We call on the Victorian Government to urgently address the growing issue of kickbacks, referral fees. and incentives in the conveyancing industry. These unlawful practices not only undermine consumer rights but also contribute to significant conflicts of interest, leading to potential financial harm and reduced quality of service for clients.

 

The Issue:

In Victoria, many conveyancers are under considerable pressure to pay significant “referral fees” or “kickbacks” to real estate agents, finance brokers and other service providers in exchange for client referrals. These fees, often reaching up to $500 per file, have become an undeclared source of income for the recipients, fuelling an unethical and most often undisclosed financial relationship between parties. In some cases, these payments are made in cash ‘under-the-counter’ with no questions asked, creating a culture of secrecy and bypassing legal, financial and ethical obligations.

The impact on consumers is severe. Clients are frequently coerced into using “preferred” conveyancers without full disclosure of the financial arrangements, and in many cases, the fees are not disclosed to the clients at all, turning these payments into illegal “secret commissions.” The secrecy surrounding these transactions not only violates laws but also compromises the independence and quality of legal and financial advice provided to consumers.

Additionally, this practice harms fair trade in the industry, with clients being directed away from firms that do not pay for referrals, leaving them unable to compete with businesses that do pay.

 

The Legality of Kickbacks:

When referral fees are not properly disclosed or declared, they constitute a serious breach of several legislative acts, including:

• Section 179 of the Crimes Act 1958 (Vic): Receipt of secret commissions is an indictable criminal offense.
• Estate Agents Act 1980: Violations of sections 48A and 49A by agents who receive undisclosed commissions.
• Conveyancers Act 2006: Breach by paying conveyancers under sections 49(1), (4), and (5).

Despite being illegal under multiple Acts, these practices continue to thrive due to inadequate enforcement and a lack of clarity in the laws governing referral fees.

 

The Practical Problems:

1. Conflict of Interest: Referral fees create significant conflicts of interest. When conveyancers pay agents or other service providers to refer clients, it undermines their independence, and clients cannot be truly represented in their best interests.
2. Pressure on Consumers: Clients are often pressured to use a "preferred" conveyancer without awareness of the underlying financial arrangements. This undermines the consumer's freedom of choice and compromises their legal representation.
3. Poor Quality of Service: Conveyancers who are forced to pay referral fees may cut corners to compensate for the reduced profitability, leading to subpar service and protections for clients. The focus shifts from providing quality service to maintaining a financial relationship with the kickback recipient.
4. Increased Costs: Conveyancers who are pressured to pay referral fees often raise their fees or fabricate ‘disbursements’ to cover these additional costs, resulting in higher settlement and homeownership costs for consumers.
5. Impact on Small Conveyancers: Ethical conveyancers who refuse to pay referral fees are losing business to competitors who engage in these practices, often leading to financial strain or even the closure of reputable firms.
    

A Solution to Protect Consumers:

The solution to this issue is clear: the Victorian Government must immediately introduce legislation to ban referral fees and kickbacks in the conveyancing industry, similar to the provisions in South Australia's Land and Business (Sale and Conveyancing) Act, 1994. This act effectively bans the payment of referral fees and kickbacks and has worked successfully for decades.

We propose that Victoria introduce a similar provision in the Sale of Land Act, 1962, that includes the following measures:

• Banning Referral Fees: Legal practitioners and conveyancers must not pay or give commissions, fees, or other consideration or incentives for referring business involving conveyancing.
• Penalties for Breaching the Law: Any person, agent or conveyancer found violating this provision should face heavy penalties, including fines up to $20,000 per breach.
• Void Clauses: Any Contract clause that requires or authorizes the use of a specific conveyancer or legal practitioner for conveyancing services should be deemed void.
   

The Call to Action:

We urge the Victorian Government to act swiftly to legislate against kickbacks and referral fees in the conveyancing industry. This will not only protect consumers but also ensure that conveyancers can operate without the undue pressure to participate in unethical practices.

By signing this petition, we demand that the Victorian Government prioritize the introduction of new legislation to eliminate conflicts of interest and uphold the integrity of the conveyancing industry.

We stand together to promote a smarter, fairer, and more consumer-driven approach to the conveyancing process in Victoria.

 
Sign this petition today and help bring about meaningful change