Keep Calm! How to respond to a NSW Fair Trading audit

12 May 2022

By Katrina Creer


It is the least glamorous side of the property industry but neglecting paperwork can prove to be an expensive error for agents – even costing them their licence.

As the regulatory authority for real estate in NSW, officers from the NSW Fair Trading (NSWFT) can pay a surprise visit to a business to check files are up-to-date, training has been completed and trust accounts are in order.

A ‘spot audit’ may be generated randomly or, more commonly, instigated by a complaint from a consumer. If you are unlucky enough to have a real estate agency in your suburb audited, it is likely NSWFT will turn up at your office as well.  With breaches carrying hefty fines up to $11,000 for individuals and $22,000 for corporations, it is understandable to feel a little jittery at this prospect.

What are they looking for?

Michelle Alchian, Director of Operations Residential for Colliers said NSWFT will request information based on what has triggered the audit, in addition to licence and COR checks, CPD and Supervision Guidelines. The audit usually includes three files from property management and three from sales.

They will look at signed and compliant agency agreements (with inspection reports attached), proof of service for agency agreements, fraud prevention ID checking, price substantiation/comparable sales and if there are any misleading or deceptive statements in the advertising material.

“An audit is only stressful if your compliance practices are loose and if there is no structure with how you manage your files,” said Ms Alchian, who is a member of the REINSW.

“As agents are given little notice you may end up having to scramble to find information if you don’t have proper procedures in place. It highlights the importance of maintaining compliance at all times because agents need to act quickly when OFT comes knocking.”

NSWFT may also check you are complying in other areas - such as having the name of the licence holder on the office door and proof of professional indemnity insurance.

How to respond to an audit?

Even the most organised of agencies can make mistakes, particularly in a busy market.

Hannah Carney, General Manager of Schwarz Real Estate in North Manly said she treated a recent spot audit by NSWFT as a ‘training session’. The officer flagged a few minor issues in their documentation.

“They were simple things such as the paperwork was dated correctly but on one document it was written in black pen and on the other was in blue,” she said.

“It was that kind of thing where you think you have done everything right, but obviously it is not right.”

The officer provided them with tips on compliance and rewarded their willingness to learn by reducing penalties. Since then, the agency has employed an independent auditor for an annual check-up on documentation. This is in addition to monthly reviews by senior staff members.

“People probably feel the same about OFT as they do about parking inspectors but their officers are there to do a job – you need to treat them with complete and utter respect,” she said. 

What about property management?

Cassandra Lantry, general manager of Leah Jay said overarching requirements for property managers are similar to sales agents such as maintaining CPD, licensing and insurance requirements.

It is particularly important for property management offices to have documented procedures around the handling and authorising of funds, including maintenance and bonds. 

“It can be intimidating to have NSWFT arrive at your office - but if you are conducting business in the appropriate way, per the guidelines, there really should be nothing to be fearful of - preparation and documentation is key,” said Ms Lantry, a member of REINSW’s Agency Services Chapter Committee. 

What happens after an audit?

NSWFT will issue on-the-spot fines for breaches. They will also send out a letter detailing which problems need to be rectified.

Penalties can vary from a warning to disqualifying the person from being involved in the direction, management or conduct of the business until the issue has been resolved. More serious infringement can mean the loss of a licence or court action.

Businesses can request an internal review of the disciplinary decision issued to them - this must be lodged within 28 days.

What else can prompt an audit?

NSWFT often carry out a blitz on a variety of issues such as CPD training or underquoting.

In September last year, disciplinary action was taken against 20 agents who failed to lodge their trust account audits for 2019/20. This resulted in the cancellation of eight licences and a total $173,500 in penalties being issued.

Valerie Griswold, NSWFT’s Executive Director of Investigations and Enforcement said failure to lodge an audit is seen as a red flag as it could indicate agents have something else to hide.

How can I best prepare?

Having processes in place to comply at all times is essential. The REINSW Supervision Guidelines Manual provides a framework for agents for best practice. Ms Alchian also recommends being proactive and investing in an external audit or compliance review to be conducted across your business.

“They will highlight any areas of concern and give you the opportunity to set practices in place - not to mention that it will give you peace of mind,” she said.

REINSW provides information on how best to monitor compliance procedures. Find out more information here.

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