Interpret Legislative and Agency Requirements & Model Ethical Practice

Interpret legislative and agency requirements model ethical practice

Contents

Overview 3

Introduction to Evansdale Realty 4

The legal framework 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

Appendix 27

Relevant Property legislation for different Australian states 27

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.

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.

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.

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.

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 Lexis-Nexis (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).

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:

·  administering licensing and registration

·  improving services

·  promoting community awareness

·  investigating complaints and resolving disputes

·  developing a regulatory framework

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.

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.