History: In 1997, the then Auctioneers and Estate Agents Council convinced the State Government to allow it to become the main training authority in Real Estate in Tasmania. While the REIT and now Property Agents Board, will tell you that TAFE were offered as an alternative training provider, but that they never responded to requests to provide training, the facts are TAFE were kept well and truly in the dark about the changes instigated by the two industry bodies. By removing TAFE as a threat, the Auctioneers Council and the REIT conveniently formed a partnership that allow them to go under the radar from government, public sand industry scrutiny, but would ultimately bring them unstuck and see the most likely demise of the REIT and result in a radical overhaul of the industry.

The writer happened to be doing his Agents Licence at the time these changes were being effected and while new to the industry thought this was highly questionable. Discussions with then TAFE training co-ordinator Peter Jones always resulted in the same information being provided. Peter and TAFE were given no information or offer to train whatsoever in future training matters.

Ultimately the REIT became the training monopoly and rather than use TAFE to provide a secondary training provider (which was required), they allowed all Agents, Consultants and the public to do training and licensing exams through the Auctioneers Council as a faux secondary provider, a convenient alternative so as not to arouse the inner workings of the arrangement between the two industry bodies.

It is not until you see how the whole system worked and the exploitation and fraudulent behaviour carried out by those in charge, that you truly appreciate the cosy and unsupervised dealings that the two bodies colluded in to acquire millions of dollars.

As is usual, egos and greed intervened and despite an attempt to cover this up in late 2006, the hole has simply become deeper. The only remaining question is what the Government involvement (if any) has been in this whole process or whether or not the whole matter was devised by those in charge of the respective institutions. It is my belief that the Government were hoodwinked and mislead and were inattentive to what was actually transpiring. The result being an embarrassing situation which the incumbent Minister was reluctant to deal with through embarrassment. It is only after constant requests to fix and a change to Ministerial positions that the whole matter is unfolding.

The Auctioneers and Estate Agents Council: The AEAC was a government appointed legislative body designed to administer the industry in an independent manner.

Ultimately it was far from independent and far from acting in the interests of the public and Agents that did not meet their requirements.

Despite being designed for Auctioneers and Estate Agents alike, the Council used a loop-hole in the Act to stack the board with Agents. The legislation provided for 3 persons who were members of the Real Estate Industry, 3 persons from the Auctioneering Industry, a member of the public and a Chairman who should be a legal practitioner.

The last point itself being contentious in its own right as the Chairman John Scott did not practice law as towards the end of his Chairmanship as he retired and was not a member of the Law Society of Tasmania. He did however meet the needs of the Board and the REIT. The Secretary of the AEAC, Geoff Clarke, was emphatic to the point of lying, that John Scott was a member of the Law Society (see attached letter Clarke 1) however the searches of the Law Society of Tasmania (see attached Law Society Search) show clearly he was not a member at all and this of course questions the legality of the AEAC and their validity.

In relationship to the structure of the board, it was loaded with Real Estate Agents excepting the member of the Public and one legitimate Auctioneer, The Auctioneer however just happened to be employed by Roberts Ltd, Tasmania’s largest Real Estate Company. This was possible through the Estate Agents claiming a seat by way of their Auctioneers licence. Certainly not was meant by the Act but convenient for the REIT and AEAC to promote their Agendas. Visits to several of the companies which Board members worked for, showed the words “Auctioneers” was not even displayed in their shop fronts.

The most amazing thing about this is that the majority of these people also were members of the REIT, some playing very active roles(see attached Council Members letter). So in effect you have the independent legislative body being run by the industry and its members!

There were numerous other discrepancies and inadequacies but I will not bore you with them at this time.

The Scam: The legislation provided for the Auctioneers Council (now Property Agents Board) that the Board had the Power to “pay” for training and as such provided funds from to the REIT under the guise of training on a regular basis.

This may well have gone unnoticed but for two reasons. Firstly the REIT charged an exorbitant amount for training and even more for non members, as such should not have required any funding, and secondly through the fact the powers to be simply got greedy and completely careless.

In the attached AEAC newsletters (see attached newsletters 2002-2006) you will see that the REIT were granted $55,500 in 2001, $75,014 in year 2002, $75,000 in year 2003 and $75,000 in 2004. After this date when the Board were told they were going to be removed is when it gets really interesting. In 2005 the amount was increased to $385,175 and then an amazing $512,872 in 2006, off a base of just $75k two years earlier.

