New Zealand’s Real Estate Institute (REINZ) has called for the government to license residential letting agents due to concerns that the large number of sizable cash transactions in the industry could prove highly alluring for criminal types.
While current legislation in New Zealand mandates that letting agents for commercial premises, including shops and offices, be licensed and handle money on behalf of landlords via trust accounts subject to audits, no such requirements apply to residential letting agents.
According to REINZ chief executive Helen O’Sullivan, this lack of regulation in tandem with the large sums of cash which so frequently change hands in the residential property business could attract unsavoury types to industry.
“It’s quite possible because there’s a lot of cash involved and where you have large amounts of cash, people with nefarious intent may gather,” she said.
It is estimated that residential property managers in New Zealand handle almost $50 million per week, given that around 125,000 rented homes in the country are handled by property management firms and the national median rent for three-bedroom dwellings is $385 a week.
New Zealand’s current lack of licensing regulation means anyone – even an individual with an extensive criminal record – is permitted to enter the property management business and receive cash payments from tenants. Prior convictions for the theft of rent owed to landlords do not bar an individual from returning to the property management profession.
Despite these compelling factors, however, REINZ’s calls for the introduction of licensing for residential letting agents have been rebuffed by the New Zealand government, with Associate Justice Minister Chester Borrows claiming that the costs for property managers is too exorbitant to justify any such risk minimization measures.
“I cannot escape the conclusion that the harm that might be prevented by licensing property managers under the act does not justify the compliance costs it would place on property managers,” Borrows said in a letter.
Borrows also sought to place the onus of ensuring the probity of property managers on landlords themselves, saying that “a simple Google search of the names and details of the person who could be the property managers could throw up all sorts of things.”
Members of industry and landlords continue to feel strongly, however, that this is an inadequate remedy given the bewildering and often unreliable nature of personal information obtained via the Internet, and that licensing is the best safeguard against unethical business practices.
“Our concern is that there are very few protections in place and a lot of the public don’t know the risk they are taking in dealing with just anybody,” said Hayden Duncan, chief executive of the Harcourts chain.