This topic provides an understanding of the changes to the Property and Stock Agents Act 2002 that commenced on 23 March 2020. On completion of this topic a person will be able to demonstrate competency of the prescribed learning outcomes detailed below.

Duration

Satisfactory completion of this topic will count as 1 hour of CPD towards the compulsory learning topics required for the current CPD year.

Learning Outcomes

A person who completes this compulsory CPD topic will be able to identify the key changes introduced as part of the 2020 reforms, including but not limited to:

• qualification and training requirements (including career pathways and CPD)
• Fair Trading’s enhanced compliance powers
• prescribed ‘material facts’ and agents’ disclosure obligations
• the different classes of licence (class 1, 2 or certificate of registration) and types (real estate, strata, stock and station)
• the functions permitted under each licence class and type
• licence types and functions (real estate, strata, stock and station) including the consolidation of former licence categories into the real estate licence
• the requirement for the licensee in charge (LIC) to authorise trust account withdrawals, including reforms to ensure greater accountability over management of trust money.

Here is the message from Kevin Anderson, Minister for Better Innovation and Regulation discussing these the changes

The new license overview

Figure 1 shows the new NSW licensing overview. A full explanation of the functions permitted under each category is described in Lesson 4 of this module.

Detailed Pathways are shown in the attached PDFs

 

 

All individuals (whether holding a Class 1 licence, a Class 2 licence, or an Assistant Agent authority), must complete the CPD specified for their licence category each year (see more details below).

New CPD Requirements

This is the first CPD year under the new requirements and the “CPD year” will go from 23 March 2020 to 22 March 2021. The CPD year will end on March 22 of every following year – and the records will need to show compliance in that annual period.

The renewal date of your licence is no longer relevant to the CPD requirements – and this is probably the biggest change to the previous system. Your licence renewal date is a completely separate, unrelated date in your calendar for CPD purposes.

Here’s what you need to remember

• Instead of aligning your CPD activity with your renewal date, you’ll need to make sure it’s completed by March 22, each year
• It’s all about hours, not points.
• The time spent on CPD needs to be recorded by the individual licence holder – and monitored by the LIC (who is responsible for making sure their staff have complied).
• There is no carry forward of hours (or even points) any more
• You must do the required number of hours applicable to your license category each and every year – as a minimum.

How many hours?

Assistant Agents

Assistant Agents need to be actively working towards their licence qualification. They will need to complete a minimum of three units of competency every year from the relevant Training Package to get the Class 2 Licence within four (4) years. If you are a LIC, you are also responsible for ensuring this occurs, and you must retain copies of their training records and Statements of Attainment as issued by the RTO delivering their training. It is important to note that by the end of the 4 years, the Assistant Agent can either obtain a class 2 licence or cease working as an Assistant Agent. A person may apply for a new Assistant Agent certificate 1 year after the expiry of their previous Assistant Agent certificate.

_{Example 1: A person who is classified as an Assistant Agent when the Licensing Reforms Changes came into effect on 23rd March 2020 (previously a Certificate of Registration holder) will need to have obtained their Class 2 Licence by completing their Certificate IV training no later than 22nd March 2024.} 

_{Example 2: A person who commences as an Assistant Agent after the Licensing Reforms Changes came into effect on 23rd March 2020, will be required to obtain their Class 2 Licence within four (4) years of becoming an Assistant Agent.}

 

Class 2 Licence holders

• 3 hours of Compulsory CPD Topics [for 2020-2021 that’s this course]
• 3 hours of Elective CPD*

Compulsory plus elective must add up to six hours of professional development training

 

Class 1 Licence holders

• 3 hours of Compulsory CPD Topics [for 2020-2021 that’s this course]
• 3 hours of Elective CPD*

Compulsory plus elective must add up to six hours of professional development training

NB The additional 3 hours of business skills topics for Class 1 licence holders does not come into force until 23 March 2021.

What can be included in Elective CPD?

Any training that is relevant to Property Practice can be delivered by anyone; at any time, up to March 22, 2021.

As we mentioned, agents are required to keep their own records for Elective CPD and the LIC is required to have a copy for verification of compliance.

These sessions can include coaching sessions, software product training, skills-based, professional reading, conferences, seminars, webinars.

We don’t see this as difficult to achieve as there is so much information in the industry that could fall under this category – including reading things like Elite Agent Magazine, The Brief etc.

The important thing is accurate record keeping.

You’ll need to have something that is easily producible on demand which says who, what where and for how long.

We are developing an app soon for release that will help you track your Elective CPD activities including logging time for reading The Brief, articles on eliteagent.com, podcasts and also where you can log your own time for ‘non Elite Agent’ activities such as other webinars, training etc. If you are interested in finding out more information on the Elective CPD tracker, register your interest here.

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NSW Fair Trading’s stated aim is to promote a fair marketplace for consumers and traders by maximising compliance with regulatory requirements.

In doing so the aim is to safeguard consumer rights and investigate alleged breaches of the legislation administered by them.

As a regulator, the main concern is to minimise any direct financial or material harm or detriment to a consumer from a business that fails to comply with the law.

Fair Trading’s compliance efforts include working with businesses and educating industry groups and other Government agencies to promote voluntary compliance.

Proactive inspection programs the vehicle by which they achieve this goal and you never know when an inspection will take place.

In any case, prevention is always better than cure!

Compliance and enforcement remedies

Fair Trading has a range of compliance and enforcement options available to achieve compliance with the law and enhance consumer protection.

Fair Trading takes a risk-based approach in determining any action to be taken against non-compliant businesses.

There are some forms of conduct that are so serious and detrimental to consumers (such as significant trust account fraud) that Fair Trading addresses them as a priority.

If an issue is found, Fair trading states they will provide a business or trader concerned a reasonable opportunity to respond, while providing a general summary of the proposed remedial actions they propose to take.

In other cases, they may consider it in the public interest to act promptly, without giving the trader or business prior warning. The last thing they want is to let anyone think that a serious compliance breach is OK – and taking swift action usually results in a positive deterrent effect.

The general approach to compliance and enforcement remedies is summarised in the compliance pyramid below.

Section 52 of the Property and Stock Agents Act 2002 (the Act) requires that a licensee or certificate holder must not induce a person to enter into any contract or arrangement by:

• any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the agent or not), or
• any failure to disclose a material fact of a kind prescribed by the regulations (whether intended or not) that the agent knows or ought reasonably to know.

An offence under this section can attract up a penalty of up to $22,000.

What is a material fact?

A material fact is defined as something that would be important to a reasonable person in deciding whether or not to proceed with a transaction. In a property services context, these are facts which:

• maybe sufficiently significant or relevant to influence decisions on whether to buy, sell or rent, and/or
• could impact the market value of a property.

You should discuss with your vendors any market sensitive matters that are likely to be the subject of statements or representations by the agent when marketing the property.

During this process, it is important for you to gather information on aspects of the property which are sensitive to the market which will assist you in accurately and honestly representing the property.

Following major reforms that commenced on March 23, 2020, an agent must not fail to disclose a material fact of a kind prescribed by the Regulation that the agent knows or ought reasonably to know.

This means that you could still be in breach of the law for failing to disclose a fact even though you, or your sellers, didn’t know about it.

What do material facts include?

• within the last five years, the property has been subject to flooding from a natural weather event or bushfire
• the property is subject to significant health or safety risks
• the property is listed on the register of residential premises that contain loose-fill asbestos insulation that is required to be maintained under Division 1A of Part 8 of the Home Building Act 1989
• within the last five years the property was the scene of a crime of murder or manslaughter
• within the last 2 years the property has been used for the purposes of the manufacture, cultivation or supply of any prohibited drug or prohibited plant within the meaning of the Drug Misuse and Trafficking Act 1985
• the property is, or is part of, a building that contains external combustible cladding to which:
  • there is a notice of intention to issue a fire safety order or a fire safety order has been issued requiring rectification of the building regarding the external combustible cladding, or
  • there is a notice of intention to issue a building product rectification order or a building product rectification order has been issued requiring rectification of the building regarding external combustible cladding
• the property is or is part of, a building where a development application or complying development certificate application has been lodged under the Environmental Planning and Assessment Act 1979 for rectification of the building regarding external combustible cladding.