The really interesting thing about this from the REIT Annual Report ended 30 June 2008 is that in 2007 only $417,955 in training expenses were incurred and just $360,314 for 2008(see attached information REIT 2008)

To a lay person reading this, you may think that it could be argued that the two large payments were close to the claimed amounts and as such could be substantiated. Not so. Even then what they did would have still been illegal. But what the average person would not know is that the REIT were already being paid for such by fees and charges by users. The REIT was collecting funding from all participants in the education programmes on top of these claims. In fact the REIT has collected close to $1,000,000 in the past two years for “cash receipts for normal operations”. These payments would have more than covered these costs of the training alone. Additionally it has been disclosed by a person/persons that the REIT blatantly claiming false numbers for their training courses and /or claiming for courses and then cancelling such. They have deliberately and fraudulently manipulated the system.

In other words they were completely scamming the system and fraudulently acquiring monies from one body to the other by illegal means. Given that both groups had all the same personnel, it was a very convenient arrangement.

This only relates to “Continuing Training” and not all the other training related and other costs they have claimed.

In 2006 over $1.5m of funding was sent form the AEAC to the REIT under various formats ironically in their last year of operation. Who are these people trying to kid?

The Real Estate Scholarship Board (.. and the dollars keep being siphoned!): The Scholarship Board was organised to place young people in the industry to obtain Agents licences over a four year period. Of course all these personnel went to REIT Board Members Company’s or people closely related to the REIT. A good initiative initially even though it was exploited from day 1, but nothing compared to the farce it has become.

Run by Esley Dunham (who just happens to be a Life Member of the REIT) and Alicia Hutton as its secretary , this is yet another case of acquiring funds through manipulation, fraudulent and illegal means. Ironically also is the fact that Alicia Hutton is CEO of the Property Agents Board, supposedly an independent governing body, yet fair in the thick of things with the REIT.

The funding pattern again is very similar to that of the training in it raises. In 2001 there $128,666 sent across from the AEAC. In 2002 there was $159,557. 2003 was $221,952, 2004 was $367,300, $421,520 in 2005 and $520,706 in 2006. So in a space of three years funding doubled when by all accounts the Scholarship Scheme was falling apart. I do not have specific factual verification of this but the last intake saw just 2 of the 12 candidates complete the scheme, yet funds kept going across and being paid despite numbers falling and diminishing.

The Property Agents Board: The Property Agents Board were appointed in 2006 and supposedly set up to eradicate all the wrong doings of the previous administration and set a course for implementation of the new act. To give you an insight I will footnote the current arrangements.

The current Secretary/CEO Alicia Hutton is also Secretary of the Real Estate Scholarship Board run by the REIT.

The former Secretary of the AEAC Geoff Clarke who was at the helm when all the funds were transferred, just happens to now work for the REIT and also be a “consultant” to the Property Agents Board.

The Chairman of the PAB, John Upcher refused to investigate the previous dealings as “it would be in effect investigating themselves” (refer correspondence PAB 15 October 2007), and we have since found out why. Anyone who refuses to address issues, release information clearing ones name or other could only deem to be covering up matters at hand. Clearly Upcher chose this position knowing full well of what had occurred and all parties wanted it to go away.

• Peter Bushby (REIT President) sits on the PAB tribunal.
• John Soundy (REIT Vice President sits on the PAB.
• Ian Wells (former REIT State President and Life Member) sits on the PAB.
• Elizabeth Gillam, sit on the board and appears to have close ties with Chris Batt as head of consumer affairs. MS Gilliam’s husband is in charge of the affordable housing scheme.

So as people can see the intrinsic web of relationships the fact so many persons have conflicts of interests, yet this appears to be acceptable. It is far from acceptable.

The most interesting correspondence in relation to the Property Agents Board was received from Alicia Hutton who in her writing of March 31 2008 confirmed the fact that the funds had not been used. This left absolutely no doubt of the actions of the REIT and the former AEAC had acted illegally and inappropriately and that the current Property Agents Board had condoned such and were trying to cover up. (see attached letter PAB 31st March).

