Interpret legislative and agency
requirements & model ethical practice
Contents
Overview
Introduction to Evansdale Realty
The legal framework
4
5
Statutes and statutory obligation
5
Where to find legislation
7
The Rules of Conduct
8
The Office of Fair Trading (OFT)
8
Other controls
10
Consumer protection
14
Common law duties and obligations
17
Ethics: building relationships based on trust
17
Code of practice
19
Financial requirements
20
Trust accounts
20
Depositing and releasing of monies
20
Identifying situations requiring specialist advice
22
Seeking the experts
22
Keeping out of trouble
23
Check your learning
25
Summary
26
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
3
Appendix
27
Relevant Property legislation for different Australian states
2
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Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
Overview
Every profession and industry has rules and regulations to make sure the
people working in it do the right thing by their clients. The property industry
is no exception.
In this topic, Interpret legislative and agency requirements and model
ethical practice, we look at the legal, financial and ethical requirements of
working in property. This includes looking at the various bodies that work
to make sure we’re all following the rules and the consequences if we don’t
follow them.
This topic will support you in building the following knowledge and skills:

Source and access legislation and other conduct standards relevant to
agency operations

Apply knowledge of legislative, licensing and eligibility requirements to
operations in property services

Identify key provisions of consumer protection and privacy legislation

Identify the role of trust accounting

Identify the roles and responsibilities of government agencies and
industry bodies

Identify situations requiring specialist advice in property services

Identify ethical and conduct standards operating in the property industry,
including penalties for breaches.
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
Introduction to Evansdale Realty
Throughout this topic you’ll see comments from the staff at the fictional real
estate agency, Evansdale Realty.
Evansdale Realty has been operating in Evansdale, Belmore Heights and
surrounding areas, and as far out as Brunswick Park, for over 15 years. It
specialises in commercial and residential sales and leasing.
Sarah Hampden, Manager
Sarah is the licensee-in-charge and manager of Evansdale Realty. As
licensee, she oversees all aspects of the business: sales, property
management, trust accounting and strata management. She manages
all aspects of staffing, including induction and training.
Vince Berger, Sales Manager
Vince is responsible for the day-to-day management of the sales
team: listing, advertising, open house and other inspections for both
commercial and residential properties.
Adrian Carrasco, Sales Consultant
Adrian works on the sales team and helps Vince with all aspects of
the sales process, both in the office and on the road.
Jackie Mansour, Reception/Sales Support
Jackie wears two hats in Evansdale Realty – she’s the receptionist
and also supports the sales team. She’s in charge of all office
procedures and helps with the advertising, listings and photo
displays.
Ellen Chu, Property Manager
Ellen manages Evansdale Realty’s rental property division. She’s
responsible for tracking down, inspecting, listing and letting
properties and collecting rent on behalf of the owners. She has
responsibility for tenant selection and sign-up for all tenancy
agreements as well as for the financial aspects of leasing.
Dave Mathews, Assistant Property Manager
Dave helps Ellen in all aspects of her work by keeping the internal
property management systems running smoothly. He’s also involved
in advertising properties for lease and organising repairs and
maintenance.
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The legal framework
The property industry, like all others today, is regulated and administered by
a system of statutes (laws) and statutory bodies (organisations which are
established and whose powers and operations are defined by these laws).
These represent the backbone of the framework in which agencies operate.
In addition to the statutory components, there are other non-statutory
components of the framework eg common law and codes of conduct. We
will look at the non-statutory elements later in this reading.
Statutes and statutory obligation
In Australia, there is a complex network of statutes, or laws, in operation
which define and guide the way all businesses operate.
Statutes in Australia are made by either, or both, our federal Parliament (in
which case they apply across all Australia states and territories) and by State
Parliaments (in which case they apply only in the State in which enacted).
Changes in some of these national laws, eg the Industrial Relations laws,
have been the subject of great controversy in recent years. No doubt you’ve
read about these in newspapers or heard about them on television.
The way that statutes are made and the role we all play in electing our law
makers is important — though it is not something we will focus on in this
reading. Instead, we will look at the specific statutes affecting the property
industry and, in particular, those impacting upon agency operations.
For those of us working in estate agencies, there are specific statutes
directing the way we and our businesses practise. In NSW, for example, the
Property Stock and Business Agents Act 2002 is the key piece of legislation
affecting the way we work. Agents working in other states have similar
pieces of legislation governing the way they work. It is important to realise
that, though similar, the law governing estate agents is not identical in all
parts of Australia. In this reading, we will focus on what happens in NSW.
If you are working or intend to work in other states in Australia (or, indeed,
internationally), you will need to familiarise yourself with the local statutes
and statutory obligations.
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
Property, Stock and Business Agents Act 2002 (NSW)
The primary legislation covering property, stock, strata management and
business agency practice in New South Wales is the Property, Stock and
Business Agents (PBSA) Act 2002. It came into effect on 1 September 2003.
The Act covers all aspects of the property industry, including:

The licensing and registration of agents

On-going professional development of agents

Employment and supervision of staff

Rules of conduct

Conflicts of interest

Advertising

Agency agreements

Conduct of sales and auctions

Leasing and management

Trust accounts

Record keeping and inspection of records

Complaints and disciplinary action.
The PSBA Act 2002 also has relevance for valuers because they need to
understand agency work which would help them prepare valuation reports.
For example, valuers can obtain important property information from sales
contracts and lease agreements for valuation tasks.
Regulatory
Most Acts of Parliament will also contain a set of accompanying
Regulations or “Regs”. The Regulations prescribe how the terms and
conditions of an Act should be carried out.
In NSW, for example, the Property Stock and Business Agents Act 2002 is
supported by the Property Stock and Business Agents Regulation 2003.
Occasionally, Acts of Parliament or their accompanying Regulations are
amended, deleted or have new ones added. This process keeps the law up to
date. Part of your role as a professional in the property industry will be to
know where to find relevant legislation and to keep abreast of current
amendments.
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Where to find legislation
Copies of all Acts of Parliament and Regulations are widely available to all
Australians. Print copies, often with commentary, are available for sale
through a number of channels, including commercial publishers eg LexisNexis (formerly Butterworths), the Law Book Company or CCH Australia.
One of the problems with a print copy of legislation can be its currency. If
you went out today and purchased a copy of the original 2002 Act of
Parliament, it would not reflect any of the changes that have occurred
between then and now.
Think about it! A book is only as current as the moment it was printed. The
White Pages telephone directory is an example of a book that needs to be
printed every year to remain current.
Commercial publishers of legal information try to overcome this problem by
publishing their books on loose-leaf pages, compiled in a ring-binder. When
the content on a particular page changes, you will receive a package of
updated pages — as long as you are subscribed to the publisher’s service.
You can replace these pages on a regular basis so that you always have a
relatively current publication.
Online sources of legislation
A better way of sourcing legislation is via the internet. Again, think about
the White Pages telephone directory. The publishers of the White Pages
have created their White Pages Online version because the internet is a
better medium for publishing content that changes frequently.
There are a number of sites dedicated to publishing and updating statutes
and these are more likely to be current (although, remember, it takes time to
update online content as well). On many of these sites, access is free — you
simply need to have access to the internet. If you wish to print parts of the
legislation, you will also need to have a printer connected to your computer.
All NSW legislation is available from the website of the NSW
Parliamentary Counsel’s Office: www.legislation.nsw.gov.au.
The Property, Stock and Business Agents Act 2002 (NSW) and Regulations
are available from this site. They are also available via a link from the
Office of Fair Trading website: www.fairtrading.nsw.gov.au.
A very useful site for finding both NSW and federal legislation is that of the
Australian Legal Information Institute or AustLII: www.austlii.edu.au.
AustLII is a free-access resource for Australian legal information, created as
a collaboration between the UTS and UNSW Faculties of Law. It also
contains extensive databases of caselaw, including decisions of the NSW
Land and Environment Court (since 1988).
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
The Rules of Conduct
Contained within the PSBA Regulations are the “General Rules of Conduct
applying to all licensees and registered persons”. These are minimum
standards that the agent must follow. Some of the requirements are that
agents must:

have knowledge of the Act and Regulation

comply with the Act and Regulation

conduct their business with honesty, fairness and professionalism

exercise reasonable skill, care and diligence in their dealings

follow clients’ instructions and act in their best interests at all times

refrain from employing high pressure tactics, harassment or harsh
conduct

avoid any act that would place their interests in conflict with the
client’s interests.
Also contained in the Regulation to the Act are rules specific to different
categories of agent, for example real estate salespersons, stock and station
agents and strata managers.
Adrian Carrasco, Sales Consultant
I used to work with an agent who didn’t seem too concerned about
running her business along what I thought were ethical guidelines.
She used to play one client off against the other. The privacy of our
clients is so important. Apparently she wasn’t aware of the Code of
Conduct by which all licensed agents are meant to abide. It’s the law!
The Office of Fair Trading (OFT)
In New South Wales, the Office of Fair Trading (OFT) is the government
agency that administers and oversees the Property Stock and Business Agent
Act 2002 (NSW) and other legislation that influences the provision of real
estate services. These include the Residential Tenancies Act 1987 (NSW)
and the Landlord and Tenant (Rental Bonds) Act 1977 (NSW).
The OFT’s real estate functions include the following:
8

administering licensing and registration

improving services

promoting community awareness

investigating complaints and resolving disputes

developing a regulatory framework
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
Administering licensing and registration
The OFT controls entry into the industry through its administration of
licensing and registration. The Office assesses every applicant’s suitability
by looking at things such as qualifications and age. The Licensee-in-charge
of a business is responsible for ensuring that staff working in sales and
property management are appropriately registered.
Improving services
The Office of Fair Trading works to help improve real estate services,
particularly the handling of money held in trust and the conduct of auctions.
The OFT has the power to inspect a licensee’s records and enforce the
provisions of the Act. The OFT may disqualify agents who do not follow
correct procedures from holding a licence or certificate of registration or
may even prosecute them.
The OFT also plays a role in the professional development of practitioners,
by administering the continuing professional development scheme and
providing workshops, seminars and other forms of training for practitioners.
Promoting community awareness
The OFT also promotes community awareness about property services,
especially in relation to consumer protection. It does this mainly through its
web site and through publications such as:

The Renting Guide, aimed at advising tenants and owners of their
rights and obligations under a residential lease,

The Bidder’s guide (for potential bidders at auctions).

