Don’t Pay for the Purchaser

Over the last three years we have seen the emergence of agents paying to attract vendors and purchasers to assist them in the growth of their business.  I don’t mean referrals, I mean payment for solicitors, application fees to mortgage brokers or even deposit bonds.  This may seen an appealing marketing strategy, however payment to solicitors and payment of deposit bonds on behalf of purchasers has considerable legal ramifications.

In the case of Zhang, which we have referred to in a previous edition of Leverage News, Justice White considered payments to solicitors. In Zhang’s case, the agent offered to pay the purchasers’ legal fees.  They referred them to a solicitor, and even accompanied the purchaser to visit the solicitor.

The solicitor was not sued in this case nor did he give evidence in court.  Even Justice White found this a little bit strange.  Justice White referred to the contracts of UAC 1980 and its protection of persons where there is an imbalance of power.

The contract of UAC 1980 does permit a court to void a contract where unjust conduct has occurred.  Section 9 of that Act sets out a number of items, one of which being independent legal advice.  Justice White of the Supreme Court held in Zhang that referral to a solicitor whom the agent pays would inhibit the purchasers’ ability to get independent legal advice.

The ramification of Justice White’s decision is that where an agent pays a solicitor, there is a perceived belief that the vendor or purchaser may not receive independent advice.  It is not the mere referral that matters, but the payment that goes with it.

It must be said that this case of Zhang related to Mandarin speakers. I heard it said that this may have caused Justice White to make his determination.  This does not seem to come through when you read Justice Whites statements.

We would suggest that all agents be very careful in paying solicitors to assists their clients.

Now for deposit bonds – no cases have been heard on deposit bonds and the payment of agents.  As all agents would be aware, there are four legs to a contract:

• Offer;
• Acceptance;
• Consideration; and
• Intention to become legally bound.

Valuable consideration refers to monies which are paid between the parties. A contract cannot be validly entered into unless valuable consideration is passed between the parties.  If the agent or the developer has paid for the deposit bond, has a purchaser ever paid valuable consideration?

Although no cases have been heard on this issue, we have settled a number of matters on this basis throughout the last five years. I do not mean settled the properties, we mean settlement of a client rescinding the contract and not having to pay a deposit. The upshot in all these cases was that the agent didn’t get paid.

The moral to these stories is simple – Don’t pay to get your way.

Watch the Expenses

Strata Managing Agents need to watch expenses in a lot of places, but no more importantly then with agency agreements.  There are two types of agency agreements that strata managing agents should concern themselves:

(a) their own strata managing agency agreements; and

(b) the managing agency agreements signed by on-site managers.

Section 55 of the Property Stock and Business Agents Act 2002 (the Act) provides that an agent is not entitled to their commission unless:

(a) the agency agreement is in writing; or

(b) the agency agreement is signed by or on behalf of the licensee or the principal; and

(c) the agency agreement complies with the regulations.

The requisite regulations are the Property, Stock and Business Agents Regulation 2003 (the Regulations). The Regulations contain nine (9) Schedules which set out the requirements for all different types of agency agreements. This ‘Common Property’ edition will not go through everything that needs to be in an agency agreement, but will focus on expenses.

Schedule 7 of the Regulations requires that the agency agreement should outline all expenses that the agent will charge to its principal.  Remember, the principal is the owners corporation in these circumstances.  Further, the strata managing agency agreement must contain a statement that warns the owners corporation that no expenses can be increased or varied without these increases being in writing and signed by the owners corporation.

We have seen an increasing trend for strata managing agents to forget to include all expenses within their agency agreement.  We have also seen a case where the warning was not included in the strata managing agency agreement.  Moreover, and more worrying, is the trend to increase fees merely by issuing a notice the owners corporation.

Section 55 of the Act will not permit expenses to be paid to a strata managing agent unless three things occur:

(a) a strata managing agency agreement contains an exclusive list of expenses;

(b) the strata managing agency agreement includes the warning on variation of expenses; and

(c) all increases are signed off by the owners corporation.