Material facts that an agent could be reasonably expected to know and could find out by doing their own discovery include, for example, whether the property has been affected by a flood or bushfire or whether the property is listed on the loose-fill asbestos insulation register.

Other material facts, such as those relating to external combustible cladding, would be known by the property owner and revealed by prospective property purchasers doing their own due diligence in getting copies of the strata owners corporation’s records.

However, if an agent has those strata records and they contain information relevant to material facts, then the agent must disclose them.

It is unlikely that an agent would be held liable for not disclosing a material fact if the vendor intentionally concealed that information from the agent when they were questioned, and the agent could not otherwise be reasonably expected to know.

 

New disclosure requirements for tenants

A landlord or agent must not make false or misleading statements or knowingly conceal certain material facts from a prospective tenant before they sign an agreement.

The list of material facts is available in the Tenant Information Statement that a landlord or agent must give a tenant before entering into a tenancy agreement.

• Before signing an agreement, a landlord or agent must also tell a tenant of any proposal to sell the property if the landlord has prepared a contract for sale, or if a mortgagee (i.e. bank or other lender) is taking court action for possession of the property.
• The list of material facts and information that prospective tenants must be told before entering into an agreement has been expanded. The changes also provide a remedy for tenants when material facts and information are not disclosed. The changes recognise the potential hardship tenants face if they are not provided with important information about a tenancy.

[Tip: You can access the loose-fill asbestos insulation register here]

Overview

The following diagram summarises the changes to the licensing system in NSW

The new Class 1 licence

Only Class 1 Licence holders can be the Licensee in Charge (LIC) of a property agency business in NSW.

Licensees who run a business that is regulated under the Property and Stock Agents Act 2002 (the Act) must ensure that no part of the business is left unsupervised by a licensee in charge (LIC).

The LIC is a new, separate category of licence with additional responsibilities and qualification requirements applicable to those who were not the nominated LIC at the time of the implementation of the reforms on March 23, 2020.

This is a major development in NSW Fair Trading’s desire to enhance the educational and professional standards across the property industry in NSW, with the goal being improving the accountability and transparency of agency operations and strengthening NSW Fair Trading’s compliance and enforcement procedures.

Who’s responsible?

As we all know – the buck stops with the boss and in this case, it has never been more true. The LIC is now ultimately responsible for all compliance issues within a business.

The following is a summary of the important things associated with the Class 1 Licence

1. Previously nominated LIC transitioned automatically to the Class 1 category – if you held an LIC position under the old system you were moved across to the same nominated position in the new system
2. You must have held a Class 2 Licence for two years before being eligible to have the Class 1 Licence issued – and you must be able to demonstrate you have the required educational qualifications
3. To become a LIC you need specific evidence of competence signed-off by a current LIC. This evidence is required in the form of a Work Experience Log Book verifying specific work activities have been completed by the applicant for a Class 1 Licence
4. Only the LIC is able to authorise disbursements from agency trust accounts – there can be someone else prepare the accounts for the disbursements, but only the LIC can press the final button for payments to be made
5. As we have previously mentioned, there will be nine (9) hours of CPD for Class 1 holders (3 hours mandatory, 3 hours elective, and in 2021, 3 hours of business related topics *)
6. Supervision Guidelines place responsibilities for all operational activity on the LIC
7. There can be more than one Class 1 Licence holder in an office – but:
8. There can only be one LIC of each separate business unit – this person must be clearly identified at all times, and any variations must be notified to NSW Fair Trading
9. A principal licensee can nominate one LIC to be in charge of the entire business, or several licensees to be in charge of different parts of the business – so long as they ensure that no part of the business is left unsupervised.
10. One LIC can be responsible for multiple parts of a business, but there cannot be more than one LIC in charge of the same part of the business.
11. It is up to the principal licensee to determine the parts of their business. For example, they may decide to appoint a LIC for a place(s) of business or one for each business area, such as strata, real estate sales or property management.
12. Alternatively, principal licensees may choose to maintain the same supervision arrangements they had in place prior to March 23, 2020, when each place of business had to have a different licensee appointed to be in charge of that place of business.

* The additional 3 hours of business skills topics for Class 1 licence holders does not come into force until 23 March 2021.

All licensed agents, who were not the nominated LIC under the old system, were automatically transitioned to a Class 2 Licence on March 23, 2020.

Current licence holders can apply to be a Class 1 holder when their renewal is due – if they have held their licence for 2 years or more, under special provisions in the Act until March 22, 2021.

There are requirements for specific evidence of competence through workplace experience in order to progress from an Assistant Agent to a Class 2 Licence. This will be via a Work Experience Log Book signed off by the LIC as evidence of having performed specific tasks to a competent standard.

Tip: For a copy of the prescribed Work Experience Requirements Log Book click here.

These Work Experience Log Book requirements will also be required if/when the agent decides to progress from a Class 2 to a Class 1 level – if the applicant is not able to meet the 2 year requirement example above.

There are also provisions, now, for a Class 2 Licence holder to have a minimum of 2 years experience before being eligible to apply for a Class 1, and additional educational qualifications also apply – including the completion of a Diploma-level qualification in Property Services.

 

To summarise the situation for Class 2 Licence holders:

1. Existing Licence holders transitioned to Class 2 (unless already the nominated LIC)
2. 1 year as an Assistant Agent before issue Class 2
3. Specific evidence of competence sign-off by LIC for progression
4. 6 hours CPD (3 hours of mandatory topics, and 3 hours of elective training)
5. Cannot authorise transactions from trust account
6. Can not be a LIC/Class 1
7. If you were an accredited auctioneer, that accreditation is carried forward under the reforms

All Certificate of Registration holders – regardless of their longevity in the industry – on March 23, 2020 became known as Assistant Agents.

Assistant Agents have now had some significant restrictions placed on the tasks they can undertake with the reform of the Act. These restrictions include the following:

1. Cannot disburse funds from trust account
2. Cannot sign agency agreements
3. Must undertake minimum 3 units of credit per year towards a Class 2 Licence
4. Must have 1 year as Assistant Agents before Class 2 can be issued
5. Must hold Class 2 within 4 years of the reforms

Let’s take each of those and expand on it.

 

Cannot disburse funds from Trust Account

The only person authorised to disburse funds from Trust Accounts is the LIC. Assistant Agents can prepare funds for disbursement, but it must be the LIC who actually performs the final task because they are responsible for pretty much everything.

 

Cannot sign agency agreements, except residential tenancy agreements.

This is a significant and major change. Only Class 1 or Class 2 Agents can sign agreements which ‘bind the agency’. An Agency Agreement signed by an Assistant Agent is not binding until it has been signed by a Class 1 or Class 2 agent employed by the agency.

The Regulations now state: Schedule 1, Clause 4 A (3) An assistant real estate agent ….. may not (a) enter into any contract or transaction on behalf of any party, except a residential tenancy agreement, or (b) authorise the withdrawal of money from a trust account

[Tip: Written operational procedures are required for all activities within an agency]

Must undertake minimum 3 Units of Competence per year towards Class 2 Licence

• CPD requirements for Assistant Agents set out that they must be actively working towards their Class 2 Licence, and must complete at least 3 full units of competence from the prescribed licence course each year.
• By March 22 each year, the Assistant Agent will have to be able to demonstrate they have completed the required 3 units, and the LIC will be required to have a copy of evidence to that effect in their records and available for inspection by NSW Fair Trading should they require it.

Must have 1 year as Assistant Agent before Class 2 Licence

• All Assistant Agents will need to have one full year as an Assistant Agent before being able to apply for a Class 2 Licence. They will need to have completed the relevant Certificate IV course, and have a log book of relevant, prescribed work experience signed off by the LIC before applying for the Class 2 Licence.

Must hold Class 2 within 4 years

• All Assistant Agents will need to have completed the relevant Certificate IV course and been granted their Class 2 Licence within 4 years of entering the industry, or they will be required to leave the industry for a minimum of 1 year.

 

If you are or have an Assistant Agent in your business that needs to complete a Certificate IV course by completing units of competence and would like to be connected with a suitable RTO, please fill in the attached form and we will get someone to contact you.

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There are a range of different roles within an agency business that may not require a licence or certificate of registration under the Property and Stock Agents Act 2002 (the Act).

