by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd
Consumer Affairs Victoria (CAV) has a sorry history when it comes to regulating Victorian real estate agents and, in more recent times, licensed conveyancers. It is one thing to be powerless to stop corruption, however it is something completely different when the government regulator not only fails to act, but also refuses to investigate. In this article I will explain how CAV has refused to use its statutory powers, and has itself become a part of the problem.
The bribery problem
Bribes paid to real estate agents for conveyancing referrals – a short history
Client trafficking is a particularly grubby part of the real estate industry, and it has a long history. Long before licensed conveyancers came onto the scene, it was common practice for lawyers to schmooze with local real estate agents in order to win conveyancing referrals. Initially the currency used in the trade of conveyancing clients was the occasional free lunch, supplemented by a bottle of Scotch at Christmas time. If a real estate agent ever had trouble with a client, the “pet” lawyer would quickly step in with some free advice, and may even come to the estate agent’s aid with correspondence on the law firm’s letterhead.
The more successful conveyancing legal practices tended be those with close ties with real estate agents, and the staff of these law firms came to understand the need to favourably consider the real estate agent’s position if a dispute should arise between the firm’s client and the real estate agent. It was not uncommon for a client to wonder why his or her lawyer could not see any wrongdoing on the part of the estate agent, even in the most extreme of cases.
These close relationships between lawyers and real estate agents saw real estate agents gain more and more power over real estate transactions. Eventually, real estate agents in the Melbourne metropolitan area gained almost total control over the contract stage of the real estate transaction. Today, real estate agents in Melbourne expect to be permitted to prepare contacts, draft special conditions, and provide legal advice to vendors and purchasers alike. In fact, a real estate agent who is provided with a contract document that is not to his or her liking feels entitled to “switch” the contract without conferring with the vendor’s lawyer or conveyancer…