The Agency agreement for the sale of residential property, the guide
handed to prospective residential property sellers.
Investigating complaints and resolving disputes
Part of the OFT’s charter is to deal with consumers’ complaints about an
agent. The OFT can investigate the complaint, and, where appropriate, act to
resolve the problem.
The Department also maintains a compensation fund, funded by licensees,
to protect the public from unscrupulous agents who might misappropriate
funds from their own trust account.
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
Developing a regulatory framework
The OFT is also responsible for reviewing and ultimately 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. In the
end, the laws must reflect the times we live in.
For more information
You can find out more about the Office of Fair Trading on its web site:
www.oft.nsw.gov.au .
Other controls
The Office of Fair Trading administers certain other areas of statutory
control that impact upon the activities of agents. These are:
Residential tenancies
The Residential Tenancies Act 1987 (NSW) applies to residential tenancy
agreements made in NSW since 5 January 1986.
Disputes concerning residential tenancies which cannot be resolved by the
agent can be heard by the Consumer, Trader and Tenancy Tribunal (CTTT).
This is a low-cost, accessible and independent decision-making body,
similar to a court, which deals with disputes between owners, tenants and
agents, as well as other consumer disputes.
Hint
You can find out more about the CTTT in the Consumer Trader and
Tenancy Tribunal Act 2001, or on its web site: http://www.cttt.nsw.gov.au .
Rental bonds
The Landlord and Tenant (Rental Bonds) Act 1977 (NSW) requires all
monies paid as rental bonds on residential premises to be lodged with
Renting Services. Renting Services is a part of the OFT and has the
responsibility of holding all bonds as security. If tenants fail to comply with
terms and conditions of their tenancy agreements, this security can be used
to settle a claim.
The agent has a responsibility to ensure that all bonds collected from
residential tenants are lodged within 7 days of collection. Interest on the
amount held as a bond is payable to the tenant when the bond is released at
the end of the tenancy.
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Non –residential tenancies
Non-residential tenancies include such property types such as factories,
commercial premises and shops. The Residential Tenancies Act 1987 does
not apply to such leases. The commercial lease is not a standard document
like the residential lease. Its form, terms and conditions vary according to
who makes it and the state of the market at the time the lease is entered into.
This is a specialist area of property management, and the leases are usually
prepared by the landlord’s solicitor.
If you are involved in retail leasing, it is important to have a good
understanding of the Retail Leases Act 1994 and the Retail Leases
Amendment Act 1998 (NSW). Some of the provisions in these Acts are quite
complex and the duty of care that property managers owe to their principal
could see any mistakes punished severely.
For example, all details concerning the lease must be laid out in a Disclosure
Statement provided to the prospective tenant before entering into the lease.
Every tenant must be given one of these statements at least 7 days prior to
signing the lease. If this is not done, there are penalties under the legislation.
Further, property managers who misrepresent a non-residential property in
this statement are liable to pay reasonable compensation for any damages
suffered by a tenant who entered into the lease.
Agricultural tenancies
The conduct of tenancies that involve agricultural property and lands in
NSW is controlled by two pieces of legislation:


Agricultural Tenancies Act 1990
Agricultural Tenancies Amendment Act 2001.
These Acts regulate the rights of agricultural landowners, tenants and
sharefarmers. They provide a process for resolving disputes between these
parties by mediation or arbitration.
Property sales
The Conveyancing Act 1919 (and the Property Stock and Business Agents
Act 2002) regulate the sale of property in NSW. This sale process is called
conveyance. All property sales in NSW use the Contract for Sale of Land.
For the sale of residential property, there are some very strict controls that
affect the role of the selling agent in the process, including:


making a copy of the contract available to buyers as soon as the
property is placed on the market
allowing a cooling-off period of five days after the exchange of
contracts (this does not apply to auctions).
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
Agency agreements
Agency agreements are contracts between the agent and the vendor covering
the marketing and sale of a property. A cooling-off period also applies to
these agreements.
Under s56(1) of the Property Stock and Business Agents Act 2002 (NSW),
the agent must give the vendor a copy of the fact sheet Agency agreements
for the sale of residential property. This fact sheet advises vendors of their
rights and obligations when they enter into an agency agreement.
Waiving cooling-off rights
If vendors are sure that they wish to go ahead with the agency agreement,
they can waive or forego their rights to a cooling off period by signing a
separate waiver form when they sign the agency agreement. The cooling-off
period can only be waived if the agent gave the vendor the following
documents at least one business day before signing the agency agreement:

a copy of the proposed (unsigned) agency agreement

a copy of the fact sheet.
Secret commissions
An agent must not make a secret profit or receive a secret commission, in
other words a financial reward that the client does not know about.
Secret commissions are illegal under various State and Territory statutes. In
NSW, it is the Crimes Act 1900 which makes it an offence to corruptly
receive or solicit a benefit.
Strata titles
The Strata Schemes Management Act 1996 (NSW) and Regulation 2005
cover the administration of strata titled property. This legislation provides:

a system of giving title to the airspace that units occupy

the rules regarding the financial management and decision-making
processes of the strata scheme’s owners corporation

procedures for settling disputes in a strata scheme.
These dispute resolution procedures are of particular importance to property
managers involved in strata property leasing.
All residents in a strata scheme, including tenants, must obey the by-laws
that apply to the scheme. By-laws are a set of rules that have the force of
law, as they are referred to in the Regulation to the Act. Each scheme adopts
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and enacts its own set of by-laws that thereafter bind all people living in that
scheme:
By-laws cover such issues as:

Noise

Parking of vehicles

Obstruction of common property

Resident behaviour

Depositing of rubbish

Drying of laundry

Keeping of animals.
It is a requirement under the Residential Tenancies Act that an agent who
leases a strata property must include a copy of the strata scheme’s By-laws
as an annexure to the tenancy agreement. The strata scheme’s secretary must
also be advised, within 14 days, of the name of any new tenant and the
duration of the lease.
Environmental planning
The Environmental Planning and Assessment Act 1979 (NSW) determines
the purposes for which land can be used. These controls are achieved by
means of zoning in local environmental plans.
One of the prescribed documents in the Contract for Sale of Land is the s149
certificate under this Act. This details the zoning and land use controls
applying to each property. Another part of s149 deals with compliance with
council building codes.
Anti-Discrimination
The Anti-Discrimination Act 1991 (Cth) is administered by the AntiDiscrimination Board. The Board acts upon any complaint it receives, either
by conciliation (trying to reach a private settlement) or by referring it to the
government’s Administrative Decisions Tribunal: Equal Opportunity
Division. Discrimination is an area of particular concern in property
management and leasing and also affects the agency in regards to the hiring
of staff.
Under the Act, it is unlawful to discriminate on the basis of sex, race, age,
marital status, disability or sexual preference in many areas of public life, or
on the basis of carer’s responsibilities in the area of employment.
Interpret legislative and agency requirements and model ethical practice
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Consumer protection
The Property Stock and Business Agents Act 2002 (NSW) has a strong
consumer protection agenda. However, the most powerful piece of
consumer legislation in Australia is the Trade Practices Act 1974 (Cth).
The Trade Practices Act 1974 (Cth)
This is an important Commonwealth statute that aims to:

preserve competition of private enterprise to benefit consumers

strengthen consumer protection.
The Act also has provisions designed to protect those in a negotiation who
may be significantly weaker than the party they are dealing with.
Section 56 of this Act says that goods and services must not be advertised at
a specific price if the seller is, or should have been, aware that they couldn’t
supply reasonable quantities at that price for a reasonable period.
This Act protects Australian consumers against certain unfair practices of all
Australian businesses, including estate agencies. For example, it prohibits:

restrictive trade practices (practices which restrict competition, for
example price fixing)

unconscionable conduct (unfair tactics or unreasonable pressure)

misleading and deceptive conduct, for example lying about the quality,
style and characteristics of goods (this includes land or housing)

false representation and misleading statements, for example in relation
to job offers or statements about the profit or risk in business proposals

harassment and coercion or misleading advertising

warranties and refunds

product safety standards and the labelling of goods

the liability of manufacturers and importers for defective goods

unsolicited goods.
This means that you are never able to mislead a potential purchaser about:
14

the quality or origin of building materials used in a property

that a property is new, or that inclusions and fixtures are new

that certain inclusions and finishes would be included in a property

the availability of finance

the permitted use of buildings

the price or cost of goods and services.
Interpret legislative and agency requirements and model ethical practice
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The Trade Practices Act 1974 (Cth) encourages fair and ethical competition
and efficiency in business. Far from being a burden on business, the TPA
actually benefits companies that offer consumers better goods or services, or
better value. It does this by preventing a company’s competitors, suppliers
or buyers unfairly reducing its ability to compete.
All States and Territories have their own fair trading laws, which mirror or
partly mirror the Trade Practices Act 1974. They also have their own
government agencies that inform and protect consumers and educate
business to trade fairly. In NSW, that agency is the Office of Fair Trading.
The role of the Australian Consumer and Competition
Commission (ACCC)
The Australian Consumer and Competition Commission (ACCC) is a
Commonwealth body that administers and enforces the Trade Practices Act
1974 (Cth).
The ACCC takes an interest in the conduct of agents where they may have,
for example:

made statements that are untrue

made unrealistic predictions or market appraisals

offered gifts or items that they don’t intend to supply, or whose costs
are disguised in the selling price

advertised services at a ‘special’ price without intending to supply
them

suggested that another party is interested in a property when they are
not.
Acting unconscionably
The Act also has provisions designed to protect those in a negotiation who
may be significantly weaker than the party they are dealing with.
Under the Act, agents must refrain from:

harassment and high pressure sales techniques

taking advantage of people who may have a limited command of
English or who for some other reason are unable to understand the
documents involved in a transaction.
Interpret legislative and agency requirements and model ethical practice
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‘Bait’ advertising
Bait advertising means offering goods at an attractive price, when in reality
there aren’t enough of the goods available at that price to satisfy the likely
demand. For example, an agent might run an advertisement that states
‘Choice of 50 home units from $179 500’ but in reality there is only one
unit at that price and the rest are over $200 000. In other words, there are not
enough properties at that favourable price to satisfy the likely demand. In
this case it is clear that the agent was trying to attract enquiry by
misrepresenting the truth. This is deceptive behaviour.
Section 56 of the Act provides that goods or services must not be advertised
at a specific price if the seller is, or should have been, aware that they
couldn’t supply reasonable quantities at that price for a reasonable period.
Other breaches of the TPA
Real estate agents also breach the TPA when they:

claim affiliation with another company where this doesn’t exist

offer gifts or items that they don’t intend to supply, or the costs of which
are disguised in the selling price