For example, a person who does purely administrative work that supports the work of a licensed agent or certificate holder is unlikely to require a licence or certificate under the Act.

However, the law does not specifically mention all of these functions as it is primarily concerned with the functions that are regulated under the Act.

For this reason, an exhaustive list of functions that do not require a licence or certificate of registration has not (and will not) be provided by Fair Trading.

Fair trading has provided some case studies in the attached document.

Consolidation of license categories

Prior to 23 March 2020, there was a separate licence category for business agents. Business agent functions now sit within a real estate agent licence.

Individuals who held a business agent’s licence immediately before 23 March 2020 have transitioned to a real estate agent licence that restricts the holder to exercise business agent functions only.

Some people may still be eligible to apply for this particular licence, if they have the required qualifications.

Real estate agent licences with this restriction condition are issued as either a Class 1 or Class 2 licence. A person who is nominated as a licensee in charge of a business must hold a Class 1 licence.

Only a Class 1 licence holder who is also a licensee in charge may authorise trust account withdrawals for the business.

Q: Can a licensee in charge (LIC) authorise trust account fund transfers that need to be made simply by outlining the process in the agency’s operational procedures?

A: No. The LIC would need to indicate their approval for each specific release of funds and cannot delegate their authority to authorise the release of funds to anyone else.

 

Q: Can anyone other than the LIC press the button to transfer a payment from the trust account?

A: Yes, but only if a licensee in charge has first authorised the withdrawal of the money from the trust account.

From 23 March 2020, an agent may not authorise the withdrawal of money from a trust account unless the agent holds a Class 1 licence and is currently appointed as a licensee in charge and is the sole licensee in charge with responsibility for that particular trust account. This makes licensees in charge ultimately accountable for any trust money released from agency trust accounts.

The Supervision Guidelines will require agencies to maintain operational procedures which include the process to obtain and document the express authorisation of the LIC for all releases of trust money. There can be only one LIC authorising withdrawals for each trust account. However, a LIC can authorise withdrawals for more than one trust account.

Trust money can be withdrawn by cheque or electronic funds transfer only — cash withdrawals are prohibited. For electronic funds transfers, another person may physically disburse funds (for example, by pressing the final release button on a bank account), but only if the LIC of that trust account has first authorised the withdrawal.

Cheques cannot be signed by anyone other than an LIC.

 

Q: What restrictions will come into effect on 23 March 2020 for certificate of registration holders/assistant agents?

A: Assistant agents cannot:​​​​​​​

• enter into a contract for the sale of land
• enter into an agency agreement (this includes a sales agreement or a property management agreement) – except for livestock transactions
• enter into a franchising agreement
• authorise the withdrawal of money from a trust account

Assistant strata managing agents also cannot affix the seal of the owners corporation.

This means that from 23 March 2020, an assistant agent can still prospect for new clients. However, only a Class 2 or Class 1 Agent can sign and bind the agency to an agreement with a vendor, landlord, franchisor or other agency.

 

Q: What are the differences between a Class 1 and Class 2 licence?

A: Both a Class 1 and Class 2 licence holder can perform all agent functions in their relevant category of work. However, only a Class 1 agent can be nominated as a licensee in charge and can authorise withdrawal of funds from a trust account. Class 2 agents are prohibited from authorising the withdrawal of funds from a trust account.

A Class 1 agent will be required to complete an additional 3 hours for CPD requirements from 23rd March 2021, and their licence has a higher application and renewal fee.

Completion of this compulsory CPD topic is to be assessed through demonstration of knowledge about the new legislative and regulatory requirements. Written questioning and responses are required to assess the candidate’s underpinning knowledge and to provide supporting evidence of competence.

A person who demonstrates competency in this topic will:

• understand the different licence classes and types
• understand the related functions permitted by law for each class and type
• be aware of their CPD obligations, and
• be aware of the changes to the operation of trust accounts.

When you are ready to proceed to the assessment for this module covering the Real Estate Reforms package, click the button below to access your assessment.

 

This topic provides an overview of the changes to the rules of conduct that commenced in March 2020 under the Property, Stock and Business Agents Amendment (Property Industry Reform) Act 2018 and Property, Stock and Business Agents Amendment Regulation 2019. On completion of this topic a person will be able to demonstrate competency of the prescribed learning outcomes detailed below.

Duration

Satisfactory completion of this topic will count as 1 hour of CPD towards the compulsory learning topics required for the current CPD year.

Learning Outcomes

A person who completes this compulsory CPD topic will be able to:

1. Overview of main reforms

1.1 Demonstrate an understanding of the requirements of the rules of conduct.

1.2 Identify the key changes to the rules of conduct as part of the reforms, including but not limited to:

1. the requirement for agents to pay rental income monthly
2. rules for the management of trust money, including the requirement to establish separate accounts for rental money and sales money
3. limitations on gifts and benefits that can be received by licence and certificate holders.

2. Rules applicable to the individual participant

2.1 Identify the rules of conduct applicable to the individual participant’s licence class and type including but not limited to:

1. new application of rules to business broking transactions
2. requirements of assistant real estate agents and real estate agents when exercising the functions of a business or buyer’s agent or an onsite property manager
3. requirement to report suspected theft of livestock

Overview

This is the second of the three mandatory CPD topics prescribed by NSW Fair Trading for Licensed Agents – and encourages agents to understand the rules that are applicable to the individual participant for their particular category of licence.

This topic provides an overview of the changes to the Rules of Conduct that commenced in March 2020 under the Property, Stock and Business Agents Amendment (Property Industry Reform) Act 2018 and

Property, Stock and Business Agents Amendment Regulation 2019.

It provides an overview of the three (3) new rules of conduct, as well as a quick look at some other key Rules of Conduct that agents should be aware of.

The 21 rules of conduct can be found in Schedules 1, 2, 3 and 6 of the Regulation as follows:

• All licence and certificate of registration holders  Schedule 1
• Real estate agents and assistant real estate agents Schedule 2
• Stock and station agents and assistant stock and station agents Schedule 3
• Strata managing agents and assistant strata managing agents Schedule 6

In addition to complying with the rules of conduct, agents and assistant agents may have to comply with other laws in relation to their conduct and in carrying out their functions.

For example, strata managing agents have obligations under the Strata Schemes Management Act 2015. Further information about strata schemes and their management can be found here.

Business Brokers and Buyer’s Agents are now covered by the rules applicable to Real Estate Agents and covered specifically in Schedule 2 of the Rules of Conduct. They do not have separate Rules of Conduct any longer.

Your knowledge of the general rules of conduct (Schedule 1)

First up, rule 1 states that you need to have a knowledge of all the rules as set out in Schedule 1.

1 Knowledge of Act and regulations

An agent must have a knowledge and understanding of the Act and the regulations under the Act, and such other laws relevant to the category of licence or certificate of registration held (including, laws relating to residential tenancy, fair trading, competition and consumer protection, anti-discrimination and privacy) as may be necessary to enable the agent to exercise his or her functions as agent lawfully.

 

So while rule 1 says you must know the rules (that means all the rules) and all the rules are important, there are also some rules for the purposes of this course that we would like to draw your attention to:

6   To act in the client’s best interests

An agent must act in the client’s best interests at all times unless it would be contrary to the Act or regulations under the Act or otherwise unlawful to do so.

 

9   To act in accordance with client’s instructions

An agent must act in accordance with a client’s instructions unless it would be contrary to the Act or regulations under the Act or otherwise unlawful to do so.

 

10   Licensee must ensure employees comply with the Act and regulations

An agent who is the licensee-in-charge at a place of business of a licensee must take reasonable steps to ensure other licensees or registered persons employed in the business conducted there comply with the Act and regulations under the Act.

14   Inducements

An agent must not offer to provide to any other person any gift, favour or benefit, whether monetary or otherwise, in order to induce a third person to engage the services of the agent as agent in respect of any matter.

There are three key changes to the rules of conduct

The three new additions to the Rules of Conduct are explained in more detail here.

Rule 20 – Payment of rental income monthly to the landlord

An agent must pay rental money received on behalf of the landlord under a residential tenancy agreement to the landlord at the end of each month, unless the landlord has instructed the agent in writing to do otherwise.

This ensures that any rent owing is passed on in a timely manner and landlords are aware if there has been a failure to account for their rental income.