In a property management case of Jude versus Chris Bourke Real Estate, an agent had to hand back all his commission for the past 13 years. This is because they did not comply with the agency requirements of the Act.  Numerous Supreme Court cases have made it clear that if you fail to comply with the Regulations, agents do not get paid. Failure to completely nominate the expenses within the agency agreement and contain the variation warning will not only result in expenses not being paid, it may also disentitle the strata managing agents to be paid any of their fees at all. Section 55 says that you are not entitled to your commission unless the Regulations are followed.  Any failure may result in non payment under the strata managing agency agreement.

I should note however that failure to increase the fees properly will only mean that the increase may be invalidated.

One other bit of bad news is that it does not void the agreement.  It only disentitles the agent to obtain money.  The managing agency agreement is in force and therefore the strata managing agent could be required to complete their duties in accordance to the strata managing agency agreement – free of charge.

There has also arisen a problem in the on-site property management regime.  Many on-site managers (owners of management rights), produce agency agreements for landlords.  These agency agreements do not contain an exclusive list of expenses.  The management rights business structure is established by where the on-site property manager will be paid a fee for everything they replace.  For example, if they replace a television, there will be an added cost for ordering and for supply.  This is not illegal, it only causes a problem where it is not disclosed.

It is our experience that the management rights industry is not disclosing all the fees.  If an on-site property manager wishes to charge these expenses, they must be set out in the managing agency agreement.

Please note that resort managers are doing the same thing.  Resort managers are like an on-site property manager, they are merely a real estate agent.  If all the expenses are not contained within their contact with each landlord, they are disentitled to be paid such expenses.

As a strata managing agent, one of your functions is to protect all people within the owners corporation.  If you are overseeing a service department, resort or management rights complex, have a look at the agency agreements to see if what your people have been charged has been set out in the managing agency agreement.

In closing, protect yourself when setting up strata managing agency agreements. It is a bad business model where you risk not being paid for a good job!

Get New Plans for Sinking Funds For Everyone

The Minister of Fair Trading, Virginia Judge has announced changes to the Strata Schemes Management Act 1996 (SSMA) regarding sinking funds.
We all knew it was coming, and now it is here.  From the 1 July 2009, all Strata Plans are required to undertake a ten (10) year plan for sinking funds.  The only exemption from requirement to do a sinking fund plan, is a Strata Plan of two units where the premises are detached.
As everyone is aware, in 2005 it was introduced for all new strata plans.  Now, every strata plan needs to undertake this 10 year planning process for sinking funds.  This is an impost on every strata plan, however the government is sincere about this measure.  The government is attempting to avoid the following things:

• The raising of excessive special levies because the sinking fund has not properly catered for unseen events; and
• Buildings falling below a proper standard.

The difficulty for every strata manager is getting the owners corporation to agree to pay the money for a 10 year plan for sinking funds.   Remember, it doesn’t need to be done by the most expensive expert. Nevertheless, for your sake, you do want it to be done by a building expert so that the plan is undertaken by a professional  and therefore you are protected from any claims into the future.
What are the obligations of a strata plans with this 10 year sinking fund plan.  I’ve mentioned it before:

• To advise
• To inform
• To select
• To arrange

In simple terms, your obligation is to advise your owners corporation of the obligation, to supply them with sufficient information so that they can make an informed decision, to select a properly qualified person and arrange the plan to be done expeditiously.
Unfortunately, we cannot force or pound our owners corporation into submission regarding the preparation of a ten year plan for the sinking fund.  It is their building and therefore their choice.  Hence, if you have advised and you have provided sufficient information and they have denied you, it is now the owners corporations’ liability.
Good luck with this new adventure in strata management.  It may cause us some heartache, however if properly implemented it will provide a benefit for strata living.

 Until Next time, Bailey Compton and the team at Leverage Australia and the Australian College of Professionals.

