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Topic 1: Introduction to real estate

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Topic 1: Introduction to real estate

Industry Fundamentals NSW

Contents

Overview ........................................................................................................... 1.2

Topic learning outcomes ............................................................................................ 1.3

Glossary of terms ............................................................................................... 1.4

1 Agency function ...................................................................................... 1.4

1.1 The agency-principal relationship .................................................................. 1.4

1.2 Fiduciary obligations ...................................................................................... 1.5

1.3 Contractual obligations of an agent ............................................................... 1.6

1.4 Types of real estate licences .......................................................................... 1.6

1.5 Property services offered by agents .............................................................. 1.7

2 Real estate business ownership and organisational structure .................. 1.8

2.2 Types of business entity ................................................................................. 1.8

2.2 Business style of agency ............................................................................... 1.11

3 Job roles and responsibilities of key agency staff ................................... 1.13

3.1 Roles and responsibilities of key staff .......................................................... 1.13

3.2 Organisational structure .............................................................................. 1.14

3.3 Relationship between licensee and agent representative........................... 1.15

Key points ........................................................................................................ 1.15

References ....................................................................................................... 1.16

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Overview The term ‘Estate agent’ is defined in the Macquarie dictionary as:

‘One who acts as an intermediary between the buyer and seller of properties, houses, etc.’

(Macquarie dictionary)

The Real Estate Institute of Australia’s glossary of terms defines an agent as:

‘A person authorised to act for another (usually for the owner) in the selling, buying, renting or management of a property. Commonly used to refer to licensed real estate agents and real estate representatives.’

(The Real Estate Institute of Australia (REIA))

In every state and territory in Australia, the role of the real estate agent is a licensed occupation regulated by the state government department responsible for enforcing the relevant agent legislation and regulating the conduct of agents. This means a person who works as a real estate agent cannot do so without meeting the set criteria and educational requirements to obtain the appropriate Certificate of Registration and/or Licence with the relevant state department.

Laws affecting the role and responsibility of the real estate agent differ slightly in each state and territory throughout Australia. There may be a general perception that real estate agents only sell homes; however, their role is much broader, and may include: • selling • leasing • managing • buying

of: • residential property • rural property • commercial property • retail (a specialist sub-category of commercial) property • industrial property • businesses.

Some real estate agencies offer a broad range of these services, whilst others may specialise in only one. Agencies may differ in their size, company structure and of course branding, but many are classified under the Australian Bureau of Statistics publication guidelines as small businesses (that is, businesses employing less than 20 staff). All agents, businesses and their employees are currently governed by state or territory legislation administered by a statutory body within that state or territory.

The real estate industry is a common career choice for those who have a passion for dealing with a variety of people, whilst providing services in the dynamic property sector. It offers the opportunity of significant financial reward for those with an outstanding work and service ethic.

Topic 1: Introduction to real estate

It can also be seen as a glamorous industry in which image is important. However, personal presentation is just a start. A real estate agent needs to be professional, up-to-date with current legislation, and compliant with their agency’s policies and procedures. Working in real estate may mean working extended hours and compete for clients’ business whilst remembering it is the client’s best interest to always keep paramount.

The real estate industry can be an unpredictable industry at times. It reflects changes and fluctuations in the economy and government policy, thus progressing in a series of waves of activity, which can influence both income and job opportunities.

As can be seen from the above, and throughout the topics in this subject, a career as a real estate agent can certainly be exciting, rewarding and challenging!

Topic learning outcomes On completing this topic, students should be able to: • explain the services offered by real estate agents • identify parties to real estate transactions • identify and explain the agency-principal relationship • research and record forms of real estate business ownership and

organisational structures • research and record the roles and responsibilities of key personnel in real estate,

including agency principals (licensee in charge).

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Glossary of terms In real estate, there are many industry specific terms. These terms and definitions are available on the Real Estate Institute of Australia’s Glossary of Terms.

Some of the terms differ from state to state. For example, ‘owner’, ‘landlord’ and ‘lessor’ are all terms used to mean the same thing; a property owner who leases their property to a tenant. For consistency, this subject uses the following terms: ‘seller’, ‘buyer’, ‘landlord’, and ‘tenant’.

1 Agency function

1.1 The agency-principal relationship The role of an agent is to: • act on behalf of a client (known as the principal) • to locate an appropriate third party to engage in a legal relationship with the

principal concerning a property.

Please note that the word ‘principal’ is sometimes used in three different ways within the industry: 1. The client — the person or party who engages the agent to act for them and who

pays the agent for their services. 2. The owner or licensee of a real estate business. 3. The original amount of a loan before interest is added (as in ‘principal and interest’).

When talking about the agency-principal relationship, it is using the term ‘principal’ in its first meaning, as shown above.

Example: Agency-principal relationships

Examples of agency-principal relationships include: • An agent acting for a seller (the principal) finds a buyer for the property

who enters into a contract to purchase • An agent acting for the landlord owner (the principal) finds a tenant to

enter into a contract to lease the property • An agent acting for a buyer (the principal) finds a suitable property for

them to purchase and negotiates with the seller.

The ‘agency’ is created by a written contractual agreement between the principal and agent to perform a service or services and carry out duties, responsibilities and obligations of an agent for a fee.

To be able to claim a fee for this service, the agent must have a contractual agreement with the principal. This is known variously as an ‘agency agreement’, ‘agency authority’ or ‘appointment to act’ and is the written authority that provides an agent with the legal right to claim a fee for the service they provide to their principal. Without this written agreement, an agent cannot claim any fees, commissions or expenses involved in the transaction as these must be specified in the agreement.

http://reia.asn.au/consumers/glossary-of-terms

Topic 1: Introduction to real estate

Under the terms of the agency agreement, the agent acts as the intermediary between the following parties (brackets indicate who the parties would be in each example): • Sales: Principal (the seller) > agent > third party (buyer) • Property manager: Principal (the landlord) > agent > third party (tenant) • Buyer agents: Principal (the buyer) > agent > third party (seller).

As a result of the written agreement under which the agent is appointed to act, there are common law duties, such as fiduciary obligations, as well as statutory duties that are placed on the agent. These are explained in the following sections.

1.2 Fiduciary obligations The agency relationship with the client is legally known as a fiduciary relationship. An agent has fiduciary obligations under both common law and statute law (explained further in Topic 2: Legislation in real estate). These can be defined as obligations of trust, responsibility and confidence in their relationship with the principal (client). The agent must be loyal and act in the principal’s (i.e. client’s) best interest at all times, by always placing the principal’s interest above the agent’s. The fiduciary and contractual obligations of an agent include: • complying with the principal’s instructions as outlined in the agency agreement or

appointment to act. The extent of the agent’s authority is specified in this document, and an agent must only act within this authority

• acting in the principal’s best interest, that is, treating the principal’s property and money both as if it were the agent’s own, but also within the boundaries set by legislation

• exercising due care, skill and diligence when carrying out duties • keeping the principal’s money separate from the agent’s • keeping client information confidential • not engaging in a conflict of interest, or if one does occur, disclosing it

(or any personal interest) to the principal • making no secret profit or gain from obligations towards the principal.

Example: Confidentiality

A common scenario that could occur is where an agent, eager to sell for the principal, being asked by a prospective buyer: ‘Why are they selling?’ If the agent answers: ‘The owners are desperate to sell as they are in financial difficulty and I am sure they will consider any offers,’ or ‘they have bought another property and must move very quickly’, the agent has released confidential information about their client in an effort to instil a sense of urgency in the buyer. However, unless they have been authorised to do so, they have breached client confidentiality. It can be also argued that they may not have acted in their principal’s best interests by encouraging someone to place low offers because of the urgency that has been insinuated. In this example, the fact that the agent must sell the property to be paid by their agency appears to be more important, than getting the best result for their principal. The agent appears to be placing their own interest ahead of the principal’s.

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The agent has a fiduciary relationship with only one party in the transaction, that is, the client. The agent’s services are hired via the agency agreement. Whilst the agent does not have a fiduciary responsibility to the customer (buyer who is the third party in the real estate transaction), the agent has a legal responsibility to be fair and honest with all parties in a real estate transaction.

1.3 Contractual obligations of an agent Contractual obligations are placed on the agent because of the agency agreement that is signed by the principal (client), which authorises the agent to act on the principal’s behalf. The agency agreement is a contract, and once signed, obliges the agent to deliver what they have agreed to in the contract. If they do not, they may be liable for damages to the principal.

Example: Contractual obligations

A management agency agreement between a landlord and the managing agent is a contract that specifies the services the managing agent will carry out for the landlord, and what the agency’s fees are for these services. The agency agreement provides for the managing agent to carry out periodic inspections of the rental property. For example, the agreement may stipulate that quarterly inspections will be carried out by the agent. If the agent fails to carry out these inspections on time over a significant period, and the property is damaged by the tenant during this time, the managing agent has neglected their contractual duties. The landlord may be able to seek compensation from the managing agent.

1.4 Types of real estate licences The governing legislation for each state stipulates the various licence categories for the various real estate services being offered. The legislation defines the different categories of agents, and the services they are licensed to provide.

Resource 1: State’s licence categories, qualifications and eligibility requirements

Refer to the ‘Toolbox’ in your KapLearn subject room for detailed information about your state’s licence categories, qualifications and eligibility requirements.

When using the term ‘agent’ to describe a property operative, that person generally must hold a licence to practice within the particular property sector in which they operate.

Most states and territories require an entry-level qualification to carry out the general functions of an agent involving selling, or leasing and managing property. The licensee-in-charge/officer in effective control of the agency is responsible for the conduct of any people they employ to assist them in their agency practice. The licensee-in-charge of an agency is responsible for closely supervising the actions of all persons working as a representative of their agency, such as sales representatives and property managers.

Topic 1: Introduction to real estate

1.5 Property services offered by agents Individual agencies may specialise in one particular service, whereas others may provide a combination dependent on their marketplace.

The range of services in the property industry includes: • Residential sales: the sale of homes, including houses, units or apartments,

townhouses, and vacant land. • Buyer’s agency: where the agent acts on behalf of the buyer in the transaction to

locate a property to purchase, and assist in negotiating the purchase price, terms, and conditions.

• Residential property management: the leasing of homes (houses, units, townhouses) to a suitable tenant and/or management (leasing and collection of rent, maintenance, repairs, refurbishment) of the property. The portfolio of properties managed by an agency is referred to as its rent roll. An extension of this field is short-term or holiday letting.

• On-site residential property management: the management and leasing of particular premises, common with holiday complexes, which usually requires conditions such as maintaining a residence and/or office on site.

• Commercial/retail sales, and management or letting: the sale and/or management of shops (known as retail), shopping centres (retail), commercially zoned land, offices, low-rise or high-rise buildings (all commercial) in which business is conducted. ‘Commercial’ is often used in the industry as an umbrella term for all of the above, incorporating commercial (e.g. offices), retail (e.g. shopping centres) and industrial (e.g. factories)

• Industrial sales, and management or letting: the sale and/or management of property where manufacturing, importing and exporting, repairs, maintenance and distribution occur, such as industrial sites, factories, warehouses and land zoned for industry.

• Business sales: the sale of businesses, including for example, hotels and motels. This is a specialist area of the property industry, and involves the sale of the business, rather than the property it sits on. The sale of the business usually includes negotiating the renewal of the lease for the property, where the business operates from.

• Rural property sales or management: the sale and/or management of land zoned for rural or pastoral purposes. Stock and station agents serve the agricultural community. They advise and represent farmers in business transactions pertaining to livestock, wool, fertilizer farm equipment and rural property. Some stock and station agents are also real estate agents.

• Strata management: the management of the strata scheme and affairs of the owners corporation of apartment or unit complexes.

• Community title management: the management of the affairs of the community or neighbourhood association for community title zoning.

• Auction: A method of selling land, property, stock, crops, goods and chattels in a public forum where the bidders make competing offers until the item is sold to the highest bidder or passed in unsold.

• Valuation: in most instances, most agents are not qualified valuers, so the valuation they offer is only an opinion of market worth or selling price, rather than a legal valuation. However, some agents hold valuer qualifications and accreditations, and hence can provide a valuation service that can be upheld in court.

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• Development of land and property: the subdivision of undeveloped land into serviced blocks. Also, the re-development of property into alternate use, e.g. wharves into commercial sites, warehouses into apartment living.

• Project management: the planning and co-ordination of property project developments from acquisition, through the construction to the sale or management of the completed development, e.g. medium-density townhouse developments, apartments, office buildings etc.

• Refurbishment, interior design, property staging: design services on a corporate and private level, such as product hire/advice and presentation techniques to enhance property presentation.

Income from property services

Income to the agency can be derived from: • selling fees or commissions, which are usually calculated as a percentage of the

sale price • auctioneering fees • valuation fees (if a qualified valuer is employed by the agency) • management fees for rental properties, which are usually calculated as a

percentage of the weekly rent • leasing fees, charged when a tenant is to be located for a rental property • ancillary charges for services such as administration, postage,

attending tribunal hearings • project management of developments • provision of services such as staging properties for sale, finance, or insurance • commissions or fees derived from acting as buyer’s or tenant’s agents,

or advocate agents.

2 Real estate business ownership and organisational structure

2.2 Types of business entity There are several options for the structure of a real estate business as a business entity, such as sole proprietorship, partnership, limited partnership or a proprietary company. Many agency businesses belong to franchise or marketing groups and may trade under a business or company name.

Regardless of whether a business decides to operate as a company, partnership, or sole trader, it will need to comply with the real estate licensing laws in its state or territory, together with Australian business laws.

Topic 1: Introduction to real estate

It is wise to liaise with specialists such as solicitors and accountants to ensure the establishment of compliant operating structures in a real estate business. It is also prudent that business owners develop a good understanding of the legal requirements of Australian business laws. Even if they do not have what is known as a ‘company structure’, as the operator of any type of business, they still have a duty of care to their employees, clients and customers.

The most common business structures in real estate are shown below.