[Tip: Depending on what the customer wants many agencies are able to pay landlords when they want to be paid, sometimes even instantly. Listen to this podcast with Hayley Mitchell for more info at about the 25min mark]

Rule 21 – Gifts and benefits generally prohibited where there could be a conflict of interest

Section 53F of the Property and Stock Agents Act establishes a general prohibition on agents receiving or requesting gifts or benefits for themselves or for another person in circumstances that could reasonably be considered to give rise to a conflict of interest.

However, this does not apply to:

• anything provided by the agent’s employer
• anything provided as part of an agency agreement or as a gift of thanks from a client for services provided under the agency agreement, or
• anything of less than $60 in value — which is the same level as the dollar limit under the reforms to the laws governing strata managing agents that commenced in 2016.

The new Supervision Guidelines also require principal licensees to maintain a register of gifts and benefits received by agents employed in the agency.

Tip: We did a podcast with Minister Anderson just before the new regulations came into place and he says to ask yourself, “does it pass the pub test?” 

What’s the pub test then?

“The pub test is basically your guilty conscience,” Minister Anderson says. “If you receive a gift that’s relative to the job or task you’ve just undertaken, then that’s fine. But if it’s overboard and you think twice about it and ask what the meaning behind it is then the pub test comes into play.”

Note: This does not apply in circumstances if the gift is given in gratitude for services provided under the agency agreement

Rule 22 – Separate trust accounts for rental and sales money

The licensee in charge of the business will need to establish a different general trust account for rental money and sales money. Rent and sales deposits must not be kept in the same general trust account.

Many businesses already maintain separate trust accounts for rental income and sales deposits; this new rule mandates it for everyone.

This requirement aims to improve the accountability and transparency of agents by ensuring they do not mix rental and sales money in a single trust account.

Fun Fact: You’ll notice the three new rules are numbered 20, 21, 22 – so you might be wondering why we said 21 rules of conduct in the beginning of this lesson. It’s because the old rule 15 was repealed.

New application of rules to business broking transactions

If you currently hold a business broking license, from 23 March 2020, the name of your licence will change to Class 2 Agent in Real Estate – Business Agent.

This licence is conditioned to the work currently done by a business agent. You can exercise business agent functions, which include:

• selling, buying, exchanging or otherwise dealing with, or disposing of, businesses or professional practices, or any share or interest in, or concerning, or the goodwill of, or any stocks connected with, businesses or professional practices
• negotiating for the sale, purchase or exchange or any other dealing with, or disposition of, businesses or professional practices, or any share or interest in, or concerning, or the goodwill of, or any stocks connected with, businesses or professional practices.

But you cannot authorise the withdrawal of money from a trust account.

From 23 March 2020, a certificate holder (Assistant Agent) in Real Estate – Business Agent will be unable to enter a sales agreement or an agency agreement. Certificate holders can still try to get new clients and arrange for a vendor or business owner to fill in an agreement, but the agreement is not binding until signed by an Agent.

You may have to review and sign agreements that have been prepared by Assistant Agents. In doing so, you will be responsible for ensuring the agreement is correct and complies with legislative requirements. You may be held accountable for any non-compliance.

Requirements of assistant real estate agents and real estate agents when exercising the functions of a business or buyer’s agent or onsite property manager

Business or Buyers Agent

Schedule 9 Terms specific to a buyer’s agent agency agreement now include the following

Property details

The agreement must include a copy of the statement prepared and given to the person on behalf of whom the agent is acting by the agent for the purposes of clause 9A of Schedule 2.

2   Purchase price range

The agreement must specify a price or price range as the maximum price or the price range that the person on behalf of whom the agent is acting is prepared to pay for a property.

Onsite Property Managers

On 23 March 2020, you would have been automatically issued with a Class 1 Agent in Real Estate – On-site Residential Property Management.  These licences are conditioned to the work currently done by an on-site residential property manager. You can perform on-site residential property management functions, which include:

• acting as an agent for giving possession of residential premises under a lease, licence or other contract
• acting as an agent for collecting bonds, deposits, rents, fees or other charges in connection with any such lease, licence or other contract.

From 23 March 2020, a certificate holder (Assistant Agent) in Real Estate will be unable to enter agency agreements or contracts for the sale of land and are unable to authorise the withdrawal of money from a trust account.

Agency agreements are not binding until signed by an Agent.  As an Assistant Agent – On-site Residential Property Management, you can still enter agreements for the lease of premises and prepare agreements.

Requirement to report suspected theft of livestock

Schedule 3 Rules specific to stock and station agents and assistant stock and station agents now include a clause with respect to theft of livestock

7A   Theft of livestock

An agent who suspects, at an auction for the sale of livestock, or at any other time, that livestock may have been stolen or otherwise unlawfully obtained, must, as soon as reasonably practicable, inform a police officer of the cause of that suspicion.

Completion of this compulsory CPD topic is to be assessed through demonstration of knowledge of legislative and regulatory requirements applicable to the class and type of licence held by the individual participant. Written questioning is required to assess the candidate’s underpinning knowledge and to provide supporting evidence of competence.

Critical aspects of assessment

A person who demonstrates competency in this unit will have knowledge of:

• the changes to the rules of conduct introduced as part of the 2020 reforms
• the rules of conduct that will apply to each licence class and type and how they impact the individual participant.

 

This topic involves understanding agent responsibilities to respond to and mitigate risks for occupants and managing risks that may arise within the property industry. For stock and station agents there is a focus on worker risk and animal welfare. For business broking there is a focus on appropriate disclosures and advice.

On completion of this topic, a person will be able to demonstrate competency of the prescribed learning outcomes detailed below.

There is no need to duplicate CPD activities for each category of licence that an individual holds. If a person holds a licence in more than one category, the individual is only required to complete one part from the list below for this topic to count towards their compulsory topic requirements.

For individuals that hold a licence in only one category, they are required to complete the part below that is applicable to their licence category.

Real Estate Agents and their staff deal with the public on a day-to-day basis. Not to mention that being in business (simply in general terms) involves risk.

The form of risk that encompasses real estate agents is quite diverse. It stems from varied and many sources when we as agents deal in all real estate matters.

Mirriam Webster defines risk as:

1 possibility of loss or injury; danger

2 someone or something that creates or suggests a hazard

TIP: The Australian common law principles of negligence come from a famous British House of Lords case involving a bottle of ginger beer, a dead snail and an awful dose of gastro/shock. You can read more about it here.

‘Risk’ in the business world is a hazard, a threat, the chance of something happening which will impact negatively on a company’s business activity.

Why is it important to manage risk?

Risk in the business environment is everywhere. However, to ignore risk is foolish as the consequences, depending on the type of risk that is ignored, can threaten the very business we rely on for our income. One of the reasons why we have a profit in business is to compensate us for some of the risks we take.

Real estate is no different from business in general. Agents supply a professional service to the public. As such there are many sources of risk which we must be aware of and be prepared to tackle. Risk can arise from many different sources and in many different areas. Because of this, we must identify those sources and do something about it.

Other than the risks that all businesses face, what particular risks do we face in the real estate sector?

We can break risk down into several areas:

• Some are imposed on us through legislation, others are of our own making.
• We cannot control the economy and changes in it, neither can we control legislation and the way it is changed or interpreted.
• These risks we have to take on board and then adapt our actions to ensure that the business continues.

Sources of risk

First of all, we must consider what type of agency you are and what services you provide. Then the extent of risks you face depend on the services that you do provide, and the way you provide them.

All our dealings whether between us the agency and clients, customers and the public at large become sources of risk to the agency. Failure to ensure staff have proper instructions and are trained for the tasks they do magnifies that risk. Changes in the economy, political circumstances and changes all add to the risks we face in our day to day work. So the possible causes of risk will include, but are not limited to:

• Financial/market – theft, fraud, loans, membership fees, insurance costs, damages claims from personal injury to clients and damage to property or penalties and fines
• Technology and technical issues -damage to software and hardware from viruses, software and hardware failures hence downtime, compatibility problems, risk of physical loss through theft or damage and ongoing maintenance needs
• Human behaviour – Mismanagement; lack of staff training and dissemination of information; breach of security; client dissatisfaction.
• Occupational health and safety – Physical injury to employees from various sources including whilst driving, in the office, out on inspections, handling stock, from other stakeholders, etc.
• Legal – Litigation from a breach of legal or contractual responsibility and duty of care, including personal injury to clients/stakeholders.
• Political – Change in legislation; failure to meet and follow statutory regulations and controls. Also deficiencies in financial controls and reporting as required by law.
• Social – Unfavourable publicity.
• Economic – adverse change in economic factors such as interest rates
• Property and equipment – Failure of machinery or equipment eg. cars, printers, cameras, etc.
• Environmental – Environmental damage due to mismanagement of maintenance and repairs.
• Natural events – Earthquake, fire, flood and tempests causing disruption to business and hindrance to potential.