The Government: After two years of pushing this matter the State Government have finally agreed to carry out an audit and investigation on this matter which is currently under way. Such has been fobbed off time and time again in perhaps hope that it would go away. When an individual or a group of individuals fraudulently acquire over $2m, things just don’t “go away”.

When David Llewellyn was acting Attorney General several months ago, he finally acted proactively in dealing with this matter and organised the audit and investigation to commence.

With a Government reshuffle last month Lisa Singh has now taken up the portfolio of Consumer Affairs. The matter has also been discussed with Paul Harriss MHA who was responsive and concerned with the situation. Messers Hodgman and McKim have been updated with this issue but have done little to push the matter forward.

The likelihood is that both the REIT and the Property Agents Board will be placed under Administration in the near future as the whole matter unfolds and unravels and those responsible will be charged as expected. The whole scenario will become and untidy and mess “he/she did it” as one by one those responsible face the full hand of the law.

How far and deep this matter transcends only time will tell but it is certain to rock the foundations of the Real Estate Industry and bring to account a number of industry personnel who have placed their interests very much on front of professional, ethical and legal conduct required in positions of authority.

I will provide updates as they progress but the media will not be able to sit on this too much longer despite the fact it has some conflicts of interest. The level of Public interest in this matter will far outweigh any short term commercial issues.

Additional documents: (all PDf files)
Press release 9th October 2007
Correspondence to Property Agents Board 3rd October 2007
Correspondence to Property Assets (sic) Board 6th November 2007
Copy of email 15th November 2007
Copy of email 11th December 2007
Copy of email 12th December 2007
Copy of email 12th December 2007 (2)
Copy of email 21st January 2008
Letter from REIT 31st January 2008
Copy of email April 14th 2008
Copy of email 24th April 2008
Copy of email 1st May 2008
Copy of email 15th May 2008(2)

This should not only alarm most members of our industry but also raise questions over the dealings between the two entities and how the Attorney General has seen fit to authorise these payments.

For a considerable period now I have been requesting the new Property Agents Board investigate the actions of the previous Auctioneers and Estate Agents Council, its members and its relationship with the Real Estate Institute of Tasmania, when it became apparent that dealings between the two entities were questionable with the transfer of literally millions of dollars from the Council to the Institute.

Further I have been disputing the legitimacy of the previous Chairman John Scott, who upon retirement failed to renew his practising certificate with the Law Society of Tasmania, in effect making him not qualified to hold the position as Chairman as was his intention by the Act, and further questions his legal capacity to have held this position. If this is correct it makes nearly six years of decisions and operations by the Council invalid.

It became even more questionable when correspondence from the Council under the hand of its Secretary, Mr Geoff Clarke stated categorically that Mr Scott held a practicing certificate (I have included this for your perusal), when searches on the Law Society web site show clearly he did not, and had not for some time. This clearly poses the questions as to whether or not he was a suitably qualified person under the terms of the Act and why the previous Council endeavoured to cover up this matter.

For those individuals that may not be aware, all interest monies earned from Real Estate Trust Accounts are paid to the Property Agents Board, previously the Auctioneers and Estate Agents Council. This is why we receive no interest monies for these accounts as they simply fund the Property Agents Board and previously the Council.

One problem the previous Act had was that it was flawed in this area, in that it stated something to the effect “any interest earned on these accounts must be paid to the Council” or similar. The problem being in modern day banking it had the effect of allowing agents to have their bank fees waived in lieu of having interest paid. As such Agents were not breaching the Act in that they were simply not receiving any interest. This was something unforeseen when the Act was written.

Despite our company choosing to have our account set up as a “no fee/no interest” option with the Bank, and with this arrangement fully conforming to the Act, the Auctioneers Council chose to override this part of the Act and change our account details (without authority) to protect their interests. This was basically illegal. Of course, if every Agent did this no monies would be earned by the Council and it was this that raised concerns and raised even more questions to other practices they may have been running contrary to their authority.

It should be noted that the new Act is much stronger and counters this approach. It had me thinking however that there are still alternative options open to us as Agents which will substantially benefit the industry members. I will mention such later in this correspondence. I raise these points merely to show that the industry is behind the times, needs a radical shake up, and huge opportunities exist for a privatised industry body working for its members.

