CPPDSM4080A Work in the Real Estate Industry

Transcription

1 CPPDSM4080A Work in the Real Estate Industry

2 CPPDSM4080A - Work in the Real Estate Industry Overview This unit of competency specifies the outcomes required to enable a new entrant to the industry to gain a basic understanding of the industry and work ethically and effectively in a real estate agency. This incudes awareness of ethical and conduct standards, core functions of real estate agency operations, legislative and regulatory framework within which the industry operates and industry employment requirements. The unit may form part of the licensing requirements for persons engaged in real estate activities in those States and Territories where these are regulated activities. This Unit of Competence (CPPDSM4080A) is one of the core (compulsory) units in the following qualifications: CPP30207 Certificate III in Property Services (Agency) CPP40307 Certificate IV in Property Services (Real Estate). Assessment Assessment for this unit includes tasks to be marked by your Assessor, which may include multiple choice questions, short answer questions, case studies, projects, role-plays and / or demonstrations. Assessment Activities for this unit are provided in a separate assessment document, which has been customised to meet the legislative requirements in your state or territory. You may apply for assessment through LA recognition process whereby you demonstrate your current competence through prior learning (RPL) by compiling a portfolio of evidence to demonstrate your skills and knowledge. Your RPL will be supported by interview questions and / or third party reports to confirm your skills and abilities. Competence in this unit will be demonstrated when you are able to show that you can meet the Elements and Performance criteria, shown on the following page. These have been extracted from the full Unit Descriptor which is available upon request. Tutorial Assistance Should you require assistance or tutorial support at any time during your study, a course facilitator is available to assist you. To request a support call, please send an to enquiries@leveragegroup.com.au with a brief outline of your query. Notes_CPPDSM4080A_Version NSW Page 3 of 114

3 Work in the Real Estate Industry Introduction and Overview Welcome to the Unit of Competence Work in the Real Estate Industry! The real estate industry is a varied and dynamic industry to work in. There are many career options available to those wishing to enter the industry, and many specialist areas, such as: Residential Sales and Leasing Commercial Sales and Leasing Stock and Station Agency Business Sales Office Building and Shopping Centre Management to name just a few. Work in the Real Estate Industry gives an overview of all sectors of the industry, and details the general foundation knowledge to allow a person to work effectively in real estate. This unit is part of a course of study for people who want to start working in the real estate industry or who may have started work and need to gain a formal qualification to continue to work in the industry. The various basic legal terms and requirements, ethical requirements, general procedural knowledge and documentation required to meet the requirements may seem daunting at first. The purpose of this unit is to enable the participant to describe basic real estate terms and concela, the structure of the industry, job functions within the industry and professional standards of conduct and industry ethics. The real estate industry is governed by extensive legislation as well as sets of rules and regulations. These are designed to ensure that agents and salespeople behave appropriately towards their clients and customers. Notes_CPPDSM4080A_Version NSW Page 4 of 114

4 In this unit you will explore: The depth and breadth of the real estate industry Property services and types of property Clients, customers and agency relationships The duties and ethical responsibilities of agents Legal aspects of the real estate industry, including: The Property Stock and Business Agents Act, 2002 Licensing and registration The role of the Office of Fair Trading Consumer protection legislation Statutory regulatory authorities Other significant legislation that governs the real estate industry Privacy and discrimination Trust accounts Land and property law Land titles Real vs personal property Encumbrances on land titles Contracts Risk management Professional associations: Representative bodies Working conditions and the award system Notes_CPPDSM4080A_Version NSW Page 5 of 114

5 What is the Real Estate Industry? The most visible sector in the real estate industry is the residential real estate sector, but there are many other people and professionals who work with property that are not so obvious to the general public. The commercial sector makes up a very large proportion of the industry. Just think of all the shops, offices and other public buildings in your local area all these are owned, managed, bought, sold, leased, demolished and rebuilt, refurbished and maintained by professionals and tradespeople who are specialists in their particular area of the real estate industry. What about all the residential and commercial developments that are under construction? These require architects, surveyors, planners, environmental specialists, engineers, developers and builders to be part of the process in turning land into property. Then there are the financiers, bankers, insurers, accountants and solicitors that represent those that wish to buy, sell, lease or manage all these properties, and the insurers that protect those that own the properties. Now think about all those who manufacture, supply and transport the raw materials that become property, and whose livelihoods depend upon the real estate industry. As you can see, the real estate industry encompasses a much wider range of functions, jobs, specialists and workers than are apparent at first glance. In all modern societies, the real estate industry is a major part of the economic framework, involving (either directly or indirectly) a huge workforce, representing a vast amount of the wealth, and producing an enormous proportion of the income (and taxation) of the country or state. In this course, we are primarily concerned with the sales, leasing and management of property and land. This module gives an overview of all sectors of the industry: selling, leasing and managing residential, industrial and rural properties as well as stock and station and business agency. There are many other industries and professions that have a close connection with the real estate industry. Most workers in real estate will engage with, and conduct business with other property professionals and specialist during their working life in order to meet the needs of their clients and customers. Notes_CPPDSM4080A_Version NSW Page 6 of 114