In day-to-day agency work our main source of risk arises from the commercial and legal relationships we enter into with members of the public and will include our dealings with vendors, purchasers, employees, landlords, tenants, subcontractors, developers, suppliers and the public at large.

Stakeholders – Who are they?

To identify the risks in your area of work, you must first establish the context and the stakeholders.

The context is the environment in which your organisation operates. For instance, the risks to an organisation that operates a coal mine would be different to those in the property industry. Even within the property industry, the risks, and the people who could be affected, would differ for different sectors, for example Stock and Station or Strata Management.

Individuals who may affect, or be affected by, your approach to the various sources of risk in your working environment are called stakeholders. They could be employees, managers, volunteers, unions, financial and insurance organisations, customers, government, suppliers and service providers.

Stakeholders in the property industry may include:

• potential vendors
• vendors
• potential purchasers
• purchasers
• prospective landlords
• existing landlords
• prospective tenants
• existing tenants
• owners corporation and community title groups
• agents/third parties for purchasers and vendors
• in-house staff and office contractors
• other agency staff.

We have identified a range of risks in the property industry: risks to the health and safety of employees, clients and others; an agency’s or agent’s reputation; the risk of legal action, risks coming from technology, risks to equipment, financial risks and so on. Ignoring these risks could impact substantially on an agency’s viability. But what is the best way to identify and manage these risks?

In everyday life, all we often have time for is a snap decision based on minimal information and a gut feeling. But in business, it may be worth investing more time and effort and consulting with stakeholders to try to identify risks before they can cause damage to the business, or before making a particularly risky decision that could have a major impact.

A systematic approach to managing risk is now regarded as good management practice. Standards Australia has recognised this and developed the world’s first Risk Management Standard, AS/NZS 4360:1999, Risk management. This standard outlines the generic procedures and processes that need to be implemented for effective Risk Management. The procedures identified can help you establish the context and identify, analyse, treat and monitor risks.

The current Standards Australia risk management approach can be purchased on the Standards Australia webstore.

The Global version can be freely accessed here from the ISO Online Browsing Platform

 

1 Analyse the risk

Most people use their experience, intuition and judgement to analyse risks. However, to be able to make rational, informed decisions about risks, we also need to understand some basic concepts of risk analysis and decision making.

Risk involves both uncertainty and unpleasant outcomes. In analysing risk, you need to address both these aspects. You need to consider the likelihood of something happening and the likely consequences if any one or all of the things that could happen, do happen.

The Australian/New Zealand Standard for Risk Management AS/NZS 4360:1999 has established a table to assist in the analysis of the level of risk based on the likelihood of occurrence and the consequences. By evaluating the likelihood of a risk occurring, and the consequences of the incident, you are able to determine the level of risk to your business.

How does it work?

The likelihood of an event occurring is described as rare, unlikely, possible, likely and almost certain. The consequences of an event occurring are described as insignificant, minor, moderate, major and catastrophic.

Combining the likelihood and the consequences of an event gives a risk level of low, moderate, high or extreme.

For example, a risk which is unlikely to occur (eg. car runs out of fuel on the way to an Open For Inspection) and has moderate consequences (eg. late for conducting and monitoring inspection which could have a detrimental impact on public relations with stakeholders) poses a moderate level of risk.

On the other hand, an event which is unlikely to occur (someone hacking into the agency’s computer records) but which would have major implications for the agency and its clients poses a high level of risk.

The level of risk you have determined influences the way in which you treat the risk. A low level of risk would be treated with routine procedures. The treatment of a moderate level of risk would be to make a particular member of staff responsible for dealing with this situation and implementing monitoring or response procedures.

A high level of risk requires action, as it has the potential to be damaging to the business, whilst an extreme level of risk requires immediate action, as it has the potential to be devastating to your business.

Therefore, our example above (the car running out of fuel on the way to an Open For Inspection) presented a moderate level of risk. Therefore it would be treated by allocating specific responsibility for maintenance of vehicles and establishing response procedures, for example sending another member of staff to the OFI.

 

A practical framework

In the examples above, we have quantified into 2 dimensions.

1. The Consequences of the risk needs to be assessed, and
2. The Probability of the risk occurring needs to be assessed.

For simplicity, rate each activity that may carry risk on a scale of 1-5. The higher the number, the larger the impact or probability, such as the matrix below.

Consequences – How severely could it hurt someone or cause damage?

• Catastrophic – death or a large number of serious injuries
• Environmental – ecological disaster and huge cost
• Major – serious injury, extensive injuries, severe environmental damage, major cost
• Moderate – medical treatment required, contained environmental impact, high cost
• Minor – first aid treatment required, some environmental and/or financial impact
• Insignificant – no injuries, low financial and / or environmental impact.

 

Probability / Likelihood – how likely is it to happen?

• Almost certain – expected to occur in most circumstances
• Likely – will probably occur in most circumstances
• Possible – might occur at some time
• Unlikely – could occur at some time
• Rare – may occur only in exceptional circumstances.

 

Therefore, if the probability is high but the impact is low it would be a medium risk.

On the other hand, if the impact is high and the probability is low it would be high risk.

NB – A remote chance of catastrophe warrants more attention than a high chance of a hiccup.

 

Managing unacceptable business risks

After identifying and analysing the risks to your business, you will need to evaluate those that you are willing to accept and those that will require attention.

You may be willing to accept some risks because:

• the level of risk is so low that it is not worth spending time and money treating it
• the cost of treating the risk is greater than the cost of the consequences if the event happens
• the benefits and opportunities offered by the risk are much greater than the threats, for example: using capital to invest in a development opportunity.

Now that we have a framework for determining the level of risk, we turn our attention to managing the risks we consider to be unacceptable.

There are four ways of doing this:

1. avoiding the risk
2. controlling the risk
3. transferring the risk
4. retaining the risk

1. Avoiding the risk

This is a method which we often employ in our own lives. We combat danger by using our common sense to avoid the risk in the first place, for example by not walking alone late at night in a city.

In a business environment, you would avoid risk by deciding not to start or continue with an activity that poses a risk or by choosing another way to achieve the same result.For example, a landlord has a bad reputation for delaying repairs and maintenance on a building or not undertaking them at all. This could put tenants in danger. You avoid the risk by not accepting a property management listing from this landlord.

Likewise, you would not recommend questionable tenants to a landlord. However, if the landlord does take on some questionable tenants, you should make sure you spell it out in writing to the landlord that he or she went against your recommendation.

2. Controlling the risk

This method of treating risk is used to decrease the likelihood of the risk occurring and/or limit the consequences of the risk.

Methods to reduce the likelihood of risk include:

• implementing quality assurance procedures and systems
• having induction programs
• providing training and ongoing professional development for staff
• having adequate supervision and mentoring
• having inspection controls and audits
• introducing preventative maintenance for equipment.

To reduce the consequences of risk you need to plan for contingencies, minimise exposure to sources of risk, possibly relocate activities and put physical barriers in place.

For example, to avoid lapsed sales and management agreements, you would need a procedure to monitor expiry dates. You would control the risk of badly written contracts and agreements with staff training.

Constant monitoring of accounts would control the risk of the misappropriation of funds. The chance of injury to staff and clients would be controlled by using signs to warn of danger or by preventing access to dangerous places.

3. Transferring the risk

This is a common method. The business moves all or part of the responsibility for the risk to another organisation. Of course, the first organisation that springs to mind is an insurance company. Insuring against risk seems to infiltrate all areas of business and life nowadays, from income insurance to pet insurance.