To find further information on businesses, the Australian Government Business website is an excellent resource. It is the Federal Government business entry point site, which also links to all states and territories regarding business structure and legal requirements.

Resource 2: Key differences between business structures

Read about the key differences between the four most common types of business structures in Australia on the Australian Government website at: <www.business.gov.au>  Guide to starting a business  2. Make key decisions Decide on a business structure (viewed 15 February 2021). Ensure you scroll right to the bottom of the page).

Sole trader or sole proprietorship

An individual proprietorship is the oldest and simplest form of business organisation. A person who owns their own business is known as a sole trader or proprietor. Anyone capable of contracting can operate a business as a sole proprietor, subject to the specific legal requirements established for the type of business (such as state or territory licensing requirements).

The Australian Taxation Office (ATO) defines a sole trader as an individual who is trading on their own (irrespective of whether the business has employees working for it or not). It is the simplest form of business structure. The sole trader has full control of the assets and business decisions. This structure requires few reporting requirements and as such, is generally low-cost. The liability lies with the individual, and therefore the business automatically comes to an end if the individual dies.

The income of the business is treated as the individual’s income, so the individual is responsible for any tax payable for the business. A sole trader uses their own individual tax file number when lodging their income tax return that includes the business income.

Partnership

A partnership is defined as an association of two or more persons carrying on a business with a view to profit. By law, a maximum of 20 parties can join in a business partnership.

As with a sole trader, no new legal entity is created when a partnership is formed. Each partner is wholly responsible for all of the business’ contracts and dealings (even debts incurred, or an agreement signed by just one partner).

Partners do not need to register a partnership with any external authority but should have a written partnership agreement. Such an agreement needs to clearly spell out the terms of the partnership, thereby decreasing the likelihood of disputes. If there is no written agreement, the partnership will automatically come to an end if one partner retires, leaves or dies.

http://www.business.gov.au/

https://www.ato.gov.au/business/starting-your-own-business/before-you-get-started/choosing-your-business-structure/sole-trader/

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If there is no written partnership agreement, partners will not be bound by the law of partnerships. Additionally, each state and territory has its own Partnership Act, which contains other provisions.

A partnership has its own tax file number, as it must lodge an annual income tax return even though the partnership does not pay income tax. Instead, each partner includes their share of the profit or loss in their individual tax return.

In all states and territories, partners are held personally and collectively responsible for the actions of the business. In other words, a partnership is not legally a separate entity.

All partners are liable for the debts of the partnership business to the extent of their personal assets. The general rule for liability applying to partnerships is that all partners are both jointly and independently liable for the debts and obligations incurred by any member of the partnership acting in a normal business capacity. This means that should a creditor bring an action against the partners, and if the assets of the firm are insufficient to pay the creditor, then each partner will have to contribute from his or her own personal assets. This arrangement is known as joint unlimited liability. The property of the partnership (such as the business premises and equipment) is owned jointly by the partners.

Real estate business partnerships can usually only exist if each of the partners holds a separate real estate agent’s licence. A partnership cannot share this licence.

Note that partnerships can also be formed between corporations that do carry limited liability for directors. Many real estate partnerships today exist under this structure and operate successfully.

Company (corporation)

A company is a separate legal entity quite distinct from the individual members who form the company. The owners of the company are known as members or shareholders. It is a complex business structure to start and run, and as such involves higher costs than other business structures. Because a company is a separate entity, it can legally transact the same way as an individual. A company can incur debt, sue and be sued. Companies are managed by company officers, called directors, and company secretaries.

A company: • can create contracts that are binding • has the right to sue • can be sued by a third party • can own and dispose of property • can enter into legally binding agreements.

A company, as a legal entity, is separate from its shareholders, and enters into contracts, owns property and undertakes business dealings by itself. The act of becoming a company is called a corporation.

Shareholders of the company do not have any liability for debts of the company, apart from the cost of the shares. This is known as limited liability. This can be contrasted with partnerships or sole traders which have unlimited liability, and where the partners or owners may be sued individually for the liabilities of the business.

Topic 1: Introduction to real estate

There are several different types of company but the one most commonly used as a business vehicle is a proprietary limited company. It has the words ’Pty Ltd’ after the name. This type of company does not sell its shares to the public and is limited by liability. Small business owners often use this type of company structure. Proprietary companies must have at least one director, and of which, at least one of the director(s) must ordinarily reside in Australia. Companies are registered through the Australian Securities and Investment Commission (ASIC). A company needs to register for an Australian Business Number (ABN) and for a tax file number. It pays income tax on its profits.

Larger companies that sell shares to the public can still limit their liability and will often have the abbreviation ’Ltd’ after their name. Larger companies must be registered with ASIC, and company officeholders have legal obligations under the Corporations Act.

2.2 Business style of agency

Independent agent

Some agents operate on their own, regardless of the type of business entity they use. Independent businesses have found that they achieve their business goals without being part of a larger group.

They may operate in a ‘niche’ market or be based around a particular style or type of property. Some agencies call themselves ‘boutique’ agencies, so called to signify exclusivity of product, as they often service a sophisticated or specialised clientele.

Multi-office group When used, this system has usually begun as an independent operator who has, over the years, expanded operations as demand for its business services has expanded. The multi-office system is usually focused around a master office, with strong leadership and direction coming from an individual or a partnership of individuals in this office. The master office determines the business structure and establishes a range of other branch offices which are owned and controlled by the master agency.

Although the master agency has control over the business operations of the other branch offices, the person in charge of a branch office must still be qualified and responsible for supervising the day-to-day activities of the business and reporting back to the master business. Multi-office owners can be independent operators, franchisees or members of marketing groups.

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Real estate franchise These agencies operate under a franchise agreement where they purchase the rights to access a tested system that makes establishment of a business easier and provides a support structure for a new business owner.

Buying a franchise is a way of taking advantage of the success of an established business. The reasoning is that the franchise group will send the franchisee new listings. Also, buyers may be drawn by the franchise name, if is well-known.

Franchisee businesses buy a licence to use the name, products, services, and management support systems of the ‘franchisor’ company. This licence normally covers a particular geographical area and runs for a limited time.

Payment for the franchise may be through an initial fee, ongoing management fees, percentage share of turnover, or a combination of these.2

A franchise business can take different legal forms — most tend to be companies. Whatever the structure, the franchisee’s freedom to manage the business will be limited by the terms of the franchise agreement.

Examples of real estate franchises in Australia include Ray White, LJ Hooker, Raine & Horne and Elders.

Marketing or network group These are independently owned businesses that seek market leverage through linking with other similar unlinked businesses. Marketing groups are very similar to franchise groups in some ways, in that they wish to gain collective power to draw in sellers and buyers, however they each prefer to govern their own business direction. Also, a marketing group membership costs can be much lower than that of a franchise network.

Agents who are a part of a marketing group can be sole traders, partnerships or corporations. These individuals could not, as a single entity, assert the business influence or buying power to negotiate significant discounts and bargain for cheaper advertising rates and other goods and services.

Some of these groups have significant impact in the market and have been able to generate their influence through strength of numbers in both marketing exposure and general ability to combine as powerful business lobby groups in the real estate industry. Membership of these groups usually involves paying a regular fee, e.g. monthly.

An example of a marketing group in Australia is First National.

Topic 1: Introduction to real estate

3 Job roles and responsibilities of key agency staff

3.1 Roles and responsibilities of key staff The general roles and responsibilities of key staff jobs in a real estate agency are: 1. Licensee in charge: the owner of the business is the principal, but they may or

may not also be the licensee in charge. If not licensed, they must employ someone who is. The licensee in charge is responsible for proper supervision of the business undertaken, and for the actions of all employees.

2. Office manager: this is usually also the role of the principal or licensee in a smaller agency, but in a large agency, this may be a separate person. This person manages the agency staff and the overall administration of the office.

3. Sales manager: typically a separate role more common to larger agencies, and held by a person with experience in sales and/or currently holds a sales role themselves. This person manages the sales department and has a training/mentoring role with new salespersons.

4. Salespeople and agents: this role obtains listings for the agency to sell. Agents hold a real estate license in their own right, whereas salespeople may require a separate state or territory-based entry-level industry qualification. The job description varies between agencies, e.g. some salespeople are expected to co-ordinate and write the advertising for their listings, other agencies may have a separate marketing division. Agents may do one, the other, or both of these tasks.

5. Sales assistant or trainee: this person will usually be new to the industry; they must learn the skills and competencies required of their position whilst under the supervision of a workplace trainer/mentor. The scope of their position expands in line with their experience.

6. Sales administration: this role carries out/coordinates the administrative aspects of sales, whilst usually not involved in face-to-face activities such as showing properties or negotiating sales.

7. Property manager: this person is responsible for handling owner and tenant issues involved in the management of rental property. They may also have an administrative role of ‘senior property manager’ co-coordinating all who work in property management.

In smaller offices, they may be involved hands-on with listing and managing the rent roll (the portfolio of properties managed by the agency).

8. Property management support or assistant: usually a less experienced position that assists and supports in property management, trained on-the-job by the property manager. Again, some states and territories require entry level qualifications in this role.

9. Property management business development: this is a role that assists the property management department to add to the number of rental properties it manages to grow that side of the business.

10. Receptionist: this is the initial point of contact for clients and customers with the agency, hence a vital role. This person needs to be aware of all business activities within the agency, and capable of communicating to the entire range of clients and customers by phone, email and over the counter personally.

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Depending upon the role that a person holds in an agency, each must ensure that they understand any related legislation and provide service based upon accurate information and good product knowledge.

3.2 Organisational structure There is no one ‘correct’ way to set up real estate agency staff. Many real estate agencies set out as very small businesses and evolve their own unique structure as they grow.

Figure 1 below shows the set-up of a typical real estate office.

Figure 1 Organisational chart for typical small real estate agency

Source: Kaplan Professional 2019.

Resource 3: 3 agency structures that will change your real estate business

Read ‘3 agency structures that will change your real estate business’ at: <https://eac.com.au/2019/08/06/3-agency-structures-that-will-change- your-real-estate-business> to gain an understanding of current trends with real estate organisational structure.

https://eac.com.au/2019/08/06/3-agency-structures-that-will-change-your-real-estate-business/

Topic 1: Introduction to real estate

3.3 Relationship between licensee and agent representative The relationship between the licensed agent (as employer) and the agent representative (as employee) is an important one legally. The agent representative, as an employee of the agency, is authorised to represent the agent, for example by providing price estimates and listing properties. The agency licensee would supervise this process and ensure that all documentation is correct. In some states it is required, as is best practice, for the agency licensee to counter sign agency authorities.

The agency licensee holds ultimate responsibility for the actions of the agent representatives. For example, if an employed agent representative incorrectly completed documents resulting in the client suing the agency for compensation, then the licensee is the person who would be sued. If the employee makes a mistake and the regulatory authority pursues the agency, the action is normally against the licensee’s licence, not the individual staff member (unless the staff member’s actions are considered illegal).

Without an employment agreement and/or appropriate authority in writing, the agent representative is not legally able to represent the agency licensee in these dealings; therefore, this must always be in place. The licensed agent and the employed agent representative must also ensure that any state-specific requirements for working in the industry are met, such as registration or licencing to work in the industry (note that employment agreements are covered in Topic 5: Working in the real estate industry).

Resource 4: Toolbox

Refer to the ‘Toolbox’ in your KapLearn subject room to familiarise with the state regulatory authority website. It includes any state-specific requirements for authority to perform duties of an agent representative.

Key points • Real estate agencies vary greatly at times regarding the types of services that they

provide. The main services provided however, are sales and property management. • The relationship between a real estate agent and their client is called a fiduciary

relationship. It involves both contractual and fiduciary obligations for the agent. • There are three parties to most real estate transactions: the client who has hired the

agent’s services via an agency authority (e.g. seller or landlord), the agent, and the customer who is using the agency services (e.g. buyer or tenant)

• Most real estate agencies are corporations, though they may also be sole traders or partnerships.

• Real estate agencies have varied organisational structures, usually based around a sales team, property management team and administration team. The Licensee in charge is responsible for supervising the whole business and its employees to ensure that the agency is compliant.

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References Australian Securities and Investments Commission (ASIC) 2020, Setting up a business structure, ASIC, 15 January, viewed 14 April 2020, <https://asic.gov.au/for- business/small-business/starting-a-small-business/setting-up-a-business-structure>.

Australian Taxation Office (ATO) 2016, Sole trader, ATO, 10 November, viewed 14 April 2020, <https://www.ato.gov.au/business/starting-your-own- business/before-you-get-started/choosing-your-business-structure/sole-trader>.

business.gov.au n.d., Australian Government, viewed 14 April 2020, <https://www.business.gov.au>.

Estate Agents Co-operative (EAC) 2019, 3 agency structures that will change your real estate business [article], EAC, 6 August, viewed 14 April 2020, <https://eac.com.au/2019/08/06/3-agency-structures-that-will-change-your-real- estate-business>.

Macquarie Dictionary, viewed 14 April 2020, <www.macquariedictionary.com.au>.