Combined as a team and utilising our resources, we can radically change the traditional operations. This presents a magnificent opportunity to build wealth and assets up and above traditional income streams, rather than having bureaucracy squander such as appears to have happened previously. This will become apparent to readers later in this correspondence.

The idea that interest earned on accounts be paid to the Council, is an aged practice but does however make some sense for both the Government and the Industry to cover running costs of the legislative body and really could be tolerated if it were utilised to improve the industry as a whole and perhaps assist in housing programmes to the less fortunate or similar.

It is abhorrent however that these funds be paid to an Industry body and will absolutely astonish most within the industry and may well have you questioning what people previously administering the industry at both a legislative and industry level (many who were the same) have been doing with monies earned from your trust accounts.

Giving a little more history, training for the industry prior to the late nineties was administered by TAFE for Managers Licences and consultants exams were done mostly through the auspices of the Auctioneers and Estate Agents Council. This was an inadequate system and poor by standards, where the licensing system in effect had persons with sometimes as little as three weeks training and no real experience going directly into the market place and responsible for peoples greatest assets. Today’s standards are marginally better.

If my memory serves me correctly, around this time the Council promoted the REIT to be an alternative training provider to the TAFE format. Correspondence recently received from the Property Agents Board suggested TAFE were asked to tender for this business, but my discussions with people in the industry at the time, suggested that they were told nothing of such and the training was simply taken away by the Council. Given the 1991 Act allowed the Council to distribute funds for such, this was convenient to say the least, but far from the intention of the Act.

Training as we all know is provided by the REIT, is arguably substandard and is a user pays system, and questions may be asked of value for money. Despite all of this (and I am unsure when it commenced as I only have information back to 2002, but it may well be when the REIT took over from TAFE), the Auctioneers and Estate Agents Council have been sending Council funds from the Council to the REIT for training, scholarships and the likes. Slowly but surely the REIT have established a substantial revenue and ever growing revenue stream from the Auctioneers and Estate Agents Council to the Industry body. As I stated earlier, the amounts are increasing towards $500,000 a year but the industry is changing little. Not only is this totally disproportional from a logical basis, but is totally unacceptable when we examine the inner workings.

The first problem being you have ALL agents contributing to the Council Guarantee Fund by default, BUT not all Agents are members of the REIT. Most Agents would be unlikely to be aware of such and even more unlikely to be approving of such. Most concerning however, these Public monies have been paid to an industry body purely with the industries interests at heart from a legislative body endorsed as a governing body. How has this been allowed to occur?

To be clear, the previous Act allowed for the Council to pay for research and training, but this was written in 1991 when training and research were carried out by independent bodies. It was hardly designed to have people spending the money who were also members of the recipient body. Conflict of interest and exploitation are prevalent.

Records I have found since 2002 indicate that the previous Council paid funds from the Council to the Real Estate Institute on the following basis:

[TABLE=4]

There are a number of issues in relation to these arrangements which should be alarming to Members and non Members alike and the public as a whole.

Many of the Council Members who were responsible for making these decisions were also REIT members.

You would naturally concur that current and past Members may enjoy the fact all this money has been poured into the REIT but this appears to be very much NOT the situation. Had funds been used to better Industry standards and delivered direct benefits to members then this would have been the case, however of those I have spoken to show that resentment is rife among many REIT members.

It is more likely however that questions will now be asked where has all this money gone, and if spent legitimately, then what type of inefficient operation are those administering it running? What benefits are Members actually getting from the REIT when it appears they have been given millions of dollars up and above Members fees being granted along with training fees and other supplementary revenue? It is quite astounding that the REIT were paid training subsidies, yet training is paid by those choosing to use such, and the price is anything but cheap. These funds could be used far more effectively in a private run industry body for diversified investment and asset building which would be real tangible benefits to Agents.

As a non member, a position which now appears with great justification, I am horrified that monies derived from my clients (and those of other non members) are being filtered to the REIT via the previous Council. It must be very clearly pointed out that the REIT is an industry body for Agents and only for the Agents. The Auctioneers and Estate Agents Council (now the Board) is a legislated government body responsible for fairly administering the industry for both Agents and the Public alike, with no vested interest (supposedly!). Based on such, it is grossly improper at the very least, and most probably illegal at the worst that these monies have been paid to the REIT.