Another Urge to Protect the Landlord

I have recently been dealing with a client who has inherited the “tenant from hell”.  You might think that they have not done the right searches, however after reviewing their files they have done everything possible to ensure they got a good tenant for their landlord.  They have a perfectly equipped application form, had contacted all referees and had undertaken the searches with the various tenancy reference associations.

These plans do not cater for the best liars – no plans can prevent the heartaches that will follow from tenants who are liars – especially, if the industry does not support its comrades.

The tenant had lied about a former address. He indicated it was rented by a landlord and not an agent.  Hence, no checks could be undertaken in relation to those premises. The last agent indicated that the tenant was an excellent tenant and would not provide any ledgers or any written information regarding the proposed tenant.

Well, this disguised the reality of the fact.  The agent had also lied. The tenant had been evicted for non-payment of rent.  This was a matter which was heard by the CTTT and the tenant had lodged an appeal.  Further, the house which was supposedly rented direct through a landlord was actually rented through an agency.  Research indicated that this agency had also evicted the tenant for non-payment of rent.  The tenant had appealed and consequently held up his eviction for twelve months and therefore lived in the premises rent free for those twelve months.

Without going through any details, the tenant has become from day one a “headache”, not just for the agency, but also for the landlord.  What is worse, the landlord is now starting to blame the agent and not the fact that the tenant lied.

Although I believe the lease is void due to the misrepresentations made by the tenant, it is always more difficult to get rid of a tenant then to keep one out.  This is not the only case of tenant misrepresentation I have heard in the past year.

There is no defence to lying tenants or agents who have committed treason amongst their colleagues, however there is one more search you can undertake.  If a case has been determined, agents can obtain a copy of the reasons for any decisions. If an agent searches the CTTT website, they can obtain a copy of all judgement of the members. There are a number of search engines in relation to the cases.  Most of all, all that is needed is to place in a name and search it on that register to see if there are any recent cases. If a judgement has been made, you will be able to obtain a copy of the reasons, which sets out the facts of the case.

This of course is not fool-proof.  If the tenant has got to the tribunal and settled, their will be no reasons recorded on the CTTT website.  What it does do however, is ensure that the agent has taken all steps necessary to avoid the harm to their landlord – thus, dispensing of their duty of care.

Do as many checks as you always can to find out about the tenant.  Good luck, I hope that you do not suffer the same consequences from a colleague that my current client has.  More importantly, let’s hope that you are not the agent that told the lie.

Until next time, Bailey Compton and the team at Leverage Australia and the Australian College of Professionals.

Fingers in the biscuit barrel

I have just had the opportunity to read an interesting case from the Administrative Decisions Tribunal (ADT).  In 2008, Member Steven Montgomery brought down a decision in a licensing appeal of Davidson versus the Commissioner of Fair Trading.  It was an interesting case not only in its findings, but because it quoted a decision of the Commissioner’s delegate, which shows the thought processes of the Office of Trading.

Mark Davidson was appointed Licensee-In-Charge of Elders Griffiths. He was not the owner of the franchise or of the businesses being operated.  He was merely the Licensee-In-Charge. Elders appointed a book keeper to oversee the accounts on behalf of the company.

Property managers in the company were given the standard access to work on a trust account. Through various means, the property manager was able to transfer into her own account $434,000.  This was not picked up by the book keeper, nor was it identified in any of the trust accounts audit undertaken by the company auditor.

The property manager was put in goal for two years. The initial decision of the Office of Fair Trading was to disqualify Mark Davidson from holding a licence for a period of five years. He was granted a certificate however to continue working within the industry. The decision was appealed to the ADT and some three years later the decision was handed down.

Member Montgomery quoted large slabs from the decision of Andrew Wilson, Director, Compliance, Office of Fair Trading.  Mr Wilson held that it was the Licensee-In-Charge’s responsibility to oversee the accounts and not a book keeper.  Although Mr Davidson had also signed off on trial balance reconciliations, he had not checked it against any source documents.  Mr Wilson held that this was not sufficient proper supervision.

