Auctioneers and House Agents Bill, 1973 [Seanad]: Second Stage.

Minister for Justice (Mr. Cooney)

Before I formally move the Second Stage of the Bill I should like to welcome Deputy Andrews to the seat opposite and I look forward to happy relations with him in various matters of mutual concern.

I move: "That the Bill be now read a Second Time."

Before describing what is in this Bill, I would like to indicate the present position regarding the employment of and remuneration of auctioneers and house agents. Normally, the cost of the services of a person having a special skill or offering a special service, is borne by the person employing him. This, however, is not the case in many transactions where the services of an auctioneer or house agent are availed of. The custom in this country, with certain exceptions, is that the purchaser ordinarily pays the auctioneer's or house agent's fees. In other words, the person who employs the auctioneer does not pay him, though, as his employer, he is legally liable to do so. Instead, he passes over this liability to the purchaser.

This practice means that the cost to the purchaser of the property in question is increased by the amount of the fees. Of course, it is also increased by the stamp duty, if any, payable and by the legal costs. There is one exception to this practice and that is sales in Dublin by private treaty, where the fee is borne by the person employing the auctioneer, namely, the vendor.

The fee which auctioneers customarily charge is 5 per cent of the purchase price with one exception, this again in the case of sales by private treaty in Dublin, where the fee charged is 2½ per cent of the purchase price. As I have already said, these fees, with the one exception mentioned, are passed to the purchaser. In addition to his fees, the auctioneer usually has a claim for out-of-pocket expenses incurred, those usually being the cost of advertising the land for sale. The practice is that these are recovered from the vendor, that is, from the person on whose behalf they have been incurred.

You will have noted that the fee charged is a flat percentage and that it is charged at the rates mentioned irrespective of the size of the purchase price or the complexity or difficulty of the particular transaction.

The extent of the service given by auctioneers and house agents varies according to the circumstances of particular transactions and remuneration is not related to the work actually done in individual cases. The fees can be, in cases, totally out of proportion to the work done. The system whereby a flat percentage rate is charged irrespective of the value of the property is, in any case, open to serious criticism, particularly in the case of land and houses, which have appreciated so enormously in value in recent years.

Auctioneers' fees charged as a percentage of the purchase price have an inflationary effect. To put it simply, present practice means that the price of a house is inflated by 5 per cent in most cases and this pressure falling as it does on a very vulnerable section of the community, the wage-earner setting up house, is a significant factor in the entire inflationary spiral. Furthermore, the custom of charging the fee to the purchaser coerces him in practice into accepting the amount thereof without question or running the risk of losing his purchase if he bargains over the fee.

This whole area of house purchase is a very sensitive area in the context of inflation and, because that is so, the Government in their budget considerably reduced, and in some cases totally abolished, stamp duty so as further to ease the lot of the person purchasing his own house.

In the Seanad I gave as an example the case of a £7,000 house. Prior to the budget a purchaser would have had to pay stamp duty and auction fees. The pre-budget stamp duty was £210 and auction fees, assuming the transaction took place outside Dublin, came to £350, a total of £560, which the purchaser had to find in addition to his purchase price and the legal fees. You will agree that this was a substantial sum for a newly-married man to find setting up his own house or for a family man moving from a rented apartment into his own house.

The budget reduced the stamp duty in this instance to £100 and when this Bill becomes law the purchaser will be relieved of auction fees of £350, giving a total relief of £460. The legal fees incidentally, assuming a title in the Land Registry free from equities amount to £80.

I now turn to the Bill itself. The Bill has two basic provisions. It first proposes that, save in certain specified cases, contracts whereby a purchaser, lessee or tenant is made liable to pay the fees and expenses of an auctioneer or house agent shall be void. The second provision proposes to increase from £5,000 to £10,000 the fidelity guarantee bond or deposit which must be maintained in the High Court by auctioneers and house agents. I will now go on to deal with these provisions in turn.

The Bill proposes that, with one exception, any provision in any agreement or contract relating to the sale, lease or letting of property, other than personal chattels, whereby the purchaser, lessee or tenant is required to pay the auctioneer's or house agent's fees or expenses shall be void. The exception is the case where the auctioneer or house agent has been retained by the purchaser, lessee or tenant to act for him and has not been so retained by the vendor, lessor or landlord. I feel that in the latter cases it would be unfair to an auctioneer or house agent unless such arrangements are excluded specifically from the provisions of the Bill.

A question arose in the Seanad as to whether a purchaser, who through ignorance, paid auctioneer's fees could recover the fees paid. While I was advised that the probability was that such a person could recover, I have amended the Bill in a way that puts the question of right of recovery beyond doubt.

I am primarily concerned with houses and lands and I specifically excluded personal chattels from the scope of the Bill. In consultation with representatives of the auctioneering profession, the question of conacre "lettings", as they are called, was raised. I am advised that a conacre or agistment arrangement does not constitute a letting but is rather in the nature of a licence and that consequently such an arrangement is not affected by the Bill.

A detailed examination is at present being carried out under the powers in the Prices Acts of the fees charged by auctioneers and house agents. This involves consultation with the profession. The powers exercisable under the Prices Acts do not, in any event, extend to directing that the vendor, rather than the purchaser, should be responsible for the payment of auctioneers' or house agents' fees and that is why this measure is being introduced now. The proposal in the Bill would not make it unlawful, in the sense of making it an offence, for an auctioneer or house agent to contract with a purchaser for the payment of his fees; it would simply make any such contract void and hence unenforceable. The main area of concern relates to the sale of property, that is, houses and land, and accordingly the provisions of the Bill are, in effect, confined to transactions in real estate.