advertise services at a ‘special’ price without intending to supply them

remain silent when they had a duty to disclose something of material
concern to a client or potential buyer

suggest that another party is interested in the property when this is not
true
Hint
We strongly recommend that you obtain a copy of the Australian Consumer
and Competition Commission’s booklet Fair and Square which deals with
property-related matters. You can either buy it or access it online.
Visit the Office of Fair Trading website at www.fairtrading.nsw.gov.au .
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Common law duties and obligations
As well as the statutory controls, there are several other legal duties and
obligations that you need to be aware of. These are the common law
principles that can affect agency practice.
Common law
Common law is unwritten law derived from the traditional laws of England.
It relies on precedent, which means it relies on decisions made by the courts.
Under common law principles, the agent has a duty to:

follow the principal’s reasonable instructions

act in good faith and in the principal’s best interests

fully disclose any personal interests that may affect the business

exercise a duty of skill, care and due diligence in any dealings on
behalf of a principal

maintain the principal’s confidentiality

care for the principal’s property as though it was their own

faithfully account for all monies held on behalf of a principal.
Duty of care
Like any professional, agents owe a duty of care to those who rely on their
advice and representations. A ‘duty of care’ simply means that, at law,
agents must demonstrate reasonable care and diligence when they provide
information or advice.
Negligence
The duty of care that a property professional owes to their principal, and in
fact to anyone who would reasonably rely on their advice, is at the heart of
any claim for negligence.
If it can be shown that a property professional owed a duty of care to a
person and was negligent in the exercise of that duty, and that the person
suffered physical or financial loss as a result of relying on their advice or
actions, then the property professional may be found liable for negligence.
Interpret legislative and agency requirements and model ethical practice
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Fiduciary obligations
Fiduciary duties and obligations are to:







preserve confidentiality
act with integrity in regard to the principal’s money
follow the principal’s instructions and fulfil obligations under the
contract
exercise due care and skill in the performance of your duties
be responsible personally, even where you have delegated authority
act in good faith in the principal’s (client’s) best interests
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 of, and obligations between, an agent and an owner depend to a
large extent on the terms and conditions of the contract between them.
Under the requirements of the PSBA Act 2002, there must be a written
agency agreement between the two parties, and it must contain certain terms
and conditions.
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.
Procedural requirements
Under the PSBA Regulation 2003 and the various Acts, agents must comply
with a number of procedural guidelines and requirements for example:





record keeping and documentation
details of trust account monies
licensing and registration
agency conduct
professional development of staff
Valuers should note that these requirements are closely mirrored in the
Valuers Act 2003 and Regulations 2005.
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Download the publication ‘Fair and square: a guide to the Trade Practices
Act for the real estate industry’ from the ACCC website.
Read the summary of do’s and don’ts for real estate agents.
Code of Practice
Codes of conduct such as the property industry’s Code of Practice are
industry-set standards that help to improve the service delivery of the
industry. Such codes are usually not statutory or regulatory which means
there is no legal obligation to follow them. The Real Estate Institute of
NSW, which has about 30% of agents in the state as members, has a
comprehensive code. Members follow the code voluntarily.
Ethics: building relationships based on
trust
Trust is the most important element in the sales process and is the natural biproduct of an ethical approach to doing business. You will inevitably find
the most successful business relationships (which are the tickets to valuable
repeat business, deep into the future) are those based on trust.
Many prospective vendors say they choose an agent based on their gut
feelings and that having an eye for character helps as it does in any situation
where trust is involved. Be prepared to offer a testimonial to potential
clients — that is, a paragraph written and signed by a previous satisfied
client for whom you have produced a great result.
When a potential client reads a testimonial written for you by a previous
client, it’s important they see references to words such as 'truth', 'honesty',
'integrity' and 'trust'? Ideally, they will make comments such as “When they
make a statement I know they are telling the truth” or “I always knew they
were completely honest with me”.
Your reputation is an honest and ethical professional will be that which
helps you stand out from your peers.
As a professional agent, you should be prepared to give the names and
phone numbers of past clients who will talk to potential clients about the
comments they have made in their testimonials. But never give a client’s
phone number out first without their express permission to do so
beforehand. Australian privacy laws forbid you from doing this.
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
Financial requirements
One of the fiduciary, or financial, duties of the agent is to act with integrity
in regard to the principal’s money. All monies received from third parties,
buyers and tenants must be held in trust by the agent.
Trust accounts
Most agents have separate trust accounts, one for sales and the other for
property management.
The Regulations under the PSBA Act requires the agent to have records that
contain comprehensive details of the trust account monies specifically in
relation to:

trust account receipting

trust bank deposit book

trust account cash book

handling of monies

banking of monies

transaction records

balancing of trust accounts

accounting to the principal

drawing on trust accounts.
Depositing and releasing of monies
Let’s now look at some of the main procedures the Property Management
and Sales Departments of the agency should follow in conducting their
business.
For a sale deposit
When the sale of a property is negotiated, some agents insist on the
purchaser providing a reasonable holding deposit as an indication of their
good faith in completing the transaction. The amount should be around one
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to two percent of the purchase price. Amounts of $100.00 to $500.00 hardly
reflect the good faith of the purchaser. There are some agents who don’t
bother with ‘holding deposits’ at all.
On paying the deposit, which is refundable if the sale does not proceed to
exchange of contracts, the agent issues a Sales Trust Account receipt and
must deposit the money in the Trust Bank Account by the end of the next
banking day, or if not possible, as soon as possible after that.
When a contract is exchanged, and the agent is to be the stakeholder of the
10% purchase price (or the balance, if there is a holding deposit) the agent
issues a receipt and, again, deposits the money in the Trust Bank Account
within 24 business hours.
The agent cannot release the money held for an exchange of contract, unless
there is a written authority from a solicitor to do so. However if no contract
has been exchanged, then money such as a holding deposit can be refunded
to the purchaser upon request.
On settlement, the agent is authorised to account to the vendor for the
balance of the deposit held less the agent’s fees, charges and any other
agreed costs such as obtaining a s. 149 certificate for the vendor’s solicitor.
For rent payments
Most agents now arrange to have tenants pay their rent direct into the
agent’s Property Management Trust Account by B-Pay or periodical
payment. Few agents handle cash over the counter any longer. This not only
reduces the risk of robbery but also simplifies the money handling for the
property management department.
All monies received are receipted daily and receipts are handed to tenants
who pay at the counter. These monies must also be banked within 24
business hours.
Generally at the end of each month the agent accounts to the landlord for the
rent received during that month less:

the agent’s fees and charges

payments made on behalf of the landlord to tradespersons, the local
council, their insurance company, etc

any other agreed payments, for example, representing the landlord at the
Consumer Trader and Tenancy Tribunal (CTTT).
A valuer will have little or no contact with trust money, as any money
received will generally be the valuer’s own, but it is useful to know the
regulatory procedures that are in place.
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Identifying situations requiring
specialist advice
One of the most useful skills in business is knowing the right person to go to
when you need something eg a particular bit of information.
In the early stages of your career, this will frequently occur when you come
across unfamiliar industry jargon or terminology. Sometimes you’ll come
across a document or form you’re unsure about and would benefit from the
knowledge and experience of someone with more experience.
As you become more knowledgeable in the property industry yourself, the
reasons you might have for seeking the advice or input of others will
probably change though you should never think you’re going to arrive at a
point where the advice and input of other specialists is not necessary.
So who would you ask to find out what some unfamiliar expression or
document is referring to? It is important to ensure you understand correctly;
remember ignorance is no excuse in the eyes of the law or your clients. It is
not wrong to tell someone that you don’t know a particular fact and that
you’ll find out, but if you do say that you’ll find out, make sure that you do.
Seeking the experts
Start with somebody more senior within the organisation you work for. This
might be the head of sales or property management, or perhaps the licensee
in charge. Often they will have enough experience to know the answer
without having to refer to anybody else more specialised in the field. Many
of the situations that appear to be confusing when you first begin in real
estate will, in time, become commonplace situations.
However, there will be many occasions when you need more professional
help or advice, so who do you ask? The answer of course depends on the
sort of information you are looking for.
Who do you ask?
There may be other people who are experts in their chosen field who can
help you find the information that you require for a particular property or
situation. The important thing is that you find the right person for the job
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you are doing, and check that they have the correct qualifications. Don’t be
afraid to ask questions and get people to explain to you until you are
confident that you have the information you need. Most forms of licence can
be checked online these days, so it’s easy to ensure that the people you deal
with have the proper expertise.
You might also find that the firm you are working for has lists of
tradespeople, solicitors, builders, etc. that they refer to when needed. These
people are trusted by the firm having done work for them previously, so
remember to check with your section manager or the licensee in charge to
see if they have experts that they prefer you to contact.
Most offices these days will also have standardised forms to be filled in that
list the type of job you are doing, the person you have contacted about the
work and the date you contacted them, as well as the date the work is
expected to be finished. It is important that these forms are fully and
correctly filled in as they create a ‘paper trail’ of the actions of the office
and its staff. This way if any one else needs to check the progress of work,
or to make sure that it is being correctly handled there will be a record in the
files. It will also protect you and the office from claims for negligence if you
have a written record of the actions you have taken.
Keeping out of trouble
Anything you say or write as an agent to the parties to any property
transaction shouldn’t just aim to secure the deal, but should also be truthful,
to avoid possible legal problems later on.
You have to resist the temptation to exaggerate or overstate (misrepresent)
the qualities of a property. Both the Property Stock and Business Agents Act
2002 (NSW) and the Trade Practices Act 1974 (Cth) state that a company or
person cannot engage in misleading or deceptive conduct.
Even when a residential tenancy agreement is signed and the tenant is in
possession, or a contract of sale is exchanged, this is not necessarily where
the matter ends. The parties can still take legal action.
How can you avoid legal problems? First, you need to be sure you describe
properties completely and accurately. This means you should take particular
care in what you tell a prospect or owner: you should provide the full picture
to all parties. Specifically, you should not:

make inaccurate statements about the property in an attempt to persuade
the buyer or tenant to commit

conceal from a prospect less attractive or potentially disadvantageous
features of the property

make predictions or assertions about what benefits a prospect will
receive, either directly or indirectly, without any reasonable basis for
these assertions
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
imprecisely identify what the prospect will and will not get.

make false or unsubstantiated claims on the state of the market to
owners, thereby pressuring them to lower their expectations.

make any claims you can’t verify. For example, you shouldn’t say that a
house has been insulated if you haven’t seen the insulation yourself.
You should:

make sure that you are completely familiar with the property. You
should understand all aspects, both good and bad, in precise detail.

