not support the abolition of regular police checks in connection with real estate licensing. 17

Professional indemnity premiums Professional indemnity insurance premiums are very likely to rise if the reforms are implemented as proposed. It is well known that professional indemnity insurance premiums have risen substantially across Australia in the last 5 years on account of the quantum of the claims received. A reduction in education standards is likely to cause premiums to rise on account of anticipated increases in the number of professional indemnity claims. Professional indemnity insurers are also likely to impose additional costs on licensees who work in another jurisdiction and are likely to impose conditions on such work because of greater risk. This will create complications in relation to premiums and possible refusal of cover for work outside the primary jurisdiction. REIQ believes that national licensing can only be truly successful if it is implemented alongside with national conduct harmonisation. 18

Conclusion An important objective of the national licensing proposal is to pursue seamless reforms in property occupations across the country. As argued above, in the absence of conduct harmonisation, this will not properly be achieved by the implementation of these proposed reforms. Moreover, in the absence of total commitment to these reforms by all jurisdictions, this objective will not be satisfied. The REIQ is concerned that Queensland specific benefits associated with national licensing have been overstated. In any event, we consider the quantum of the alleged benefits to be relatively minimal and certainly not sufficient to justify the substantial detriment to consumer protection and increased risk that the proposed reforms represent. 19