Mr Wilson went to some length to clearly define proper supervision. After some considerations from the Macquarie Dictionary, he indicated that “proper” meant “accurate”. “Supervision” meant “the oversight of the execution of duties”. Mr Wilson therefore concluded that proper supervision meant that a Licensee-In-Charge responsibility was to “oversee the accurate execution of duties of employees”.

Member Montgomery endorsed this definition.  Mr Montgomery’s interesting slant was to also conclude that the establishment of poor policies and procedures may lead to failure to “properly supervise”.  Mr Montgomery said that where policies and procedures are in place which increase the risk of theft or non compliance, proper supervision has not occurred.

Member Montgomery believed that the procedures whereby the Licensee-In-Charge merely checked reconciliations and trial balances was not sufficient.  Member Montgomery believed that the agent needed to have checked bank statements, cheque butts and other source documents as a means of ensuring that a reconciliation trial balance was correct.  Due to this study, and the time that Davidson spent out of the industry, Mr Montgomery reduced Mr Mark Davidson’s sentence to 18 months. This is a reduction in time, however the ADT has upheld the viewpoint of the Office of Fair Trading.

In conclusion, your policies and procedures must be in place and must be such that they ensure that compliance is being effected.  Merely signing off on documents is not sufficient. Practices need to be in place to show that all reasonable attempts have been made to ensure that an agency is compliant.

The Davidson case appears to demonstrate the following:
• agencies should be careful in who can sign off on cheques;
• agencies should be vigilant in authority for electronic fund transfers;
• balance sheets need to accompany trial balance and reconciliation been checked off by Licensee-In-Charge;
• random audits of cheque butts, EFT transfers and other documentation need to be undertaken by the  Licensee-In-Charge;
• a bond reconciliation needs to occur to ensure that all bonds have been lodged with the Rental Bond Board; and
• source documents should also be initialed by the Licensee-In-Charge.

Strata Managers carry far greater amounts in a trust account than any other agent. Leverage is experiencing a number of clients who have experienced good employees who have for different reasons needed to “touch” the trust account.  We are not talking about effective employees, but loyal employees for a number of years.  We are in the middle of a financial holocaust, and these are the times that Licensees-In-Charge and those who own businesses, need to be internally vigilant.

If you require a health check or any full assessment, please contact the office of Leverage Australia.  We have people who are experienced in this area and can provide assistance to you if required.

Until next time

Bailey Compton and the team at Leverage Australia and  The Australian College of Professionals

Fair Trading Alert! A new breed with new goals

Sometime in mid to late 2008, the Director of Compliance of the Office of Fair Trading, Mr Andrew Wilson, resigned. At the same time as appointing a new Assistant Director General to handle that area, the investigations unit was completely overhauled.  Specialist units were disbanded and investigators were stream lined. On top of this, all senior investigators jobs were made vacant and advertised. Many senior investigators have now lost their position and new persons appointed.

Time will only tell whether this is a good or a bad thing from an industry standard perspective. Nevertheless, what will happen is that a re-enthused investigative regime will target identified problems.  There is no doubt that Leverage Australia’s clients have been faced with more letters from the Complaints Unit and the investigators than ever before. This is evidence of a new vigilance.

One of the areas we should be concerned about is continuing professional development. Leverage is aware that 200 letters have been sent out randomly to agents throughout New South Wales. These letters go direct to the sales person or the property manager and not to the company concerned. They are being required to produce evidence of continuing professional development prior to their last license renewal. They are not just asking for a copy of a receipt that it was undertaken, but a copy of a certificate of attainment.

We suggest that all agencies make certain that their certificates of attainment for the last two years are in order. We would suggest those who hold an administrative position in agencies, have a central file for all these certificates to be kept.  Many of our clients seem to have lost their certificates of attainment, not expecting to be asked.  The anxiety we suffer and the trouble they need to go to re-obtain their certificate has been in some cases disadvantageous to their business.

If you haven’t done continued professional development you need to contact the Australian College of Professionals urgently to get your CPD Points up to date.