6 Some of those that you will come into contact with on a daily basis include: Solicitors Accountants Finance Brokers Banks and other Finance Companies Property Developers & Builders Asset and Wealth Creation advisors Architects Interior designers Landscapers and Garden designers Local Government Officers Planning officers Investment Advisors Insurance Brokers Marketers and Advertisers Electricians Plumbers and Drainers Roofing specialists Damp Eradication specialists Pest specialists Carpenters and Joiners Air-Conditioning specialists Garden maintenance Other Tradespeople There are many others that may not be on this list, but as you have seen, the real estate industry does not exist in isolation there are many people from all walks of life that you will come into regular contact with. You will get to meet a diverse range of people who will rely on your skill and expertise so it is essential that you have a good understanding of the industry and learn correct and ethical work practices. Real Estate is a dynamic industry and to enjoy what you do in your future career is going to be one of the keys to your success. Honest and ethical real estate people earn respect and can look forward to a long and successful career in the real estate industry, whereas the dishonest or unethical ones do not last long enough to enjoy a the rewards offered in the industry. Two of the key factors that are indicators of personal success in the real estate industry are professional image and your personal attitude: Professional Image Professional Image is not just how you look, it is also how you act, speak, behave and interact with those that you do business with. Image is probable mentioned in your office s policies and procedures manual, so that there is a consistency throughout the agency. It means consistently doing what is best for you, establishing the best personal care / exercise / beauty habits and so on, and taking care of yourself, because you know it matters, because you know you matter and you want the world to know it too! Notes_CPPDSM4080A_Version NSW Page 7 of 114

7 The face mirrors to the outside world the state of health and well being of the body and the mind. That is why we all desire to put forward an attractive face for everyone to see, with a flawless complexion to illustrate that our bodies are healthy and a beautiful expression to manifest the quality of our minds. Wellbeing and beauty are interrelated. Observe the professionals, by observing you learn a lot, the professional people are the ones who have already been through what we are going through. They have already made mistakes and learnt from them, do not be afraid to learn from their mistakes. The leadership of groups is as much an art as a science and the art is learned and improved only through experience. Attitude Attitude is the source of your whole personality, the way you see the world and the way the world sees you. When you have a healthy positive attitude you know how to apply constructive intelligence to your problems as well as your goals, your self-assurance allows you to enjoy being you, your fine-tuned self-awareness both perceives and expresses what you know to be right and good. A positive attitude means having an outgoing involvement in yourself and the people you care about, a day-by-day joy in making the most of whatever life brings you not complaining about what life fails to bring you. A positive attitude comes from your personal enthusiasm, your wholehearted zest for life and people you love. Having a positive attitude means finding joy and delight wherever they exist, and discovering them in unlikely places. It is approaching each day knowing that everything cannot always be perfect but believing that there is good to be found almost everywhere and knowing you have the ability to try to change what you feel is wrong. Optimism is the source of a positive attitude and optimism comes from your own intelligent perspective on your capacity to make things better. When you believe in your own self-worth you also believe in discovering what is worthwhile in everyone around you and you look for the best in others. When you demonstrate your self-worth and professional image to the people you deal with, they too will see those qualities and values in you, which leads to their confidence and belief in you, and the desire to do business with you. Notes_CPPDSM4080A_Version NSW Page 8 of 114

8 Services in the Real Estate Industry Within the real estate industry a wide range of services are offered by specialist agencies and individuals, including: Residential Sales Commercial Sales Industrial Sales Business Sales Residential Property Management Project Management The sale of land, property, homes, apartments, units and townhouses, where people live or erect a home The sale of land and property zoned for commercial or business purposes The sale of land zoned for industrial purposes and factories, warehouses etc. The sale of an actual business or income producing commercial enterprise, such as hotels, shops and other business entities The leasing and management of residential property The sale or leasing of multiple properties on behalf of a developer or builder Commercial, Industrial and Retail Management The leasing and management of property used for retail, business, commercial and industrial enterprises Strata Management & Community Management Stock and station Agency Buyers Agency On-site residential property management Holiday lettings Valuations The management of property developments on behalf of an owner's corporation or neighbourhood association with common property, and shared facilities and amenities such as buildings, lifts, swimming pools, etc The sale, leasing and management of rural land and property, the sale of livestock stock and agistment. Locating and securing property for buyers Leasing and management of property specifically within a development where your office and residence is located Leasing and management of property usually for short term periods to casual occupants. The sworn valuation of land and property. Only qualified and registered valuers may undertake this function. Notes_CPPDSM4080A_Version NSW Page 9 of 114

