Industry conflicted over NSW's proposed commercial property services deregulation

The NSW real estate industry is in conflict over proposals to deregulate the state’s commercial property services sector.

The proposals form part of draft regulations put forward to replace the Property, Stock and Business Agents Regulation 2003, which will lapse on 1 September, 2014.

The Shopping Centre Council of Australia is calling for the removal of licensing requirements for agents dealing with large commercial properties.

“From our point of view it’s classic red tape. It’s dumb, counterproductive regulation,” SCCA deputy director Angus Nardi told Property Observer.

The SCCA argued in its response to consultation on the proposals that the regulations aimed to protect consumers in residential property transactions and were largely irrelevant to major commercial property owners that were big enough to protect their own interests without regulatory assistance.

Nardi said ‘consumers’ in the case of large commercial property transactions were professional organisations such as Westfield Group, AMP Capital Shopping Centres, and Real Estate Investment Trusts rather than individual consumers or small businesses.

But Real Estate Institute of NSW president Malcolm Gunning said removing the licensing requirements would hurt tenants in major shopping centres.

“It’s taking away that level of accountability and responsibility. The Shopping Centre Council’s argument is that it’s not required because [the consumers] are sophisticated but we question that level of sophistication ... Tenants will be more exposed to the dealings of major shopping centres,” Gunning said.

He added it would be difficult to determine where the line should be drawn on which agents needed to be licensed and which did not.

The SCCA proposed that agents should not have to have a license if they were dealing with commercial property worth more than $10 million or that was more than 10,000 square metres in floor space. Agents that were related to the property owner should also not have to be licensed, it argued.

Such exemptions would save an estimated $4 million a year in compliance costs, but affect only 629 commercial buildings in NSW, the SCCA said.

Nardi argued that if licensing requirements for commercial agents were cut, tenants would still be protected by the Retail Leases Act, while owners of small commercial properties would be covered by the new Property, Stock and Business Agents Regulation as they would not be considered sophisticated investors.

But Gunning said some areas fell outside the remit of the Retail Tenancies Act, such as holding deposits, and tenancies that applied to offices within retail shopping centre.

“The deregulation of commercial property agency work would be going further in the wrong direction and would be counterproductive for consumer protection in the commercial space,” the REINSW said in its submission to the consultation.

REINSW said existing licensing requirements were “grossly inadequate” and should be remodelled based on the stricter regimes that applied in the Northern Territory, South Australia and Tasmania.

The SCCA said Queensland’s regulations already exempted large commercial properties and Victoria’s government has agreed in principle to a similar system, and that NSW should follow the lead of those states.

NSW Fair Trading plans for the updated regulation to commence on 1 September, 2014. Consultation on the Regulatory Impact Statement closed in mid June.