Proactive compliance visits - Real estate agents

This publication is for: 
Licence holdersProperty industry

Consumer Protection staff organise regular proactive compliance visits to licensed or registered people throughout the state.  The visits aim to ensure the laws are followed, help educate what the laws means on a practical level and provide information about changes.  

If you would like more information please contact the Consumer Protection Advice Line team on 1300 304 054 or by email.

Preparing yourself

Objectives of the program

The Department of Commerce has an initiative to “conduct and promote education and provide advisory services for persons who are licensed or registered” under the authority provided by the Real Estate and Business Agents Act 1978 “the Act”. 

The department’s proactive compliance programme aims to encourage high levels of compliance with the requirements of the Act, the Regulations and Code of Conduct resulting in:

  • greater understanding by agents of the laws which govern their activities;
  • the achievement of consistently high ethical and professional standards in the industry;
  • fair and open competition because all agents compete on the same “level playing field”;
  • enhanced consumer protection because of high ethical and professional standards; and
  • the delivery to agents of compliance tools including checklists, references, manuals and compliance systems.

How the visit is conducted

A proactive compliance visit entails:

  • meeting with the person in bona fide control of the agency;
  • a reconciliation of your current representatives to ensure the accuracy of the Department’s database in relation to your staffing profile and licensed and registered persons;
  • review of notices and particulars on correspondence and documents;
  • examination of the agency’s trust account and trust accounting procedures;
  • a review of a sample of the agency’s settled sales files; and property management files;
  • a discussion with you of the complaints (if any) lodged against your agency;
  • a discussion with you of the training and professional development needs of your agency.

What you will need:

To ensure the visit is conducted with the minimum of disruption to your business operations we would be pleased if you would have the following available at the appointed time of our visit:

  • The Licence, Triennial Certificate and Business Name Registration Certificate displayed [Section 41(1)(a) & (b)]
  • A copy of the agency’s letterhead [Section 41(2)(a) & (b)]
  • A printed copy of the Appointment to Act and Offer & Acceptance documents used in your agency (if applicable)
  • Your trust account bank statements and reconciliations for the previous 3 months
  • Your trust account cheque book and receipt book
  • Current copies of the Real Estate and Business Agents Act 1978, (General) Regulations 1979 and the Code of Conduct for Agents and Sales Representatives 2011
  • A sample of identity checks recently conducted by your agency
  • A sample of an advertisement recently placed by your agency
  • The last audit report from your agency’s auditor.

We will select a sample of your settled sales files and property management files for inspection during our visit.

As a minimum you should review the following prior to the visit:

Proactive visit checklist:

A copy of the official checklist form can be emailed to you on request when the visit booking is made. The checklist covers the following items:

Proactive compliance checklist - Real estate agents
Description Legislation
LICENSING / RECORDS
Check complaint database prior to visit to ascertain any deficiencies in operations. Check if management letter issued by Auditor (consider the contents in relation to current operational matters at agency). BP & RE Act s.79, 80, 81
What dispute resolution process do you have in place? Is it documented & are staff provided with regular training in handling disputes? How many complaints does your agency receive each year & what do they relate to? BP & RE Code 14
Check display of Licence & currency of Triennial Certificate. Is current Business Name recorded on the TC? Check particulars on correspondence and documents. If branch office, does branch manager hold current TC which is correctly endorsed? RE Act s.26, 41(1) 41(2) & 37
Examine employment records and match with CALS register. Agent provided update form? RE Act 51(1)
What process do you have in place to ensure currency of sales registration? Check to see if property manager is registered or if licensed as an agent, whether a Triennial Certificate is held. RE Act s.44
CONFLICT OF INTEREST
Does agent have any potential/actual conflict of interest or an affiliation with a settlement agency or any other significant relationship requiring disclosure. If required is disclosure adequate (not on O&A). Ref REBA vs Landa SAT (2008).

RE Act s.64(1)

RE Code s.16(2)

Does agent recommend a third party service provider to their client?  Is a written disclosure of relationship provided? Has client been referred by a third party? Has agent disclosed commission or fee for referral accepted or paid? RE Code s.16(3).(4)
IDENTIFICATION
Check that agent undertakes appropriate searches: CT; ASIC; encumbrances, property interest report. Copy of power of attorney retained on file. REBA Code s.24
Does agent have sufficient procedures to identify clients? e.g.: - 100 points of ID is obtained and evidence retained on all sales files; - 100 points of ID is obtained and evidence retained on property management files (best practise/risk management); and - security passwords are used for updating lessor's information on property management transactions (best practise/risk management)

REBA Code s.25

BP

ADVERTISING
Does the BFC review and authorise advertisements and all promotional material before they are published (no inducements).

