As Licensee, Property Manager or Trust Accountant in a Real Estate office in NSW you cannot afford to ignore this explanation. The importance in having a delegation of authority.  Failure to have the appropriate delegation in writing carries penalties of up to $4,400 for a corporation and $2,200 in any other case.

A ‘delegate’ is someone who has the authority to sign cheques and effect EFT payments on behalf of the Licensee.

Giving someone the authority to release money from the trust account is not something all employers may wish to do.  Such as if they prefer to remain the sole signatory of the account.

In a larger office with a big rent roll, it may not be practical to have a sole signatory. This one person may become ill or incapable of signing cheques which means clients won’t receive payments.

As a sole trader, this becomes particularly challenging. It essentially means that responsibility lies with one person. It is always ideal to have a second signatory in the event of an emergency. However, it is preferable this authority comes with strict conditions.

What do regulations state?

In NSW, the PSBA Regulations 2014 explicitly states that the Licensee and not more than 2 employees at the place of business may carry the authority to release funds from the trust account.

To effect an EFT payment is when someone releases an electronic funds transfer from the trust account. This is usually with a banking token and password. It is quite common that most Trust Accountants or Senior Property Managers have the authority to effect EFT payments and the Licensee retains the ability to sign cheques.

Ensure signed authority

Whomever we grant this responsibility to, the authority MUST be in writing and signed by the delegator (Licensee) and delegatee (employee). This is something that Fair Trading may ask to sight during a random audit. Also see Surviving a Random Fair Trading Inspection.

The purpose of the authority is that it clearly defines the conditions in which the employer gives the employee the authority to release funds and sign cheques. It may carry certain terms and conditions which will be specified in the delegation. Such such as the maximum amount of EFT payments the delegate may transfer in a 24 hour period or that the employee has the authority to only release funds in the event that the Licensee becomes ill or some other emergency situation.

Important note:

If the Licensee feels that the delegate is no longer fit and proper to have such authority or the Licensee wants to grant another delegate the authority, they may revoke the initial delegation and reissue the new authority. To revoke an authority or make any changes, it must always be in writing and never a verbal arrangement.

As a Property Manager or Trust Accountant who has been granted such responsibility to release funds from the trust account but has not been provided with the appropriate authority from your employer then you should definitely look to obtain such authority in writing immediately to protect your own interests as the legislation clearly states;

any person who claims to have the authority of the licensee and who signs trust cheques or effects an EFT payment but has not been authorised to do so is also guilty of an offence. 

As an employer it is also important to obtain this delegation, not only from a compliance perspective. In the event of misappropriation of funds or theft by employee your insurer may request such documentation. Documentation that relates to any authorised persons that have been granted access to the trust account.

Finally, it doesn’t hurt to follow the process of setting down this level of authority in writing between employee and employer. Even in other states and industries where this is not mandatory. It is a great tool to use to protect the interests of either party. Do you agree?

Some final questions

Agents, are you aware of the penalties and implications of not holding a delegation of authority?  Are you aware of the restriction to not more than 2 employees?  Do you have an agreement between you and your employer? What steps will you take if there is none in place? We’d love to hear your thoughts/comments.

Want to know more about the trust accounting services my company provides or have any trust related questions? 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