Over the last 2 years, there has been discussions, heated debate and submissions to NSW Fair Trading regarding various aspects of the Real Estate and Property Services industry. Last year we blogged about the ‘The good, the bad and the ugly’ components of the proposed reforms that lay ahead.
A recent reform paper published by NSW Fair Trading has bought to light what we can expect in regards to the 2018 trust accounting reforms. The proposed changes are due to take effect in late 2018. We understand people can be resistant to change, especially when they have been operating the same way for many years. However, with the amount of general audit breaches and fraud cases we worked with throughout 2016 and 2017, we wholeheartedly agree with and welcome these changes. These changes will see more accountability required from licensees, which can only be a good thing.
So let’s get acquainted.
A Summary of the 2018 Reforms to Trust Accounting
Reform to account to all landlords at the end of the month
This new reform requires an account to all landlords at the end of each month unless specifically instructed not to do so. Last financial year, NSW Fair Trading paid out $2.4 million from the Property Services Compensation Fund. This new reform is aimed at attempting to reduce the loss from failure to account to a landlord across the board.
Agents must hold a separate sales and rental trust
This reform may not come as a surprise to many as this is often common practice. It is now just a requirement.
Submit all audits
This reform sees us revert back to 2013 legislation whereby all audits are to be submitted to Fair Trading. Whether they are good or have been qualified, they are all to be submitted.
The online portal system and lodging audits
2018 will see the establishment of the online portal system for lodgement of audits. The obligation to submit will be by the auditor. Fair Trading will also have renewed power to suspend licenses. They will have the power to suspend licenses for failure to lodge an audit or if there is a current fraud investigation underway.
Once again, another welcomed reform change that will see the requirement of greater transparency of fees to clients. Everyone knows where they stand and this will wipe out any rogue and unethical behaviours.
Level of responsibility
The final and most welcome change is Certificate of Registration holders will not be able to handle trust monies. Only those holding the ‘Licensee in Charge’ license category within an agency will be able to authorise trust account transactions,. This is a welcome change in helping to make licensees in charge more accountable for the financial transactions within their agency.
~ Jane Morgan is the Director of End of Month Angels, a consultancy firm specialising in Trust Accounting. Jane knows the legislative requirements of running a successful Real Estate office through her 20 years industry experience. Don’t trust just anyone with your trust accounting. Book an appointment with an End of Month Angel today.