Until next time, Bailey Compton and the team at Leverage Australia and the Australian College of Professionals

General Obligations and Repairs~Four Simple Steps

Section 62 of the Strata Schemes Management Act 1996 imposes obligations on the Owners Corporation to maintain the common property in a “good workman like standard”.  This function is usually delegated to the licensed strata manager under their agency agreement.  Notwithstanding these delegations, the Owners Corporation through its Executive Committee usually approves all repair and maintenance jobs.

Unfortunately, Owners Corporations don’t always fix what needs to be fixed. They either don’t want to fix it now or they don’t have the money to fix it and don’t want to raise the special levys to allow the problem to be remedied.  It often places the strata manager in a difficult position regarding repairs which may cause danger if not undertaken.

There are four basic obligations of a licensed Strata Manager:
• to advise;
• to inform;
• to select;
• to arrange.

These are generic objectives and special circumstances may cause a variation from those circumstances.  This is a simple mind map that can be followed when considering the obligations of a Strata Manager.

To Advise:
When the strata manager becomes aware of a problem, their first and most fundamental obligation is to advise the Executive Committee.

To Inform:
Many agents think that advising the Owners Corporation abrogates them of any obligations to do anything else. Some think that to tell them of the problem is enough. It is the second obligation to inform which is vital.  It is the obligations of the strata manager to provide sufficient iformation to the Executive Committee so that the Executive Committee can make an informed choice. This may require the obtaining of quotes or expert opinions to ensure that the Executive Committee have sufficient information to make the best decision possible. If the Executive Committee decides not to do something after they have been advised and informed of the appropriate action, the Executive Committee takes responsibility.

To Select:
It is the obligation of the Strata Manager to select the appropriately qualified, skilled and insured person.  Once the Executive Committee approves work to be done, it is incumbent on the Strata Manager to ensure that the person has the requisite qualifications to do the job.  The fact that somebody has a licence is not enough! Just because somebody has a licence, does not mean they can do the job well!   It is incumbent on the Strata Manager to undertake sufficient checks to ensure that the qualified person can do the job.  This is why strata managing firms have panels.  These panels allow the Strata Manager to identify who is good and to select people who have a proven track record.  All new persons on that panel should have reference checks undertaken to ensure that the person can do the job.

Finally, the strata manager must always pick a person who has the appropriate insurance, for example, public liability insurance of a minimum of 10 million dollars and workers compensation where applicable.  If it is an expert or professional, you should also ensure that they have professional indemnity insurance.

To Arrange:
It is incumbent on the Strata Manager to ensure that all work is arranged expeditiously. It is not enough to merely select the right person, it needs to be done in the right period of time.  If it is urgent work, the right person selected needs to do it urgently.

As noted above, these are general principles.  If followed in normal circumstances, it will protect the Strata Manager.  If there are issues of work which are dangerous, the Strata Manager should do everything in his/her power to convince the Executive Committee to approve the work.  There are circumstances that will arise which will call for different things to occur, however this is a very simple starting point to teach your staff.

It is good to do the work!  And it is even better to also be protected!

Until next time Bailey Compton and the team from Leverage Australia and The Australian College of Professionlas.

They’ve Got It All! It’s not an Aprils Fool’s joke!

I received a phone call from one of my mates in the industry.  It was the day after April fool’s day.  He said that on April fool’s day he had been out on property inspections and found that a tenant had taken it all.

On arriving at the premises, the Real Estate Agent found that the key did not turn the lock. The tenant had changed the locks on the door. Believing that the tenant had done a runner, he obtained access.  As his lawyer, I did not want to know how he obtained access.

His inspection report revealed the following:
• No stove;
• No range hood;
• No dryer;
• No washing machine;
• No laundry tub;
• Curtains missing;
• Missing light fittings

Yes, the tenant had taken the lot. They had not only moved out their own stuff but had taken a whole pile of the landlords stuff as well.  They not only abandoned, but they had taken.