I recognise that if the vendor has to pay the fees the net cost of the property to the purchaser might increase but, on the other hand, the vendor who employs the auctioneer or house agent is in a stronger position to bargain for a fee commensurate with the job. This will probably lead to a reduction in fees; and even if fees then are passed to the purchaser, the eventual amount which the purchaser will have to pay will be less and it is not unreasonable to assume that in many cases it will realistically be related to the amount of work involved in the particular transaction. It has been argued that there will be no real saving to the purchaser and that the vendor will increase his asking price or his reserve by the amount of the fee he has bargained with his auctioneer. I am confident this will not happen because the market prices which determine the price of a house will not tolerate an excessive asking or reserve price. The vendor who would do this to a significant extent would find himself with his property left on his hands as potential purchasers would be put off by his inflated price.

Generally speaking, it is far less onerous for a house owner to pay agent's fees out of proceeds of sale than, as at present, having to raise them over and above the price of the house. The latter might be more acceptable if the price were correspondingly reduced but I do not believe that this can be shown to happen in the normal case. The price paid is usually the full market price regardless of liability to pay commission and I believe this situation will continue to obtain after this Bill is enacted. Furthermore, the proposal in this Bill will not inhibit those vendors who wish to do so from selling their houses without an agent. At present vendors have no real reason for doing this. I have no particular reason to make proposals to encourage people to sell their own houses privately, but on the other hand I do not think a system which actively discourages this is either economically or socially desirable.

I will now pass to the second object of the Bill. Auctioneers and house agents are required by law—the Auctioneers and House Agents Acts, 1947 and 1967—to maintain in the High Court a fidelity guarantee bond for £5,000 or to lodge this sum with the High Court. In practice, almost all auctioneers and house agents are covered by bonds, collective or individual. The figure of £5,000 was fixed in 1967, the figure fixed in 1947 was £2,000. The bond or deposit is required to provide a form of insurance for the public in view of the fact that clients' money is regularly held by auctioneers and house agents pending the completion of transactions.

Having regard to appreciation in the value of property in recent years, the figure of £5,000 now appears to be too low. This view was borne out during the Committee Stage in the Seanad when several Senators expressed the opinion that the increase to £7,500 originally proposed by me was too small.

Having considered the points made by Senators I decided to introduce an amendment raising to £10,000 the amount of bond or deposit which must be maintained in the High Court. I realise of course that any figure arrived at which is still within the bounds of reason can be faulted on the ground that it is insufficient to meet all possible contingencies.

The fact is, of course, that in order to provide complete insurance against defalcations an elaborate compensation fund such as is operated by solicitors would be required. In the course of discussions I have had with representatives of auctioneers and house agents I have suggested that consideration be given to establishing such a scheme and in due course I would be prepared to consider any proposals put forward in this regard. I understand that the current premiums on bonds for £5,000 are not unreasonable and that a collective bond at a very reasonable figure is maintained for members of the Irish Auctioneers and Valuers Institute. I should add that no claims have been made against these bonds in the past five years. The Auctioneers and House Agents Act, 1967, includes a provision requiring auctioneers and house agents to keep separate client accounts and stipulates the manner in which these accounts must be kept. Despite these safeguards it was thought desirable at the time that Act was introduced to increase the amount of the guarantee bond or deposit from £2,000 to £5,000.

In the context of the amending legislation which is now being introduced I consider that the amount of the bond or deposit should be increased to £10,000.

I have now covered the two objects of the Bill in some detail and I accordingly commend the Bill to the House.

Mr. Andrews

May I thank the Minister for his remarks of welcome to me as Opposition spokesman on Justice. While I will be responsible and reasonable, I cannot guarantee the Minister that I will agree with him on every point. I would imagine the Minister will agree with me that that is what opposition is about, so long as it is based on reason.

It is the policy of the Fianna Fáil Party to support the principles of this Bill. The Fianna Fáil Party supported the Bill in its entirely in Seanad Éireann. During the discussion on the Arts Bill here concern was expressed that the Bill did not go far enough. With the indulgence of the Chair and the patience of the House it is my intention to express concern on this Bill. Since becoming spokesman on Justice I have had an opportunity of examining the structure of the auctioneering trade and I believe we are missing an opportunity to restructure the whole field of auctioneering. Since becoming spokesman a number of matters have been brought to my attention. Possibly between now and the Committee Stage I may table a number of amendments.

The Minister mentioned that the fidelity bond is to be increased from £5,000 to £10,000. We welcome that proposal but, in common with quite a number of auctioneers who have expressed concern about the actual figure of £10,000, we believe it could have been increased to, say, £20,000. We believe that within the auctioneering profession as a whole, assuming that the auctioneering profession would be a united whole or entity, there should be a common fund which would meet claims from time to time. At present, as I understand it—the Minister and other Members of the House who are more experienced in this field than I am may correct me if I am wrong— the bond is confined to the amount expressed on the bond and no more and the person actually holding the bond is the only person liable. This to my mind is a rather inequitable situation. A vendor, after the introduction of this Bill, may go along to an auctioneer and find himself in trouble relating to money he has given to that auctioneer. Yet the vendor will have no action against the auctioneer except to the amount of his bond, although there may be a considerable sum of money in excess of the bond itself involved. I am subject to correction on that point.