9 Types of Property Just as the range of services within the industry is wide, so too is the range and scope of property that is managed, bought, sold and negotiated by real estate agents: Residential Property Rural Property Houses Units/Apartments Duplexes Semis /Terraces Townhouses Villas Vacant land Retirement housing Livestock Farms Arable Farms Fruit Farms Broad hectare holdings Hobby Farms In NSW a rural property is defined as one that includes land of over 20 ha [50 acres] Commercial Property (The place of business of the white collar worker) Offices Hotels Motels Shops Industrial Property (The place of business of the bluecollar worker) Factories Warehouses Industrial complexes Heavy Industrial complexes Light Industrial units Careers in the Real Estate Industry Given the wide range of property, there are many career options available to those who wish to work in the real estate industry. The range of occupations or types of jobs, at all career levels is equally diverse. As previously mentioned residential real estate is probably more visible to the general public than some of the other disciplines, but there are a number of different roles that have arisen to cater for the wide divergence in the specialist fields of operation, and the scale of individual businesses. Within a real estate office, there will be a wide range of personnel undertaking different roles In smaller offices, some of these roles may be combined, and larger businesses may well have staff at all levels. In addition, there is the possibility of becoming a specialist in particular fields: Notes_CPPDSM4080A_Version NSW Page 10 of 114

10 Specialist Business Areas: Residential Business Sales Commercial Rural Industrial Livestock Departments: Property Management: Sales: Business Management: Admin & Support: Valuations: Project Management: Job Roles in the department: Property Assistant Property Manager Leasing Specialist Property Officer Sales Cadet Salesperson Sales Manager Buyer Agent Auctioneer Business Owner Sales Director General Manager Reception Personal Assistant Research Assistant Marketing and Promotion Bookkeeper / Accountant Office Administration Certified Valuer Assistant Valuer Project Manager Feasibility researcher Traineeships may be available in many of these specialist fields that can lead to nationally recognised qualifications. Additionally, many larger real estate offices are able to offer opportunities for advancement or promotion, or to gain experience in different departments. Smaller agencies tend to specialise in just one or two real estate disciplines. Notes_CPPDSM4080A_Version NSW Page 11 of 114

11 Clients, Customers and Agency Relationships A Client is someone who: Pays a service provider for goods or services. Enters into a written agreement with a service provider for goods or services Uses the services of an agent or agency. Often known legally as the Principal In the real estate industry, clients are consumers that have entered into a formal contract with an agency who provides services to them and on whose protection they rely. The formal contract is typically the Agency Agreement, and real estate agent, acting on behalf of the client (principal), has been given the right to negotiate and enter the client (principal) into a contract with a third party. Typically in the real estate industry, clients will comprise the following: Vendors Landlords Buyers (Under a buyer agency agreement) Relocation Agencies Government Agencies Clients place their trust in their agent to undertake the role they have been contracted to fulfil to the best of their ability. These responsibilities can be summarised as: Agents must act in the best interests of the client Agents must follow their clients instructions (except where these may be illegal) Agents assume a duty to act in good faith and with due care, skill and attention Agents must act fairly, ethically and appropriately on behalf of their client. The aim of the Sales relationship is to obtain the highest price in the shortest time to meet the specific requirements and instructions of the client. The aim of the Property Management relationship is to secure the best tenant, fair market rent, quickest time to meet the specific requirements and instructions of the client. Notes_CPPDSM4080A_Version NSW Page 12 of 114

12 On the other hand, a Customer is someone who: Makes use of or receives the products or services of an individual or organization or who Buys goods or services without a formal contract In real estate industry terms, customers are consumers that do not have a formal contract with the agent or agency. They are the third party that the agent has the right to negotiate with and enter the clients into contracts with. In the real estate industry our customers typically include Buyers and Tenants To summarise (in terms of a property management scenario): 1. The agent has a legally binding contract with the client (in this scenario, the landlord), known as a Managing Agency Agreement. 2. The agent negotiates with customers (prospective tenants) and finds a suitable tenant for the client. 3. The agent then signs the lease on behalf of the client (the Tenancy Agreement). 4. The Tenancy Agreement is a contract between the client and the tenant. 5. The agent manages the property and the tenancy in accordance with the terms of the Management Agency agreement. Notes_CPPDSM4080A_Version NSW Page 13 of 114