The agent rang his property manager to advise of the fact. She would not believe him, thinking that it was an April fool’s joke. He pleaded for some period of time before she actually believed that this was no April fool’s joke.
As funny as this seems to the outsider, it was no joke to the landlord. Not only did the tenant leave in arrears, leave the place in a mess, but had depreciated the asset. Thankfully, the agent had talked all of his landlords into getting landlord insurance.  The insurer payed:
• For all rent in arrears;
• The rent for the vacancy period;
• The replacement of all the white goods; and
• The fixing up of all damage to the property.

The landlord is now laughing. Not only is the place decked out, he can commence to claim for the depreciation on his tax.

This is a timely reminder of why landlord insurance is absolutely vital to any person who is renting out their property.  Do we think the agent has a responsibility to advise on landlords insurance.  Yes!

Insurance is a financial product and can only be sold by persons who have an Australian Financial Services Licence or is an authorised representative under an Australian Financial Services Licence.  This means that agents are not permitted to sell the insurance or to provide any advice as to what products should be taken. Nevertheless, we believe it is encumbrance upon the agent to advise their landlord that they should obtain insurance.

Real estate agents have a duty of care to ensure that a landlord’s property asset is protected. The principles set out in Donoghue and Stevenson, state that the real estate agent must take all reasonable steps to avoid any harm which they could reasonably foresee.  It is foreseeable that a tenant may do damage to a landlord’s property and may not pay the rent.  The only reasonable steps in relation to preventing any damage which could occur from this consequence is by taking out appropriate insurance. Hence, we believe it is a reasonable step that an agent must take to avoid the foreseeable harm that a tenant could bring to a property is to recommend the obtaining of appropriate insurance.

To give you insurance, you should recommend it.

 

Bailey Compton & the team at Leverage Australia & The Australian College of Professionals.

Land Usage!

Australia acquires its principles of land from England.  It is neither the European system, nor complies with Indigenous Cultures.  It is clearly identifiable as Anglo-Saxon. 

English law focuses on a persons right to use land.  People buy it, lease it, obtain licenses etc. for the pure purposes of using the land for a specified objective.
The laws of this State are being clearly refined to focus on this concept of land usage, and exist within a layered level of controls which identify how a person can use a piece of property and for what purpose that property can be used.

In 1979, the Environmental Planning and Assessment Act was enacted.  This Act set up three layers of policy planning for New South Wales:
• State Environmental Planning Policy (SEPP)  – was a policy that was made by the State Government and relates to all of NSW.
• Regional Environmental Planning Policy (REPP) – Regional policies made by the State Government that are specifically designed for the development of a region of NSW.
• Local Environmental Planning Policy (LEPP) – these are policies made by the Local Council for the Council Precincts.

All these planning policies are drawn together to create a single plan for every property in NSW.  It culminates in what we now commonly refer to as “Zoning”.   Each local council will give a property an identified zoning.  This zoning will set out what the property can be used for.
The zoning requirements per specific area are set out in a Section 149 Certificate under the Environment Planning and Assessment Act 1979.  These are referred to as Section 149 Certificates.  Among other things, the Certificates will set out:
• what the property can be used for without consent;
• what the property can be used for with consent; and
• what the property is prohibited  from being for.
These zoning requirements are meant to be used as a basis for council decisions.  Before any property can be built or any commercial venture can be established, a development approval application must be lodged with the local council.  The development determination made by council must exceed the various planning policies.  They can be narrower than the planning policies but can not be wider.

When a strata complex is built, it has an attached development determination.  In many cases, there are a number of development determinations, whether made by local council or the Land and Environment Court, that are associated with these buildings.

The bi-laws can further define the use of a strata building.  Bi-laws can give exclusive use, can provide that a specific lot be used for a specific purpose or can prohibit activities from the Strata complex.  These bi-laws cannot exceed the development determination.  Yes – it can be narrower but cannot exceed it.

There is a final layer to this usage equation.  An individual lot owner can define how a tenant uses a property under a lease.  All commercial leases set out the use of a commercial unit.  Under a residential tenancy agreement, the landlord can restrict the usage of that premises.