The Minister stated that there has been no claim against the bond for a number of years. We are not in any way questioning the integrity of auctioneers. On the contrary. It is proper that we should point out that there has been no claim against the bond of auctioners for the last four or five years because there is a fashionable point of view abroad, a doubt in the minds of people in regard to auctioneers. Therefore, it is well to bring out that point.

I would also ask the Minister, if not on this Bill then at some time in the future, to consider the possibility of introducing a Bill consolidating the 1947 Act, the 1967 Act and this small but important measure which is before us today and to ensure that there will be a common fund from which compensation would be paid to an individual who may be hurt by some transaction. That is not a new principle. The Minister on becoming a Minister had to give up his practice as a respected solicitor. He is fully aware of the position relating to his profession. Solicitors pay an annual fee into a common compensation fund and if there are claims to be met this fund meets them.

We welcome the transferring of the burden of paying the fees from the purchaser to the vendor. We believe this is a socially just principle. The Minister has also outlined the history of the fees relating to auctioneers. He stated that the overall fee, with one exception, is 5 per cent. Need I remind the House that the fee itself has no statutory effect? Apparently it has arisen by custom, usage and convention.

The exception to that principle is that in the Dublin area, and by private treaty, the fee is 2½ per cent. In this instance the vendor pays the fee. This Bill proposes to extend that principle nationwide. I believe the vendor should pay the fee. He is in a far stronger position to negotiate with the auctioneer on his own terms. By definition the purchaser comes now into the transaction. He is negotiating with the auctioneer and the vendor and, consequently, he is in a weaker position. The Bill, properly, seeks to cure that situation. We welcome the curing of that situation.

I must express my concern about the total inadequacy of legislation relating to the proper structuring and functioning of the auctioneers' and house agents' profession. As we know, over the years this country has become a very attractive area from the point of view of industrialists. People coming in here from other countries who wish to buy houses raise their eyebrows when they are asked, as purchasers, to pay the fees. I would not be so much concerned about that in the sense that they are coming from countries where the practice is that the vendors pay the fees. We are bringing out situation into line with that. My concern and worry would be in relation to newly-weds, younger people setting out on a long and difficult economic road. My concern would be for our own people, the people I have just described who are purchasing a house. In this instance it is proper that the vendor should be asked to pay the fee rather than the purchaser.

I have studied the Bill and I have had a number of representations from auctioneers, particularly from the Irish Auctioneers and Valuers' Institute. May I state here and now that I did not meet them formally but in my capacity as a Deputy received a circular from them. Every Deputy in the House received a letter from the Irish Auctioneers and Valuers' Institute dated 18th July, 1973, and headed "Auctioneers and House Agents' Bill, 1973". Basically it agrees with my thinking on the proposal before us. I will quote a number of paragraphs, with your permission, Sir. It states:

Dear Deputy,

I am writing to you on behalf of the Irish Auctioneers and Valuers' Institute which has a membership of about 800, and represents practically all the long-established Auctioneers in the country. I feel, therefore, that the views of my Institute might be of interest to you in considering the above Bill.

We welcome the views of this organisation and, indeed, of any other organisation who may wish to offer a point of view in relation to this legislation or any other legislation that comes before this House. The view expressed in this letter is of benefit and help to us as Deputies in coming to our decisions on matters of this nature. The second paragraph reads:

My Institute does not oppose either section of the above Bill and has already met with the Minister for Justice and explained firstly the desirability of having the amount of bond increased from the proposed £7,500 to as much as £20,000, and secondly the obvious need for some test of professional fitness to be applied to applicants for Auctioneers' Licences.

Here we have a responsible auctioneers' organisation asking us to consider legislation in regard to some test of professional fitness to be applied to applicants for auctioneers' licences. This is an extremely frank and honest request from this institute. To point out that all is not lost in the auctioneering profession, for the benefit of the House I might quote the penultimate paragraph in the letter. It goes as follows:

For a number of years the Institute has provided a course of professional studies for student members, and prior to that the system of articled apprenticeship obtained. It has always been the aim of the Institute (formerly the Irish Auctioneers and Estate Agents Association) to maintain the highest possible standards of professional competence and conduct. The Institute has, from time to time, and especially on the occasion of the introduction of new or amending legislation affecting Auctioneers and House Agents, approached various Ministers for Justice with a view to having suitable legislation on the point of professional fitness.

There is another paragraph in the letter suggesting an amendment to the Bill before the House at the moment. It is our intention, again with the Minister's co-operation, between now and Committee Stage to examine very seriously that proposed amendment to the Bill. I might put the Minister on notice that we will be looking for a fortnight or three weeks to discuss and consider possible amendments.

The 1966 Bill did not become law until 1967. It might sound rather extraordinary to say that in the 1967 Act there was enshrined for the first time the principle of the keeping and preservation of accounts, clients' accounts, priority of claims to clients' money, and so on. In view of the call by the Irish Auctioneers and Valuers' Institute in the letter sent by them to me in my capacity as a Deputy, we might consider other reforms also.

I have already called for a consolidating Bill in relation to the whole field of auctioneers. Our thinking on this matter is that, in addition to the reforms suggested already, consideration should be given to the possibility of a board being set up under legislation to perform the functions in the Bill, the setting up and maintenance of a register, and the establishment and carrying on of schemes of education and training courses. The institute, the organisation of which I have most knowledge, is indulging in this proper type of activity. This lends status to the calling and gives the type of person coming into the profession an opportunity of giving himself a very thorough grounding in his calling.