13 What is an Agent? An Agent (in commercial law) is a person who is authorised to act on behalf of another (called the Principal) to create a legal relationship with a third party. An agent can therefore be defined as: A business or person authorised to act for another A person through whom power is exerted or an end is achieved A consensual fiduciary relationship in which one party acts on behalf of and under the control of another in dealing with third parties; The principal must give, or be deemed to give, the agent authority to act, and, when they do so, they effectively transfer some rights to the agent to act on their behalf. Under an agency agreement there are rights and obligations on both parties: The agent's primary duty is to be loyal to the principal. This is known as their Fiduciary Duty. This involves several responsibilities: 1. Not to accept any new obligations that are inconsistent with the duties owed to the principal. Agents can represent the conflicting or potentially conflicting interests of more than one principal, but only on the basis of full disclosure. 2. Not to make a private profit or unjustly enrich himself from the agency relationship. In return, the principal must: 1. Make a full disclosure of all information relevant to the transactions so that the agent is able to negotiate effectively and 2. Pay the agent either the commission or fee as agreed, or a reasonable fee if none was agreed. If the agent reasonably incurs expenses, he or she is also entitled to reimbursement. In the context of the real estate industry, real estate agents are authorised to act on behalf of clients under an agency agreement. In effect, the principal (Owner) has abdicated some (or all) of their right to sell, lease or manage their property to the real estate agent. Agency agreements are discussed in detail in the sales and property management units of competence. Notes_CPPDSM4080A_Version NSW Page 14 of 114

14 Duties of an Agent The relationship between the agent and the principal (property owner) for whom they are acting is known as a fiduciary relationship. Fiduciary means trust. The principal has put the agent in a position of trust to negotiate a sale or lease on their behalf. Under both common law and statutory law, the fiduciary relationship confers specific obligations and responsibilities on the agent. Ethical Conduct The duties and obligations discussed in this section should be considered to be the ethical obligations of those working in the real estate industry. Many of the industry bodies and associations that support the various sectors of the industry publish codes of conduct and codes of ethics that their members have to subscribe to and abide by. In light of the frequent negative portrayals of the real estate industry generally in the media, the responsibility of agents and others engaged in the industry to apply ethical standards to all aspects of their dealing with both customers and clients is of paramount importance. Common Law Obligations Common law is unwritten law that has derived from the traditional laws of England. It relies on precedent, which means that common law has been established by decisions previously made by the courts, whether they are Australian, British courts or from other common-law-based countries such as the USA and Canada. Agents have two types of common law duties and obligations in their relationship with the principal: Fiduciary obligations of trust and confidence, and Contractual duties and obligations Fiduciary Obligations Members of many professions (eg doctors, architects, lawyers, and real estate agents) have received specialised training and possess credentials and expertise in their particular field. In many cases they (including those in the real estate industry) may have a licence to practice a profession from which others are barred. These professionals are often placed in positions of trust with respect to those who avail themselves of their services, and are often deemed to owe fiduciary duties to their clients within the scope of their engagement. Fiduciary obligations are those obligations that are based on trust. Notes_CPPDSM4080A_Version NSW Page 15 of 114

15 Most professions are subject to specific codes of conduct prescribed by authorities and may be subject to additional penalties. A fiduciary duty is the highest standard of care possible. A fiduciary is expected to be extremely loyal to the person to whom they owe the duty (the "principal"): they must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust, requires a strict standard of behaviour. The test, when determining whether someone has met their contractual, or fiduciary duty is: What would a reasonable person expect? Comply with the principal s instructions Perform in accordance with their contractual duties Act in good faith in the principal s best interest Exercise due care, skill and diligence in the performance of duties Preserve confidentiality Act with integrity in regard to the principal s money Never act deceptively Never mislead or misrepresent any party to a transaction Follow the principal s instructions and fulfil obligations under the contract Be responsible personally, even where you have delegated authority Meet legal requirements when acting for the principal. If you, as an agent, don t live up to these expectations and your client suffers loss as a result, he or she can claim compensation from you. Contractual Obligations The rights and obligations of both an agent and a property owner depend, to a large extent, on the terms and conditions of the contract between them. Under the requirements of the PSBA Act, there must be a written agency agreement between the two parties, and it must contain certain terms and conditions. Notes_CPPDSM4080A_Version NSW Page 16 of 114

16 Agency agreements are required for leased and managed properties, and properties for sale. They state clearly what services the agent will provide and what fees and charges the parties have negotiated and agreed. A failure of an agent to fulfil his duties, as expressed in the agency agreement is a breach of contractual duties. The test, when determining whether someone has met their contractual and fiduciary duty is: What was in the contract and what would a reasonable person expect? For example: Real Estate agents are frequently given the keys and alarm codes to client properties so that they can show prospective customers the property. Whilst such detail would not be specified in the contract it would be reasonably expected that the agent would: Take appropriate steps to look after the keys Ensure that the confidentiality of alarm codes is not compromised Ensure that the keys are not readily identifiable to the property Secure the property after each visit Protect the client s personal possessions in the property Return the keys when requested. A failure by the agent to fulfil these obligations would be considered a breach of the agents fiduciary duty, as well as their contractual duties. The Duty to Follow Instructions The precise instructions given to the agent must be followed unless they are illegal. The agency agreement used to engage an agent forms the basis of this instruction, as you will see later in this module You should always make sure you receive any instructions in writing signed by the principal. If your principal phones and asks you to do something which is outside the agency agreement, make sure you receive the instruction in writing as well. To ensure that you obtain your instructions in writing it may be necessary for you to write (or ) to your client with your understanding of the instruction and ask them to confirm their instructions. Notes_CPPDSM4080A_Version NSW Page 17 of 114

