Promise to probe land agent fees

Press, 16 August 1977, Page 1

Promise to probe land agent fees

PA Auckland Mr Muldoon says that he will have a hard look at the increased real estate agents fees, announced yesterday. The increases — up to 33 per cent — were announced by the council of the Real Estate Institute of New Zealand, the day after the freeze on professional fees was lifted.

Questioned in Auckland last evening Mr Muldoon said it was a “very superficial assumption” that land agents fees had gone up by a flat one-third.” He promised that he would examine the increases very closely, to see whether they were justified.

If the Government considered the fees excessive, then regulations would be immediately brought in freezing the agents’ fees at the level applying before Sunday.

The new scale of fees, which will push up a land agent's average commission from 2.6 per cent to about 3.5 ner cent took effect yesterday.

The revised scale was settled on in April by the Real Estate Institute, but could not be adopted until the freeze on professional fees expired.

The national president of the institute (Mr T. F. Molesworth) said that the increases were "modest," and the minimum necessary to help real estate agents recover their position “relative to similar professional groups.” The commission on freehold homes would now be 3 per cent of the selling price, plus a basic fee of $lOO, compared with the previous scale of 5 per cent on the first $lOOO and 2] per cent thereafter, up to $lOO,OOO. Not all fees had risen, Mr Molesworth said. Commission on residential tenancies had not been changed, and the maximum commission on long-term leases had been reduced from 15 to 12| per cent of a year’s rental.

Charges for mortgagee sales cancelled seven days or fewer before an auction had also been reduced, he said.

Mr Molesworth said the new scale was the first change “of any conseouence” since 1934, and full documentation and explanation had been provided to the Government. Land agents’ income, as a percentage of the value

of the property sold, had “dropped seriously.” “Average commission earned on all sales decreased by almost a third from 3.7 per cent in 1950 to 2.6 per cent in 1976,” he said.

“The revised scale will yield about 3.5 per cent, thus recovering most, but not all, of the lost ground.” Mr Molesworth said the deterioration in agents’ income had been less noticeable when property values were rising. But with a combination of rapidlyrising costs and a market fall it had become a “real threat” to the viability of many well-established and efficient companies. He said the institute had negotiated with successive Governments, seeking relief. but each time political decisions had blocked any movement.

As long ago as 1971 the then Minister of Justice (Mr Riddiford) had agreed in principle to an adjustment, and suggested a revised scale similar to that now introduced. However, the position had remained unchanged until the Real Estate Agents Act, 1976 gave the institute the responsibility for setting charges.