In addition to the establishment and carrying on of schemes of education and training courses we would suggest the provision and supervision of courses and lectures for the further education of auctioneers and house agents, the establishment and carrying on of schemes for the giving of scholarships, bursaries, prizes and other awards to persons wishing to become auctioneers and house agents, the holding and organising of conferences for house agents and conferences and exhibitions relating to auctioneers and house agents and their duties. This appears to be part of the function of the programme of the Irish Auctioneers' and Valuers' Institute. We welcome that. This should be enshrined in future consolidating legislation along with the principle in the Bill concerning the transfer of auctioneers' fees from the purchaser to the vendor. That does not seem to be acceptable at this time. I would urge the Minister to activate his Department within the next 12 months. Maybe I am asking too much of him now. I know his Department are working to full capacity in relation to other matters. But I would urge him to consider these proposals, proposals which are not specifically my own but arose out of discussions within our party.

As the Minister says, there is nothing in the Bill which in any way changes the fee. It is not a statutory fee; it never was and, as stated already, it is merely a matter of custom. Again the vendor is in the position to make the best practical deal in regard to the rate of charges. The vendor would be in a stronger position to negotiate a fee appropriate in the circumstances. The vendor and the auctioneer are better matched in the market than the auctioneer and purchaser. The give and take of the market will ensure that a negotiating fee can, with the least possible danger of injury to the persons involved, be negotiated between the vendor and the auctioneer.

The manner of payment proposed in this Bill, as I understand it from my researches into this field, is not a new principle. There is a principle enshrined in the Revisionary Leases (Ground Rents) Act, 1967, similar to the provision in this Bill. That section provides that in future any contract which requires one party to a lease to pay the costs of another party would be void. The principle, therefore, is precisely the same as that in this Bill. The principle is that the person retaining services or ordering the work is the person who should pay for it.

On the matter of the scale of fees, the Minister mentioned the Prices Act. I would mention the Prices Commission. It would be very difficult to write a scale of charges into the statute. Ideally this would be the correct way to do it, but due to the variations in the type of property and services any fixation of charges would be more appropriate to the National Prices Commission. There is no reason why the National Prices Commission should not look into the position in regard to other professions. I am not isolating the auctioneers for special treatment; quite the contrary.

In his speech in the Seanad the Minister mentioned, directly or indirectly, that this measure was part of the campaign for the control of prices in which his colleagues were engaged in relation to other matters. With respect to the Minister, I do not follow that line of thinking in regard to the house purchase field. If the Minister considers this Bill, as he mentioned in his opening remarks, to be in some way anti-inflationary, I suggest that that is a wrong interpretation of the situation. Auctioneers are genuine, honest and bona fide. Because of the inadequacy of the deposit, about which we have spoken, and the manner in which a person can become an auctioneer, it is fair to say that in some instances licences have been taken out by certain individuals to deal with one particular transaction. I have no evidence myself to this effect, but somebody informed me of this recently.

If one is discussing present standards and looking for a proper and efficient administration, one must set down very rigid rules relating to the profession itself. If one has not that rigidity one will not have a proper profession. The profession should be very difficult to enter. We should have the same standard of entry into this profession as we have for others—dare I mention the legal profession to auctioneers—the legal profession, accountants and doctors. This would lend greater status in the eyes of the people to the whole auctioneering profession and I use the word "profession" deliberately.

I should like to thank the House for listening to my remarks with patience. There are a number of my colleagues who are members of the auctioneering profession and they will no doubt give their views and bring their considerable knowledge to bear on this Bill. They may disagree with some of the views expressed by me on the Bill. We are supporting this Bill and request the Minister to give us more than normal time to discuss within our own party the possibility of amendments, amendments which I have already stated we may table, but we reserve the right to take that action.

Mr. Esmonde

I find myself in disagreement with Deputy Andrews on one matter and that is whether this Bill is anti-inflationary. The Minister in his introductory speech on the Bill gave figures for a typical £7,000 sale which would cover many family home purchases by young married couples at today's prices. I have some experience of the purchasing and selling of property in the way of my profession. It has been for a number of years always assumed that if a person asked a solicitor or lawyer what it was going to cost beyond the purchase price— this is before the last budget—the usual reply given was: "Allow for another 10 per cent". That is a rather wicked addition for a young married couple, going possibly into their first real home, to have to meet on top of the price that they pay for their house. That is made up of the auctioneer's commission which they as purchasers have to pay, the solicitors' fees, and sometimes counsel's fees if the matter is of some difficulty, the stamp duty, and the matter that was not specifically referred to by the Minister, the legal fees and stamp duty associated with the mortgage on the purchase. By and large, the average case has meant another 10 per cent. Where property is for sale you may have competing bidders. What people are concerned with at the bidding stage is the market price of the property, but when they are finished there, they then have to provide 5 per cent on top of that for the estate agent or auctioneer, and that works out at approximately 50 per cent on the added cost of a sale.

I think it is only right that the person who is selling the property and getting the benefit of the money should be made responsible, and I would certainly be all for this Bill on that ground. I would also be in favour of it particularly because of its anti-inflationary effect, as it does not add to the price of a house and, more important, does not add to the price of the house to that section of society that is least able to bear it.

As Deputy Andrews has correctly pointed out, there is no legal sanction for the 5 per cent. It has grown up over the years as a matter of practice and is accepted in business and trade, and one can probably say in many circumstances very unhappily accepted, with no option but to accept it. If one can call that an acceptance, then that is the meaning of the acceptance given to this rate.