Real Estate Institute of Australia (REIA) n.d., Glossary of Terms, viewed 14 April 2020, <http://reia.asn.au/consumers/glossary-of-terms>.

https://asic.gov.au/for-business/small-business/starting-a-small-business/setting-up-a-business-structure

https://www.ato.gov.au/business/starting-your-own-business/before-you-get-started/choosing-your-business-structure/sole-trader/

https://kaplanint.sharepoint.com/sites/16.%20Real%20Estate%20products/CIVREP-NSW1v1%20Industry%20Fundamentals/1.%20Topics/Selina/%3Chttps:/www.business.gov.au

https://eac.com.au/2019/08/06/3-agency-structures-that-will-change-your-real-estate-business/

http://www.macquariedictionary.com.au/

http://reia.asn.au/consumers/glossary-of-terms

Topic 2: Legislation in real estate

Industry Fundamentals NSW

Contents

Overview ........................................................................................................... 2.2

Topic learning outcomes ............................................................................................ 2.2

1 Introduction to legislation in real estate .................................................. 2.3

1.1 Legal jargon and definitions ........................................................................... 2.3

1.2 Legal framework in Australia ......................................................................... 2.3

2 Key legislation relevant to real estate ..................................................... 2.6

2.1 Federal legislation relevant to agents ............................................................ 2.6

2.2 State-based legislation ................................................................................. 2.14

3 How to access legislation ...................................................................... 2.16

3.1 Accessing Commonwealth laws ................................................................... 2.16

3.2 Accessing the most current version of the legislation ................................. 2.17

4 How to interpret legislation .................................................................. 2.17

4.1 How laws are normally laid out .................................................................... 2.17

4.2 Citing legislation ........................................................................................... 2.18

4.3 Hansard ........................................................................................................ 2.19

4.4 General rules used to interpret legislation .................................................. 2.19

4.5 Interpretation of the words in an Act .......................................................... 2.21

4.6 Guidance with interpreting and applying legislation ................................... 2.22

5 Staying up to date with the legislation .................................................. 2.23

5.1 Own responsibility to stay up to date .......................................................... 2.23

5.2 Strategies for staying up-to-date ................................................................. 2.23

5.3 Keeping records of changes ......................................................................... 2.25

6 Investigating discrepancies in the application of legislation ................... 2.25

Key points ........................................................................................................ 2.26

References ....................................................................................................... 2.27

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Overview When embarking on a career in real estate, it is important to understand the legislation that underpins the real estate agent’s role. Real estate agents are required to analyse key real estate related legislation and understand how these requirements impact their work in the industry, and also be able to explain the legislation to clients when required. Real estate agents are also required to know how to work within the parameters of key business processes within the industry.

Real estate transactions are based on a lot of regulations — meaning there are many laws and legal requirements that real estate agents need to know and understand to be compliant. A strong knowledge of these requirements also enables real estate agents to develop a good reputation within the industry that is sought after by many clients. A lack of legislative knowledge on the part of its agents places an agency at risk from loss of business and possible legal action from clients. In some instances, it may also mean real estate agents may be fined personally or have their Certificate of Registration to work in the property sector cancelled by the regulator.

As legislative requirements change, developing skills to access the most relevant and up-to-date legislation, and understand how these changes apply to the role, ensure real estate agents industry knowledge remains current.

Topic learning outcomes On completing this topic, students should be able to: • identify and analyse key pieces of legislation and codes of practice, and explain their

relevance and impact on real estate activities • identify the regulator for real estate activities in the state or territory of operation

and explain their role in the industry • identify and explain common problems with interpreting legislation, and the

consequences of misinterpretations • identify and interpret guidance material to support interpretation of legislation • understand their own responsibility to access, read, interpret and apply legislation to

real estate operations • identify and apply techniques to access current and point-in-time versions of

legislation • identify and apply techniques for tracking changes and amendments to legislation • examine and record processes to investigate and respond to discrepancies in

application of legislation.

Topic 2: Legislation in real estate

1 Introduction to legislation in real estate

1.1 Legal jargon and definitions When working in the property industry, it is important to locate and understand relevant legal terminology. Sometimes, this terminology can technical and challenging to understand, and therefore, apply.

The following websites are reputable resources to assist in understanding legal terms • The Federal Legislation Glossary: <www.legislation.gov.au/content/whatisit>. • The Parliament of Australia Glossary: <www.aph.gov.au/Help/Glossary>.

1.2 Legal framework in Australia As noted, working in the property industry involves a grasp of legal terminology and being able to interpret many different types of legislation. The property industry and its agents are controlled by a complex set of rules based on common law, equity law and statute law.

In Australia, different types of laws take effect across different areas: • Federal laws have effect across Australia and its territorial waters and must be

obeyed by all people living in Australia. The Commonwealth government has powers under the Constitution of Australia to make laws for the whole of Australia in specific areas, such as trade and commerce, taxation and foreign investment.

• State and territory laws have effect in the state or territory of their making and must be obeyed by people living in that state or territory. State and territory laws have the most direct impact on property transactions. Each state and territory jurisdiction has its own property laws that regulate title to land, and impose both planning and environment controls, and property taxes.

• Local governments regulate the use of land through local planning laws, control building and development activities. By-laws are secondary laws that apply in the council area of their making and must be obeyed by the people living in that locality.

Statutory law

Statute law is law made by ‘legislatures,’ often characterised as ‘Acts of Parliament’. Statute law consists of federal legislation enacted by the Parliament of Australia which applies to the whole of Australia, and laws enacted by the Parliaments of the Australian states and territories. The states and territories of Australia are separate jurisdictions and have their own system of courts and parliaments. The systems of law in each State are influential on each other, but not binding.

Statute law is legislation created and passed in Parliament. For a law to be passed by Parliament, it is first presented as a ‘Bill,’ which must be approved by Parliament before it is released as actual legislation or an ‘Act of Parliament.’

Statutes allow a society to: • create frameworks within which the members of the society can operate • enforce prohibitions and other rules which are set by the frameworks • adjust to changing circumstances.

https://www.legislation.gov.au/content/whatisit

http://www.aph.gov.au/Help/Glossary

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Primary and secondary legislation

Primary legislation consists of Acts of Parliament or statute. Some lawmakers including the Australian Parliament can enable, authorise or delegate somebody else to make additional laws on matters of detail. Acts of Parliament can authorise a person or body other than the Parliament to make laws on matters of detail, that is, secondary legislation.

Secondary legislation is laws made by people using powers that Parliament, by means of its Acts, has given them. Sometimes these laws are called subsidiary, delegated or subordinate legislation. Secondary legislation involves the granting of additional law-making powers to another branch of government by an Act or statute.

Secondary legislation is made ‘under’ an Act because only an Act may give a person power to make subsidiary legislation. Acts that give someone the power to make secondary legislation also say who can make it, and what things the subsidiary legislation can deal with.

Hence, Acts are sometimes referred to as ‘primary legislation’ and the additional laws that enable this primary legislation may be referred to as ‘secondary,’ ‘delegated’ or ‘subordinate’ legislation. This type of legislation is classified as a legislative instrument. It is often said that 'Secondary' or 'delegated' legislation is an administrative convenience, reliant for its authority on primary legislation. It may comprise regulations, ordinances, rules, by-laws, and orders-in-council.

An ’Act’ is to be read in conjunction with subsidiary legislation that has been made using the powers in the Act. Subsidiary legislation will often fill in details not covered by the Act under which it is made. Not all Acts have or need subsidiary legislation. In general, Regulations contain the practical details and rules made under an Act.

Regulatory authorities and their role

Each piece of legislation has a regulatory or statutory authority whose role it is to monitor and enforce compliance with the legislation.

Regulatory authorities serve two primary functions in government: • to implement laws and enforce laws. • to be the means by which a regulatory agency implements laws enacted by

the legislature.

Resource 1: Regulatory authority in your state

The ‘Toolbox’ in your KapLearn subject room covers the regulatory authority for real estate state-based activities and their role in industry.

One example of a federal statutory authority is the Australian Securities and Investments Commission (ASIC). ASIC is the corporate regulator that ensures company directors and officers carry out their duties in an honest and diligent manner, and in the best interests of their companies. ASIC regulates financial markets and the financial services industry, both of which have a flow-on effect to property associated services, as most people must obtain finance (i.e. loans) to purchase large assets, such as property. ASIC is responsible for consumer protection in the area of financial products and services, which gives it a shared role in some areas with the Australian Competition and Consumer Commission (ACCC).

https://asic.gov.au/

Topic 2: Legislation in real estate

Non-statutory laws — Common law and Equity law

Australia’s non-statutory laws are divided into two facets — Common law and Equity law.

Common law

Common law is law based on custom or court decisions, as distinct from statute law. This means that it refers to the principles of law that have been determined by and passed down by courts via their decisions. The results of judgments are recorded in law reports and used as precedents for subsequent judgment of cases. Common law is judge-made law or ‘unwritten law’, which involves judges interpreting statute law, and applying it to specific cases.

Common law is made through the decisions of federal and state courts. It covers areas that parliament has not passed legislation on and may address areas or details that parliament has not considered. In this way, judges play an active role in shaping the law.

Common law may not override an Act of Parliament; however, an Act of Parliament may override existing common law.

Equity law

Equity means fairness of justice. Equity law is therefore a set of legal principles that supplement rules of law whose application could be considered harsh, strict, or unfair. Equity is commonly said to ‘mitigate the rigor of common law,’ allowing courts to use their discretion to apply justice in accordance with natural law.

Thus, if it occurs that common law principles deprive a person of a fair decision, or there is no common law principle upon which to judge a case, equity law applies. Today, both common law and equity principles apply in the same court, and if there is a conflict, equity will prevail.

Contract law

Contract law is an important type of law that real estate agents should be familiar with, as it is very commonly used in real estate.

A contract is a legally enforceable promise or set of promises made by one party to another. A contract is a legally binding agreement concerning a bargain which is essentially commercial in its nature and involves the sale or hire of commodities such as goods, services, or land.

In Australia, contract law is based on common law. However, there is direct legislative intervention in the common law principles; legislation such as the national Competition and Consumer Act can override contracts in whole or part, restrict their operation or insert some mandatory terms.

Legislation impacting contractual freedoms is operational at a national level from the Commonwealth Government of Australia, at each of the state and territory levels of government, and at a local or municipal government level. While national laws apply consistently across Australia, legislation from other levels of government is not uniform.

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There are six essential elements necessary for legally binding contract formation: • an agreement (offer and acceptance) • consideration (generally, the supply of money, property or services) • capacity to enter legal relations (such as being of sound mind and legal age) • intention by the parties to enter into legal relations (private non-commercial

agreements between family members may not necessarily constitute a contract, as intention to create legal relations is often not present)

• formalities (in most jurisdictions contracts do not need to be represented in writing, however exceptions apply)

• certainty (for contract formation the agreement must be sufficiently certain and sufficiently complete that the parties' rights and obligations can be identified and enforced).

Legislation such as the National Competition and Consumer Act can override contracts in whole or part, restrict their operation, or insert some mandatory terms. For example, this Act offers protection against unfair contract terms.

Resource 2: National Competition and Consumer Act

Read ‘Contracts & agreements’ at: <www.accc.gov.au/consumers/contracts-agreements>.

2 Key legislation relevant to real estate

2.1 Federal legislation relevant to agents There are various pieces of specific federal legislation relevant to working in real estate, and these are summarised below.

Consumer protection

The federal consumer protection legislation includes: • Australian Consumer Law (ACL) • Competition and Consumer Act 2010.

It is federal legislation that applies to most businesses in Australia, because its objective is to enhance the welfare of Australians through the promotion of competition, fair trading, and provision for consumer protection. It encourages a fair and competitive environment for efficient and innovative business practices and protects consumers by prohibiting the industry undertaking certain activities that would disadvantage consumers.

https://www.accc.gov.au/consumers/contracts-agreements

Topic 2: Legislation in real estate

The aspects of these pieces of legislation which are particularly relevant to the real estate industry include: • Unconscionable conduct — occurs when a business or agent knowingly takes unfair

advantage of a client or customer who is in a weaker position in some way. Example: if a real estate agent were to encourage a seller with poor English language

skills to sign an agency agreement or appointment to act without suggesting an interpreter or family member first read through it with them, in order to take advantage of this person in some respect.

• Misleading or deceptive conduct — any conduct that is or is likely to mislead or deceive, such as advertising and including acts of silence or omission which create an incorrect impression.

Example: A real estate agent who states ‘only minutes to the city’ in a property advertisement, knowing the property is a 30-minute drive (that is, a much further distance than a reasonable person would consider to be ‘minutes’).

• False or misleading representation with regards to land — Section 30 of the ACL relates to not making a false or misleading representation with respect to any of the following: the nature of the interest in land, price, location, characteristics, or use that can be made of the land, and availability of facilities.

Example: Advertising a site as ‘suitable for medium density development’ when council approval has not yet been provided for such development.

• Misleading representation about certain business activities — making predictions about profitability of any aspect of business or representing that certain business activities can be carried on from a person’s place of residence.

Example: Promoting ‘work from the home office’ without the relevant approval to carry on a particular type of business activity in the home.

The Role of the ACCC

The Australian Competition and Consumer Commission (ACCC) regulates the federal consumer protection legislation. The ACCC is the regulatory authority that promotes competition and fair trading practices for the benefit of consumers and businesses. The primary role is to ensure compliance with Commonwealth competition, fair trading, and consumer protection laws.

The ACCC will prosecute businesses where they can identify breaches of the consumer protection legislation. The ACCC also complements the role of state and territory consumer affairs agencies that administer mirror legislation within their jurisdictional geographic boundaries.

The ACCC has produced a useful guide to the ACL developed by Australia’s consumer protection agencies to help businesses understand their responsibilities under the law.

Resource 3: Avoiding unfair business practices

Read ‘Avoiding unfair business practices – a guide for businesses & legal practitioners’ at: <www.accc.gov.au/publications/avoiding-unfair-business- practices-a-guide-for-businesses-legal-practitioners>.

Resource 4: Consumer protection law

Refer to the ‘Toolbox’ in your KapLearn subject room to access information on consumer protection law.

https://www.accc.gov.au/publications/avoiding-unfair-business-practices-a-guide-for-businesses-legal-practitioners

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Secret commissions

Taking a ‘secret commission’ is a criminal offence in Australia. A secret commission is just that: it is ‘secret’ in the sense that a key player in the arrangement is never told about it, and often it is the real estate agent’s client. In real estate, a criminal offence has been interpreted by the courts to occur where an agent dishonestly accepts money or other benefits (payment of money is not a requirement of the offence) from a third party in return for agreeing to depart from duty owed to the agent’s principal.