Another way of moving risk is to contract out activities that the business doesn’t specialise in or that would be too time-consuming to do properly. For example, some small organisations now contract out valuations to businesses that specialise in this type of work, as opposed to having in-house valuation staff do them. The risk of litigation may be too high for these organisations to undertake the work themselves.

Another way to transfer risk, often used in real estate and valuation, is to include an exemption from liability clause in the documentation. These disclaimers or waivers state that the agency does not accept responsibility for certain events. However, the legality of these disclaimers is often ambiguous and they do not release an organisation from its duty of care to the person who signs the waiver or protect organisations that act negligently or fail to act when they should have.

4. Retaining the risk

In reality, it is not possible to have a totally risk-free environment, nor may it be desirable. It may not be possible to avoid, reduce, eliminate or transfer all risks, nor may it be cost-effective to do so, therefore some risks will need to be retained.

Who is responsible?

The licensee-in-charge is ultimately responsible for everything that happens in the agency. However, every individual staff member should be made aware they have a responsibility to help avoid risk, both business and personal. Staff members need to be aware of potential or actual hazards in the office and on-site and to either act to remove the risk or tell a responsible staff member.

Team and staff meetings are a good place to discuss actual and potential risks and their management. Staff members need to look out for each other, particularly where personal safety is concerned. All staff members need to be aware of emergency procedures and need to know when and how to complete incident reports. Staff attitudes to risk and a team approach to minimising their impact are critical.

Identify the primary occupancy risk for the various functions carried out by agents, including but not limited to: residential sales residential property management commercial, retail and industrial sales commercial, retail and industrial leasing.

 

Main risks for sales agents

Listed here are a large number of functions that have associated risks in the area of residential sales. Read through them and check to see if your office has those risks identified and strategies to minimise the risk.

Market Appraisals

• Inadequate Inspection
• Conflict of Interest
• Lack of research
• Making false or misleading representations as to services provided
• Making unsubstantiated opinions
• Not recording evidence of information used to establish a “True Estimate of Selling Price”.

Listing Agreement

• Not checking who owns the property
• Not inspecting the property
• Incorrect preparation of Agreement
• Not providing a correct marketing schedule
• Not disclosing discounts, rebates or commissions
• Not giving a copy of the guide on Agency Agreements
• Not explaining to vendors the Agency Agreement
• The incorrect signing of an agreement
• Inadequate vendor disclosure
• Not giving the owners a copy of the signed agency agreement within 48 hours of the last owner signing

Advertising Preparation

• Misleading and deceptive conduct
• Not checking facts and claims correctly
• Conflict of Interest
• Discrimination
• Breach of Privacy or confidentiality
• Not including disclaimers

Contract for Sale

• Not checking that contract for sale is complete
• Not checking names of Vendor(s) on contract with agency agreement
• Not checking attachments are for property for sale
• Not securing a copy of the contract on the file and
• Not copying contracts correctly
• Not double-checking claims in advertisements with contract eg land size, zoning, easements etc
• Not checking special conditions and their meaning

Other Marketing

• Sign Board erected on the correct property
• Unsafe location of signs
• Security at Open Houses
• OH&S issues at Open Houses
• Privacy statements at Open Houses
• Security of Keys
• Misleading and deceptive representations to buyers
• Representations made to buyers on price

Other Documentation

• Non-compliance with Sections 47 & 49 of the Act
• Inadequate qualification of buyers
• Discrimination
• Not submitting offers or not confirming them in writing
• Not filling up contracts correctly
• Inadequate deposit
• Non-collection of deposit
• Providing legal advice
• Making changes to contracts outside the heavy black box
• Not getting instructions to exchange in writing
• Not exchanging contracts correctly
• Not explaining Cooling off periods correctly
• Not transmitting the exchanged contracts to the respective solicitors within 2 working days
• Inadequate minimisation of liability

Office Procedures

• Delays in sending sales letters
• Inadequate Accounting procedures
• Failure to notify tenants if a managed property is listed for sale
• Failure to notify tenant when a managed property sells
• Non-compliance with the Privacy Act
• Not ensuring all required checklists are on file and completed correctly
• Failure to account to vendor when a cooling-off period contract is rescinded
• Failure to account to the vendor correctly at the completion of the sale

Main risks for property management

Listed here are a large number of functions that have associated risks in the area of property management. Read through them and check to see if your office has those risks identified and strategies to minimise the risk.

Appraisals

• Inadequate Inspection
• Conflict of Interest
• Lack of research
• Making false or misleading representations as to services provided
• Not identifying possible future repair and maintenance issues

Listing Agreement

• Not checking who owns the property
• Incorrect preparation of Agreement
• Not completing a condition report correctly
• Not explaining to owners the Agency’s policies as regards Tenant selection, arrears and Repairs and Maintenance
• Not giving the owners a copy of the signed agency agreement within 48 hours of the last owner signing
• Not providing a written report of the property noting possible future repair and maintenance issues

Tenant Selection

• Not using correct application forms
• Not seeking verifiable referees
• Inadequate checks of tenant and references
• Insufficient qualification
• Conflict of Interest
• Discrimination
• Breach of Privacy or confidentiality

Formal Documentation

• Errors in Lease preparation
• Incorrect special conditions – conflict with Act
• Error in Bond calculation
• Non-collection of the full bond
• Dishonour of prepayments
• Not explaining to the tenant the lease and their obligations
• Not explaining Agency policy on arrears
• Not explaining Agency policy on Repairs
• Not giving a copy of the documentation to the tenant
• Not giving the tenant a full set of keys to the property

Ongoing Property Management

• Inadequate/Incorrect/Incomplete/Lack of Ingoing condition report
• Inadequate key security
• Careless selection of tradespeople
• Failure to check tradespeople’s credentials
• Inadequate routine inspections
• Careless or Incomplete Inspections
• Inadequate maintenance routine
• Failure to advise the owner of breaches of lease
• Inadequate tenant liaison
• Inadequate landlord liaison
• Late or non-payment of accounts
• Inadequate Insurance of Property or Landlord risk
• Excessive vacancies
• Not maximising returns
• Inadequate reporting to owner
• Inadequate record-keeping
• Failure to act or procrastination on tenant complaints
• Inadequate minimisation of liability
• Incorrect disposal of abandoned goods
• Failure or organise repairs correctly
• Failure to inspect repairs when completed
• Failure to advise the Landlord and Tenant that repairs are completed

Rent Collection and Disbursement

• Rent payments not made on time
• Inadequate follow-up of arrears
• Failure to inform the owner of arrears
• Failure to invoke the Agency’s arrears procedure
• Failure to account for funds correctly
• Inadequate procedures for handling receipts/cash control
• Infrequent reconciliation of funds held
• Inadequate owner statements

This list an indication of the risks and hazards in the Property Management area or agency business. From this you should have Policies and Procedures that cover all the functions performed in the Property Management area to ensure risk is minimised.

 

As of 23rd of March, 2020 new rules came into play with respect to fire safety, swimming pools and risks arising from poor maintenance of property.

New smoke alarm obligations

From 23 March 2020, NSW landlords and agents need to ensure that smoke alarms installed in rented properties are in working order.

Requirements for landlords and agents

• Where a smoke alarm is not in working order, landlords and agents must ensure the alarm is repaired (this includes replacing a battery) within 2 business days.
• Landlords and agents must check smoke alarms every year to ensure they are working.
• Landlords and agents must ensure:
• smoke alarms are replaced within 10 years of manufacture, or earlier if specified by the manufacturer
• batteries are installed or replaced every year (or for lithium batteries, in the period specified by the manufacturer).
• Landlords and agents must give at least 2 business days’ notice to inspect or assess the need for smoke alarm repair or replacement, and at least 1 hour notice to carry out repair or replacement of a smoke alarm.

Requirements for tenants

• Tenants must notify their landlord or agent if they discover that a smoke alarm is not working (this includes when the battery needs to be changed).
• Tenants must notify their landlord when they change a battery in a smoke alarm or engage a licensed electrician to repair or replace an alarm. The different circumstances where a tenant can change a battery or engage a licensed electrician are provided in the table below. This does not apply to social housing tenants.

Responsibilities for certain types of alarms

Below is more information to help landlords and agents understand their responsibilities for different types of smoke alarms, and the situations where a tenant can change a battery in a smoke alarm or arrange for a repair.