Let us throw our minds back a little bit. The people who used to buy and sell property were people with capital resources. A certain section of society were the property owners. Today every man, no matter what grade he is in society, no matter how humble his circumstances are, is a possible purchaser. I think, although it is not strictly relevant in this Bill, it is an argument for the transfer from purchaser to vendor of the responsibility for the fee. Possibly the reason for the 5 per cent having been accepted, is the class of person who was involved in buying and selling property in the past. I do not think it fits in with today's terminology or practice or with the type of people who are now involved in the buying and selling of property.

In my experience valuers and auctioneers do very good work, and particularly in the sale of chattels, which is excluded from this Bill, an enormous amount of work has to be done by auctioneers and valuers quite outside what has to be done in many cases concerning the sale of property, because, basically, there is a big backup service to the sale of an estate, a factory layout or a factory estate. That expense in most cases is not taken out of the auctioneer's commission. It is a net commission to his own pocket, because the practice is that where an auctioneer incurs expenses he submits a bill, in addition to his 5 per cent, for his expenses and outlay. I do not know of any profession that has that situation. This is a matter for prices, but it is also a matter for us in this House to give a reason for endorsing the transfer of this 5 per cent to the vendor rather than to the purchaser.

Mr. Barrett

While, as Deputy Andrews has said, we support this Bill in principle, many of us have our own opinions on it. The first question I would ask is: why the haste in bringing in the Bill? As has been pointed out by the Minister, the Prices Commission are at the moment studying the fee structure of the auctioneering profession. I would have thought it would have been wiser to wait until we heard from this body and then have a proper re-assessment of the whole auctioneering profession or business.

I presume the pressure has come as a result of the publicity given to very big sales which have taken place in Dublin in recent times. In the newspapers you read about some lucky auctioneer in the city selling a pub maybe for £150,000 or £200,000, and everybody suddenly starts calculating, at the rate of 5 per cent, how much he cleans up on this. However, some of us who are engaged in auctioneering know that it is not just that easy. Some of the Dublin firms have done remarkably well in recent years and more luck to them, but this is not at all the case with regard to rural auctioneers. The Minister, who comes from a rural constituency, would appreciate this.

There are over 2,000 auctioneers in this country. Many of them in the west and south of Ireland and the midlands are trying to make a living. It should be remembered that a house which would be selling for £15,000 here in Dublin would command only £7,000 down the country. Even though the house in Dublin at £15,000 is sold by private treaty there are fees of 2½ per cent, which is approximately £375, while fees for the house in the country will be approximately £350.

Most of the contributions in the debate seem to have been about houses and newly married people. I appreciate that in Dublin auctioneering firms, with few exceptions, act as agents for the large building concerns but this is not the case in the country. While house property is not a big factor in our business—we deal principally with land—most of the houses we sell are second-hand houses. Many of them are sold because the original owners who purchased them as new houses are unable to meet mortgage commitments or occasionally there may be hardship cases where a young widow may have no option but to sell her house. I should have thought that in such cases the purchaser would be in a far better position to meet the fees than the vendor. Surely we are not so foolish as to believe that a big development company which employs an auctioneer to sell its houses will not add the auctioneer's fees to the net price of the houses. Those concerns will not be at a loss with regard to the fees.

A point has been made that since the vendor will be the person employing the auctioneer he will be in a much stronger position to negotiate the fee. I find the fact that he should negotiate the fee very interesting. I do not mean any disrespect to the Minister, but how many people who employ a solicitor, barrister—either senior or junior counsel—an architect, doctor or chartered accountant negotiate a fee? I have never succeeded in doing it nor have I heard of anyone else doing so. Why is there all the emphasis on negotiating a fee with the auctioneer—in other words, why hammer the auctioneer on the fee? I do not see why there should be negotiations with the auctioneer about the fee. The profession are offering a service which the public want and they are entitled to their fees. They earn them more often than people believe and with much greater effort. It has been the accepted custom here, particularly in country areas, that the purchaser pays the fees. This is also the custom in some other countries. It is customary in some parts of Germany and France but is not the case in England. In some places the purchaser pays half the fee and the vendor pays the other half.

In my business I have dealt mainly with Irish people and, strangely enough, I have heard little cribbing about paying fees. I fail to see where the tremendous pressure for this change has been coming from. I realise a change is necessary but not in this way. Admittedly when I sell property to English people occasionally they complain and say this is not the custom in their country. Continentals or Americans do not complain about it but accept what is customary here. I do not think we should make this change just because English people complain. In my experience Irish people have accepted this custom and there has not been any tremendous pressure for this measure. I realise that changes must come in every walk of life but they should come in a proper manner.

Some previous speakers inferred that the 5 per cent rate was very high. It is not high by international standards, although I am not saying that everyone who sells a business for £250,000 should get 5 per cent. There are countries in the EEC where there are fees of 7 per cent or 8 per cent. I am not advocating that the fee here should be 8 per cent but I am merely pointing out that by international standards 5 per cent is not as exorbitant as some people would have us believe. If the vendor is put in the position where he can negotiate the fee, it will adversely affect many auctioneers in small rural communities who are having a difficult time even now.