A secret commission is potentially misleading and deceptive conduct under ACL and the Competition and Consumer Act 2010. Breach of this provision will expose the agent (and potentially the payer of the commission) to an action for damages by an aggrieved party (such as the principal) or the ACCC itself. There may also be a misrepresentation under that legislation giving rise to a liability for a fine.

Resource 5: Pssst …. Secret commissions — misleading & deceptive and possibly a crime

Read ‘Pssst …. Secret commissions — misleading & deceptive and possibly a crime’ at: <www.bartier.com.au/insights/articles/pssst-secret-commissions- misleading-deceptive-and-possibly-a-crime>.

Finally, any real estate agent that accepts a secret commission will be likely to have committed a default under the agency agreement, thus exposing the agent to termination of the agreement and liability for damages.

Privacy

The privacy legislation includes: • Privacy Act 1988 (Cth) • Privacy Amendment (Enhancing Privacy Protection) Act 2012.

Private sector provisions in the Privacy Act 1988 regulate the way many private sector organisations, including the real estate industry, can collect, use, keep secure and disclose personal information.

Australian Privacy Principles

A real estate agency collects and stores various personal information about clients and customers, such as names and addresses, driver license or other identification details, tax file numbers and bank account details. The correct handling and storage of this personal information is vital to the relationship of trust between an agent and their client.

A real estate agency’s procedures in dealing with client information must follow the Australian Privacy Principles.

Personal information means information or an opinion (including information or an opinion forming part of a database), whether true or not, and whether recorded in a material form or not, about an individual whose identity is apparent, or can reasonably be ascertained, from the information or opinion.

https://www.bartier.com.au/insights/articles/pssst-secret-commissions-misleading-deceptive-and-possibly-a-crime/

https://www.oaic.gov.au/privacy/australian-privacy-principles

Topic 2: Legislation in real estate

Real estate agents frequently handle personal information from clients. When sellers list their property for sale, when purchasers buy a property, or when prospective tenants complete an application for tenancy, they must provide personal information such as contact details, tax file numbers, bank records, and employment details. Real estate agents are required to consider the requirements of the Privacy Principles when they handle this personal information.

Examples of that handling of personal information by real estate agents that would be in breach of the Privacy Principles may be seen below:

Examples: Privacy breaches by real estate agents

Example 1

A real estate agent is reviewing a tenancy application for a property that is managed by the agency, when an unexpected visitor arrives to see the real estate agent. The visitor makes a fuss at the front of the agency, so the receptionist ushers them straight into real estate agent’s office. The visitor takes a seat at the real estate agent’s desk and, in doing so, has in full view the personal information of the prospective tenant from the tenancy application which is on the desk, including personal information about the applicant.

Example 2

A real estate agent is showing a property at an ‘Open for inspection’. As rental properties are hard to locate, there are a lot of attendees at the inspection. The real estate agent takes the property file with them, in case they need to answer any questions, and leaves it on the kitchen bench whilst carrying out the open house. Whilst the real estate agent is showing one of the attendees the garage area, another attendee opens the property file and locates the landlord’s contact number. They intend to contact the landlord with an offer to pay 10% more rent than any other application the landlord receives.

Example 3

A real estate agent takes a call from a person who identifies themselves as a creditor who is owed money by one of the agent’s tenants who has recently vacated. The creditor is anxious to get their overdue account paid and asks for a forwarding address of the tenant, which the real estate agent then provides.

Example 4

A real estate agent receives a call from a person claiming to be another managing agent who has received an application for tenancy from a person who is one of the first agent’s existing tenants. Without hesitation, the first agent provides personal information about the tenant to the second agent, including a rental reference and details of the tenant’s employment.

Example 5

An agency contracts a carpet cleaning business to clean properties between rentals. The cleaning business asks the real estate agent to provide email addresses of all tenants on the agency’s database, so they can send an advertising email offering a discount on a carpet shampoo.

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Office of the Australian Information Commissioner (OAIC)

The Office of the Australian Information Commissioner (OAIC) is the regulator for the privacy legislation.

Work Health & Safety (WHS)

Federal WHS legislation in Australia includes: • Work Health and Safety Act 2010 and Regulations.

Under this legislation, employers have a duty to ensure the health, safety, and welfare of their employees while they are at work. If harm results to an employee through a breach of this duty, the employer may be liable to the employee.

There is also state and territory legislation regarding work health and safety. Each state has its own WHS laws, and a regulator to enforce them. The WHS framework for each state includes: • Acts — outline broader responsibilities. • Regulations — set out specific requirements for particular hazards and risks, such as

noise, machinery, and manual handling. • Codes of practice — provide practical information on how to meet the requirements

in the Act and Regulations. • Regulating agency (regulator) — administers WHS laws, inspects workplaces,

provides advice, and enforces the laws.

Resource 6: Work Health & Safety (WHS) information and resources

Refer to the ‘Toolbox’ in your KapLearn subject room to access Work Health & Safety (WHS) information and resources for each state’s regulatory website.

In the event an employer breaches its obligations under that legislation, they can be prosecuted. It is also possible, in some cases, for officers or senior managers of the employing corporation to be prosecuted.

ComCare

Comcare draws its authority for regulation from the WHS Act as the federal regulator for WHS. Comcare regulates by assisting, supporting, guiding and advising employers, service providers, employees, and their representatives.

Resource 7: ComCare

Access and view the ComCare website at: <www.comcare.gov.au>.

https://www.oaic.gov.au/

https://www.comcare.gov.au/

Topic 2: Legislation in real estate

Anti-discrimination

The federal anti-discrimination legislation includes: • Age Discrimination Act 2004 • Disability Discrimination Act 1992 • Racial Discrimination Act 1975 • Sex Discrimination Act 1984.

These laws operate at a federal level to prevent discrimination.

Commonwealth laws and the state and territory laws generally overlap. However, the laws apply in different ways, and employers must comply with all legislation.

Commonwealth laws and the state and territory laws generally cover the same grounds and areas of discrimination. However, there are some ‘gaps’ in the protection offered between different states and territories, and then at a Commonwealth level. In addition, there are circumstances where only the Commonwealth law would apply or where only the state law would apply.

Resource 8: Australian discrimination laws

Read ‘A quick guide to Australian discrimination laws’ at: <www.humanrights.gov.au/our-work/employers/quick-guide-australian- discrimination-laws#NSW>.

Application of anti-discrimination legislation in real estate

Both federal and state legislation prohibits discrimination in a range of aspects of employment, including recruitment, promotion, and termination based on certain unlawful grounds, including sex, race, disability, religion, and age. Sexual harassment in an employment context is unlawful under federal and state legislation.

Anti-discrimination legislation is also relevant to how an agency treats tenants and prospective tenants. Agents must abide by this legislation, for example, when deciding who may view a rental property, when considering an application for a tenancy, and when considering any conditions placed on tenants.

The purpose of anti-discrimination legislation is to make discrimination unlawful upon certain grounds and give remedy to those persons discriminated against. This means that fines may be imposed, and legal action taken against those who discriminate.

Review your state’s legal requirements; however, in general, it is illegal to discriminate on the following grounds: • race • gender • marital status • physical or intellectual impairment • sexual preference • age • religion • pregnancy • transgender status • carer responsibilities.

http://www.humanrights.gov.au/our-work/employers/quick-guide-australian-discrimination-laws#NSW

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It is important that clients are aware they cannot place the real estate agent in a position whereby they want the real estate agent to engage in discriminatory actions on their behalf. If real estate agents were to accept such instructions, both the client and the real estate agent might be liable for prosecution.

Example: Anti-discrimination

A landlord tells their managing agent (i.e. real estate agent) to not consider a person of XYZ ethnic origin as a tenant, that is, the landlord expects the managing agent not to take any applications or show any person of this particular ethnic origin through the property. The managing agent’s duty and is to abide by all relevant laws. The managing agent should advise the landlord that it is unlawful to accept and act on the landlord’s instructions. The managing agent should talk to the client and try to understand the concerns that may have given rise to the request, for example, the landlord may be concerned about the property being damaged, may have had bad experience in the past with someone of XYZ ethnic origin, or be acting on stereotypes.

As the managing agent, having a conversation with the landlord and explaining that the best way to choose a good tenant is based on their rental reference and capacity to pay the rent, rather than their cultural background or skin colour, is the best approach. Discussing how tenancy applications are vetted may also help them to feel secure with the process, without being dissimilatory.

Australian Human Rights Commission (AHRC)

Australian Human Rights Commission (AHRC) has statutory responsibilities to regulate these laws.

Resource 9: Australian Human Rights Commission (AHRC)

Access and view the Australian Human Rights Commission (AHRC) website at: <www.humanrights.gov.au>.

In addition to federal legislation, each state and territory in Australia has equal opportunity and anti-discrimination agencies, with statutory responsibilities.

Resource 10: State-based discrimination laws and statutory authorities

Refer to the ‘Toolbox’ in your KapLearn subject room to access state-based discrimination laws and statutory authorities.

https://www.humanrights.gov.au/

Topic 2: Legislation in real estate

Foreign investment

Legislation relating to foreign investment includes: • Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), and • Foreign Acquisition and Takeovers Regulation 2015 (FATR).

The Commonwealth government regulates foreign investment. Under Australia’s foreign investment framework, foreign persons generally need to apply for foreign investment approval before purchasing residential real estate in Australia.

Foreign persons must notify the Commonwealth Treasurer (through the Foreign Investment Review Board) so that screening is carried out to ascertain that proposed acquisitions are in the national interest.

Foreign Investment Review Board (FIRB)

The Foreign Investment Review Board (FIRB) is part of the regulatory framework for foreign investment legislation.

Resource 11: Foreign Investment Review Board (FIRB)

Access and view the Foreign Investment Review Board (FIRB) website at: <https://firb.gov.au>.

Employment-related legislation

Legislation related to real estate industry awards or employment legislation includes: • Fair Work Act 2009 • Industrial relations legislation.

The Fair Work Act 2009 is the primary piece of legislation governing Australia’s workplaces. It is the foundation of all standards and regulations for employment.

Fair Work Ombudsman

Their primary role of the Fair Work Ombudsman is to: • promote harmonious, productive and cooperative workplace relations • ensure compliance with Australian workplace laws.

Resource 12: Fair Work Ombudsman

Access and view the Fair Work Ombudsman website at: <www.fairwork.gov.au>.

Environment and sustainability

All levels of government (local, state, and federal) have laws relating to environmental protection and sustainability.

In terms of federal legislation, one example is the Building Energy Efficiency Disclosure Act 2010, which sets mandatory obligations applicable to disclosing the energy ratings, via a Building Energy Efficiency Certificate (BEEC) for many commercial buildings.

https://firb.gov.au/

https://www.fairwork.gov.au/

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Department of Agriculture, Water and the Environment

The federal Department of Agriculture, Water and the Environment is responsible for implementing the Australian Government’s policies to protect our environment and heritage, and to promote a sustainable way of life.

Resource 13: Department of Agriculture, Water and the Environment

Access and view the Department of Agriculture, Water and the Environment website at: <www.environment.gov.au>.

2.2 State-based legislation Whilst the common law principles of agency apply to real estate agents throughout Australia, the main legislative framework under which the property industry is regulated currently operates within individual state and territory boundaries.

Each state and territory provide statutory requirements relating to agency practice and rules or codes of conduct governing how agents operate and go about their business daily.

Every state and territory has rules regarding the handling of money in relation to trust accounting and regulations requiring disclosure of various interests by agents. There are many similar aspects but also some state/area-specific differences particularly in the area of sales practices, contractual obligations for sales, and in conveyancing. Residential tenancy laws also have many similarities but can differ in periods of notice requirements and bond legislation, for example.

Some states and territories have continuing professional development requirements for agents and registered employees which assist agencies to keep up-to-date on, and correctly interpret legislation through mandatory ongoing training.

In general, state-based legislation relevant to real estate includes acts relating to: • real estate agents, licensing and conduct • property sales and management • residential tenancies • fair trading and consumer protection • anti-discrimination and equal opportunity • work health and safety • environmental (sustainability) • planning and zoning • secret commissions • commercial, retail or industrial leases • operation of tribunals or courts relevant to real estate • conveyance of title to land • anti-discrimination legislation • real property Acts concerning land titles • strata schemes or unit titles Acts • retirement village or aged persons unit Acts • environmental planning and assessment legislation • heritage or historical property Acts.

https://www.environment.gov.au/

Topic 2: Legislation in real estate

Resource 14: State-based resources

Refer to the ‘Toolbox’ in your KapLearn subject room to access State-based resources.

State-based legislative agent codes of practice

Industry codes of practice can provide the necessary regulatory support for an industry. Prescribed (i.e. legislated) mandatory codes provide a set of rules or minimum standards for an industry, including the relationship between industry participants or their customers.

They can guard against misconduct and opportunistic behaviour, while fostering long term changes to business culture. Codes of practice provide agents with a guide to the professional and ethical standards expected by the public.

Each state has its statutory set of agent rules of conduct. They may variously be called conduct standards, agent rules of conduct, or codes of practice. Though the legislation is different in each state, in general, the agent rules of conduct cover: • Having an up-to-date knowledge of relevant legislation • Abiding by fiduciary obligations to a client • Being honest, fair and professional to all parties in a transaction • Using skill, care and diligence when carrying out agent duties • Not using high-pressure tactics, harassment or unconscionable conduct • Not disclosing confidential information obtained whilst acting on behalf of a client or

dealing with a customer. • Acting in accordance with client authority • Acting in accordance with client instructions, unless they are unlawful • Not offering inducements to third parties to induce a person to engage the services

of an agent

Resource 15: State legislation

Refer to the ‘Toolbox’ in your KapLearn subject room to access state legislation.

A state’s real estate regulatory authority is responsible for ensuring real estate agents comply with the conduct standards. A real estate agent that fails to comply with the conduct standards can be pursued by the regulatory authority with compliance actions such as financial penalties (fines) and action to suspend or cancel licence or registration to work.

