Wouldn’t it be lovely to receive notification from the NSW Fair Trading Office that your Real Estate agency was undergoing an audit? It would give you time to ensure documents were up to date, training completed and trust accounts reconciled! NSW Fair Trading doesn’t give you a heads up as many agencies have found over recent weeks. 

In recent articles published by Domain and Indusage reveal that NSW Fair Trading Officers have conducted a blitz on more than 114 real estate agencies in the Cronulla and Sutherland Shire area. Seventeen individual agents were issued fines of $550 each. They failed to complete mandatory Continuing Professional Development (CPD) requirements and four agencies were fined $1100 for breaching NSW Fair Trading laws. Plus one agency reportedly received a $2200 fine for failing to maintain their Corporation License.

During this blitz, known as “Operation Kuban”, Fair Trading officers also exercised their powers under Sections 105 & 107 of the PBSA Act 2002 to examine and retrieve sales records. In a statement released by NSW, Minister for Fair Trading Matthew Mason-Cox:

“A number of agents will be required to produce further documentation in order to avoid penalties.”

“In the last year, NSW Fair Trading inspected close to 500 real estate agencies across the State, and handed out $120,000 in fines to agents and agencies,”
Mr Mason-Cox said.

“NSW Fair Trading will continue to closely monitor the market to ensure consumers are being treated fairly and agents are acting within the law.”

Operation Kuban highlights the importance for maintaining compliance at all times because it shows the need for agents to act quickly and be prepared when NSW Fair Trading come knocking.

Make no mistake – it will probably happen!

Is your office prepared? 

The following 10 minimum requirements will ensure you have everything in place for meeting compliance with NSW Fair Trading Officers if they exercise their powers under Section 112a of the PSBA Act 2002 and come knocking on your door.

  1. Names of License Holders on the Door

    All agents operating under the licensee’s license number must have their names displayed clearly on the front door of the premises. However, certificate holders do not need to be displayed on the front door.

  2. CPD Register

    It is the responsibility of the licensee to maintain a CPD Register. The Register will contain copies of all CPD certificates issued to individuals that are employed within your agency. It shows evidence that they have met the mandatory training requirements. The responsibility to meet Continuing Professional Development requirements lies also with the individual license or certificate holder. As they have declared that they have met these requirements when renewing their license/certificate. Operation Kuban saw 17 Individual agents fined $550 for failure to meet these requirements.

  3. Certificates & Licenses

    Are they current and are any individuals operating on an expired license or certificate? You will be asked to provide evidence.

  4. Corporation License

    Is the Corporation License current and is it displayed within the agency?

  5. Professional Indemnity Insurance

    It is the responsibility of each agency to hold professional indemnity insurance. The minimum requirement of insurance is listed on the NSW Fair Trading website as $1-$3 million.  However, agencies who have experienced NSW Fair Trading inspections report that they need to increase their level of cover to the maximum level of $3 million. Individual agents operating as contractors under this agency also need to hold their own insurance. They must also produce copies when asked.

  6. Bank Reconciliation and Trust Records

    You will need to show evidence of meeting with trust accounting requirements. In some cases clients satisfy Fair Trading Officers with Bank Statements and Bank Reconciliation that are identical and balanced. However in the case of unbalanced/unreconciled accounts they were then asked to produce other trust accounting files to show compliance. When it comes to trust accounting, not reconciling accounts within the prescribed time frame will incur a fine. Additionally, failing to bank trust monies in time and failing to run monthly reports on the last day of the month (30th or 31st of the month) rather closing their monthly reports on the 27th, 28th or 29th.

  7. Sales File and Property Management Files

    You will generally need to produce at minimum 3 files from property management and 3 from sales. Fair Trading will be looking in particular for signed and compliant agency agreements (with inspection reports attached), proof of service for agency agreements, price substantiation/comparable sales and if there is any misleading or deceptive statements in the advertising material.

  8. Policies and Procedures Manual

    Is there a policy and procedures manual on display in your office?  Do all staff know where to locate it? This is an absolute must for any agency and part of the proper supervision guidelines.

  9. Copy of the Act and Regulations

    Keep a copy of the current PSBA Act 2002 and Regulations 2014 in your office at all times. Generally this will sit next to your policies and procedures manual and ensure all staff know where to locate it.

  10. Trust account receipts worded correctly and comply with the Act

    One the other main things agents receive breaches is for Trust Accounting receipts without the prescribed words “Trust Account” on them. For example if you are operating as ABC Real Estate then your trust receipts MUST display the words “ABC Real Estate Rental Trust Account”. Additional requirements for receipts are:

    1. number in numerical sequence
    2. state the name of the person from whom the money was received
    3. Name or reference number of the person on who’s behalf the payment is being paid to
    4. Payment method (eft, cheque, cash etc)
    5. Property address
    6. Payment date

Additional requirements for new agencies

You will need to show evidence of your trust account registration with the new Fair Trading OneGov registration process.

For existing agents that undergo an inspection after the 30th June, you must show your new trust account registration form that replaces the previous Blue Form for opening a trust account.

This list is not exhaustive so you may need to produce documents at any time. Do NOT deny a NSW Fair Trading inspector access to records. It will therefore only aggravate the situation and you may find yourself worse-off than if you just cooperated with their requests. 9 times out of 10 they will try and work with you rather than against you. In conclusion, show them what they want to see and don’t try and hide anything.

Finally, have you experienced a random Fair Trading inspection? Was it scary or did you see it as a reassurance since you were doing everything right? We would love to hear your thoughts.

~ Jane Morgan is the Director of End of Month Angels, a consultancy firm specialising in Trust Accounting. She knows the legislation and the requirements of running a successful Real Estate office. She practiced Real Estate herself for 15 years! Don’t trust just anyone with your trust accounting. Trust End of Month Angels and get back to what you do best – growing your business.