17 The Duty to Use Reasonable Skill and Diligence Registered & licensed agents are, in law, considered to be more knowledgeable than their clients and customers. You will be considered by them to be an expert, and legal history has shown that the courts will assume that you have expert skills and knowledge in your role. The term reasonable means that the actions you take would be considered normal to an average person. You are required by law, therefore, to demonstrate a level of competence which an average person would expect of someone who is considered to be a professional. You will be considered to have received the training and education necessary to be a professional. When clients and customers ask questions that you do not know the answer to it is foolhardy to give a quick, incorrect answer. You must answer correctly and with the facts. If you are unsure of an answer you should seek information and answer when the facts are known or refer the question to another authority. Agents must never assume or guess information, nor be misleading or deceiving, even through remaining silent about material facts. The Duty to Act in Person Salespeople have a legal responsibility to their client. In most cases, the agent that lists a property for sale or lease acts on behalf of their principal. What clients want is a personalised service. However, it is important to note that whilst the agent themselves sign the agency agreement with the client, the contract is in fact between the agency and the client, and the agency itself is responsible for the actions of the salesperson or property manager. Real estate agents, salespeople and property managers must understand that they are legally binding their agency (and therefore their licensee or office principal) to their statements and actions. In every agency, different people undertake different functions and jobs to achieve a successful outcome for the client, and whilst that is perfectly acceptable and normal practice, the actions of those to whom you delegate different responsibilities, also have a responsibility to the client and to the agency itself. Notes_CPPDSM4080A_Version NSW Page 18 of 114

18 The Duty to Act in the Principal s Best Interests This area has the potential to create a Conflict of Interest. It is important to note that you are acting for your principal (landlord or vendor). It is an easy trap to fall into thinking that you should act upon the interests of the buyer or tenant they often think that you should be acting on their behalf and lead you in that direction. Unless you have a specific agreement with a buyer (known as a buyer s agency agreement) and they are paying you a fee to locate property for them, you are contracted to the property owner. Your duty is to market the property in accordance with the instructions you have been given, and at the price requested by the seller. You should also note that if you are contracted by a buyer to find a property on their behalf, it is illegal to receive commission from both parties to the transaction. You cannot accept commission from both vendor and purchaser for the same property, and so must decide which client you will act for. For further information on Buyer Agencies see the appropriate section in these notes. The concept of buying listings, where the salesperson quotes an inflated price to a seller to persuade them to list the property with them is a problem throughout the industry, and leads to problems for the salesperson. Imagine a situation where you believe (and your research shows) that a property s value is about $ In order to win the listing against your competition you tell the vendor that you think you will achieve over $ for the property. After listing, your buyer feedback tells you figures in the low mid $600 s. You now have two problems: 1. To convince the vendor their price is too high. They will have relied upon your expert advice and therefore convincing them will be difficult to say the least. 2. You now have to convince buyers that the property is worth more than it really is in order to achieve a sale. This illustrates an agent not acting in the best interests of their client because the chance of selling the property is greatly reduced. Notes_CPPDSM4080A_Version NSW Page 19 of 114

19 The Duty to Act Confidentially Whilst acting on behalf of vendors and landlords, you will learn things about their personal and business affairs during the course of your business with them. This information must remain confidential to you at all times. For instance, you may know that the property transaction has been forced by a separation, divorce, financial difficulties, co-ownership disputes, and that these reasons may require an urgent sale. Whilst it may be beneficial to you to mention these as a selling point to buyers, you must never disclose this information, unless you have received instructions from (all) the principals in writing. Remember, you must act in the best interests of your principal. Duties in Respect of Clients Monies During most property transactions, you will be handling money on behalf of clients and / or customers. You must remember that all money you receive is their money and that you are holding it in trust for them. You may receive money from landlords and vendors for advertising and marketing, or deposits from buyer and tenants. The Property Stock & Business Agents Act in NSW states that all clients monies must be lodged in the agents trust account kept at an approved financial institution before the end of the next banking day or as soon as practical after that day. You must keep accurate and detailed accounts of all financial transactions and it is prudent to accurately record discussions that are in anyway connected with the financial aspects transaction. If your principal wishes to see these accounts at any time you must make them available. Remember your fiduciary duties. You are holding that money on trust for your vendor or purchaser. You must ensure this money goes to a properly constituted trust account. Notes_CPPDSM4080A_Version NSW Page 20 of 114

