Property Services Council Bill 2023

Second Reading Debate

Debate resumed from 31 May 2023.

The Hon. COURTNEY HOUSSOS (Minister for Finance, and Minister for Natural Resources) (14:30:21):

The Government opposes the Property Services Council Bill 2023. The bill proposes to fundamentally change the way the property services and strata industry is regulated in New South Wales by creating a new statutory authority, the property services council. The council would have an industry‑dominated board and would replace NSW Fair Trading as the regulator under three key property Acts: the Strata Schemes Management Act 2015, the Property and Stock Agents Act 2002 and the Community Land Management Act 2021. That would mean that New South Wales would move away from an independent regulator towards partial self-regulation by the industry.

The Government's view is that the current regulatory arrangements ensure effective industry oversight and regulation and high-quality engagement with the industry. The bill would be a retrograde step. It would significantly undermine that important independent oversight and regulation and would take New South Wales back to a regulatory model from the nineties that was found to be ineffective. The bill also fails to recognise the Government's initiatives to improve outcomes for consumers and the work that has occurred since it was last debated. Finally, the bill would be disruptive for industry and consumers. For those reasons, the Government opposes the bill.

I will expand on the reasons. New South Wales already has an effective and independent regulator for the property services industry: NSW Fair Trading, which has dedicated professional staff with substantial regulatory expertise, experience and connections with the sector. It is engaged in regulatory education and information, complaint handling, dispute resolution, compliance and enforcement across multiple and interrelated property sectors—from strata and real estate sale and management to residential tenancies, retirement villages, residential land lease communities, boarding houses, conveyancers and short-term rental accommodation. The administration of strata and community schemes laws has been in the hands of the Fair Trading Commissioner for the better part of 30 years.

During the 30 years of administration of those Acts, Fair Trading has assisted with the resolution of tens of thousands of complaints and inquiries about strata and community living. The Fair Trading strata mediation service team are skilled, passionate and compassionate experts who have conducted countless mediations to settle disputes among the million-plus strata residents in New South Wales. Those services not only help New South Wales citizens every day of every year but also provide a public benefit by keeping countless civil disputes out of the tribunal and courts system. The expectation of the public at large is overwhelmingly that the administration of those three flagship pieces of Fair Trading legislation stay in the independent, trusted, accountable and expert public hands that they are in today.

The proposed council board would have 10 members, and an eleventh if the council appoints a property services commissioner. While the 10 board members would be appointed by the Minister, those appointments can only be made from nominations coming from industry and others. The board would consist of members nominated by the property industry, a member nominated by a university and members nominated by those representing consumer interests, as well as one member appointed by the Minister. If appointed, a property services commissioner would be responsible for the day-to-day management of the affairs of the council in accordance with the policies and general directions of the board. Leaving administration of key property services legislation in the hands of a council with an industry-dominated board will put the independent oversight and regulation of the industry in jeopardy.

That model may lead to less consumer-oriented regulation, poor consumer outcomes and the undermining of consumer confidence in the property industry. Moreover, it may encourage the establishment of barriers to entry as industry players attempt to protect their position, with reduced competition potentially leading to increased costs and reduced services, reduced innovation and reduced incentives to play by the rules. It should be abundantly clear that an industry-dominated council would lack the necessary and critical independence from the parties it would seek to regulate. How could consumers trust an industry-dominated council to deal with their complaint about agent misconduct, for example? How could consumers trust staff to help resolve disputes and properly enforce the law when staff work for an industry-dominated council? Could we trust it to provide adequate information to the public or would it favour communications that support agents?

Despite most real estate agents doing the right thing, overall the industry has not demonstrated a capacity to self‑regulate. That is evidenced by the record of poor conduct and noncompliance with the law by some elements of the property sector. For example, earlier this year Fair Trading conducted 123 inspections in New South Wales to investigate rent bidding by real estate agents between 18 March and 15 April. As a result, Fair Trading issued 10 warning letters and 51 penalty infringement notices, worth a total amount of $53,350 for breaches. In 2022 Fair Trading prosecuted a number of agents who fraudulently misused trust money for their own purposes. One licensee fraudulently converted over $140,000 in trust money. They were sentenced to 2½ years' imprisonment, served by way of an intensive correction order along with a requirement to perform 120 hours of community service.