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3 How to access legislation

3.1 Accessing Commonwealth laws

Federal Register of Legislation Federal Register of Legislation (formally known as ‘ComLaw’), contains Commonwealth Acts, as well as other documents such as Bills and Legislative Instruments (Regulations), in electronic form.

Resource 16: Federal Register of Legislation

The Federal Register of Legislation website provides a search facility for legal information at: <www.legislation.gov.au>.

Note: This website does not provide access to State Legislation or Commonwealth and State Case Law Databases.

A Quick Reference Guide is available on this site to guide through the forms and functions of the site.

Australasian Legal Information Institute (AustLII)

AustLII is an online free-access resource for Australian legal information, a joint facility of the UTS and UNSW Faculties of Law.

Resource 17: Australasian Legal Information Institute (AustLII)

Access and view the Australasian Legal Information Institute (AustLII) website at: <www.austlii.edu.au>.

State laws

Each state/territory has its own legislation.

Resource 18: Accessing state laws

State-based laws can be accessed via the following state legislation websites: • NSW legislation: <www.legislation.nsw.gov.au> • Western Australian legislation: <www.legislation.wa.gov.au> • Queensland legislation: <www.legislation.qld.gov.au> • South Australian legislation:<www.legislation.sa.gov.au> • ACT legislation: <www.legislation.act.gov.au> • Victorian legislation:<www.legislation.vic.gov.au> • Tasmanian legislation: <www.legislation.tas.gov.au>.

https://www.legislation.gov.au/

http://www.austlii.edu.au/

http://www.legislation.nsw.gov.au/

http://www.legislation.wa.gov.au/

https://www.legislation.qld.gov.au/

http://www.legislation.sa.gov.au/

http://www.legislation.act.gov.au/

http://www.legislation.vic.gov.au/

http://www.legislation.tas.gov.au/

Topic 2: Legislation in real estate

3.2 Accessing the most current version of the legislation When looking up legislation, it is important to access the most current version that includes all amendments up to and including the current date.

To access information about what laws were in place at a particular point in time, look up the Table of Amendments or Amendment History (or similar) to ‘remove’ amendments made since the point-in-time of interest.

The time at which the legislation comes into force depends upon the wording in the Act. It’s useful to read the first 3 or 4 paragraphs of the legislation to clarify this. In some cases, the provisions of the legislation apply immediately. In others, a start date or a ‘commencement date’ is laid down in the Act.

To know if the legislation been changed or amended since it first came into force is important. Some legislations have been around for some time and have been amended on multiple occasions. If consulting a printout or hard copy of the legislation, it is important to check the date it was produced to confirm if the Act is still current.

When accessing government legislation websites, the amendments are consolidated into the Acts.

As the law changes, compilations of the law as amended are published on the Legislation Register and are listed on each law’s series page with details of start and end dates. These dates should be used as a guide to decide which compilation covers the desired point in time or period of interest.

The notes at the end of the compilation will list the commencement dates for amendments and provide additional information to work out what the law was on a particular date.

4 How to interpret legislation

4.1 How laws are normally laid out While their content varies enormously, Acts and Regulations have similar basic components such as: • the title page and table of contents. This material helps identify and navigate around

the law. It is usually at the beginning of the Act or Regulation • How and when the law was originally made, whether any amendments been

incorporated into its body, and other process information. • unique numbers or other identifiers, headings (or several levels of headings) may be

used where needed to deliver information in a structured and meaningful way.

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Understanding the key parts of an act

The key parts of an Act of Parliament generally are: • Year and number of the Act (or reprint number). • Long title: often now replaced with a statement of purpose or definition section. • Words stating the enacting of the Act. • Short title. • The date of assent: the date the act is signed and thus approved by the Queen or her

representative in Australia. • Commencement: the date the act starts which is generally when it becomes a law. • Table of contents: also known as the analysis. • Preamble: stating the reasons for the Act. • Parts/divisions/chapters/sections with headings are ways of organising the Act by

consecutive numbering and alpha sequences for easier reference. • Notes (also called margin notes or marginal notes): similar to footnotes but in the

margins of the pages of an Act. • Definitions: legal definition of terms used in the Act. Note that this may vary from the

vernacular (common) use of the term. • Schedules set out clearly and with detailed provisions for the working of the Act. • Legislative history (identifying amendments) • Amendments and repeals of other legislation by this new act. • History gives details of assent, including the Minister's reading dates in parliament.

Penalties

A penalty set out at the foot of a section, or subsection, means that a breach of the respective section, or subsections, is punishable by a penalty not exceeding the specified maximum amount of penalty units.

Prior to the introduction of penalty units in Australian legislation, fines and other charges were usually prescribed in the legislation in terms of ordinary money (pounds originally and then later, dollars). However, the effects of inflation meant that what were originally substantial penalties, were eventually reduced to trifling sums. Frequent amendment of the many laws and regulations dealing with pecuniary penalties would be a very time-consuming process. Penalty units provide a quick and simple way to adjust many different fees and charges. The amount of dollars that the penalty point is equivalent to varies from state to state.

4.2 Citing legislation Typically, to cite a statute, use the short title (including the year of enactment), the jurisdiction (in brackets) and specific sections/subsections.

For example:

• Acts Interpretation Act 1901 (Cth) • Sex Discrimination Act 1984 (Cth) • Privy Council (Limitation of Appeals) Act 1968 (Cth) • Crimes Act 1900 (NSW) s19A.

Topic 2: Legislation in real estate

For citing sections of Acts, the details which must be included are: • Title of the Act — In italics. • Year — In italics. • Jurisdiction — Use abbreviations and round brackets. • Pinpoint — Identify the particular section, paragraph, part, schedule, etc.

4.3 Hansard Hansard is the familiar name for the official publication of parliamentary proceedings. The Senate and House of Representatives Hansards are available on the Internet each morning following a sitting day.

Resource 19: Hansard

Access and view the Hansard website at: <www.aph.gov.au/Parliamentary_Business/Hansard>.

4.4 General rules used to interpret legislation When interpreting legislation, consider the Act itself as a whole, plus any subordinate legislation that explains or expands on it (such as Regulations or Guidelines). When looking at Sections of an Act, the Section needs to be considered in the overall context of the legislation and will often lead to other sections of the Act.

Words are not precise instruments for conveying ideas or communicating intent. Any written text of substance has the potential to raise problems over the meaning of the words used, let alone a piece of legislation. Words are ambiguous and change in meaning over time. Ambiguity can arise both from within words individually, from their linkage with other words and from the context in which words are use. Source: McGrath, J 2002.

Legislation may contain uncertainties for a variety of reasons, including that: • unforeseen situations are inevitable • new technologies and cultures make application of existing laws difficult • during the course of enactment of law, there is a need for compromise or to cater to

special interest groups.

To the extent that the words in legislation can be capable of different meanings, courts endeavour to ascertain in a principled way which of them is the more probable meaning. This is the presumed meaning sometimes described as the ‘legal meaning’. Source: Bennion, F 2001.

There are four basic general rules of statutory interpretation; namely: • the Plain Meaning Rule/Literal Rule • the Golden Rule • the Mischief Rule • the Purpose Approach.

To understand the statutory requirements in relation to interpreting legislation that exist in all Australian jurisdictions it is necessary to understand these rules.

http://www.aph.gov.au/Parliamentary_Business/Hansard

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The Plain Meaning Rule/Literal Rule

The Plain Meaning Rule is also sometimes referred to as the Literal rule or the ordinary rule. It is very simple — if the meaning of the Act is plain, it is to be given that plain meaning. The test as to whether the rule is to be applied is that the ordinary meaning is that which an ordinary person would place upon it. Generally, if the words of a statute are clear and unambiguous, the courts give them their ordinary meaning.

The Plain Meaning Rule dictates that statutes are to be interpreted using the ordinary meaning of the language of the statute, unless a statute explicitly defines some of its terms otherwise. In other words, the law is to be read word-for-word and should not divert from its ordinary meaning.

The Golden Rule

The court is usually interested in delivering justice and in order to foresee the consequences of their decisions the Golden Rule is usually applied. Like the Plain Meaning rule, the Golden Rule gives the words of a statute their plain, ordinary meaning. However, when this may lead to an irrational result that is unlikely to be the legislation’s intention, the Golden Rule dictates that a judge can depart from this meaning. The Golden Rule of statutory interpretation may be applied where an application of the literal rule would lead to an absurdity.

If the statutory provision is ambiguous, the Plain Meaning rule cannot be used. An Act must be read in such a manner to avoid a result of manifest absurdity (devoid of meaning) or injustice. The court would conclude that the Parliament did not intend injustice. In the event of absurdity, ambiguity or inconsistency on the literal interpretation of the Act, the court adopts the meaning which reflects the purpose of the legislation.

If the reader uses the ordinary meaning of the word and this gives rise to absurdity or a result clearly inconsistent with the remainder of the Act, then the reader must use a meaning that will remove the absurdity, injustice or inconsistency.

Example: The Golden Rule

The Golden Rule may be used in two ways. It is applied most frequently in a narrow sense where there is some ambiguity or absurdity in the words themselves.

For example, imagine there may be a sign saying ‘Do not use lifts in case of fire.’ Under the literal interpretation of this sign, people must never use the lifts, in case there is a fire. However, this would be an absurd result, as the intention of the person who made the sign is obviously to prevent people from using the lifts only if there is currently a fire nearby.

The second use of the Golden Rule is in a wider sense, to avoid a result that is obnoxious to principles of public policy, even where words have only one meaning.

Topic 2: Legislation in real estate

Example: Adler v George [1964] 2 QB 7

Under the Official Secrets Act 1920 it was an offence to obstruct a member of the armed forces 'in the vicinity' of a prohibited place. In the example of Adler v George, the defendant was actually in the prohibited place, rather than 'in the vicinity' of it, at the time of obstruction.

The court applied the Golden Rule. It would be absurd for a person to be liable if they were near to a prohibited place and not if they were actually in it. The conviction was therefore upheld.

The Mischief Rule

This Rule is used to find the meaning of an Act when the meaning is obscure. To do this the reader must ask four questions, namely: • What was the state of the law before the Act was passed? • What was the mischief or defect for which the law did not provide before the Act

was passed? • What remedy has Parliament provided in the Act to cure the mischief or defect? • What is the true reason for the remedy?

When applying the Mischief Rule to an ambiguous provision (and it can only be applied to an ambiguous provision) of the Act, the court will give an interpretation to that ambiguous provision to alleviate the mischief.

The Purpose Approach

The other general rule used for the interpretation of legislation at common law is the Purpose Approach. This rule is a development of the Mischief Rule. As noted above, this rule requires the courts to interpret legislation in a manner consistent with its purpose: the ‘mischief’ it was intended to remedy. Some Acts contain a section known as a statement of principle, which sets out the purpose of that legislation. Since the statement of principle is contained in a section of the Act, it must not be treated as a preamble or a long title, but rather as a substantive part of the Act. The Purpose Approach is applied only when an attempt to use the Plain Meaning rule produced an ambiguity or an inconsistency.

4.5 Interpretation of the words in an Act The reader must understand that words without meaning are not used in legislation, and wherever possible, no clause, sentence or word is superfluous, void or insignificant. Accordingly, the reader should give the proper weight to every word used. Source: Gifford, DJ & Salter, J 1996.

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A court will interpret a word in an Act in such a manner as to avoid it being synonymous with another word in the same provision. Some basic principles in the interpretation of a statute are, namely: • the Act is to be read as a whole • a section is to be read in the light of the Act as a whole • sections should be read in sequence • words should not be discarded • words are presumed to have consistent meanings throughout the whole of the Act • words are to be interpreted in accordance with their ordinary and current meaning • the meaning of a word or phrase will be derived from its context • words are to be interpreted in accordance with their common usage • technical words are to be given their technical meaning.

Rules of language

Three important rules of language used in legislation are: • ejusdem generis: where a list of words are followed by more general words,

the meaning of the general words is restricted to the same class as the words in the list.

• noscitur a sociis: the words of an Act take their meaning from the other words in the same section or sub-section.

• expressio unius est exclusio alterious: mention of one or more things of a particular class excludes all other members of the same class.

4.6 Guidance with interpreting and applying legislation Every real estate industry member has a personal responsibility to know how to access, read and interpret legislation, as well as how to apply the legislation to their area of operation as an agent.

In order to fully understand relevant legislation, and hence reduce potential agency and consumer risks, guidance may need to be sought from the statutory body that enforces the Act. Frequently, fact sheets produced by the regulatory authority addressing the most common problems agents and consumers have had understanding the legislation may be found and are useful.

The relevant industry associations or groups often also publish information via journals or membership email alerts to assist agents to understand legislation and may also run educational sessions about the legislation.

Often legal practitioners who specialise in that field produce journals or case studies that can assist with interpreting the legislation. Agents should refer to definitions of legal terms, look at judicial interpretations and precedents or the parliamentary papers that introduced or led to the legislation.

Some insurance providers offer professional indemnity insurance. Providers publish case studies and case histories covering legal interpretation of various legislative elements as they apply to the property industry.

Topic 2: Legislation in real estate

Industry associations also routinely offer Help Lines with legislative advice, as do franchise groups and marketing or network industry groups. It is one of the key benefits of membership, as peer group advice can be vital in interpreting and complying with prevailing legislation and being alerted to current areas of statutory concern and changes.

5 Staying up to date with the legislation

5.1 Own responsibility to stay up to date It is the personal responsibility of all those working as licensed and registered persons in real estate to stay up-to-date with the legislation relevant to their area of real estate practice. It is a requirement of the agent rules/code of conduct. It is also a legal requirement since an agent is contracted and paid professional fees and charges for the provision of their services. Hence, they must be able to provide these services with due care and diligence, always complying with the most current legislation.

Real estate agents need to be able to respond to changing market conditions, be aware of changing technology, ensuring that they are complying with legislation, and using the most current regulated forms at all times.