The legislative body is designed to represent the industry in an independent manner NOT fund the Real Estate Institute of Tasmania.

Whilst I could get into great depth on this matter, I am sure that most Agents would agree that there are certainly grounds for investigating not only the process, but where these funds have gone. Members of our industry, who are genuinely concerned about promoting our industry to greater levels, have a desire to radically overhaul the industry and build an organisation powerhouse need to be heard in this instance.

One of the most amazing instances is that in 2004 the Auctioneers Council paid the REIT $8352 to promote themselves from monies obtained from Public coffers , in part as retribution that Agents such as Portico and other non members can succeed in the industry without being REIT members. In effect my company and other non members are part funding to advertise against ourselves. We will be referring this to authorities for investigation in due course.

The credibility and promotion of the REIT by certain Agencies may well be something worth reconsidering, in light of the information supplied to you in this correspondence and the probable fall out from such.

You will note also in 2003 they paid $3500 for a Training Room, whether it be hire or decoration I am unsure, but you would have to suggest these are dubious transactions at best and I maintain they are only the tip of the iceberg into what really has been occurring.

Additionally, Agents should be aggrieved by the Scholarship system and the funding spent in this area. It would be interesting to find out which Agencies have benefited from the Scholarship scheme and whether or not any members of the previous Council were beneficiaries of the Scholarship subsidies and what advantages they gained.

On the surface on cannot detract from the intention of this scheme, but the bias, advantages and manner in which it is run is fundamentally wrong.

Just to put this in true perspective, you have monies derived from consumer deposits being filtered through to the REIT and then onto select Agencies to employ individuals in certain offices. Agents not utilising the Scholarship system are in effect subsidising and indirectly paying to employ a person at Agencies that do benefit from such. Great for those benefiting if you can get it!

Apart from the fact this matter needs to be completely investigated and thoroughly overhauled, it clearly shows that the REIT is out of touch in business practices and not up to the standard Agents should expect. You have a grasping organisation totally out of touch with Agents needs, today’s social fabric and clearly acting in total self interest. A new vision and culture change is required.

I believe, we as Agents are now professional enough to look at the big picture and assign all competitive and emotive differences to past history in order to better our industry and better our asset base as individual companies. The market is such that there is plenty of business for all and with substantial changes to the industry, through improving resource sharing and industry efficiencies; we could become far more profitable. This would be limited to non commercial areas only so that it did not effect anti competitive practices. The spirit of competition and market share would remain a healthy facet of our industry.

With a dramatic shift of direction, culture change and preparing a clean slate, the combined strength can radically overhaul our industry, work at greater buying power, increasing combined efficiencies, offer investment into area for its members on a share basis and take back a lot of control that has been eroded over the years through poor management and substandard industry representation. We can build an private organisation that can actually add substantial wealth to Agencies in addition to real estate.

For example if Agents were to combine and source an alternative institution to administer deposits (with permission of both Vendor and Purchaser built into agency authorities), then these funds could be earning interest to both Vendor and Purchaser, and given that Agents have pro actively formulated this, then a percentage would be filtered back to the Agency owned body.

Additionally there are several other large income earning options which also could be earning monies for Agents. I will however treat this in a separate attached document to fully differentiate between the two matters as this is not a sales pitch to advance an agenda. By default however one leads into another.

I ask you to consider all the points mentioned in this letter in a bi partisan manner and give great consideration to supporting an investigation into the funding matters and also the options open to make “Agents Tasmania” (for want of a better caption) so much more than just a real estate service. Let’s utilise the combined power and strength of Agents to divest into alternative areas and provide a real asset to those parties willing to being involved.

Regards

Andrew McCullagh
Director Portico Global Holdings.

“For an Industry that has been fighting for years to improve it’s credibility and demand respect from the public, this sort of activity is exceptionally ordinary, and totally unacceptable”, Mr McCullagh said.

“On the facts presented, the agent has acted totally improperly and unethically, and these sorts of people are not required in our industry. Anyone wanting to continue to improve the industry would be in total agreement”.

Mr McCullagh is particularly critical of the handling of the matter and would like to know why Mr Whitehall has not been dismissed.

“For Roberts to come out and try and put a polish on the story, and furthermore threaten the television show not to assist the Purchaser further, if the story was aired, is actually as wrong as the matter itself”.