Reimbursement for repairs

A tenant (except in the case of social housing tenants) is entitled to reimbursement within 7 days after giving written notice of relevant expenses. The notice must detail the nature and cost of repairs together with copies of receipts or invoices. Further reading.

Swimming or Spa Pools

Swimming pools are a major source of risks – both during general open for inspection activities and during tenancy agreements.

Visit the NSW Swimming Pool Register website to check if a certificate of compliance has been issued for a particular property (This requirement does not apply to a lot in a strata scheme or in a community scheme if that strata or community scheme has more than two lots.)

Here is a self-assessment checklist in 2019 if a pool or spa is compliant with the Australian Standards (NSW Pool Fencing Law )

Pool fence

• Pool fences should be at least 1200mm high (from the ground level).
• The gap from the bottom of the fence to the ground is no more than 100mm.
• If a boundary fence is part of the pool fence, the barrier should be 1800mm high from the pool area.
• The gap between the vertical bars in the fence should not exceed 100mm.
• The gap between the horizontal bars should be at least 900mm apart.
• The holes in the barrier (if mesh fencing is used) should be 13mm or less.
• The pool fence should be well maintained and in good working condition (no holes, rust or broken parts).

Pool gate and windows

• The gate should be self-closing from any position.
• The gate should latch by itself.
• The latching device should be at least 1500mm above the ground level.
• The gate should open outwards (away from the pool).
• Windows should open not more than 100mm and should have a locking device.

Non-Climbable Zone (NCZ)

• There should be no potential hand holds or foot holds (e.g. shrubs, trees, pot plants, ladders, chairs and other objects) within the 900mm non-climbable zone.
• Non-Climbable Zone should be measured in an arc shape from the top of the fence to the ground.
• There should be a 300mm clearance from the barrier inside the pool area.
• An appropriate warning sign such as the CPR guidelines should be available near the pool area and can be easily read from a distance of 3m.

For indoor pools and spas

Checklist for all indoor pools, including spas that don’t have a lockable child-resistant closure:

• The latch on the gate should be at least 1500mm above ground level.
• There should be no pet door or opening that is more than 100mm.
• There should be no wall openings greater than 100mm.
• The windows should open to a maximum of 100mm.
• An appropriate and clear warning sign such as the CPR guidelines should be available near the pool area and can be easily read from a distance of 3m.
• There should be no climbable objects within 1200mm area outside the fence.

Maintenance

Some of the recent changes to tenancy laws commencing on the 23rd of March 2020 are designed to reduce disputes over repairs and maintenance, increase protection and certainty for tenants, as well as clarifying the rights and obligations

NSW Fair Trading now has powers to resolve disputes between tenants and landlords over repairs and maintenance and property damage. This includes the ability to issue rectification orders. The rectification order process supports tenants and landlords to resolve disputes about property repairs and damage in a tenancy by working with Fair Trading.

Landlords can apply to Fair Trading to investigate whether a tenant has caused or allowed damage to the property and has refused or failed to repair, or not satisfactorily repaired, the damage without a reasonable excuse.

Tenants can apply to Fair Trading to investigate whether the landlord has failed to provide and maintain the property in a reasonable state of repair.

A landlord or tenant must first make a written request to the other party to try and resolve the issue and can then apply to Fair Trading through the complaints and dispute resolution process if the issue is not resolved.

Minimum standards to clarify ‘fit for habitation’

Landlords are currently required to provide the rented property in a reasonable state of cleanliness and ‘fit for habitation’. The changes introduce seven minimum standards which clarify what ‘fit for habitation’ means.

The minimum standards set clearer expectations for landlords and tenants and will apply to all rented properties. To be fit to live in, the property must (as a minimum):

1. be structurally sound
2. have adequate natural or artificial lighting in each room, except storage rooms or garages
3. have adequate ventilation
4. be supplied with electricity or gas, and have enough electricity or gas sockets for lighting, heating and other appliances
5. have adequate plumbing and drainage
6. have a water connection that can supply hot and cold water for drinking, washing and cleaning
7. have bathroom facilities, including toilet and washing facilities that allow users’ privacy.

Landlords need to ensure their rented properties meet the minimum standards to be fit for habitation. Rented properties are already required to be fit for habitation and should already meet these basic standards.

The property could have other issues that may make it unfit for a tenant to live in, even if it meets the above seven minimum standards. Before the property is rented out, the landlord or agent should take steps (such as make repairs) to make sure the property is fit to live in. These standards must be maintained throughout the tenancy (by making repairs).

The new standard form of agreement

The new standard form of agreement has been updated to reflect the rights and obligations between tenants and landlords under the new laws.

The new agreement contains new terms requiring the landlord to advise the tenant in writing within 14 days of becoming aware of the fact that the property:

• is subject to a significant health or safety risk and the nature of the risk
• is part of a building where a development application or complying development certificate application for rectification has been lodged regarding external combustible cladding
• is part of a building where a fire safety order or a building product rectification order (or a notice of intention to issue one of these orders) has been issued regarding external combustible cladding

There is also a new term for landlords to allow a tradesperson to enter the property to carry out maintenance or repairs needed to avoid health or safety risks to any person, or to avoid a risk that water, utilities or other services may be disconnected.

New condition report

The standard condition report has been updated to reflect the new laws, including the minimum standards and smoke alarm requirements.

The requirements around condition reports have also been improved by:

• allowing a condition report to be provided to tenants electronically
• introducing a penalty if a landlord or agent does not provide a tenant with two hard copies or one electronic copy of the completed property condition report at the start of the tenancy
• providing that tenants complete and return the condition report within seven days of taking possession of the property (instead of from when they receive the condition report), but only if the tenant has received the condition report.

The new form of condition reporting is available in the new Regulation and must be used from 23 March 2020 onwards.

Key changes to the Property Stock and Stations Act included new and improved disclosure obligations on landlords and their agents, including disclosure of material facts, and strengthening the remedies for tenants when these obligations aren’t met, as we saw in Topic 1 ‘Material Facts’.

Section 52 of the Property and Stock Agents Act 2002 (the Act) requires that a licensee or certificate holder must not induce a person to enter into any contract or arrangement by:

• any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the agent or not), or
• any failure to disclose a material fact of a kind prescribed by the regulations (whether intended or not) that the agent knows or ought reasonably to know.

An offence under this section can attract up a penalty of up to $22,000.

What is a material fact?

A material fact is defined as something that would be important to a reasonable person in deciding whether or not to proceed with a transaction. In a property services context, these are facts which:

• maybe sufficiently significant or relevant to influence decisions on whether to buy, sell or rent, and/or
• could impact the market value of a property.

You should discuss with your vendors any market sensitive matters that are likely to be the subject of statements or representations by the agent when marketing the property.

During this process, it is important for you to gather information on aspects of the property which are sensitive to the market which will assist you in accurately and honestly representing the property.

Following major reforms that commenced on March 23, 2020, an agent must not fail to disclose a material fact of a kind prescribed by the Regulation that the agent knows or ought reasonably to know.

This means that you could still be in breach of the law for failing to disclose a fact even though you, or your sellers, didn’t know about it.

What do material facts include?

• within the last five years, the property has been subject to flooding from a natural weather event or bushfire
• the property is subject to significant health or safety risks
• the property is listed on the register of residential premises that contain loose-fill asbestos insulation that is required to be maintained under Division 1A of Part 8 of the Home Building Act 1989
• within the last five years, the property was the scene of a crime of murder or manslaughter
• within the last 2 years, the property has been used for the purposes of the manufacture, cultivation or supply of any prohibited drug or prohibited plant within the meaning of the Drug Misuse and Trafficking Act 1985
• the property is, or is part of, a building that contains external combustible cladding to which:
• there is a notice of intention to issue a fire safety order or a fire safety order has been issued requiring rectification of the building regarding the external combustible cladding, or
• there is a notice of intention to issue a building product rectification order or a building product rectification order has been issued requiring rectification of the building regarding external combustible cladding
• the property is or is part of, a building where a development application or complying development certificate application has been lodged under the Environmental Planning and Assessment Act 1979 for rectification of the building regarding external combustible cladding.

