Released 21 June 2012
By Don Jones - Assistant Commissioner, Compliance & Enforcement at NSW Fair Trading
Nearly 50,000 individuals and corporations are licensed to work within the NSW property industry.
While the overwhelming majority of licence holders understand and meet their legal responsibilities, every year Fair Trading receives tens of thousands of complaints about strata and property managers, house or unit sales and auctions.
Most of these complaints are resolved with the intervention of Fair Trading, usually without the need for a full Fair Trading investigation. However, every year it is necessary to investigate several hundred agencies for breaches of NSW property laws.
Whenever Fair Trading takes this action, it decides whether an agency’s failure to comply with the law was through negligence, by accident, or deliberate action.
Good agencies can avoid both consumer complaints and Fair Trading investigations by taking the time to get business fundamentals right.
Of course, there is no single prescription of the types of policies and procedures that can guarantee compliance with all NSW laws. Agencies need to think about their business activities, the size of their business and the way they are structured when setting up these policies and procedures.
Industry associations such as REINSW play an invaluable role in assisting businesses to comply with the law. The following information may also assist business operators across the NSW property industry to better understand what is expected of them.
Laws are minimum standards. Good businesses do more than the law requires; they establish systems and policies that deal with possible consumer complaints before they arise.
Understanding the sorts of complaints Fair Trading is most likely to take action about can assist agencies in developing the right polices and procedures.
Fair Trading gives priority to complaints where there is conduct:
- of significant public interest or concern;
- resulting in significant consumer detriment;
- affecting disadvantaged or vulnerable consumers;
- that suggests a pattern of non-compliance by the business or is indicative of a risk of future misconduct;
- demonstrating a blatant disregard for the law;
- involving a significant new or emerging market issue; and
- that is industry-wide, or may become widespread.
Fair Trading is less likely to pursue matters that are one-off, isolated events, or are private rights disputes.
However, depending on the matter, Fair Trading may still take action even if the agency has taken steps to redress the detriment to the consumer.
When Fair Trading investigates a matter, we will clearly state to the agency the activity or practice causing concern and which law or laws appear to have been breached.
We will give the agency a reasonable opportunity to respond, a general explanation of our possible compliance and enforcement actions, and an explanation of the possible consequences of a failure to respond.
Fair Trading uses its enforcement powers to achieve compliance in order to:
- change the behaviour of the agency and others in the industry;
- address any unlawful financial gain or benefit from non-compliance;
- clarify the relevant law; and/or
- provide the necessary level of deterrence to those agencies who would deliberately flout their legal obligations.
Each year we publish our compliance priorities. Currently, the failure to properly account for monies held in trust by property industry licence holders is one such priority.
In most cases, no notice is given about a Fair Trading investigation. This is because we are checking ‘as-is’ compliance in a business’ everyday operations.
Unless it is a covert operation, the investigators will identify themselves and ask to speak to the person in charge of operating the business. It is not necessary for that person to be available for an inspection to proceed, or to be present throughout the inspection.
Fair Trading investigators will ask for the records required for inspection. Often, this is not limited to the matters that are the subject of the complaint, and in some cases the inspection is simply a routine targeted audit of the agency.
Investigators will ask for an area within the business in which to work. They may photocopy documents or take computer files.
At the end of the inspection you will ordinarily be advised of the outcome if you request this information or if Fair Trading is taking action against you. Fair Trading also publishes information about all of its compliance and enforcement activities on its website.
- Make sure that your business immediately receipts trust money.
- Have written authority for persons who are able to make payments from the trust account.
- Only pay money from the trust account when the trustee gives you written authority.
- Have clear supervision procedures.
- Lodge your audit on time.
- Ensure receipts and deposit books hold full particulars.
- Ensure that appropriate receipts, cheques and bank statements include the words ‘Trust Account’.
- Ensure cheque stubs and online banking records are completed correctly.
- Lodge rental bonds within 10 working days after the end of the month bonds received.
- Reconcile all adjustments on monthly financials.
While there are many elements to running a successful agency that meets its legal obligations, Fair Trading suggests that property industry businesses pay particular attention to:
- Hiring the right staff and developing them
- Getting your business plan and procedures in place
- Keeping your licences current and visible to the public
- Making accurate representations to vendors and purchasers about the price and quality of the property you are marketing
- Maintaining records that substantiate the advertised selling price
- Having all documents completed before advertising a property
- Asking your accountant or auditor for a frank assessment of the quality of business systems
- Asking for advice when you are unsure about your obligations from REINSW and from Fair Trading