Mr McCullagh was very sceptical of the Real Estate Institute, and their silence in the matter.

“It is typical of the Institute to tread on egg shells when it comes to matters such as this. The institute always hope things will go away or take a reactive rather than proactive approach, when issues arise of such a nature”.

“The best they can do, is divert the focus and talk about the number of million dollar properties which will be sold. For this matter to still be an issue after such an extended period, may lead the public to believe that Roberts Real Estate and the Real Estate Institute condone such behaviour, and you wonder why the public have perceptions as they do!”

“On the evidence provided to date it appears that the Law Society may also have some interest in the matter.”

“With all the interest currently shown in Tasmanian property by mainland buyers this is a time when we want to promote the highest ethical standards, and we do not want this type of negative publicity been broadcast across the Australian mainland”.

It is wise to negotiate the contract firstly, as you may find that you have spent $300.00 for nothing if you cannot agree upon the terms of the contract.

The Vendor agrees to guarantee a rental amount of $_______ per annum on the said property from the date of settlement for a period of ____ months from that date. The total guaranteed amount equating to $_______ monthly shall be settled in full on a quarterly basis and any shortfall will be paid prorata to the guaranteed amount and this amount will be paid on the last day of each due month for any shortfall that may be due. Immediately upon the full amount being obtained or the time period expiry (whichever is the sooner) this agreement will be deemed at an end.

It is further agreed that a bond of $_______ be held from the settlement by Portico Property and used as required by the Agent to fulfil the guarantee obligations.

The Property must maintain the management of Portico Property during the guarantee period and the Purchaser must have full landlord insurance at all times during this guarantee or it shall be deemed void.

As a Vendor, you are no doubt aware that eventually your Agent will claim their share of the sale price in the form of a sales commission however what you may not know is that a significant portion of that commission goes solely to the person who sold your house.

Just pause and consider that for a moment. When someone’s livelihood depends on a sales commission, is that person really going to encourage other team members to field enquiries on your property? Are they going to let someone else take a potential purchaser through the house?

Are they going to share the most important information throughout the office or are they going to protect their own interests?

When we sell a property, the sales commission is shared between everyone in the office, irrespective of who oversaw the sale. In this way, we ensure that every Consultant is working towards a common cause: the sale of your property for the best possible price. Every Portico Consultant has access to the information on your property so every Consultant can take enquiries and present you with offers.

We would encourage you to ask other Agents how they get paid. Go ahead… you’ve got the right to know. And once you have your answer you will see that yet again, Portico Property continues to set new standards.

Andrew McCullagh, Director of Portico Property states that there is a very simple solution:

“All Government property sales, whether it be through an agent or by Departmental employees should be advertised in a relevant Government section in local real estate guides. This would be similar to the current process for advertising Government job vacancies. It’s very simple, transparent and it really isn’t rocket science”.

Mr. McCullagh was also critical of the continued debate over the performance of the housing area.

“The procedures Government departments have to go through in both the buying and selling process is totally inadequate for dealing with an entrepreneurial market. The Government is always behind the eight-ball in their methods and they need radical reform to add a business dimension to this Department”.

For many years, Tasmania’s Real Estate agents have generally operated under the guidance of a scale of fees set down by the Real Estate Institute of Tasmania.

However because the charging of fees is not regulated, the system has been open to abuse as some Agents produce their own scale of fees, often considerably in excess of the REIT recommended scale.

Andrew McCullagh, Director of Portico Property, is critical of both the REIT and Agents who have exploited the current strong market.

‘The REIT has put up the recommended scale of fees at least twice since 2000 on the back of significant increases in property values. Hardly fair one would have thought and of course it is always the lower end of the market, those who can least afford it, who ultimately end up paying the most with the current system’.

To bring fairness and equity back to the market, Portico Property is introducing a flat sales commission rate of 3.3% of sale price. This will not only provide a reasonable rate to all sellers but importantly, also develop a benchmark that will allow consumers to compare all other agents.

Mr McCullagh goes on to state:

‘Agents will no longer be able to hide behind the smoke and mirrors that have become so much a part of the industry and all Vendors will now know exactly what they should be paying in commission’.

ANDREW MCCULLAGH
Managing Director
Portico Property