Material facts that an agent could be reasonably expected to know and could find out by doing their own discovery include, for example, whether the property has been affected by a flood or bushfire or whether the property is listed on the loose-fill asbestos insulation register.

Other material facts, such as those relating to external combustible cladding, would be known by the property owner and revealed by prospective property purchasers doing their own due diligence in getting copies of the strata owners corporation’s records.

However, if an agent has those strata records and they contain information relevant to material facts, then the agent must disclose them.

It is unlikely that an agent would be held liable for not disclosing a material fact if the vendor intentionally concealed that information from the agent when they were questioned, and the agent could not otherwise be reasonably expected to know.

New disclosure requirements for tenants

A landlord or agent must not make false or misleading statements or knowingly conceal certain material facts from a prospective tenant before they sign an agreement.

The list of material facts is available in the Tenant Information Statement that a landlord or agent must give a tenant before entering into a tenancy agreement.

• Before signing an agreement, a landlord or agent must also tell a tenant of any proposal to sell the property if the landlord has prepared a contract for sale, or if a mortgagee (i.e. bank or other lender) is taking court action for possession of the property.
• The list of material facts and information that prospective tenants must be told before entering into an agreement has been expanded. The changes also provide a remedy for tenants when material facts and information are not disclosed. The changes recognise the potential hardship tenants face if they are not provided with important information about a tenancy.

[Tip: You can access the loose-fill asbestos insulation register here]

Top tips for agents to reduce risk

1. Ensure you have a valid Sales Agreement and a complete contract before any marketing of the property is commenced.
2. Do not make statements about the property that cannot be independently verified.
3. We do not recommend you list properties without first ensuring the exact title details of the property (as to ownership)
4. Obtain written sign off from vendors as to the advertising on all sales and be sure you don’t breach copyright provisions when using images.
5. Never rely on measurements for land/building areas obtained from data companies. Confirm in writing from the vendor and/or vendor’s solicitor.
6. Always ensure you obtain written instructions from your vendor as to all actions that you undertake on their behalf
7. Take comprehensive and detailed file notes of any verbal instructions and follow up those in writing.
8. Do not provide investment return forecasts unless provided by a quoted independent third party.
9. Do not release trust funds without uniform written instructions from both parties.
10. Point out obvious hazards to the owner that could result in potential buyers injuring themselves during open house inspections.

Top tips for property managers

1. Follow up on all requests for maintenance. Pass this on to the owner and recommend the use of experts for suspect structural areas.
2. Complete paperwork and documentation important – so make sure everything is in writing (detailed file notes and communications)
3. If your owners refuse to invest in repairs and maintenance record this in writing, and perhaps if a landlord continually refuses to undertake repairs consider terminating your Agreement with them
4. Ensure owners, contractors and handymen all have their own Public liability insurance
5. Make sure all certificates of insurance are updated annually
6. Stick to your scope under your Management Agreement –you are not accountants and/or tax advisers – all owners should make their own enquiries and ascertain their liability for land tax and statutory charges
7. Ensure you have procedures and checklists in place to monitor all aspects of property management.

General Tips

1. Do not provide financial advice to clients when not qualified to do so
2. Ensure Vendors sign off on all marketing materials including information memorandums and financial documents before they are published or shown to buyers
3. Stock and station agents must be aware of unique risk issues including things like animal welfare, traceablility, chain of responsibility, safety at property inspections and identification of property boundaries during inspections
4. Strata agents must identify unique obligations and responsibilities for managing fire safety, smoke alarms, electrical matters, loose fill asbestos and external wall cladding

We’ve written a fair bit on risk management in practice over the years. Here are some of our top picks that you might like to gain more information from:

• Episode 27: How to Identify Risk and Obtain Insurance for your Real Estate Business (eliteagent.com) – EBM RentCover’s Sharon Fox-Slater talks about the types of business insurance and performing regular audit checks on your internal and external procedures.

 

• Understanding Business Insurance and Risk Management: Sharon Fox-Slater (eliteagent.com) – Sharon Fox-Slater of EBM RentCover talks about insurance to consider in your business, protecting yourself from cybercrime, and tips for risk management.

 

• Business auditor reveals the 7 most frequent failures by Australian organisations (eliteagent.com) – A leading global risk management provider has revealed the most common reasons why organisations fail to meet the goals they set.

 

• Risky Business – Are Your Property Managers Leaving You in The Dark? (eliteagent.com) – What is the biggest fear that all Principals have about running their Real Estate Agency business? Is it paying the wages/bills or is it a poor market and low activity? The answer is none of the above.

 

• RP Data & CoreLogic Delivers Property Hazard Risk Reports (eliteagent.com) – Geospatial data and analytics are used by government, corporations and individuals to manage and mitigate risk arising from natural disasters such as bushfires, floods and cyclones, and assists in facilitating more efficient land use.

 

• Are your listings at threat from meth contamination? (eliteagent.com) – Few would argue that Australia has a problem with ‘ice’, but is the hysteria about meth contamination in rentals justified? Sharon Fox-Slater of EBM’s RentCover investigates.

 

• Safety Tips for Property Managers with Fiona Blayney: Part 2 (eliteagent.com) – Real+ CEO Fiona Blayney takes us through safety in the workplace for property managers in Part 3 of our exclusive 3-part video series.

 

• Safety Tips for Property Managers with Fiona Blayney: Part 1 (eliteagent.com) – Real+ CEO Fiona Blayney takes us through safety in the workplace for property managers in Part 1 of our exclusive 3-part video series.

 

• Maintenance and Risk: Property Management Coaching with Phil Oakes (eliteagent.com) – How to improve maintenance efficiency and managing risks in our property management coaching session with PropertySafe’s Phil Oakes. Watch the video here.

 

• Is the Rent Roll Worth the Investment? (eliteagent.com) – Jo Oliveri from ireviloution intelligence says if you are thinking of acquiring a rent roll as part of your growth strategy, you need to perform both operational and financial due diligence prior to purchase.

 

• One Small Dog (eliteagent.com) – Don’t let all that tail wagging and cute fluffiness fool you! ‘One small dog’ is sometimes all it takes to strike fear into the hearts and minds of landlords and property owners everywhere.

 

• If It Ain’t Broken… Break It! (eliteagent.com) – In today’s fast-paced business world, ‘if it ain’t broke, don’t fix it’ is probably one of the worst philosophies you can hold if you want to stay in business says Fiona Blayney.

 

More useful websites

This list is not exhaustive but all of them provide information relevant to real estate agency work.

 

NSW Fair Trading – www.fairtrading.nsw.gov.au

The ACCC – www.accc.gov.au

Real Estate Institute of Australia – www.reia.com.au

Real Estate Institute of NSW – www.reinsw.com.au

Workcover (WH&S) – www.workcover.nsw.gov.au

The Australian Legal Information Institute – www.austlii.edu.au

Privacy Legislation and Issues – www.privacy.gov.au

NSW Land and Property Information – www.lpi.nsw.gov.au

Office of State Revenue – www.osr.nsw.gov.au

Foreign Investment Review Board – www.firb.gov.au

NSW Civil and Administrative Tribunal – www.ncat.nsw.gov.au

Australian Taxation Office – www.ato.gov.au

Property Council of Australia – www.propertycouncil.com.au

Valuers and Land Economists – www.propertyinstitute.com.au

Australian Bureau of Statistics – www.abs.gov.au

Completion of this compulsory CPD topic is to be assessed through demonstration of knowledge of legislative and regulatory requirements applicable to the class and type of licence held by the individual participant.

Written questioning is required to assess the candidate’s underpinning knowledge and to provide supporting evidence of competence.

Participants must be able to analyse a scenario that focusses on one of these areas of risk, and complete questions showing the participant has identified how to deal appropriately with the identified risk.

Critical aspects for assessment

A person who demonstrates competency in this unit will have knowledge of:

• the definition of ‘risk’ within a property agency
• specific instances of risk that may occur in relation to specific agent functions connected with the type of individual licence held
• risk responsibilities and the disparity between agents and occupiers
• components of risk management plans
• incorporation of contingency planning into daily agency practices
• importance of communication strategies for the identification, management and mitigation of risks.

 

The assessment for this Compulsory CPD module has two parts. Both parts must be completed attaining an 80% pass mark.

• The first part is applicable to all roles
• The second part is applicable to your area of business or expertise.