May 4, 2011
By Craig Sisterson
LAWYERS HAVE to take advantage of the opportunity they’ve been given to sell real estate, because it will mean clients get a much fairer and more cost-effective service, while being legally protected throughout the entire process, experienced Auckland practitioner Mike Tolhurst told NZLawyer extra. “It’s a total no-brainer, particularly for property lawyers. Real estate agencies have been a monopoly, but ... it’s going to be good for the industry that they’ve now got competition.”
Glaister Ennor Special Counsel Joel Fotu noted that New Zealand lawyers, under the provisions of the Lawyers and Conveyancers Act 2006 and the Real Estate Agents Act 2008, are allowed to market and sell real estate as long as they don’t charge a commission on the sale of the property. Tolhurst and Fotu, who has experience working for the Land Transfer Office, are part of a team that has recently established ACRES (A Complete Real Estate System), a web-based initiative developed over the past two years, that Tolhurst said offers “a true alternative” to the services currently offered by real estate agents and agencies.
“We have allowed the REINZ to entrench the practice of price-related commissions simply because it held a protected monopoly on the selling of real estate in New Zealand,” said Tolhurst. “Now that lawyers are able to offer an alternative, there is an opportunity to make a real change to the way real estate is sold in New Zealand. The fees being charged by lawyers will inevitably be lower than those charged by most real estate agents, given that lawyers are only able to charge a reasonable fee for their services and are not able to charge commission.” It's unfair to consumers to charge commission based on the value of a property, said Tolhurst. “There is as much work involved in selling a $500,000 property as there is in selling a $2 million property. Based on the principles of quantum meruit (a fair fee for effort expended), there can be no justification whatsoever for [real estate agencies] taking $15,000 plus out of the sale price of a $500,000 property but then taking $50,000 plus out of a $2 million property.” Tolhurst estimated the fees lawyers using the ACRES system will charge for their services could be as low as $5,000-10,000, with all fees being agreed between the lawyer and their client from the outset. Such fees would be substantially less than the three to four per cent commission traditionally charged by real estate agencies for their role in the selling process, and vendors will also receive the additional benefit of their lawyer’s advice from the very beginning of the sale process for no extra cost. “Selling a house through a lawyer will provide a real point of difference to what is currently available to consumers who sell through REINZ agents,” said Tolhurst. Lawyers also don’t need to be members of REINZ. Tolhurst told NZLawyer extra that in Scotland more than 80 per cent of real estate is sold by lawyers, a figure that New Zealand Law Society President Jonathan Temm has also referred to when calling on more lawyers in New Zealand to sell real estate. “Clearly this is an area where lawyers should get involved in an endeavour to reduce the [property] marketing and selling costs to their clients,” said Fotu. “Consumers and society would benefit as a consequence through the striving for efficiency and economy that a system like ACRES will bring to the real estate market.” ACRES helps lawyers guide their clients through the selling process, arrange a comprehensive marketing plan online, control the contractual process, and be on hand to give professional advice in dealing with the house sale and subsequent purchase of a new home. It is a group of lawyers and experts who are “totally focused on ensuring that lawyers are able to increase their income through the real estate selling opportunity”, with the support of the Auckland District Law Society, Inc (ADLS) It aims to build brand awareness – the annual ACRES fee for users will be used solely to market the brand and raise public awareness that lawyers sell real estate. The initiative grew out of discussions at the ADLS in 2008 when Fotu was Senior Vice-President, when the organisation was investigating the viability of lawyers selling real estate. “The idea was to develop ACRES for the use of ADLS members in an endeavour to cut costs of marketing and selling a client’s home and other real estate through a real estate agent,” Fotu told NZLawyer extra. A Working Group was established, meetings held, and a plan submitted, but subsequently other projects became priorities for ADLS, so a small team (Fotu, Tolhurst, former real estate agent Kim Hemus, investment banker Mike Hocking, and legal consultant Grant Aislabie) funded and developed ACRES independently. Although the ADLS hasn’t funded the initiative, it is still “very keen” to promote and support ACRES, and encourage its members to consider selling real estate as part of their legal practice, said Tolhurst. Several Auckland property lawyers have already signed up to use the ACRES system, and Tolhurst is issuing an Auckland-wide invitation for lawyers to attend an official launch on 13 April at the ADLS premises. Long-term, ACRES will “definitely” be going nationwide, he told NZLawyer extra. Recently REINZ chief executive Helen O’Sullivan addressed the issue of lawyers selling real estate, telling The New Zealand Herald that lawyers could provide a “competitive offering” and legal skills, but she questioned their marketing backgrounds (“Lawyers grab property selling role”, 27 March 2011). However, Tolhurst told NZLawyer extra that ACRES would assist individual lawyers with marketing, create a growing network, and provide experienced real estate practitioners that lawyers can contract to provide the “same or better” marketing skills and real estate nous available via real estate agencies. Tolhurst said the aim of ACRES is to encourage every property lawyer in New Zealand to sell real estate. “ACRES believes that there is an opportunity to take a significant market share for lawyers,” he said. “In doing so, lawyers will substantially increase their bottom lines, which have seen an erosion over the past few years with the undertaking of core services by other providers. ACRES firmly believes that selling property through a lawyer is the safest way to sell what is most people’s biggest asset.” For more information about ACRES, visit http://www.acres.org.nz/. NZLawyer extra, edition 22, 1 April 2011 Copyright 2010 LexisNexis NZ Ltd | Legal | Your Privacy | Site byWebstream