Employers will provide a certain amount of training on the job, but it is the responsibility of each employee in the industry to keep themselves up to date. Staying up-to-date involves formal or informal education on changes and setting up to newsletter alerts from the regulatory authority and industry member associations.

5.2 Strategies for staying up-to-date The first is being on the emailing list for newsletter or e-news with the relevant state consumer protection authority and/or property industry regulatory authority. This is where a greater proportion of changes emanate from.

Many regulatory authorities have email alerts for changes to legislation related to their function. It is recommended to register for automatic updates. Apart from newsletters or e-news, statutory authorities may also provide seminars or webinars to alert the industry to legislative changes.

Regulatory authorities often issue administrative guidelines to assist the industry with compliance, and these usually constitute mandatory industry practice, meaning they must be followed.

Membership of industry associations also provides agencies with access to legislative change, usually coupled with the opportunity to attend seminars or training where the changes and their impact on agency practice are covered in detail. In these cases, it is vital that all relevant employees are given the opportunity and encouraged to attend.

Another area to seek assistance with both changes and interpretation is through the agency’s insurance providers, who often have legal departments and helplines to answer questions on legislative matters.

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Once changes are identified they need to be referred and explained to the relevant employees within the agency. They need to be reflected in the agency’s policies and procedures and may form part of a special office meeting or training session. It may also be an added agenda item where necessary at regular sales or office meetings.

It is also vital for the agency to conduct regular compliance audits to ensure that their practices comply with the current legislation. This can be conducted by the licensee, manager or an external consultant. These audits need to include random checks of information covering the entire sales and management process. They are particularly important regarding completing statutory documentation and contractual documentation requirements.

There are external consultants that specialise in compliance audits, including registered training organisations, industry associations, and some legal and industry practitioners also.

Increasingly, in order to coordinate keeping up with legislation across the whole of agency areas of operation, agencies will nominate a staff member to monitor for changes and communicate changes to members of the agency. This may be the licensee-in-charge, or a specific compliance officer employed or delegated to for that purpose. Many larger agencies employ a manager with a business (rather than real estate industry) background, whose role includes checking and advising on all legislative changes and decisions, and may include such legislative functions as Privacy Officer, Work Health and Safety Officer, and designated complaints handling person. Whilst accountants and auditors may fill this role regarding finances and trust accounting; they do not cover the full spectrum of legislation for agency operations.

Quick tips for to staying up to date

• Maintain memberships in organisations that benefit the agency and attend events that will provide networking and sharing of knowledge.

• Attend regular training to keep up-to-date on new legislation and trends • Review systems and documents regularly to ensure that they are up-to-date and

compliant • Attend industry events to keep up to date with the latest information • Subscribe to Federal, State, and local legislation newsletters for information on

upcoming changes • Keep a list of website links, for quick and easy access to industry-relevant

information. • Make a habit of regularly visiting property-related blogs, especially for stakeholder

groups such as Tenant Unions or Building Owners and Managers Association. • Share news with clients when systems are reviewed and updated, or when attending

educational events, to promote relevance and currency with clients.

Topic 2: Legislation in real estate

5.3 Keeping records of changes Some real estate offices retain hard copy of the legislation to refer to when needed. The problem with this strategy is that someone then must review these copies if changes occur; but this rarely actually happens. It can be a laborious process if a major review of the legislation has taken place.

If changes have not been covered in the office records, the legislation itself may no longer be accurate, which can lead to mistakes in interpretation and agency practice.

The easiest way to access up-to-date copy is to have desktop links to the relevant statutory licensing authority. This allows the whole Act or Sections to be read and referred to directly online (or if necessary printed for one-off reference).

Whilst it is each person’s individual responsibility to stay up to date, agency wide, an audit trail needs to be identified and proper records kept. This is because the agency licensee-in-charge is responsible for supervising staff and ensuring they comply with the legislation. Included in this should be the method for accessing the current copies of relevant legislation, and ensuring the changes are made to agency policies and procedures as required.

From time to time, any agency will find themselves in a situation where there is a discrepancy in the application of legislation. It may be agency-wide and may be because agency staff have not stayed up to date with changes, and not updated policies and procedures. It could also be because new legislation has commenced, and it is not yet fully clear how the legislation will be interpreted by the courts. The next section deals with this issue.

6 Investigating discrepancies in the application of legislation By continually scanning the legislative environment, discrepancy in the application of legislation is identified within the agency or in the personal practice of real estate. Sometimes it may be a matter of a discrepancy being identified during training sessions, or by clients who are dealing with the agency. It is preferable for the agency to self-identify the discrepancy (instead of the client), as this involves loss of face. The discrepancy may also be identified by regulatory authorities, in which case the real estate agent or agency may face disciplinary action over the matter.

Each agency should have a published policy and procedure to outline how discrepancies are to be managed. For example, if a staff member recognised that an agency procedure needed to be updated to reflect application of current legislation, the process may involve this person advising their manager of what they believe needs to be changed, and why, including noting the source of information that has been researched. Changes to agency standard letters and procedures would generally require the approval/sign off of the agency licensee-in-charge. These changes would then need to be documented, and version control applied to the new documents or procedures.

It is good practice to involve all agency team members when seeking to resolve concerns about discrepancies in the application of legislation. By consulting the agency team members about their opinion, it displays to staff that their professional opinion on legislation is valued, and it encourages them to be clear on their own interpretation and application of the legislation.

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Key points • The property-related legislation needs to be understood within the legal framework

that exists in Australia and the authority of the state-based regulatory authorities for real estate.

• Besides the key agent-related legislation, agents need to understand a broad array of both federal legislation and state-based legislation relating to privacy, consumer protection, contracts, foreign investment, anti-discrimination, and more.

• Staying compliant with the law means that an agent must know how to read and interpret the relevant legislation, including the four basic general rules of statutory interpretation, and the conventions of how language is used in legislation.

• An agent needs a personal network and resources to assist in the interpretation and application of legislation.

• Practising as a real estate agent involves keeping up-to-date with the latest legislation, including understanding where to locate the legislation in current legislation databases and regulatory authority websites.

• It is an agent’s responsibility to stay up to date and to seek assistance from their agency manager, licensee-in-charge especially if there are discrepancies between personal or agency practice and current legislation.

Topic 2: Legislation in real estate

References Australian Competition & Consumer Commission (ACCC) 2016, Avoiding unfair business practices – a guide for businesses & legal practitioners, 22 April, viewed 7 April 2020, <https://www.accc.gov.au/publications/avoiding-unfair-business-practices-a-guide-for- businesses-legal-practitioners>.

Australian Competition & Consumer Commission (ACCC) n.d., Contracts & agreements, viewed 7 April 2020, <https://www.accc.gov.au/consumers/contracts-agreements>.

Australian Government Office of the Australian Information Commissioner (OAIC) n.d., Australian Privacy Principles, viewed 7 April 2020, <https://www.oaic.gov.au/privacy/australian-privacy-principles>.

Australian Human Rights Commission (AHRC) n.d., viewed 7 April 2020, <https://www.humanrights.gov.au>.

Australian Human Rights Commission (AHRC) n.d., A quick guide to Australian discrimination laws, <https://www.humanrights.gov.au/our-work/employers/quick- guide-australian-discrimination-laws>.

Australian Securities and Investments Commission (ASIC) n.d., viewed 7 April 2020, <https://asic.gov.au>.

Bartier Perry Lawyers 2007, Pssst .... Secret commissions – misleading & deceptive and possibly a crime, viewed 7 April 2020, <https://www.bartier.com.au/insights/articles/pssst-secret-commissions-misleading- deceptive-and-possibly-a-crime>.

Bennion, F 2001, Understanding Common Law Legislation: Drafting and Interpretation, Oxford University Press, New York, p.18.

Department of Agriculture, Water and the Environment n.d., viewed 7 April 2020, <https://www.environment.gov.au>.

Federal Register of Legislation n.d., viewed 7 April 2020, <https://www.legislation.gov.au>.

Federal Register of Legislation n.d., Glossary, viewed 7 April 2020, <https://www.legislation.gov.au/content/WhatIsIt>.

Gifford, DJ & Salter, J 1996, How to understand an Act of Parliament, Cavendish Publishing Ltd., London, p. 99.

Hansard n.d., viewed 7 April 2020, <http://www.aph.gov.au/Parliamentary_Business/Hansard>.

McGrath, J 2002, ‘Reading Legislation and Ivor Richardson’ [2002] VUWLawRw 44; (2002) 33(3&4) Victoria University of Wellington Law Review 597.

NSW Government NSW legislation n.d., viewed 7 April 2020, <https://www.pco.nsw.gov.au/accessing-legislation.html>.

Parliament of Australia n.d., Glossary, viewed 7 April 2020, <http://www.aph.gov.au/Help/Glossary>.

Parliament of Australia n.d., Publication of parliamentary proceedings, viewed 7 April 2020, <http://www.aph.gov.au/Parliamentary_Business/Hansard>.

Parliamentary Education Office 2019, Making a law in the Australian Parliament, 27 November, viewed 7 April 2020, <https://www.peo.gov.au/understand-our- parliament/how-parliament-works/bills-and-laws/making-a-law-in-the-australian- parliament>.

https://www.accc.gov.au/publications/avoiding-unfair-business-practices-a-guide-for-businesses-legal-practitioners

https://www.accc.gov.au/consumers/contracts-agreements

https://www.oaic.gov.au/privacy/australian-privacy-principles/

https://www.humanrights.gov.au/

https://www.humanrights.gov.au/our-work/employers/quick-guide-australian-discrimination-laws

https://asic.gov.au/

https://www.bartier.com.au/insights/articles/pssst-secret-commissions-misleading-deceptive-and-possibly-a-crime/

https://www.environment.gov.au/

https://www.legislation.gov.au/

https://www.legislation.gov.au/content/WhatIsIt

http://www.aph.gov.au/Parliamentary_Business/Hansard

https://www.pco.nsw.gov.au/accessing-legislation.html

http://www.aph.gov.au/Help/Glossary

http://www.aph.gov.au/Parliamentary_Business/Hansard

https://www.peo.gov.au/understand-our-parliament/how-parliament-works/bills-and-laws/making-a-law-in-the-australian-parliament/

Topic 3: The regulatory environment in the real estate industry

Industry Fundamentals NSW

Contents

Overview ............................................................................................................. 3.2

Topic learning outcomes ............................................................................................ 3.2

1 Regulatory authorities and their role in the property sector ..................... 3.3

1.1 Toolbox ........................................................................................................... 3.3

1.2 The roles of statutory authorities in real estate ............................................ 3.3

2 Eligibility requirements for the real estate industry .................................. 3.5

2.1 Licence types .................................................................................................. 3.5

2.2 Licence classes ................................................................................................ 3.6

2.3 Eligibility requirements .................................................................................. 3.7

2.4 Applications for registration or licence .......................................................... 3.9

3 Requirements to continue working in the real estate industry ................. 3.9

3.1 Continuing Professional Development (CPD) ................................................ 3.9

Key points .......................................................................................................... 3.10

References ......................................................................................................... 3.11

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Overview The property sector is a highly regulated industry. The regulatory authority for property in each state makes agent-related state laws and decides who may be registered or licenced to work in the industry. The regulatory authority can also pursue and penalise an agent for breach of agent legislation, for example, via warning notices, fines, suspension or cancellation of a licence.

It is vital to a successful real estate career to understand and work within the regulatory environment. Compliance with the regulatory requirements can lead to maintenance of good reputation in the industry and a hence contribute to a longer, more successful career.

Topic learning outcomes On completing this topic, students should be able to: • identify the regulator for real estate activities in the state or territory of operation

and explain their role in the industry. • research and record licensing and eligibility requirements for real estate personnel,

including required qualifications in the state or territory of operation. • understand requirements to continue working in the industry.

Topic 3: The regulatory environment in the real estate industry

1 Regulatory authorities and their role in the property sector In Topic 2, the role of a regulatory body or statutory authority that exercises autonomous regulatory and supervisory authority over particular activities was discussed. Real estate in each state and territory is regulated under the relevant Act by a statutory body which operates as the regulatory authority in that state. These authorities are government bodies and are usually attached to Fair Trading, Consumer Affairs, Justice or Commerce offices and departments, or an appointed board (such as in Western Australia).

1.1 Toolbox When working through the subject materials, the Toolbox in your KapLearn subject room should be used. The state specific information about the role of the regulatory authority in your state is provided below.

The regulatory authority for real estate in NSW is NSW Fair Trading who regulate compliance with the Property and Stock Agents Act and the Property and Stock Agents Regulation 2014.

Resource 1: State regulatory authority, website and functions and requirements

Refer to the ‘Toolbox’ in your KapLearn subject room and review your state regulatory authority, its website, and functions and requirements.

1.2 The roles of statutory authorities in real estate In general, statutory bodies that regulate real estate have the following functions: • protecting the interests of consumers • promoting appropriate standards of conduct and competency for the real estate

industry • regulating statutory requirements of agents and employees • resolving disputes • prosecuting breaches of legislation • recommending policy to government.

The state regulatory authority is where applicants go when they wish to apply to work in the sector or wish to apply for their own licence. It also decides who can renew their registration or licence.

Regulatory authorities can carry out random audits of agencies to ensure compliance with the agent legislation. It also follows up on complaints from consumers regarding property agents.

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Resource 2: NSW Fair Trading

Visit the NSW Fair Trading website at: <www.fairtrading.nsw.gov.au> and research the NSW Fair Trading website and the resources it provides. It is recommended agents in NSW regularly visit the website and to keep updated on any changes.

It is important to remember that NSW Fair Trading has licensing and/or compliance functions for industries other than property, such as trades and businesses, cars and vehicles, associations and co-operatives, charitable fundraising and games of chance.

The functions of NSW Fair Trading as they relate to the property industry include: • protecting the interests of consumers in a real estate transaction • promoting and enforcing appropriate agent conduct standards • implementing agent legislation which sets out legal requirements for agents as they

transact with sellers, buyers, landlords and tenants • resolving complaints and some disputes between agents and consumers • prosecuting breaches of legislation by agents • recommending policy to NSW government related to agency, tenancy and

strata laws.

