How The OFT deals with bad behaviour in real estate
Just like any industry, not everyone in real estate does the right thing. Unfortunately, some agents and agencies bend the rules and break the law.
Queensland real estate has The Office of Fair Trading (OFT), which steps in when an individual or organisation is out of line and they can hand out penalties if an accused party is proven to be guilty.
Season two of the REIQ Property Brief podcast featured Victoria Thomson, the Queensland Fair Trading Commissioner, as she discussed common regulatory issues in real estate and how the OFT deals with bad behaviour in the industry.
Season three of the Property Brief podcast launches on 6 September 2022!
Issue 1: Misapplication and Unlawful Use of Trust Account Money
According to Thomson, trust accounts are the source of many problems for the OFT. With a whole range of administrative processes that need to be followed when dealing with a trust account, some of the common issues involve:
Agents and agencies not notifying the OFT when opening a new trust account;
Using trust account money to pay for business or personal expenses;
Paying commission early using trust account money; and
Not reconciling on time.
"The OFT takes a very interested view in terms of how trust accounts are managed, and we have all sorts of tools and techniques at our disposal to make sure we interrogate those properly," says Thomson.
Issue 2: Correct Licensing Arrangements
The licensing regime for the real estate industry is very prescriptive and detailed, and Thomson says it's there for a reason.
"This is a regulated industry to protect consumers and their very large asset, so we have to make sure that the companies are working within the correct scope of their licence otherwise they are at risk of being seen to be unlicensed," she says.
An example of this could be if a real estate agent decided to conduct an auction without the correct licence to do so. This could land the agent in hot water as they do not technically have the qualifications to be an auctioneer, even if they have their full real estate licence.
Issue 3: False or Misleading Representations
It's very important to not entice a buyer with false advertising or marketing and this is another one of the primary issues the OFT must deal with.
"The OFT sees [false or misleading representations] happening in terms of the price of a property or, in terms of the property's attributes, which includes the views or potential income of capital gain that could be reached," says Thomson.
There are a wide variety of penalties that the OFT can hand down. These range from general dishonesty provisions where people negligently or didn't intend to deceive people through to very significant penalties under the Australian Consumer Law that reach up to $10 million for corporations and $500,000 for individuals.
The penalties at the top end are reserved for when businesses or individuals have been misleading and wilful in their practices.
"People often want to do the right thing but there may be times when they don't get it right and that's when we can issue a formal warning and provide guidance," says Thomson.
"When we deal with actions of fraud and dishonesty, that's when we end up in court and taking disciplinary action and that's when we can really see the penalties escalate to very considerable amounts of money for the individuals or businesses involved."
Complaints from the general public are one of the main ways the OFT becomes aware of any wrongdoing in the industry and these complaints can come from anyone. The OFT then completes due diligence to determine the materiality and seriousness of the complaint before conducting a complete investigation.
"As the real estate industry would be aware, we have auditors out on the ground who are our eyes and ears in the marketplace," says Thomson.
"They check the audit reports which are a very good form of intel that will help us look for the red flags that will prick our investigators' eyes and ears.
"We also do a lot of data analysis and cross-matching from financial institutions, so we have some fairly sophisticated processes in place in terms of data and our information."
The OFT also conducts proactive compliance work by talking to agents and industry representatives. By doing this work themselves, Thomson says they can gather enough intel to know where they can direct their regulatory effort.
"We take the view that most people in the industry want to do a good job and are doing a good job," she says.
"When we work with the likes of the REIQ we can then focus our attention on the areas where the industry and government are concerned about potential detriment for the community. It's important for us to have a very good industry partnership."
To hear more from Victoria Thomson about the OFT tune in to the REIQ Property Brief podcast.
This article was first published on 15 December 2021.
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