The property services and strata industry is too important to New South Wales consumers for its regulation to be left to an industry-dominated council rather than an arms-length regulator. It is an important point that the bill fails to take account of developments since 2021 and the Government's commitments to further improve the operation of the property industry. NSW Fair Trading and the Property Services Commissioner are working to improve the regulation of the property services and strata industry, including by raising the professional standards of property agents and improving relations with the industry. Improving professional standards is one of the main focuses of the existing Property Services Commissioner, who has over 25 years of experience in the real estate industry and has forged a consensus with industry to develop transformative change. That work will result in more balanced and meaningful changes than are proposed by the bill, and should be supported by a strong, independent regulator.

The Government has also made significant commitments to the property sector, including appointing a Rental Commissioner to act as a voice for renters and a new strata commissioner to oversee strata governance and policy in New South Wales. There is broad community support for those commissioners, and the Government expects that their work will deliver valuable improvements in strata and tenancy policy and services. The developments since the bill was first introduced in 2019 highlight why the Government will not support the bill. The bill proposes that New South Wales return to the 1990s, when a similar council existed. The Government has seen how that council worked and there were good reasons for abolishing it. The previous council was replaced in the mid-1990s due to a lack of independence, widespread conflicts of interest, a lack of enforcement against wrongdoing and a lack of tangible return on investment of government time and resources. The council was replaced with an independent government regulator: NSW Fair Trading.

For some decades industry-specific regulatory models have been avoided or abandoned at both State and Commonwealth level due to their lack of rigour in prosecuting misconduct and a lack of vigour in protecting consumers and pursuing the public interest. The regulatory model proposed in the bill runs counter to the direction of regulatory policy in consumer protection in recent years and best practice in regulation. Lastly, the bill would bring significant disruption for industry and consumers, fragmenting customer experiences across different regulators and resulting in poor consumer outcomes. It does not address the immediate consequences of replacing NSW Fair Trading with the council, leaving licensing, compliance, enforcement and complaint handling in a state of uncertainty. The bill also fails to provide for how the council would regulate an entire industry. The Fair Trading Commissioner is an accountable public official who has the resources, expertise and corporate knowledge of a government department at her disposal.

Further, the proposed council will not have the comprehensive coverage of the property sector that is crucial to achieving consistency and consumer confidence. The bill only covers three property Acts rather that the broader property sector, which includes residential tenancies, boarding houses, residential land lease communities, short‑term rental accommodation, conveyancers and retirement villages. All those areas are regulated by NSW Fair Trading, along with other industries such as the motor vehicle industry and retail sectors. It is common for a consumer to have various touchpoints with Fair Trading over the course of a single transaction, or their whole life. The bill would fragment the customer experience across different regulators and hand over governance of a sector that has significant impacts on consumers to a statutory council that does not yet exist and has no experience administering laws.

In conclusion, the Government opposes the bill. It would remove regulation of parts of the property service sector from an effective, experienced, independent regulator and instead hand it to an industry-dominated council with no experience, which would result in industry‑centric regulation, confusion, disruption and poorer outcomes for consumers. I represent my good friend and colleague the Hon. Anoulack Chanthivong in his capacity as Minister for Better Regulation and Fair Trading. He is doing a fantastic job, and I appreciate the support that he has provided me in formulating the Government's position on the bill.

The Hon. AILEEN MacDONALD (14:41:11):

The object of the Property Services Council Bill 2023 is to constitute and confer functions on a property services council and for related purposes. The Opposition opposes the bill. As we have heard from the Hon. Mark Banasiak, the bill seeks to establish a property services council that would take over many regulatory functions currently overseen by NSW Fair Trading. The council would also advise on matters relating to the real estate and property sector. Further to that, the council would have a board consisting of a range of real estate industry, consumer, tenant and strata stakeholders in its make-up.

As the member has indicated, the bill on its own will not solve the current issues we face in housing, especially affordable housing. The member indicated he had previously introduced a bill that would reform the property services industry in New South Wales in the form of the Real Estate Services Council Bill 2019. While that bill passed the Legislative Council, it was defeated at the second reading stage in the Legislative Assembly. The Minister at the time of debate noted this:

The bill is an attempt by representatives of the real estate industry to claim a greater direct say on the regulation of their members, which they have sought to justify by characterising Fair Trading as incompetent and failing to protect consumers. While it is all too easy to pin the blame on Fair Trading as the regulator, it is difficult to imagine that the industry will investigate its own members with the same rigour and scrutiny as an independent regulator. Without the current level of independence, the potential risk of harm to the public interest is unreasonably high.

