December 10, 2013

The long-overdue wind back of the spectacularly counter-productive PAMD Act has been set in train with the introduction to Queensland Parliament of enabling legislation that will also de-regulate agent’s commissions and separate regulation of the industry from that of motor dealers and the like.
The Property Occupations Bill – now awaiting public submissions and consideration by the Parliamentary Legal Affairs Committee – incorporates consumer protection warnings into contracts of sale, eliminate the “drawing attention” requirements and remove the need to attach a form 30 C warning statement or for that matter, any ancillary documents, to contracts.

The Bill also simplifies the appointment of agent process by providing a single form that can be used by any agent for any type of appointment. Additional requirements can simply be included in the approved form. For example, the date for an auction need not be conveyed in a separate form, the information can be sufficiently contained as part of the appointment.

The absurd requirement of the current 22a to state “how services are to be performed”, is gone as is the need to draw attention to the self-evident difference between an open listing and exclusive agency. The draftspersons are to be congratulated on the simplicity of the proposed new regime, with one exception discussed below.

Congratulations too to all of those who have supported the campaign for the removal of the counterproductive PAMDA edifice that has shackled the real estate and property development industries for nearly 14 years.

You may recognise some of the other proposed changes, pressed via Take the law….: a lawyer’s certificate will no longer be needed to waive a cooling-off period; for options, no repetition of warning statements will be required at the time of exercise; and a common-sense change to the definition of “residential property” for determining when the warning statement etc rules apply.

PAMDA was introduced to curb the rip-offs that resulted from marketeering which put simply is a sales process that involves operatives at many levels: from appointment setting for the initial pitch to the prospect, to ‘runner’ for the conduct inspections by the prospect of the marketed product, to salesman to close the deal and get the prospect to sign on the dotted line.

The nasty side of marketeering was the lack of disclosure of remuneration to some shadowy middle-men recruited to the sales process. In many cases, financial advisors – who the buyers believed were acting independently – were actually part of the sales machine.

Since PAMDA, the demise of marketeering has opened the way for “marketing”, a similar process but where all involvements and all payments are disclosed. Property marketing is now a legitimate alternative to conventional agent representation and has developed into a substantial industry upon which many developers rely for the success of their project.

The POB proposes however to merely require “disclosure of interests, which may signal to a prospective purchaser the possibility that the contract price may be inflated and that the actual market value of the property could be significantly lower than the sale price.”

What this extract from the “explanatory notes” to the Bill implies, is that buyers will be adequately informed if marketers who hold developer “put and call” options disclose that fact to the buyer. A marketing “put and call” option is where the marketer must buy the property from the developer if it can not be on-sold.

Sure, this type of disclosure will be useful, but it doesn’t help if the marketing is being conducted under another model. Only some marketing – perhaps 50% – is performed that way. How will other buyers identify the sales process applicable to their purchase?

While it is true that the “commission the seller has agreed to pay the agent is a private contractual matter that does not impact on a prospective purchaser”, it is not true as suggested in the “explanatory notes”, that “the buyer will not be disadvantaged or prejudiced by lack of such disclosure”.

The proposal appears to be to maintain part 3.1 of the existing 27C (agent’s relationships and benefits) but will remove part 3.2 (payments to all involved in the transaction).

Marketeering died because of the mandated disclosure of marketing payments required in part 3.2. Only full disclosure differentiates marketeering from marketing. Of all the naïve, nonsensical and wantonly wasteful measures in PAMDA, only that part of the 27C has had a beneficial effect for consumers.

Those in the development industry pushing so hard to remove the 27C, should think twice. They may lose some prospects out of the sales funnel by openly disclosing payments down the sales chain, but without transparency that part 3.2 brings, the effective and legitimate marketing industry of recent times, will – in the hands of some – revert rapidly to marketeering.

Rip-offs by the unscrupulous will resume and all marketers will be tarred with the same brush. And as happened in 2000, the government of the day will be forced into heavy-handed regulation which will again entangle the entire real estate industry.

The filthy bathwater of PAMDA must be thrown out. Cast it out and the excrement in it, far away. But be careful not to throw out the only thing in it worthwhile at the same time. That worthwhile thing, still alive in the putrid water of the tub, is the smiling baby of PAMDA, the painful but powerful 27C.

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