Supervision guidelines for property agencies
Licensees who run a business have a legal obligation to ensure the proper supervision of their business.
Why supervision matters in property and stock agencies
It is vital that businesses are properly supervised, particularly as large sums of money and trust accounts may be involved.
Poor supervision can cause distress and financial loss for consumers.
It can also lead to claims of negligence, misleading conduct and fraudulent use of trust money — for which substantial maximum penalties apply.
Licensees who run a business must ensure proper supervision in accordance with the Secretary’s Guidelines for the Proper Supervision of the Business of a Licensee (the supervision guidelines).
Corporations or individuals who run a business under a Class 2 licence need to employ a Class 1 licence holder to be the licensee in charge (LIC) of their business.
Visit the licensee in charge page for more information about the requirements relating to LICs.
About the supervision guidelines
The supervision guidelines set out the requirements for proper supervision of a business, including the steps to be taken to prevent fraud, underquoting and misrepresentation.
The guidelines also give guidance for both principals and licensees in charge and specific requirements that must be met. Guidance tells you what you should do to maintain a well-supervised business; while failure to meet the requirements is an offence that may be penalised or prosecuted.
The supervision requirements
Supervision requirement 1: people leadership
- Principal licensees must ensure that all parts of the licensee’s business are supervised by a licensee in charge.
- No part of the business is to be left without supervision by a licensee in charge
- Principal licensees and licensees in charge must properly supervise persons engaged in the business.
- Licensees in charge must assist persons engaged in the business by verifying completion of work experience requirements set out in the Property and Stock Agents (Qualifications) Order 2019.
Supervision requirement 2: operational procedures for legal compliance
- Principal licensees must establish procedures that ensure the provisions of the Act and any other laws relevant to the conduct of the business are complied with.
Operational procedures must:
- exist separately from the Supervision Guidelines and identify the agency business or group of agency businesses to which they apply,
- identify the licensee in charge with responsibility for the procedures, and
- identify the laws that are relevant to the conduct of the agency business (or businesses) that are covered by the procedures, by considering the following Acts and Regulations/subordinate instruments made under those Acts, at a minimum:
- Property and Stock Agents Act 2002
- Strata Schemes Management Act 2015
- Strata Schemes Development Act 2015
- Community Land Management Act 2021
- Community Land Development Act 2021
- Residential Tennancies Act 2010
- Conveyancing Act 1919
- Real Property Act 1900
- Retail Leases Act 1994
- Swimming Pools Act 1992
- Electronic Transactions Act 2000
- Uncollected Goods Act 1995
- Work Health and Safety Act 2011
- Environmental Planning and Assessment Act 1979
- Design and Building Practitioners Act 2020
- Australian Consumer Law, under the Competition and Consumer Act 2010 (Commonwealth)
- Fair Trading Act 1987
- Anti-Discrimination Act 1977
- Privacy Act 1988 (Commonwealth)
- Prevention of Cruelty to Animals Act 1979
- Biosecurity Act 2015 (NSW and Commonwealth)
- Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Commonwealth)
Operational procedures prepared under Supervision Requirement 2 must also address financial risks in the business and how they will be mitigated, at a minimum ensuring:
- each trust account maintained as part of the agency business has only one licensee in charge who can authorise withdrawals from that account (noting a single licensee in charge can be responsible for multiple trust accounts)
- a procedure is in place for obtaining and documenting authorisation from the relevant licensee in charge for the withdrawal of funds from a trust account, in accordance with the restrictions on licensees’ functions in the regulations
- security measures for operation of trust accounts, including each person with access has a separate login and passcode
- daily or next day banking practices for trust moneys
- verification of amounts deposited into and withdrawn from trust accounts, using the relevant financial institution’s records as source document
- procedures for the receipt, lodgement, claims and disbursement of rental bonds
- a procedure for the monthly review of trust accounts, which includes ensuring that any adjustments shown at the end of month reconciliation can be explained with evidence
- procedures for handling cash transactions, having regard to any reporting obligations of large cash transactions under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, and including records of:
- the cash amount received
- the name of the person who received the cash from the payer
- the name of the person who prepared the daily banking of those funds
- the name of the person who deposited the funds in trust at the financial institution, and
- the trust account details and
- procedures for notifying the Commissioner for Fair Trading of a failure to account under section 39 of the Property and Stock Agents Act 2022.
Supervision requirement 3: monitoring business conduct
- Principals and licensees in charge must establish adequate systems to monitor the conduct of the business to ensure that the requirements of the operational procedures are complied with, and
- licensees in charge must record instances of non-compliance with the operational procedures and any corrective action taken.