confirm all instructions in writing

convey all offers in writing to the principal

keep records of meetings and details of what has been said to the parties.
A note of what has been said will help you remember what happened, if
someone makes a claim later. This will also add to your credibility in
court.
Even if you didn’t intend to misrepresent a property, this will not protect
you if the case goes to court. For example, if you made a statement about
the nature of the expected retail tenancy mix or the services provided by the
building owner, which over time turned out to be incorrect, then you could
be sued for misleading and deceptive conduct even if you made the
representations believing they were true.
Be wary of giving unqualified financial advice or even how what you say to
a client may be construed by them as making a financial recommendation.
Financial advice to investors should be referred to an authorised financial or
business advisor.
These suggestions will help you minimise the risk of a claim being made
against you, and in the event of a claim being made, allow you to respond to
it effectively and make the claim less likely to succeed.
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Check your learning
Here is a check-list of the things you should now know or be able to do. Put
a tick beside each one you feel confident about.
I can …

… name the main laws which cover agency activities in NSW
…name the additional pieces of federal legislation which also impact on the way
businesses operate in NSW
… name the organisations which administer the regulatory framework in which the
real estate industry operates
… recognise that the framework within which NSW operates is not identical to that
in which other Australian states operate.
How did you go? If there are some areas you’re not sure of, you may like to
revise them before attempting your assessment tasks.
Interpret legislative and agency requirements and model ethical practice
 2008 DET NSW
Summary
This topic provided an overview of the legal operating requirements of the
estate agency sector of the property industry.
In it, we looked at the laws, both specific and general, that govern property
agents’ everyday work and the organisations that oversee the real estate
industry. We considered the industry’s code of conduct, the client’s
expectations and the agency’s own values and the way they influence an
agency’s work.
We also looked at the ethical dimensions of working in the real estate sector.
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Appendix
Relevant Property legislation for
different Australian states
Go to your state’s legislation site and search for the relevant Act or
Regulation. Most sites have a Search or ‘Browse by Acts and Regulations’,
or ‘Browse A - Z in force’ or similar.
Note that the following list is not exhaustive nor necessarily current at the
time you happen to be reading it. You should always seek professional
advice in matters of the law.
Australian Capital Territory
www.legislation.act.gov.au
Act / Regulation
Section Reference / Headings
Agents Act 2003 (ACT)
Trustee Act 1925 (ACT)
Part 2 – Trustees
New South Wales
www.legislation.nsw.gov.au
Act / Regulation
Section Reference / Headings
Property Stock and Business Agents
Act 2002 (NSW)
Part 2 – Licenses and Certificates of
Registration
Part 3 – General conduct of licensees and
registered persons
Part 4 – Agency Agreements
Part 7 – Trust Accounts
Part 8 – Record Keeping
Part 8 – Division 1: Keeping and inspection of
records
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Property Stock and Business Agency
Regulation 2003 (NSW)
Part 2 – Conduct of Agency Business
Part 4 – Trust Money
Part 5 – Records
Schedule 1 – General rules of conduct
Schedule 6 – Rules specific to Strata,
Community, Residential and other property
managers
Schedule 7 – Terms applying to all agency
agreements
Schedule 14 – Terms specific to agency
agreement for the management of strata or
community title land
Strata Schemes Management Act
1996 (NSW) and Regulations
Strata Management Legislation
Amendment Act 2008 (NSW)
Residential Tenancies Act 1997
(NSW)
Part 2 – Residential Tenancy Agreements
Part 3 – Landlords and Tenants
Community Land Management Act
1989 (NSW) and Regulations
Fair Trading Act 1987 (NSW); and
equivalent section in Trade Practices
Act 1974 (Cth)
Part 5 – Fair Trading
Privacy and Personal Information
Protection Act 1988 (NSW)
Part 2 – Information protection principles.
Occupational Health and Safety Act
2000 (NSW)
Sections of the Act on general duties, obligation
and industry codes of practice
Occupational Health and Safety
Regulations 2001 (NSW)
Sections of the Regulations on general risk
management issues, workplace consultation and
training
Anti-Discrimination Act 1977 (NSW)
General understanding of what constitutes
discrimination on various grounds (ie Sections
7, 24, 38b, 39, 49b, 49c, 49t, 49u, 49zg, 49zya
Northern Territory
www.nt.gov.au/dcm/legislation/current.html
28
Act / Regulation
Section Reference / Headings
Agents Licensing Act 2003 (NT)
Part IV – Trust Moneys, Trust Accounts and
Agents’ Records
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 2008 DET NSW
Queensland
www.legislation.qld.gov.au
Act / Regulation
Section Reference / Headings
Body Corporate and Community
Management Act 1997 (Qld) ie
‘BCCMA’
Chapter 3 – Part 2 of BCCMA