20 Legal Aspects of the Real Estate Industry Just like many other industries, the real estate industry is regulated by a series of statutes (laws) and administered by statutory bodies. These laws affect the way you carry out your business dealings. There are many traps for the unwary. Real estate industry workers as well as their business owners can find themselves in trouble with government agencies and authorities if the correct procedures are not followed. This section will look at: The laws which regulate the real estate industry Agents obligations when dealing with money Consumer Protection and Trade Practices Law Basic Property Law ConceLA Property, Stock and Business Agents Act 2002 Property, Stock and Business Agents Regulation 2003 This Act (and the regulation) are the primary legislation covering property, stock & station agency, strata management and business agency practice. This Act came into force on 1 September 2003, and has been updated since then. The PSBA Act and regulations cover all aspects of the real estate industry, including: The registration, licensing and on-going professional development of agents Employment of staff, and supervision by licensees in charge Rules of conduct Conflicts of interest Advertising and representations Agency agreements Conduct of real estate sales agents, auctioneers and auctions Selling price estimates and substantiations Leasing and management of real estate Trust account management Availability of sales contracts Record keeping and inspection of records Complaints and disciplinary action Notes_CPPDSM4080A_Version NSW Page 21 of 114

21 The Legislation is produced in two parts The Act itself and the supporting regulations. The purpose of having regulations is that they provide: 1. An interpretation of the act and how it should be applied in day to day real estate practice and 2. A framework for making changes to real estate business practices without having to re-draft and prepare a new Act of Parliament. You should ensure you are familiar with the provisions in both the Act and Regulations. The Act and Regulations, together with the Rules of Conduct can be accessed on the internet via You should now visit this site and download a copy of both the Act and the Regulations to your PC for reference. Further supporting information on the implication and operation of the PSBA is available on the NSW Fair Trading Website at: Regulation of the Real Estate Industry: The Role of the Office of Fair Trading The Office of Fair Trading (OFT) control over agents is absolute and is dictated by the Property, Stock and Business Agents (PSBA) Act The role of the Office of Fair Trading in administering this Act includes: Licensing and Registration Improving the delivery of real estate services Promoting community awareness of real estate services Investigating complaints made by the public and helping resolve disputes Continuing the development of the regulatory framework. Additionally, the OFT administers the Fair Trading Act that also affects the conduct of real estate agents and real estate practice in NSW. Notes_CPPDSM4080A_Version NSW Page 22 of 114

22 Licensing and Registration All agents who carry on activities covered by the PSBA Act must hold a Real Estate Licence or Registration certificate, which is granted by the Office of Fair Trading. In addition, each place of business must be operated by a separate licensee in charge, whether or not the business is owned by an individual (as a sole trader) or by a corporation (Pty Ltd Company). The Licensee in Charge Each place of business must be in the charge of a licensee, who is responsible for the proper supervision of the business carried on there and for the actions of all employees. An individual licensee is responsible for the supervision of their own place of business. A licensee who has more than one place of business must employ a licensee to be the person in charge at each other place of business. A corporation that holds a corporation licence must employ licensees to be in charge of each of the corporation s places of business. A licensee-in-charge of a place of business must hold a licence in the category relevant to the type of business carried on there. For example, a person in charge of a real estate agency business must hold a real estate agent s licence. The licensee-in-charge is responsible for the supervision of the business. Proper supervision entails: Supervision of employees engaged in the business, Establishment of procedures designed to ensure that the provisions of the Act and regulation and other relevant laws are complied with Monitoring the conduct of the business to ensure that those procedures are followed. Ensuring that those employed in the business are suitably qualified and are not disqualified from holding a licence or certificate of registration The Commissioner for Fair Trading has issued guidelines as to what constitutes proper supervision of the business of a licensee. Whilst a licensee who employs anyone at any place of business of the licensee is responsible for anything done or not done by the person, the Act also recognises that some functions of the licensee may be delegated to staff within an agency. Notes_CPPDSM4080A_Version NSW Page 23 of 114