RE Act s.62(1) &

RE Code s.22

Check that agent regularly reviews properties on its website and advertising to ensure listings are accurate. Ensure sold and settled properties are removed from agency's website. ACL s.18 &
Check validity of testimonials on website. ACL s.18
TRUST ACCOUNTING
Check that trust accounts & interest bearing trust accounts (IBTAs) including cheques are designated in accordance with the RE Act and Regulations. RE Act s.68(1) &
Are all trust accounts and IBTAs opened during the year disclosed to DoC and auditor (excluding IBTAs for DoC) RE Act s.68C(1) & s.70
Check that trust account(s) receipts conform to the RE Act and Regulations. RE Reg R.6G
Check a sample of receipts to verify banking by the next business day including strata management. RE Act s.4(3a),
Check that the trust account(s) are reconciled on a monthly basis (to the last day of the month), reviewed and certified by BFC within 10 working days. RE Act s.68(6)(d) & BP
Check Trust Client Ledgers for funds that cannot be allocated and transferred to a holding account. Check for "buffer funds". Does agent investigate unidentified deposits, follow up unpresented cheques and take appropriate action to deal with those monies? RE Act s.68(6)(a)
Check system of accounting – manual or computerized program in use. Note type of software. RE Act s.68(6)(a)
Check that person in bona fide control is proficient in performing bank reconciliations. RE Act s.27(1)(d) &
Check that agent includes IBTAs in monthly reconciliations, Check written instructions are retained for IBTAs. RE Act s.68(6)(d) & 68A
SETTLED SALES FILES (randomly selected)
Is the appointment to act in writing, clearly set out the services to be rendered, clearly identify the property/ business (eg.address, title details) & signed by person(s) for whom the services are being provided or his lawfully authorised agent? The appointment to act must contain prescribed information: A statement that commission charges are not pursuant to any scale fixed by law and are to be agreed upon, & Clients may seek assistance from the Commissioner in relation to fee disputes.

RE Act s.60(1)(b), 60(2)(a)(i) & (ii) & RE Code s.17(1)

Reg R.6BA(2) & R.6Ba(3)

An appointment to act must set out the method by which remuneration is calculated. Where expressed as a %, a clear relevant example should be shown (eg. selling price, gross rental). Where expressed as an hourly, weekly or periodic rate, a maximum amount must be specified in monetary terms. RE Act s.60(2)(a)(ii) &
Where an expense is to be recovered, agent must specify nature of expense and how it will be calculated eg. marketing expenses specified, agreed & initialled. RE Reg 6BA(1)(D) & RE Code s.20 (1) (2)
Are material facts relating to the transaction ascertained/verified & disclosed? REBA Code s.24
Check that deposit is received into agent’s trust account. RE Act s.68(1)
Check when commissions drawn from trust account(s). RE Act s.61(4)
Check agent reviews files & records are properly maintained. Does agent supervise staff to ensure employees comply with relevant legislation? REBA Code s.14
Does the agent use electronic storage/iCloud/Drop Box? RE Reg R.6H & BP
OFF THE PLAN SALES (randomly selected)
Check authority as per Certificate of Title RE Act s.60(1)(b), 60(2)(a)(i) & (ii) & RE Code 17(1)
Is the vendor/developer the proprietor? Developers who are not the proprietor can now sell one or more lots in a subdivision, including strata subdivisions provided contracts comply with new provisions in SOLA.  SOLA s.13B, 13C &13D

Is the deposit paid into a settlement agent, real estate agent or solicitors trust account?
(Funds should be held in trust until plans have been registered. BP for funds to be held in trust until titles have been issued).

SOLAs.13D & ST Act s.70
PROPERTY MANAGEMENT FILES (randomly selected)
Check validity of appointment to act (residential / commercial). RE Act s.60 (1) & (2)
Verify that funds paid by tenant at commencement of lease paid into trust account. Does the agent keep a record of every tenancy agreement sign up to ensure funds are deposited into trust account? RTA s.27
Check that actual costs/disbursements only are recouped as per appointment to act and that owner statement information matches terms of appointment to act. RE Code s.6, 7, 19 & 20
Check residential tenancy bonds are reconciled monthly. BP
Does agent use a 3rd party to collect rental funds? RTA s.27
Are lease agreements in the prescribed form (Form 1AA)? RTA s.27A
Do the property condition reports contain the prescribed minimum content and was it provided to the tenant within 7 days of moving into the premises? RTA s.27C
Check additional clauses in the lease agreements (Part C) to ensure they do not conflict, contract out of RTA or contain unfair contract terms. RTA
Is lessor's full name being included in lease agreements? RTA s.51
What process does agent have in arranging for repairs to be conducted within a reasonable period after the need for repair arises. RTA s.42(2)(b)
Check agent reviews files & records are properly maintained. RE Code s.14

Consumer Protection
Fact sheet
Last updated 08 Sep 2017

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