Resource 3: Housing and property

The section of the NSW Fair Trading website tailored for real estate is: <www.fairtrading.nsw.gov.au/housing-and-property>.

Here there is a large amount of information related to real estate functions, including information relevant to: • eligibility requirements to enter the industry • requirements to obtain a real estate licence • renting and residential tenancy laws • buying and selling properties • strata and community living, strata legislation including building bonds • fire safety and external cladding • loose-fill asbestos insulation • building, renovating, repairs and maintenance.

Resource 4: NSW Fair Trading eNews

It is worthwhile subscribing to the NSW Fair Trading eNews to receive email newsletters at: <www.fairtrading.nsw.gov.au/help-centre/online- tools/enews>:

Some of the email newsletters published by Fair Trading include:

• Property Matters — alerts for all those working in the property industry • The Letterbox — alerts for those working in residential property

management • Strata and Community Scheme Updates — alerts for strata managers,

and real estate agents those who may be managing or selling strata properties.

https://www.fairtrading.nsw.gov.au/

https://www.fairtrading.nsw.gov.au/housing-and-property

https://www.fairtrading.nsw.gov.au/help-centre/online-tools/enews

Topic 3: The regulatory environment in the real estate industry

2 Eligibility requirements for the real estate industry Each state has entry level requirements that must be met before an individual can register to work in the industry. As registered representatives, agents work under the supervision of a licensee-in-charge, or officer in effective control.

These entry level requirements include: • a minimum ‘good character’ requirement, which involves a police check • certain educational requirements, such as completion of a course • being an Australian resident.

Full details of the requirements to enter the industry can be found on each state’s licensing authority’s website.

If an individual wishes to obtain their own real estate licence, there are further educational requirements, and also in some states, requirements for industry experience prior to obtaining a real estate licence.

Note: Trading as a real estate agent without a licence or ‘licence lending’ is illegal. ‘Licence lending’ is the process of a person ‘lending’ their licence to a business who otherwise does not have its own licensee in charge, even though the person lending their licence do not work in the business.

2.1 Licence types NSW Fair Trading website has detailed information about the different property industry licence types.

These licence types are: • Real estate • Strata • Stock and station.

Real estate sales and leasing functions include: • acting as an agent for a real estate transaction • inducing or negotiating with a person to enter into, or to make or accept an offer to

enter into, a real estate transaction or a contract for a real estate transaction • introducing a prospective purchaser, lessee or licensee of land to another licensed

agent or to the owner, or the agent of the owner, of land • collecting rents payable for any lease of land and providing property management

services for the leasing of any land • acting as an auctioneer of land (provided that the agent also holds auctioneer

accreditation).

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Business agent functions include: • selling, buying, exchanging or otherwise dealing with, or disposing of, businesses or

professional practices, or any share or interest in, or concerning, or the goodwill of, or any stocks connected with, businesses or professional practices

• negotiating for the sale, purchase of exchange or any other dealing with or disposition of businesses or professional practices, or any share or interest in, or concerning, or the goodwill of, or any stocks connected with, businesses or professional practices.

On-site residential property manager functions include: • acting as an agent for giving possession of residential premises under a lease,

licence or other contract • acting as an agent for collecting bonds, deposits, rents, fees or other charges in

connection with any such lease, licence or other contract.

2.2 Licence classes There are also three different classes of licence within each licence type. These are: • Assistant agent • Class 2 licence. • Class 1 licence.

Resource 5: Licence classes

Read ‘Licence types and classes’, at: <www.fairtrading.nsw.gov.au/housing- and-property/property-professionals/licensing,-certification-and- qualification/Licence-types-and-classes>.

Assistant agent

Assistant agent is the title given to all certificate of registration holders. This is an entry level position, with limited functions, to allow new entrants to the industry to gain the experience and knowledge required to qualify as an agent.

A certificate of registration is issued for a four-year term and is not renewable. Within the four-year period, assistant agents must complete their qualifications and progress to a Class 2 licence. If not, they must cease working as an assistant agent and cannot apply for a new certificate of registration within 12 months of the expiry of their previous certificate. The supervising licensee-in-charge is expected to check the progress of each assistant agent in completing at least three units of competency from the Class 2 licence course each year.

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,-certification-and-qualification/Licence-types-and-classes

Topic 3: The regulatory environment in the real estate industry

The Class 1 or 2 licence holder must also supervise assistant agents on-the-job in order for the assistant agents to exercise their functions. Assistant agents can generally exercise functions related to their certificate type (i.e. real estate, strata or stock and station), but they cannot: • enter into a contract for the sale of land • enter into an agency agreement, including sales agreement and property

management agreements (except for agency agreements that relate to the sale or purchase of livestock)

• enter into a franchising agreement • affix the seal of the owner’s corporation (if you are an assistant agent in strata

management) • authorise the withdrawal of money from a trust account.

Assistant agents cannot use the title ‘real estate agent’ in their job title, on their business cards etc. Only someone with a Class 1 or Class 2 licence can use the tile ‘agent’ e.g. ‘sales agent’.

Licence

Real estate agent licences are issued as either a Class 1 or Class 2 licence. A person who is nominated as a licensee-in-charge of a business must hold a Class 1 licence. Only a Class 1 licence holder who is also a licensee-in-charge may authorise trust account withdrawals for the business.

A real estate agent licence Class 1 or Class 2 allows the holder to exercise all the functions below without supervision: • real estate sales and leasing functions • business agent functions, and • onsite residential property manager functions.

Changes in NSW from 23 March 2020

Prior to 23 March 2020, there were separate licence categories for on-site residential property managers, business agents and buyer’s agents. These categories now fall under the real estate licence functions. Those working in the industry under these previous licence categories have been transitioned by NSW fair Trading to a real estate agent’s licence ‘with restriction’ i.e. the holder is restricted to the functions of the licence category they previously held e.g. business agent functions, on site property manager functions, sales and leasing functions (which includes buyers agents functions). Restrictions can be removed by completing further qualifications.

2.3 Eligibility requirements The NSW Fair Trading website provides information about what educational qualifications are required for each licence type and class, as well as other eligibility requirements.

http://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,-certification-and-qualification/Licence-types-and-classes

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Resource 6: Educational qualifications

Access and view details of the educational qualifications required for each class of licence at: <www.fairtrading.nsw.gov.au/housing-and- property/property-professionals/licensing,-certification-and- qualification/qualifications>.

Assistant agent

To apply for a certificate of registration to work as an assistant agent, the applicant must: • be least 16 years of age • be a fit and proper person to hold a certificate of registration (this involves a

police check) • have completed the educational requirement for the type of certificate of

registration being applied for • have not been disqualified (see heading below).

Licence

To apply for a Class 1 or Class 2 licence, the applicant must: • be at least 18 years of age • be a fit and proper person to hold a licence. Any person in partnership with a licensee

in a property agency must also be a fit and proper person • have the qualifications required for class of licence for which they are applying • have not been disqualified • have paid the relevant contribution to the Property Services Compensation Fund.

Licence disqualification

A person is generally disqualified from holding a licence of certificate of registration if they: • have a conviction for an offence involving dishonesty that was recorded in the last

ten years, or • have a conviction that was recorded in the last 5 years for an offence involving

licence or certificate of registration lending.

There are also some provisions regarding bankruptcy that that disqualify a person from holding a licence.

There are various issues that may disqualify a corporation from obtaining a licence, such as winding up orders, external administration etc.

Resource 7: Licence disqualification

Access and view more information about licence disqualification on the NSW Fair Trading website at: <www.fairtrading.nsw.gov.au/housing-and- property/property-professionals/licensing,-certification-and- qualification/licence-disqualification>.

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,-certification-and-qualification/qualifications

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,-certification-and-qualification/licence-disqualification

Topic 3: The regulatory environment in the real estate industry

2.4 Applications for registration or licence An application for registration or a licence is completed on the Service NSW website. The site also has information on working in real estate and information about obtaining a registration to work.

Application for a registration or licence may be made when all the requirements are met, including education

3 Requirements to continue working in the real estate industry In order to continue work in the real estate industry, an individual must renew their licence or registration as required by their state’s regulatory authority and must remain a person of good character. If a person working in the industry is convicted of certain crimes, or they are in serious breach of the agent legislation, they may have their licence or registration to work in the industry suspended or cancelled by the regulatory authority.

In some states there are specific regulatory requirements for continuing professional development for real estate personnel. This means that an individual in the sector must fulfil certain professional development requirements in order to be able to renew their registration or licence to work in the property industry. This is in line with the requirements in many other related professions, such as valuation, law and accounting.

It is the responsibility of each individual working in the property sector to understand the requirements that must be met on an ongoing basis to remain working in the property sector.

3.1 Continuing Professional Development (CPD)

Resource 8: Continuing Professional Development (CPD)

Refer to the ‘Toolbox’ in your KapLearn subject room for further information on understanding your personal CPD obligations. Details can also be found at: <https://www.fairtrading.nsw.gov.au/housing-and- property/property-professionals/working-as-a-property-agent/Continuing- Professional-Development-CPD-requirements>.

Keeping records of CPD

Licence and certificate holders must retain their own records of any compulsory, elective or business skills CPD topics completed.

Certificate of registration holders must retain the statement of attainment issued by a registered training organisation for each unit completed from the relevant Certificate IV for their area of practice.

Licence holders (Class 1 and Class 2) must retain all records for three years. Certificate of registration holders must retain all records for four years.

http://www.service.nsw.gov.au/

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/working-as-a-property-agent/Continuing-Professional-Development-CPD-requirements

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Licence and certificate holders will also be required to provide evidence to Fair Trading that they have completed the required CPD topics. Please see Topic 5 for further details on CPD and keeping correct CPD records.

Remaining of good character

The requirements for good character under eligibility requirements must be maintained by an agent if they wish to continue to work in the industry.

NSW Fair Trading publishes ‘Compliance and enforcement reports’ on a quarterly basis which remain on their website for two years. They include public information available through the courts or through public registers administered by NSW Fair Trading.

These reports include information on: • convictions resulting from prosecution in a court • statistical information on penalty notices issued by NSW Fair Trading • disciplinary determinations — including results of proceedings in the NCAT. • injunctions resulting from civil proceedings in the Supreme Court.

Resource 9: Compliance and enforcement reports

Access and view the ‘Compliance and enforcement reports’ at: <www.fairtrading.nsw.gov.au/about-fair-trading/data-and- statistics/compliance-and-enforcement-data>.

Agents who fail to remain of good character, or who commit serious breaches of the agent legislation, may lose their licence or registration to work in the industry. Consumers are also able to check the history of a licence or registration holder on the NSW Fair Trading website. Even if a breach of the legislation is not significant enough to prevent someone holding a licence or registration, it can damage the reputation of the agent/agency.

Key points • The regulatory authority for the property industry in each state is responsible for

deciding who should obtain a registration or licence. This authority is also responsible for agent compliance with the legislation.

• As a registered representative, an agent works under the supervision of a licensee in charge, or officer in effective control.

• Entry level requirements include that being of good character (involving a police check) certain educational requirements, such as completion of a course and being a resident of Australia.

• Continuing work in the industry includes maintaining good character, being compliant with legislative requirements, and meeting any requirements set by the state regulator for mandatory Continuing Professional Development.

https://www.fairtrading.nsw.gov.au/about-fair-trading/data-and-statistics/compliance-and-enforcement-data

https://www.fairtrading.nsw.gov.au/

Topic 3: The regulatory environment in the real estate industry

References NSW Fair Trading n.d., eNews, viewed 14 April 2020, <https://www.fairtrading.nsw.gov.au/help-centre/online-tools/enews>.

NSW Fair Trading n.d., Applying for a licence or certificate, viewed 14 April 2020, <https://www.fairtrading.nsw.gov.au/housing-and-property/property- professionals/licensing,-certification-and-qualification/applying-for-a-licence-or- certificate>.

NSW Fair Trading n.d., Compliance and enforcement reports, viewed 14 April 2020, <https://www.fairtrading.nsw.gov.au/about-fair-trading/data-and-statistics/compliance- and-enforcement-data>.

NSW Fair Trading n.d., Licence disqualification, viewed 14 April 2020, <www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,- certification-and-qualification/licence-disqualification>.

NSW Fair Trading n.d., Licence types and classes, viewed 14 April 2020, <www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,- certification-and-qualification/Licence-types-and-classes>.

NSW Fair Trading n.d., Qualifications, viewed 14 April 2020, <www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,- certification-and-qualification/qualifications>.

Service NSW n.d., NSW Government, viewed 14 April 2020, <https://www.service.nsw.gov.au/transaction/apply-real-estate-agent-licence- individual>.

Service NSW n.d., Continuing Professional Development (CPD) requirements, NSW Government, viewed 14 April 2020, <https://www.fairtrading.nsw.gov.au/housing- and-property/property-professionals/working-as-a-property-agent/Continuing- Professional-Development-CPD-requirements>.

Service NSW n.d., Property certificate of registration, NSW Government, viewed 14 April 2020, <https://www.service.nsw.gov.au/services/business-industries- and-employment/real-estate-and-property-industry/property-certificate>.

