Poor management of trust accounts in the real estate industry is under the spotlight, with Consumer Affairs Victoria (CAV) taking action to protect consumers’ money.
CAV investigates how estate agents, conveyancers and businesses manage their trust accounts, which hold client funds including rental payments and home deposits.
Estate agencies and conveyancers are legally required to audit their trust accounts every financial year. Failing to lodge an audit report can be a sign of potential deeper problems within the business.
CAV’s recent disciplinary proceedings have resulted in one estate agent having their licence suspended, another being fined, and a third facing a hearing at the Victorian Civil and Administrative Tribunal (VCAT).
Licence suspended over serious audit failures
Earlier this month, Point Cook agent James Anthony Ferris had his licence suspended for 3 months after failing to arrange trust account audits for his company, James Ferris Property Pty Ltd, for 5 years.
VCAT found that Ferris:
- was not a fit and proper person to hold an estate agent’s licence
- engaged in unprofessional conduct damaging to the industry’s reputation
- failed in his duties as the company’s Officer In Effective Control (OIEC) to arrange audits; and
- did not exercise due care, skill and diligence.
Ferris was also reprimanded and ordered to complete additional professional training.
Once he gets his licence back, Ferris will have to appoint a third party to manage his business’ trust account records for 2 years.
VCAT acknowledged that since disciplinary proceedings were brought against him, Ferris and his company had put systems in place to manage its trust accounting requirements and had completed all outstanding audits.
However, the tribunal also noted Ferris’ initial failure to engage with CAV and emphasised the need to protect the public as part of its decision.
Further legal actions
In a separate case, Cranbourne real estate agent Carmelo Sottile was fined $500 after failing to lodge trust account audits for his business, Builders Property Direct, for 4 years.
Sottile, 51, was also ordered to appoint a third party to maintain his trust accounting records for 3 years. The outcome followed an agreement with CAV.
CAV is also taking action against estate agent Stephen Horler, 69, of Cheltenham. He is alleged to have failed to have his trust account audited between 2015 and 2022. Horler is scheduled to appear at VCAT tomorrow.
If you're an estate agent and have questions about your obligations, go to Trust accounts.