Let's put some context around the introduction of this bill. The Real Estate Institute of New South Wales has for many years advocated for this type of bill to be introduced in Parliament. The belief is that the current regulator, NSW Fair Trading, is letting the industry and consumers down. It is worth noting that the real estate industry appears to be the only body that makes this comment. The bill would mean there was a coregulatory model in the industry. The Coalition does not accept that a coregulation model would be the best model to achieve optimal outcomes for consumers, owners and tenants or other stakeholders within the sector.

There is already an effective regulator in the form of NSW Fair Trading. While the Coalition was in government it appointed the Property Services Commissioner in 2021 to assist Fair Trading, which was done to support and improve support for all stakeholders in the industry. The commissioner reports directly to the Secretary of the Department of Customer Service. In August 2022 the Coalition reappointed the commissioner until August this year with a view to the commissioner working with the industry on a model for an independent statutory commissioner to be legislated in the future. However, it was not able to legislate for that prior to the March 2023 election.

The Coalition will support measures that improve standards and oversight but does not believe that the bill will effectively address the concerns outlined. Therefore, the Opposition will oppose the bill. In a previous life I was a licensed stock and station agent, wherein I completed the appropriate courses run by the Real Estate Institute of New South Wales and then completed 20 points of continuing professional development each year in order to retain my licence. That was over 16 years ago. From recollection, it was not too onerous, with almost everyone passing assessments.

Ms CATE FAEHRMANN (14:45:45):

On behalf of The Greens I oppose the Property Services Council Bill 2023. It is a fundamental principle that a bill that goes this far in reforming an industry and impacts tens of thousands of businesses should come from the Government. I acknowledge the Hon. Mark Banasiak has a keen interest in this, but there should be more information, given the many hours of work he indicated he and his office did to bring this private member's bill forward. However, when there is such extensive reform planned it should come from government. It is notable that crossbenchers such as The Greens have not been lobbied by stakeholders to urge us to support the bill. In fact, not even the mover has approached me or other members of my party to see if we would support it. We ordinarily would have been open to discussing the need for it.

In previous contributions to a similar bill in the previous Parliament, the then Labor Opposition supported a bill like this with amendments. Perhaps it is fair that now it is in government, the Labor Party is not supporting it. When now Treasurer, the Hon. Daniel Mookhey, spoke to that bill, he said that it had become clear that it was increasingly difficult for the industry to work in partnership with the regulator, and that senior officials of NSW Fair Trading did not understand the industry. He went on to say:

If the regulatory authority cannot answer basic questions, such as who can be licensed, it is time for reform. The only solution is to establish a dedicated commissioner for the property services industry.

The question is whether that is the only solution, and that sounds like a highly politicised statement. At the committee stage the Opposition moved amendments to include the Strata Community Association and the Tenants' Union, but I do not think that would have fixed all of the issues. We are in a unique position over the next four years to get some legislation passed that does not come from government. We could get legislation passed by working with the crossbench and the Opposition to get support both in this place and the other place. I urge members to consult thoroughly with crossbench members if they want their bill supported, if they want their work supported. We are open to reform. We possibly could have been open to considering a bill like this, but there is not the information or the industry support. On behalf of The Greens I urge members not to support the bill.

The Hon. MARK BANASIAK (14:50:02):

In reply: Just as I did last week, I preface my speech by saying that these comments do not reflect on the Minister who has carriage of defending the Government's position on the Property Services Council Bill 2023. I had to check my watch and make sure that we have not shifted in time and gone to Freaky Friday, because there seemed to be some body‑shifting going on. The now Government, which as the previous Opposition supported the bill, has now taken on the Opposition's position and even the Opposition's excuses for not supporting the bill. I note that for the record.

I refer to some of the Minister's comments regarding examples of bad behaviour by agents. There are good and bad people in all industries. We need to acknowledge that. But the examples the Minister outlined took place under the watch of Fair Trading, the so-called custodians of consumer protection. If we want to look at Fair Trading's expertise in the property sector we only need to look at the shambles of the bill that was passed in this place last week. It had to go to inquiry because one clause was absolutely diabolical: It did the opposite of what the Minister was hoping to achieve. The second part of the bill that was passed had no substance or background as to how it would work. Essentially, we passed the bill blindly, not knowing how it would work practically. This was all done by the so‑called experts at Fair Trading. I will not go into too much more detail about their so-called expertise. It has been well ventilated in my second reading speech with some clear examples of where Fair Trading has stuffed up over the years, and has deskilled and devalued the industry and the work of real estate agents.

