One bad apple ruins the bunch…

It is unfortunate that there are a small breed of rogue Real Estate agents that continue to ruin the reputation of the industry with the misuse of trust money.

Theft is particularly rife in Property Management. Bond theft is number one on the list of most common misappropriation of funds within the industry.

It is difficult to comprehend but some agents seem to have trouble differentiating between the two. The boundaries seem blurred on whether bond monies should be placed in their trust account or the general account. This is particularly rife in the holiday letting industry because there is no requirement to forward funds to the local bond authority.

The down-low on trust money

Across Australia the rules are clear. Bond money is trust money. If you’re ever unsure about how to treat monies received by the agency then it is always best practice to place it in the trust account. Then you can never go wrong. Other forms of trust monies include:

  • Residential rent paid by tenants
  • Commercial/retail rent paid by tenants
  • Sale deposits paid by purchasers
  • Advertising money paid by vendors
  • Strata levies paid by lot owners
  • Sale options, off the plan sales, expressions of interest
  • Stock & equipment purchases

How low some will go

There have been many instances where agents will falsify tradespersons invoices at the end of the tenancy and make a full claim against the bond. The agent will then pay the funds received by the bond authority to their own personal account. This leaves no trail in the trust accounting software other than the BSB and account number.

There was a case of this reported in a recent article published by RPM Online. It revealed that a Queensland agent misappropriated $1,988 worth of bond money. The agent was found guilty of falsifying evidence and incorrectly receipting funds into the agencies trust account as opposed to depositing the funds into her general account.

Earlier this year, the Illawarra Mercury published an article reporting on an agent that stole $93,000 in rental bonds. This money should have been lodged with the Rental Bond Board.

Stick to the regulations

In NSW there are two distinct time frames for lodgement of bonds. Agents have 10 days following the end of the month to lodge all of the bonds collected in the previous month. If the tenancy is a private rental between the Landlord and Tenant then the Landlord has 7 days from receiving the bond to lodge it with the Rental Bond Board. This varies across the country but only slightly. Penalties also apply within each state and territory for any agents that fail to complete this process.

Steps to take to ensure correct procedures are followed

So as Licensee or Officer in charge, how can we prevent our staff from misappropriation of funds? How is it possible to check that our staff aren’t paying themselves in the trust accounting software? How do we therefore ensure the correct lodgement of bonds? Because our jobs are difficult enough without the added stress of worrying whether there is theft in our property management departments.

Our top 5 ways to combat this issue:

  1. Random audits

    Generally conducted by the Licensee or Officer in charge on the agency’s rental bond ledger and cross referencing with bond authority records.

  2. Register for electronic bond authority access

    Registering in your state which will show all bonds received and held on behalf of your agency. This is a great tool to ensure the lodgement of all new bonds and refund of outgoing bonds.

  3. User restriction controls

    Increase security within the trust accounting software will prevent property management staff from altering bank account details. Senior management should only perform alterations to bank account details. Also see our article regarding software compliance and what to consider in implementing the right software in your office.

  4. Compliance checklists

    Include these with every property management file. List the steps in order with meeting compliance for each property. The person handling bond lodgement can sign off within the file to prove that this has been performed.

  5. Limited signatories

    Restrict to no more than two people within each place of business with authorisation to lodge and claim bonds.

In conclusion, this doesn’t prevent the agency owner from misappropriation of funds. But it will help prevent this from occurring within our office. We’d like to think that we don’t have to go to these measures but unfortunately as part of our proper supervision and upkeep in our ability to maintain our responsibilities to our clients, it is imperative we do so.

Have you experienced or witnessed any bond theft? Were you aware that bond theft is an issue within the industry? Do you have other ways you ensure the correct lodgement of your bonds? And do you feel that there needs to be better education for Property Managers or Tenants in relation to bonds? We’d love to hear your thoughts/comments.

If you want to know more about the trust accounting services my company provides or have any trust related questions please don’t hesitate to get in touch: jane@endofmonthangels.com.au

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~ 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 18 years industry experience. 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.