The greatest fear about changing the system of payment is that there will be a tremendous amount of horse-trading within the profession. Auctioneering concerns spring up practically overnight. This is completely legal and the people concerned are within their rights. If a person knows his brother will be selling a farm for £20,000 or £30,000 he can apply for an auctioneer's licence, sell the farm and stay in business just for that one sale. When the vendor is responsible for payment of the fee there will be an enormous amount of horse-trading. It may mean that reputable firms of auctioneers who have given good service to the public—many of them have carried out property valuations under CPOs for which they may not have been paid—will have to compete with a fly-by-night person who may have just taken out a licence. The situation could arise that an established firm might canvass business from a client but a newcomer might offer to sell the property at a lower rate of commission. There will be a general lowering of standards. The people who will cut the fees will not stay in business but, unfortunately, they will put good firms out of business when they embark on this kind of venture. It has been admitted in the statements made here that the vendor will be in a position to negotiate. While that might be all right if he is negotiating with one firm only, it may happen that he is negotiating with many firms and this will be of benefit to nobody. It will not do any good to the service which has been given during the years by the auctioneering profession.

There are small auctioneers throughout the country who are barely able to make ends meet. The last speaker said that auctioneers are about the only people who can submit a bill for expenses on the completion of a transaction. Of course, an auctioneer can submit a bill for expenses but it is only on very few occasions that he will be paid. Advertising today is very costly. If the daily or provincial newspapers were to disclose the extent of the revenue they receive from auctioneers for advertising it would be realised how much advertising costs auctioneers. If a property is sold such expense is likely to be recouped from the client but if for some reason it is not possible to make a sale, there may be no possibility of the auctioneer being able to recoup the cost of advertising. Many properties are advertised but are not sold. This may be due to difficulties concerning title or the client may place an exorbitant reserve on the property which makes it impossible for the auctioneer to sell it. Apart from these difficulties, the person may take away the business from an auctioneer if a sale has not been made within a couple of months. It will be seen, therefore, that auctioneers must carry much advertising for which they are not paid. Many people would be surprised at the amount of expense that is involved even in a small firm.

It is wrong to assert that we are the only profession who submit a bill for expenses of this nature and are paid accordingly. An auctioneer is lucky if he is paid even a percentage of the expenses involved.

As Deputy Andrews has suggested, the way to tackle the problems involved is to form an auctioneers' board that would control the entire business. This should be feasible. There is no reason why the auctioneering profession should not be entitled to run their own profession in the same way as Bord na gCapall control half-bred horses and Bord na gCon control the greyhound industry. Such a board could maintain a proper register and have some control regarding people entering the profession so that there would not be the situation whereby anybody can apply for a licence. That situation has led to the present position of overcrowding in the profession. Such a board, too, could be responsible for school leavers who wished to join the profession.

Of course, our institute are doing a very good job but they are limited in what they can do. A properly constituted board should be able to do an excellent job on the educational side of the business. This is the most important aspect of the business because if there is adequate education young auctioneers will be able to give far better service. Auctioneers should be trained properly but by that I do not mean simply that they are able to stand up on a box and conduct a sale. Their training should include surveying, evaluation and many other ancillary sides of the profession. This can only be achieved by the setting up of a board such as I have mentioned. Such board, too, should be empowered to re-examine the question of the fees structure so that they could make recommendations to the Minister for sanction or otherwise. I urge the Minister to have a further examination of this question particularly when the Prices Commission make their report.

The Bill is totally inadequate to tackle the problems that we believe should be tackled. It is not broad enough in itself. We hope to bring in amendments which may benefit the profession as well as the public. We are conscious of the fact that we are providing a service and that we are at the mercy of the public. Our aim in the profession and in the institute, of which I am a member, is to improve the service we are providing in every way possible.

I hope that the Minister will see his way to setting up a body such as we have suggested. This is necessary in particular to control the numbers entering the profession and to eliminate the fly-by-nights who survive within the profession for only a year or two. My party are supporting the Bill but some of us have our own ideas in regard to it and I hope that the Minister will find these ideas helpful.

Minister for Justice (Mr. Cooney)

I am obliged to the Deputies who contributed to the debate and for the ideas they put forward. The burden of the contributions from the other side of the House is that an opportunity has been missed on the occasion of this Bill to restructure the entire auctioneering profession. This case has been made to me already by the Auctioneers' Institute. They wrote to me on much the same lines as they wrote to Deputy Andrews. I will deal with that correspondence in a few moments.

I am glad that it is accepted by both sides of the House that the basic principle of the Bill, that is the transferring of the liability to pay auctioneers' fees from the purchaser to the vendor, is just and equitable. Indeed, it is so just and equitable that it was never in contention and the auctioneers through their institute—I emphasise that it was through their institute—conceded that because they recognised that the Bill did not seek in any way to impinge on their position in regard to how they operate their business or as to what fees they charge. It is not within the scope of this Bill, which is a limited measure nor is it within the scope of my Department, to move in that area but it was undesirable socially that the more vulnerable or weaker party in a transaction would have to pay a fee, a fee which by custom and not by any statutory basis is, with one exception, at the rate of 5 per cent. When liability is transferred to the vendor negotiations will take place between the vendor and the auctioneer as to the level of fees to be paid.

Deputy Barrett took me up on this and asked why should auctioneers be put in the position in which they are subject to negotiation by their clients when other professions are not in such a position. The reason is that the fees chargeable by the other professions are geared according to the size and complexity of the transaction whereas, in the case of auctioneers, the custom has grown up whereby the fee of 5 per cent is charged irrespective of the size of the transaction. It is a flat fee and it takes no account of the vastly increased values of property in recent years. In many cases it is not proportionate to the work the auctioneer puts into the particular transaction. There may be a minority of cases in which five per cent would not be an adequate fee but there is nothing whatever to prevent an auctioneer negotiating under the new regime which this Act will bring in. There will be nothing to prevent the auctioneer charging a larger fee when he finds himself faced with a difficult and complex sale.