I address the Opposition's position, which is at least very consistent with its position when it was previously in government. As a former teacher I am always looking to help provide a bit of positive reinforcement, even though it is probably only a minor improvement. At least the Opposition has been consistent. It has been upfront and honest this time about why it is not opposing the bill. The shadow Minister has given me some reasons about why the bill is not being supported by many of the stakeholders. It is the case that many of these stakeholders have been appeased by the creation of the expert panel. That expert panel would not have been created if we had not pressured the government of the day with the bill in the first place. That extends to the appointment of the Property Services Commissioner by the previous Government. The issue is, just like the Building Commissioner when he was first appointed, the Property Services Commissioner had no standing or recognition in a legislative or regulatory sense.

It was the good work of members in this place, like my colleague the Hon. Robert Borsak, Mr David Shoebridge and even the Minister across from me, who worked to pressure the Government to appoint a Building Commissioner who is the force to be reckoned with that he is today. Currently the Property Services Commissioner has no standing. We are essentially half done with this reform. The bill merely proposes to take the existing commissioner and give them some standing and recognition in legislation. It would still be up to the government of the day to work with the commissioner on their reform agenda and their direction and work with the council on those reforms. I turn to the current Government and its opposition to the bill. I am probably more disappointed in members of the Government than I am in the Opposition, because the Government's opposition now represents a backflip that even the infamous Nadia Comaneci would be impressed by. I highlight some of the comments from the Government when the bill was considered by both Houses last term. The Hon. Daniel Mookhey stated:

I congratulate the member on introducing the bill. The Opposition does not oppose the bill but will be moving amendments at the committee stage.

It should be noted that we accepted those amendments and the bill passed the House with Labor's support. Ms Yasmin Catley, who was the shadow Minister at the time, stated the following:

From the outset, I state that the Opposition supports this sensible bill that will deliver crucial oversight of the property service industry.

Ms Julia Finn stated:

The Opposition supports the original intention of the Property Services Council Bill 2021.

I am disappointed in light of those comments, but I am probably more disappointed about this policy about face when I look at the current Minister, who when discussing the bill with me tried to spin a porky that even the Real Estate Institute [REI] did not support proceeding with the bill any more. Clearly the Minister was not aware of how closely I have worked with the industry and particularly the good people of the REI in drafting the bill. I knew full well that they still supported it because that was the reason I was reintroducing it. I am disappointed that in the first instance that the Minister and I have a chance to interact, he chooses to lie to me. It is not a great way to start a constructive relationship in this place. I do not expect an apology for that. Unfortunately, in this place one gets used to lies. We certainly had our fair share of them from the last Government. But I think he owes an apology to the REI for misrepresenting their views in this case.

The other member I am really disappointed in is Mr Stephen Kamper. He was a member of the lower House whom I had a lot of positive dealings with in the last term of government when we were working on the taxi issues. So it was disappointing to hear about this Government's backflip when I know Mr Kamper had strong support for this reform in the last term. Even during the most recent election campaign he was publicly pledging his party's support for this reform in a room full of real estate agents, including REI representatives. Out of all of the people I am disappointed in, it is probably those two, particularly given what I have just outlined, I am most disappointed in. I note the CEO of the REI is here today to watch proceedings. Perhaps Government members can explain their political gymnastics to him directly on their way out, because they do not seem to be able to answer their phones when the industry is calling and wanting to talk to them. I know the numbers; Regardless, I commend the bill to the House.

The Hon. Courtney Houssos:

Point of order: It was remiss of me not to raise the point of order earlier. During the honourable member's contribution he referenced that the Minister had lied to him. I ask that he withdraw that part of the contribution.

The Hon. Sarah Mitchell:

To the point of order: I am not disputing that that language is unparliamentary but I submit that the Minister should have raised that while the member was giving his contribution, not after the fact.

The Hon. MARK BANASIAK:

To the point of order: I may accept that people have difficulty in accepting the word "lie". I am happy to rephrase and say "was liberal with the truth" or "misrepresented the truth". But the fact remains, he was not completely honest when he made those comments to me. If the Government has a problem with the word "lie", I am happy to withdraw that and replace it with "misrepresent the facts".

The DEPUTY PRESIDENT (Ms Abigail Boyd):

Thank you. I think that would be very useful in moving us forward.

The question is that this bill be now read a second time.

Motion negatived.

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