Chapter 3 – Part 3 of BCCMA – financial and
property management
Chapter 4 – Part 2 of BCCMA: Records
Schedule 2 of the BCCMA
Body Corporate and Community
Management (Standard Module)
Regulation 1997 (Qld)
Part 6 of Standard Module
Part 7 of Standard Module: Financial
management
Part 9 of Standard Module
Code of conduct of CTIQ
Anti-Discrimination Act 1991 (Qld)
General understanding of what constitutes
discrimination on various grounds (ie
Chapters 1, 2, 3, 4 and 7)
Fair Trading Act 1989 (Qld)
Parts 1 and 3
Residential Tenancies Act 1994 (Qld)
Chapters 1, 2, 3, 4, 5 and 6
Workplace Health and Safety Act
1995 (Qld)
Sections of the Act on general duties,
obligation and industry codes of practice
Workplace Health and Safety
Regulation 1997 (Qld)
Sections of the Regulations on general risk
management issues, workplace consultation
and training
South Australia
www.legislation.sa.gov.au
Act / Regulation
Section Reference / Headings
Strata Titles Act 1988 (SA) and
Regulations
Part 3 – The Strata Corporation
— Divs 1, 2 and 5
— Div 6A – Agents Trust Account
— s36G Record keeping
Community Titles Act 1996 (SA)
and Regulations
Part 2 – Scope of the Act
Part 9 – The Community Corporation
Part 11 – Financial Management
— Div 2 s126 Keeping of records
Part 13 – Div 1 Records
Part 14 – Resolution of Disputes
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Residential Tenancies Act 1995
(SA)
Part 4 – Residential Tenancy Agreements
Trades Practices Act 1974 (Cth)
Part 5 – Fair Trading
Privacy Act 1988 (Commonwealth)
Part 2 – Information protection principles
Equal Opportunity Act 1984 (SA)
Relevant sections related to rights and
responsibilities and discrimination
Occupational Health, Safety and
Welfare Act 1986 (SA)
All relevant sections of the Act relating to
general duties, obligation and industry codes of
practice
Occupational Health, Safety and
Welfare Regulations 1995 (SA)
All relevant sections of the Regulations relating
to general risk management issues, workplace
consultation and training
Part 4 – Landlords and Tenants
Tasmania
www.thelaw.tas.gov.au
Act / Regulation
Section Reference / Headings
Strata Titles Act 1988 (as amended,
Tas)
Div 6A – Trust Accounts
Community Titles Act 1996 (as
amended, Tas)
Part 11 Div 2 – Trust Money
Trades Practices Act 1974 (Cth)
Part 5 – Fair Trading
Privacy Act 1988 (Cth).
Part 2 – Information protection principals
Residential Tenancy Act 1997 (Tas)
Part 4 – Residential Tenancy Agreements
Div 6A s 36G – Record Keeping
Part 13 Divs 1 & 2 – Records
Victoria
www.legislation.vic.gov.au
Act / Regulation
Section Reference / Headings
Subdivision Act 1988 (Vic)
Sections 12, 28A, 34
Owners Corporations Act 2006 (Vic)
Part 3 – Financial Management
— Division 1: Financial Powers
— Division 2: Accounts & Audit
— Division 3: Maintenance Plan
— Division 4: Maintenance Fund
Part 6 – Managers
Part 9 – Records
Part 12 – Registration of managers
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Owners Corporations Regulations
2007 (Vic)
Reg 5 – Prescribed owners corporations
Reg 7 – Professional indemnity insurance
Reg 9 – Establishment of owners corporation
register
Reg 10 – Fee for owners corporations
certificate
Reg 11 – Prescribed information for owners
corporation certificate
Reg 12 – Prescribed statement to accompany
the owners corporation certificate
Reg 14 – Registration application fee
Reg 15 – Annual registration fee
Reg 16 – Late lodgement fee
Subdivision (Body Corporate)
Regulations 2001
Part 2, Division 2 – Financial Provisions
Equal Opportunity Act 1995 (Vic)
General understanding of discrimination on
various grounds (ie Part 2 – What is
prohibited discrimination?)
Fair Trading Act 1999 (Vic), and
equivalent section in Trades
Practices Act 1974 (Commonwealth)
Part 2 – Unfair Practices
Information Privacy Act 2000 (Vic).
Part 3 – Information privacy.
Residential Tenancies Act 1997 (Vic)
Part 2 – Residential Tenancy Agreements
Regs 312 and 313
Part 2, Division 5 – General Duties of
Landlords and Tenants
Occupational Health and Safety Act
2004 (Vic)
Sections of the Act on general duties,
obligation and industry codes of practice
Occupational Health and Safety
Regulations (Vic):
Sections of the Regulations on general risk
management issues, workplace consultation
and training

(Asbestos) 2003

(Certification of Plant Users
and Operators) 1994

(Hazardous Substances) 1999

(Lead) 2000

(Major Hazard Facilities)
2000

(Plant) 1995
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 2008 DET NSW
Western Australia
www.slp.wa.gov.au
Act / Regulation
Section Reference / Headings
Strata Titles Act 1985 (as amended,
WA)
Division 6A – Trust Accounts
Strata Titles Act 1996 (as amended)
Part 2, Division 2 – Trust Money
Section 36G – Record Keeping
Part 13:
— Division 1
— Division 2 – Records
32
Trades Practices Act 1974
(Commonwealth)
Part 5 – Fair Trading
Privacy Act 1988 (Commonwealth).
Part 2 – Information protection principles
Residential Tenancies Act 1995
(WA)
Part 4 – Residential Tenancy Agreements
Occupational Health, Safety and
Welfare 1986 (WA)
Sections of the Act relating to general duties,
obligation and industry codes of practice
Occupational Health, Safety and
Welfare Regulations 1995 (WA)
Sections of the Regulations on general risk
management issues, workplace consultation
and training
Part 4 – Landlords and Tenants
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 2008 DET NSW