The level of fees is being investigated at the moment by the National Prices Commission which operates under the aegis of the Department of Industry and Commerce. It is not primarily my concern. In their investigation the Commission will, of course, pay full heed to the representations of the auctioneering bodies and I have no doubt they will arrive at an equitable fee structure, bearing in mind the needs of the public. It is not correct to say that, merely because negotiations will follow from the proposals in this Bill, I am asking auctioneers to accept a position inferior to that of other professions. That does not follow since they are not in the same position because they now charge a flat fee while other professional charges are on a sliding scale geared to the complexities of the particular transaction.

There may be undesirable professional consequences in the sense that horse-trading may result because auctioneers may price cut one another and inferior standards may be introduced. This may happen to some extent but it will be to a very limited extent, and it will be compensated for in another area to which I shall refer in a moment. It will happen only to a limited extent. I am prepared to give full credence to the commonsense of the man selling his house; he will not employ a fly-by-night auctioneer or the auctioneer with no back-up facilities, who is in the business in a half-hearted way as a side-line and, because of that, can offer an attractive cut price since he has no overheads. The majority of vendors will go to a reputable firm long established in business, whose integrity is beyond doubt and whose experience in the technical aspects of the business is superior to that of their competitors. That is the type of firm which will get the vast bulk of the business. Occasionally a person, for reasons of cupidity, will no doubt engage the fly-by-night and he will suffer accordingly, but word does not be too long spreading as to the proficiency, or otherwise, of those engaged in the profession.

Another reason why I think there will be a positive advantage in this for the profession is that there are too many ad hoc auctioneers at the moment because of the present practice of the fee being paid by the purchaser. It has happened—Deputy Andrews indicated that it had been brought to his attention and I can confirm what he said— that a person has taken out an auctioneer's licence for the purpose of effecting a single sale. That usually happens in the context of a farmer selling a substantial farm. He has an articulate and energetic neighbour and he suggests to the neighbour that he should take out an auctioneer's licence and sell his farm for him, thereby getting 5 per cent on the sale. This has happened. The auctioneer collects the 5 per cent from the purchaser. If the obligation was on the vendor, I doubt if he would ask his neighbour to take out a licence and then negotiate the fee with him. That simply would not arise and the figure of 2,000 auctioneers which Deputy Barrett mentioned would be vastly reduced. Only 800 of the 2,000 are members of the institute.

There has been a considerable increase in recent years in the number of licences granted and this increase is due to the number of ad hoc auctioneers who have taken out licences for single transactions; they get a taste of easy money and they continue in business in an informal and half-hearted way. As well as that, people who had been toying with the idea of becoming auctioneers and who learned of the possible restriction on entry into the profession decided to beat the proposed legislation and took out licences. This may be another reason why the number is so high at the moment. Many auctioneers are very reputable people who carry on a reputable business, with very high standards. I offer the reasons I have given as an explanation as to why there has been such an increase in the number of new auctioneers in recent years.

This brings me now to the question of the control of entry into the profession. It brings me back to the basic case made by Deputy Andrews and Deputy Barrett that an opportunity is being missed to restructure the profession and consolidate the existing legislation. I sympathise with their point of view and I agree with the desirability of doing what they urge, but I submit this is not the proper Bill under which to do it. The Bill is of a very limited character. It set out originally basically to do one thing, namely, to prevent the transfer of the liability for fees to the purchaser and to make the vendor liable. It was felt that the bond was not a realistic figure and if an amendment in that regard could be introduced in this Bill there would be no inconsistency in taking this opportunity to increase the bond. I shall explain later how the figure was arrived at.

I appreciate the concern on the other side of the House for providing a new structure for the profession. This will be a large-scale operation involving provision for recruitment to the profession and subsequent training. It will involve deciding where the academic side of the training will be provided, by whom and at what cost. It will involve deciding on practical training and apprenticeship. That, in turn, will involve deciding over how many years the apprenticeship should extend, how the qualifications of the masters will be determined, remembering that there are at present in the profession, and this is common case, people who are themselves inadequately trained because they are, as I said earlier ad hoc auctioneers who take out licences for single sales and then continue in business. All these matters will have to be examined carefully. When the new entrant has been suitably trained decisions will have to be taken as to the standards required in examining that training. Decisions will have to be taken as to who will provide the examination facilities, who is to be the judge, and when the new entrant finally enters the profession there will be the whole question of control and discipline, the formulation of standards and the enforcement of those standards. It is a very big area.

Because of the increasing volume of property transactions of immense value and the increasing sophistication of the nature of these sales and all the financial sophistications now being employed in the property market area, the need is becoming more urgent to have the auctioneering profession capable of answering the demands of the day. This subject has been mentioned many times recently and one effect of this was to tempt many persons to take out auctioneering licences in case they might need them, in advance of legislation which might restrict their entry into the business. I do not think this Bill is the proper vehicle in which to introduce changes of that magnitude. The amount of research that will be needed to determine exactly what is required will be considerable. Deputy Andrews put his finger on one problem, the resources available in the Department to do the preliminary spadework. I do not concede that this would be the sole task of the Department of Justice. The auctioneering profession should be involved in this and possibly do the bulk of the work.