23 The Supervision Guidelines (Summary) 1. A licensee must have written procedures regarding banking practices of the agency with respect to the receipt of trust money. The licensee must be able to provide details of the process to ensure employees comply with the procedures. 2. A licensee must have written procedures about the review of trust account cash flow on a monthly basis. The review must include a process which shows that the amounts banked to the trust account have been verified using the financial institution's records as source documents. 3. A licensee must have written procedures that set out the steps that all relevant staff must take to substantiate any selling price estimates which have been provided to a seller or prospective buyer. They should reference the Estimated Price Guidelines published by the Commissioner. 4. A licensee must maintain and be able to demonstrate that listing agents use a checklist in the property sales process to ensure that the following requirements are met: All advertising material accurately describes the property concerned and that the information provided complies with the requirements of the relevant agency agreement and with the Act and Regulations; Proper disclosures of conflicts of interest as required the Act are made to clients, and where appropriate, any prospective buyer of land; The listing agent engaged to sell the property is aware of the restrictions on obtaining a beneficial interest in property. The completed checklist must be certified in writing by the agent representing the principal and be retained in the Sales File as a record. 5. A licensee must maintain documented complaint handling procedures, including a process to ensure that all complaints about staff behaviour towards consumers, and the agency's response to those complaints, are recorded and retained. The procedure must require that complaints of a financial nature are directed to the licensee in charge or the Manager to be supervised directly by that person. A separate record of the handling of financial complaints must be kept. 6. Where any of the above requirements stipulate the preparation and use of a set of documented procedures a checklist, or a review system; the licensee must be able to produce this documentation to an authorised officer in accordance with the provisions of section 105 of the Act. The licensee must also be able to produce information demonstrating the regular use and maintenance of the required documentation within the agency. A failure to comply with the requirements of the guidelines is deemed to be a failure to properly supervise the business and carries a penalty not exceeding 200 penalty units ($22,000) in the case of a corporation or 100 penalty units ($11,000) in any other case. Notes_CPPDSM4080A_Version NSW Page 24 of 114

24 Corporation Licence Where the proprietor of the business is a company, this company must have a separate Corporation Licence. All applicants for a corporation licence must satisfy the Commissioner for Fair Trading that: The corporation is fit and proper to hold a licence Each director of the corporation is a fit and proper person to hold a licence No director or executive officer is a disqualified person At least one of the directors holds a personal licence for the industry sector in which the corporation proposes to operate The corporation has paid the relevant contribution to the property services compensation fund. One of the directors of the corporation, as well as the licensee-in-charge, must be licensed in all the licence classes in which the corporation wishes to do business. Anyone working in the industry as a real estate agent must hold a Real Estate Licence. In addition, those in the following positions must hold the appropriate additional Licence: Stock and Station Agent Business Agent Strata Managing Agent On-site Residential Property Manager Auctioneer All real estate and stock and station agent licence holders need specific accreditation to act as auctioneers. Those who were granted licences under the pre-2003 regulations are required now to obtain additional accreditation. Since 2003, the Real Estate Licence course has included the relevant auction unit of competence as a mandatory subject, but this still requires separate accreditation on the Real Estate Licence. In order to be eligible for a Licence, applicants must be: At least 18 years of age A fit and proper person to hold a licence, for example not have a criminal record (established by a police check) Hold the qualifications specified in the regulations Notes_CPPDSM4080A_Version NSW Page 25 of 114

25 Not be a disqualified person (people can be disqualified because of convictions for dishonesty and fraud, bankruptcy and a range of other reasons) Have paid the relevant contribution to the Property Services Compensation Fund. Certificate of Registration In order to work in the following positions in NSW, a NSW Certificate of Registration is required: Real Estate Salesperson Stock and Station Salesperson Business Salesperson Property Manager Registered Strata Manager or Registered Community Manager Registered On-site Residential Property Manager Anyone who wants a Certificate of Registration must be: At least 16 years of age A fit and proper person to hold a certificate of registration (established by a police check) Have the qualifications required for the class of certificate of registration concerned Not be a disqualified person. The appropriate qualifications for a licence or certificate of registration involve one or more of the following: Completing a course of study; or Completing of a period of training in a particular activity; or Achieving a standard of competency in a particular activity. The specific education requirements vary according to the category of certificate or licence, for example the requirements for a stock and station agents or buyer s agents are different to those for a real estate certificate of registration. Notes_CPPDSM4080A_Version NSW Page 26 of 114

26 Support staff in a Real Estate Agency Depending on the size of the agency there may be the following staff, who may or may not require Registration Certificates depending on the role they perform, and whether or not they have direct contact with clients and customers or undertake the functions of a real estate agent. Receptionist Bookkeeper Administration staff due to the nature of their role ie supporting salespeople and property managers, it is likely that they will come into contact with the agency s clients and customers. Therefore they should ideally be registered. Marketing staff Deal with and look after both the marketing and advertising of client properties, but also undertake public relations corporate advertising and community involvement initiatives. Business Development staff Larger agencies may have business development staff who could undertake 2 functions: 1. Developing business networks, or 2. Co-ordinating prospecting activities. If support staff undertake any sales or property management roles, or are in a position to provide real estate information to customers and clients they should hold a Certificate. For instance the receptionist may be asked questions about properties on the rental list or in the window. Let s assume that the customer asks how many bedrooms a property has. If the receptionist answers that question, a statement has been made that falls under the act, and a Certificate of Registration would be required. Notes_CPPDSM4080A_Version NSW Page 27 of 114