These four layers of laws will identify how a specific unit can be used.  In relation to strata, it is generally only the first three layers which are important for a Strata Manager or Community Title Manager to understand.  Strata Managers and Community Title Managers need to consider what needs to be put on file so that they can understand how their complex is to be utilised.

Until Next Time Bailey Compton The Team at Leverage Australia & The Australian College of Professionals.

LICENSEES-IN-CHARGE!! ARE YOU REALLY WATCHING??

An emerging trend in the industry is stealing from the Trust Account.   Statistics coming from the Office of Fair Trading demonstrate that Trust Account defalcation is on the rise.  Defalcation is where money has been taken out of the Trust Account without authority.  What is even more frightening is that it is not those who control the Trust Account who are the thieves.  The emerging trend is for employees or business partners to have “touched up” the Trust Account.
In the first quarter of this year, Leverage has worked with three clients where employees, fellow directors or family have manipulated the Trust Account so that money ends up in their personal account.  On all occasions, these people were trusted, good operators and what can only be called “good people”.

Fears associated with the financial holocaust are probably at the root of this problem.  People who are struggling with the most basic problems of paying their rent, credit card or just to put food on the table, have created the class of good people who do bad things.

Section 31 of the Property, Stock and Business Agents Act 2002, requires the Licensee-In-Charge  be appointed for every corporation and every place of business.  Section 32 goes on to require the Licensee –In-Charge to demonstrate proper supervision.  Proper supervision is not fully defined but is outlined in Section 32 to include:
a. the Agency having a policy manual;
b. the agency having mechanisms to ensure the policy manual is followed; and
c. oversight of staff.

The Licensee-In-Charge bares the total responsibility for ensuring that staff comply with laws.  George Bushman’s disqualification from holding a licence in 1998 is clear evidence of the burdens placed on Licensees-In-Charge.  George was a licensee of 35 years experience who engaged a hot property manager.  The property manager was not just hot in terms of her performance but was a quote “hot chick”.  George was captured with her charm and influence and merely followed her instructions on the signing of cheques.  Among the many cheques that George had signed, $164,000 over a period of time, went to the “hot chick”.

The comments from the Magistrate in the Licensing Court were interesting to say the least.  The Magistrate indicated that George was an “honest” man, but lacked the “ability” to oversee his staff.  The Magistrate believed that it was a fundamental obligation of a licensee to be able to oversee staff.  It was not George’s dishonesty that caused the problem, but his inability to protect the Trust Account against staff.  George lost his real estate licence for three years. Unfortunately, the cost of running the case and loss of family, friends and reputation, culminated in George  never returning to the industry.

Licensees-In-Charge – it is your responsibility.  To merely sign off reconciliations and trial balances at the end of the month, or just sign cheques as presented by staff, may leave you in a vulnerable position.  We suggest the following:
• Examine your reconciliations and trial balances before signing;
• Undertake a bond reconciliation each month to ensure that all bonds have been lodged.   A bond reconciliation requires that the licensee in charge looks at the numbers of bonds that should have been lodged against those that have been lodged with the Rental Bond Board.  This can be done by simply checking the number of residential properties listed on your practice data base against a print out from the Rental Bond Board.
• Investigate arrears.  Always check the under 14 day arrears.  The best place for a person to take money on rent is where the tenant would never know about it.  If the rent arrears are below the 15 day limit, the tenant will never find out about their rent being siphoned off elsewhere. Investigate a cross section of these properties to ensure that money is not disappearing.
• Do random checks.  On an irregular basis, licensees should look at 5 to 10 deductions from the trust account.  The agents should investigate what authority exists to take that money; who the money went to and the simple check through to the bank to ensure that the money has gone to that destination.
This is not foolproof.  No system is foolproof because criminals for years have been able to outsmart everyone.  If you are a Licensee-In-Charge who is a sales person and does not like paperwork, employ a book keeper who is capable of doing this for you.  If you do employ a book keeper, sit with them on a monthly basis to do what we said above.

It is your license!  It is worth protecting!

Until next time Bailey Compton & The team at Australian College Professionals