In this connection I should like to mention the correspondence and conversations I had with the profession, principally with the Auctioneers and Valuers Institute during the time this Bill was in the Seanad and subsequently. The correspondence is, I think, of the same tenor as that received by Deputy Andrews. The institute is concerned at the standard of entrants. They are entitled to be concerned because they ensure that entrants into membership of their institute have certain standards. They have to serve an apprenticeship and undergo certain formal training so that when they come into the business they do so with specialised knowledge. Speaking from the strength that position gives them, the institute wanted me to introduce an amendment to this Bill which, in effect, would limit future entrance to the auctioneering profession by providing that future entrants would have to serve an apprenticeship with a licensed auctioneer, the apprenticeship to be not less than three years or have bona fide service as an assistant for not less than three years.

I have sympathy with the thinking behind that proposition but was unable to accept it because it was altogether too simplistic a solution for what is a very difficult problem. I indicated in further correspondence that it was too simple an amendment and that it would have the effect of limiting entry to the profession without providing any guarantee that the new entrants would have any real training because all it said was that they had to have an apprenticeship or a bona fide assistantship with a practising auctioneer. There was nothing to show the standard of the practising auctioneer or to control the standard of instruction given during apprenticeship or the type of work entrusted to an assistant. They had to be bona fide but that amendment could allow in members who would not be properly trained, and without achieving what it set out to achieve, could restrict entrance to the profession. For that reason I indicated to the institute that I was not prepared to accept the amendment at this stage.

I respectfully suggest to Deputy Andrews who has indicated that he is considering, in consultation with his colleagues, amendments for the next Stage of this Bill that I would be opposed to amendments of that type because they would not solve the problem that he and I want to solve. I think the cure can only come from a detailed restructuring of the profession. The spadework for this must be done by the auctioneers themselves. I indicated this to the institute and they agree to make submissions along these lines, submissions covering qualification for entry to the profession and submissions which would also deal with the matter of controlling the operation of the profession when the standards have been improved and are being practised.

I shall be glad to receive submissions from any party interested. I share Deputy Andrews' concern that in this House we should always be ready to receive the views of people interested in our problems so that we can deal with them from a fully informed or better informed position. Any other persons interested in the future of the auctioneering profession wishing to make representations or submissions on any of these matters are very welcome to do so and I look forward to receiving their views. That is why at this stage and in this Bill —bearing in mind that it is a limited Bill to correct what I consider was a social injustice—it would be inappropriate to attempt to go further and attempt to restructure the auctioneering business generally.

As regards the bond, I concede that as a matter of pure logic, having regard to the size of transactions and the amount of money handled by auctioneers, protection to the extent of £10,000 is hardly realistic. But in addition to that protection, there is also the requirement that separate accounts be kept and that before the certificate of qualification is renewed each year in court an accountant's certificate has to be handed in to show that this requirement has been complied with. That is the greatest protection to the customer—that the books are being properly kept, that there is an accountant in the background to oversee their keeping. Nevertheless, we felt the bond should make some concession towards the decreasing value of money and the increasing volume of transactions. It was for this reason that the figure, after hearing the views expressed in the Seanad, is now set at £10,000. It is a substantial sum of money bearing in mind that the person who is likely to default is probably a person who is not doing a substantial amount of business but may be practising in a half-hearted way and the amount of the defalcation will be proportionately reduced.

I should like to emphasise again what I said in my opening remarks and which was endorsed by Deputy Andrews and Deputy Barrett that in the last five years there has been no claim against auctioneers' bonds. This is a remarkable tribute to the integrity of those in the business. It consoles me in putting forward to the House the figure of £10,000 as being the appropriate figure for a bond. One of the arguments advanced for increasing the bond to say £20,000—even that might not be a logical figure because there is no logical figure in the absence of a compensation fund—attracted me although it was not conclusive. It was that the premium on a bond of that size could be heavy. It might be impossible for a would-be entrant to the profession to obtain a bond of that magnitude. Through no lack of integrity, through no lack of capital a person might find it hard or the insurance companies might begin to be chary of issuing bonds in that amount. I felt that to increase the bond to £20,000 would tend to build a closed shop at the moment for those already in without in any way getting any real benefit for the public.

I think that the entrance to the profession should be determined by a consideration other than the consideration which would arise in that context. It should be determined by proper training and an examination system. I agree with Deputy Andrews that real and full protection for the public is a compensation fund such as is maintained by the Incorporated Law Society. I do not think that such a fund can be set up or that it would be proper to set it up until such time as the profession is restructured and reorganised and possibly given a statutory life of its own. Possibly it could be administered departmentally at the moment but this is a task I would be inclined to shy away from. The need for it, happily—and this is a tribute to the integrity and honesty of the auctioneers—has not arisen over the last five years. I do not think, because of the requirements to separately account for clients' moneys, there will be any change in that happy position. Accordingly, I commend the Bill as it stands with the bond at £10,000.

My reason for not wanting to expand the debate at this stage is that the implications of the expansion are so large that this is not a suitable Bill in which to do it. The amount of time, investigation and preparatory work will be very considerable and I do not think that it is of a nature to permit this Bill to be amended. In conclusion, I should like to thank the Deputies for their very helpful contributions.

Question put and agreed to.

Committee Stage ordered for Wednesday, 31st October, 1973.

Dáil Éireann debate - Wednesday, 17 Oct 1973