27 Types of Licences and Certificates The various roles and licence / certificate categories are defined in the PSBA Act as follows: A Real Estate Agent is a person who, for reward, carries on the function of an auctioneer of land or as an agent for; Real estate transactions Inducing or attempting to induce or negotiating with a view to inducing any person to enter into, or to make or accept an offer to enter into a real estate transaction or contract for a real estate transaction The introduction, or arranging for the introduction, of a prospective purchaser, lessee or licensee of land to another licensed agent or to the owner or agent of the owner of land Collecting rents payable in respect of any lease of land and otherwise providing property management services in respect of the leasing of any land. This does not include a person who carries on business as an auctioneer or agent in respect of any parcel of rural land. A Stock and Station Agent is a person who, for reward, carries on business as an auctioneer of rural land or livestock or as an agent for: Carrying out any of the functions of a real estate agent where the land consists of rural land Livestock transactions Inducing or attempting to induce or negotiating with a view to inducing any person to enter into, or to make or accept an offer to enter into a livestock transaction or contract for a livestock transaction Providing agistment for livestock or collecting fees for the agistment of livestock. A Business Agent is a person who, as an agent, carries out the following functions for reward: Selling, buying, exchanging or otherwise dealing with or disposing of a businesses or professional practices Dealing with shares or interest in the business, or the good will of any stocks connected with businesses or professional practices Negotiating for sale, purchase or exchange of any interest or share in the stocks, inventory, fixture and fittings connected with the business or professional practice. Notes_CPPDSM4080A_Version NSW Page 28 of 114

28 A Strata Managing Agent is a person who, for reward, exercises any functions of an owners corporation within the meaning of the Strata Schemes Management Act 1996 or any function that is prescribed by the regulations for the purpose of the definition. This excludes people who: Are owners of a lot in the strata scheme for which the owners corporation is constituted Are lessees of a lot in the leasehold strata scheme for which the owners corporation is constituted Are secretaries or treasurers of the executive committee of the owners corporation Maintain or repair any property which the owners corporation is responsible for maintaining or repairing. A Community Managing Agent is engaged or appointed for reward, to exercise the functions of an association constituted for a scheme under the Community Land Development Act 1989 or any other function that is prescribed by the regulations. This does not include: A proprietor of a lot within the scheme The secretary or treasurer of the association A person who maintains or repairs any property that the association is require to maintain and keep in repair. An On-site Residential Property Manager is a person who, for reward, carries on business as an agent for giving possession of residential premises under a lease, licence or contract and who collects bonds, deposits, rents fees or other charges in connection with any such lease, licence or other contract. It is a condition of an on-site residential property managers licence that the licensee must only act for the principal s place of residence and only if the licensee owns or has a prescribed interest in that principal place of residence. A Buyers Agent is a person who, for reward, acts on behalf of the buyer of property. A Buyers Agent is prohibited from acting on behalf of both the seller and the buyer of the property. Those who hold a Certificate of Registration are required to obtain additional qualifications in order to undertake the functions of a Buyers Agent. Real Estate Licence holders hold the appropriate qualifications within the qualifications required to obtain their licence and are able to act as Buyers Agents. Notes_CPPDSM4080A_Version NSW Page 29 of 114

29 The Role of the Office of Fair Trading (continued) Developing a Regulatory Framework The Department is also responsible for reviewing and, where necessary, updating the rules and regulations under the Act. This is to ensure that they remain consistent with modern business practice and the changing needs of consumers. One example is the deregulation of agents fees. At one time, the PSBA Act set the fees. Nowadays, all selling, leasing and management agreements are required to state that the agent s fee has been negotiated. Another example is the introduction of Continuing Professional Development. Improving Services The Office of Fair Trading is required to help improve real estate services, particularly the handling of money held in trust and the conduct of auctions in order to protect clients and customers. The OFT has the power to inspect a licensee s records and enforce the provisions of the Act. The Commissioner for Fair Trading has the right to disqualify agents who do not follow correct procedures. In such cases, suspension or cancellation of a licence or certificate may occur, and the OFT may seek to prosecute them. Continuing Professional Development Since 1 September 2003, the renewal of Licences or Certificates of Registration is conditional on holders undertaking CPD each year. CPD is mandated under the PSBA Act 2002, and administered by the Office of Fair Trading. The aims of the CPD scheme are to: Improve knowledge and skills of agents, salespeople and property managers Increase levels of consumer protection Promote professionalism across the property agency industry Encourage high standards. CPD provides industry participants with the means for responding effectively to change, adopting new work practices and enriching their knowledge and skills. CPD applies to all categories of licences and certificates of registration. Notes_CPPDSM4080A_Version NSW Page 30 of 114