Service NSW n.d., Real estate agent licence, NSW Government, viewed 14 April 2020, <https://www.service.nsw.gov.au/services/business-industries-and-employment/real- estate-and-property-industry/real-estate-agent>.

https://www.fairtrading.nsw.gov.au/help-centre/online-tools/enews

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,-certification-and-qualification/applying-for-a-licence-or-certificate

https://www.fairtrading.nsw.gov.au/about-fair-trading/data-and-statistics/compliance-and-enforcement-data

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,-certification-and-qualification/licence-disqualification

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,-certification-and-qualification/Licence-types-and-classes

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/licensing,-certification-and-qualification/qualifications

https://www.service.nsw.gov.au/transaction/apply-real-estate-agent-licence-individual

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/working-as-a-property-agent/Continuing-Professional-Development-CPD-requirements

https://www.service.nsw.gov.au/services/business-industries-and-employment/real-estate-and-property-industry/property-certificate

https://www.service.nsw.gov.au/services/business-industries-and-employment/real-estate-and-property-industry/real-estate-agent

Topic 4: Ethics in real estate

Industry Fundamentals NSW

Contents

Overview ............................................................................................................. 4.2

Topic learning outcomes ............................................................................................ 4.2

1 Introduction to ethics ............................................................................... 4.3

1.1 Foundation of ethical practice ....................................................................... 4.3

1.2 Ethical principles ............................................................................................ 4.4

1.3 Risks of unethical practice by agents ............................................................. 4.4

1.4 The importance of ethical practice in a career in real estate ........................ 4.5

1.5 Ethics and personal decision making ............................................................. 4.5

2 Ethics and its relationship to agent legislation and codes of practice ........ 4.7

2.1 Professional ethics and agent rules of conduct ............................................. 4.7

2.2 Professional ethics and industry standards ................................................... 4.7

2.3 Ethical practices in real estate ....................................................................... 4.8

2.4 Role of procedures, forms and documents in managing risk of unethical practice ........................................................................................... 4.8

3 Ethical standards for privacy, confidentiality and disclosure ..................... 4.9

3.1 Privacy, confidentiality and security of customer information ...................... 4.9

3.2 Disclosure of material facts .......................................................................... 4.10

3.3 Conflicts of interest and referrals ................................................................ 4.11

3.4 Secret commission ....................................................................................... 4.12

3.5 Price guide recommendations ..................................................................... 4.13

4 Strategies to resolve concerns about ethical practice ............................. 4.13

4.1 Sources of specialist advice about ethical practice ...................................... 4.13

4.2 Responding to ethical concerns ................................................................... 4.14

4.3 Communication strategies for ethical practice ............................................ 4.14

Key points .......................................................................................................... 4.16

References ......................................................................................................... 4.16

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Overview To make a successful career in the real estate industry, a real estate agent must conduct themselves in an ethical manner. People prefer continuing business dealings with someone they can trust and who they believe has their best interests at heart. A real estate agent that loses clients’ trust will damage their reputation for honesty and will struggle to obtain referral business, which is at the heart of all successful real estate careers.

This topic looks at ethics in real estate, including ethics as a foundation for professional practice, personal decision making, where to locate sources of specialist advice about ethics, the relationship between ethics and the rules of conduct and other legislation for agents, industry codes of practice.

Topic learning outcomes On completing this topic, students should be able to: • research and examine the foundation for ethical practice applicable to real estate

and its relationship to ethical behaviour • explain ethical consideration in personal decision-making • analyse and examine statutory and industry standards, codes of practice or codes of

conduct in relation to ethical practice in real estate • source and review statutory and industry standards and codes of practice or codes of

conduct for ethical practice in real estate • describe ethical practice standards for privacy, confidentiality, and security of

customer information • review and explain ethical standards for: – privacy, confidentiality, and security of customer information – disclosure of material facts, conflict of interest and referrals – price guide recommendations • describe communication strategies for precise representations of consumer rights

and responsibilities, and complaints resolution processes • demonstrate appropriate communication strategies for ethical practice in

relationships with customers, clients and external agencies.

Topic 4: Ethics in real estate

1 Introduction to ethics

1.1 Foundation of ethical practice According to the Macquarie Dictionary, the word ‘ethics’ is defined as:

A system of moral principles by which human actions and proposals may be judged good or bad or right or wrong.

(Macquarie Dictionary)

Resource 1: The meaning of ethics

Explore the meaning of ethics on The Ethics Centre at: <https://ethics.org.au>. The Ethics Centre is a not-for-profit organisation that focuses on bringing ethics to the centre of personal and professional life. It provides information, guidance, life experiences, education and many more useful topics.

Ethics: values, principles and purpose

Ethics defines the best option or decision in any given situation as the one which best achieves what is good, right and consistent with the critical issues at the heart of every situation: ‘values’, ‘principles’ and ‘purpose’. See below to understand the meaning of each. • Values tell us what’s good — they’re the things we strive for, desire and seek

to protect. • Principles tell us what’s right — they outline how we may or may not achieve

our values. • Purpose is your reason for being — it gives life to your values and principles.

Ethics is the process of questioning, discovering and defending our values, principles and purpose. It’s about finding out who we are and staying true to that in the face of temptations, challenges and uncertainty. It’s not always fun and it’s hardly ever easy, but if we commit to it, we set ourselves up to make decisions we can stand by, building a life that’s truly our own and a future we want to be a part of.

Further details are provided below about ethics and its application in decision-making.

https://ethics.org.au/

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1.2 Ethical principles Ethical principles may differ depending on the profession; for example, professional ethics that relate to medical practitioners will differ from those that relate to lawyers or real estate agents.

However, there are some universal ethical principles that apply across all professions, including: • honesty • clear communication • trustworthiness • loyalty • respect for others • professional courtesy • confidentiality • privacy/security of information • adherence to the law • doing good and avoiding harm to others • accountability.

Ethics in real estate also must consider the fiduciary relationship; hence it includes having a client focus and consideration of client protection.

1.3 Risks of unethical practice by agents There are risks to all parties and stakeholders in a real estate transaction if the real estate agent does not act ethically. Below are some examples.

Party/Stakeholder Examples of risk

Clients and customers For many people, buying or selling a home is a once or twice in a lifetime experience. It involves the biggest asset that most people have in their lives. Also, consumers rely upon agents to give them advice. For example, a landlord that does not trust a real estate agent to manage their property may find their own tenant for a rental property, and not properly check the tenant’s application for tenancy. The tenant moves into the property and causes a lot of damage, also does not pay the rent.

Agency If a community sees a real estate agent as unethical, the reputational damage directly impacts the potential income of the agency. If a real estate agent chooses to breach the law by deceiving their customers or otherwise acting unethically, they risk the loss of their licence, their reputation, and their livelihood.

Community Real estate agents provide a valuable service to the community, helping people to locate homes to put a roof over their head, whether for sale or for rent. When community members lose trust in real estate agents, they do consult the real estate agent for advice, and sometimes try to carry out the real estate agent’s function themselves, to their financial detriment at times.

Industry Whenever there is a high-profile case where the real estate agent is acting fraudulently, it is usually published and written about in detail by the media. It can cause damage to the professional image of the real estate industry, causing the regulator to enforce additional regulation to the industry. The more real estate agents in the industry who act ethically and honestly, the better it is for the whole industry.

Topic 4: Ethics in real estate

1.4 The importance of ethical practice in a career in real estate A common saying within the real estate industry is ‘you are only as good as your last transaction.’ This translates to being involved in the industry, as an ongoing process. Without properties for sale, there are no sales, and without properties to lease, there is no management or letting. Therefore, agents must act ethically and with honesty and integrity to maintain a reputation that allows and attract further business.

New real estate agents often hear, ‘you have to build a business reputation by working hard to achieve results.’ In sales, it is a case of prospecting for new business by becoming known, and in property management, doing the tough or mundane jobs to growing a business building and rental roll.

Another term widely used in a business is, ‘work smarter rather than harder’. This means building an ethical reputation together with growing a database of clients. Clients provide ongoing referrals and future business opportunities because they know the value a real estate agent brings to the transaction. This rapport and empathy is developed through previous business transactions.

One of the best ways of creating a good impression and establishing a long-term business ally is to create a good impression with the client. The flip side, if the agent does not create a positive and trustworthy impression, clients may say, ‘Don’t do business with that person.’ In this situation, the real estate agent leaves themselves open to scrutiny. This comment may be spread within the business community, which may result in brand damage to the real estate agent and their business.

1.5 Ethics and personal decision making Ethics should be the backbone of every decision a real estate agent makes on both a personal and professional level.

Of course, many of a real estate agent’s actions when working within the industry are governed by legislation and the agency’s policies and procedures. However, there are situations faced by real estate agents that are outside these areas; this may mean a real estate agent may need to draw on their own ethical decision-making process.

The extract below, from The Ethics Centre web site, provides six questions to guide in ethical decision making.

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Questions to guide you There is no ready-made way to deal with ethical challenges. They require you to respond to specific circumstances and relationships as well as the various ethical considerations — purpose, values and principles — at play. Still, there are a few questions you can ask that can help crystalise ethical issues you may face in your real estate role. 1. Would I be happy for this decision to be headlining the news tomorrow? This is known as the Sunlight Test. Imagine if your decision — and the reasons you made it — were public knowledge. What if the people you most admire knew what you have done and why? Do you think you would be able to defend yourself? Would other people agree, or at least understand, why you did what you did? Note — it is the ‘do not be ashamed’ test, not the ‘do not get caught’ test. 2. Is there an ethical non-negotiable at play? Is there a rule that any reasonable person should apply to this situation regardless of the consequences? Some rules are unbreakable, even when the stakes are high. For instance, you should never act in ways that undermine the equality and dignity of anyone. The rules are often associated with duties — some of which you create yourself, like when you make a promise. 3. Will my action make the world a better place? We often think about ethics in terms of consequences. ‘The greatest good for the greatest number’ is a ‘maxim’ many people recognise and accept. Consequences are an important part of ethical decisions, but are they everything? You should be aware of what you are sacrificing when trying to bring about good consequences. Are you violating an important principle? Are you compromising your own values? If so, have you considered these facts when balancing harms and benefits? 4. What would happen if everybody did this? Would you be happy if your reason for action was used by everyone in the same circumstance? If not, then why should you allow yourself to take the action this time? Most ethical frameworks suggest the right decision for one person should be right for everybody in the same position. A lot of unethical behaviour arises from people making special exceptions for themselves. This test helps you to be sure you’re willing to hold yourself to the same standards you hold others to. 5. What will this do to my character or the character of my organisation? Many people believe that our decisions shape our character and vice versa. That is, we cannot lie and cheat without eventually becoming a fraudulent liar at the core of our self. For instance, if we tell a lie once, we will tend to be more likely to lie next time or on another occasion, which over time creates a pattern of acceptable behaviour. So, think about whether your action is establishing a habit either for you or your organisation. If so, is it a good habit (virtue) or a bad one (vice)? If you cut corners on a work job today are you developing a habit of laziness that may affect your future work? 6. Is this consistent with my values and principles? Plenty of people and organisations are happy to tell you what they stand for — but do they walk the talk? Are your actions reflecting your ethical beliefs? Most ethical systems have no time for hypocrisy. Answering these questions doesn’t guarantee everyone will accept your decision. Moral disagreement is extremely common. But even the answer to this question doesn’t achieve universal approval, the way in which we reach those answers matters. Ethics allows us to explore these questions in a way that is sincere, rational, competent and honest.

Topic 4: Ethics in real estate

As a real estate agent, it is important to remember people have different values. When working with either clients or colleagues, it is a good business practice to be aware of people’s different values to enhance the working relationship.

2 Ethics and its relationship to agent legislation and codes of practice

2.1 Professional ethics and agent rules of conduct Ethical practice in real estate is not just a ‘nice to have’. Ethics is a legal requirement for those working in the real estate sector. Each state has its own set of agent Rules of Conduct, which are regulated by the authority in the state. Though the agent rules of conduct differ in each state, they are based upon providing honest and transparent dealings by an agent to all parties in a transaction.

Since legislating the Rules of Conduct, any real estate agent who conducts a breach of the Rules of Conduct, will face disciplinary action by the state’s regulatory authority for the property industry. This disciplinary action will vary according to the actions of the real estate agent and could lead to monetary fines, or actions to suspend or cancel the real estate agent’s registration to work in the industry.

Resource 2: Rules of conduct

Refer to the ‘Toolbox’ in your KapLearn subject room for further details on the rules of conduct in your state.

2.2 Professional ethics and industry standards Professional ethics are principles that govern the behaviour of a person or group in a business environment. Like values, professional ethics provide rules on how a person should act towards other people and institutions in such an environment.

Industry codes of practice are also used to create ethical practices in the real estate industry. When industry associations have a code of ethics or code of practice, it helps clients understand the standards they should expect from a real estate agent during a property transaction. Industry codes of practice help promote trust with real estate agents.

Whilst it is important for industry associations to have codes of ethics and practice, these codes are not law and do not have the same legal consequences if breached. The primary value of a professional code of practice within industry associations is not to use it as a checklist for disciplining non-conforming members; rather, its primary value is to act as a ‘prompt sheet’ for the promotion of ethical decision-making by members of the profession. Members who do breach the codes may find their membership revoked.

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2.3 Ethical practices in real estate Examples of ethical practice in real estate include: • renewing one’s licence or registration as required • maintaining and developing industry qualifications to ensure competency

and currency • maintaining knowledge of relevant legislation and truly demonstrating this

knowledge in real estate activities and transactions • complying with the fiduciary duties and obligations • acting with honesty, fairness, and professionalism • obtaining and acting according to client authority and instructions • following the principal’s (client’s) instructions unless unlawful or unethical • exercising skill, care, and diligence in the role as a real estate agent • acting in the best interest of clients, putting client interest before self-interest • maintaining independence and disclosing and managing potential conflicts of interest • disclosing real and potential conflicts of interest, including disclosing material or

material facts, beneficial interests, commission, rebates • maintaining confidentiality and security of information • making sure advertising and communications are not false or misleading • using clear communication in all dealings with all parties to the real estate

transaction, including providing written documents and signed documents.

2.4 Role of procedures, forms and documents in managing risk of unethical practice Ethical real estate agents use procedures, forms and documents in managing the risk of ethical behaviour. Real estate agents are trained in written agency procedures. These procedures provide clear guidelines for real estate agents to conduct business in an ethical manner.

Topic 4: Ethics in real estate

Examples: Agency procedures to promote ethical practice

Example 1

A real estate agent or someone close to the real estate agent is interested in purchasing a property listed with the agency. To ethically support this process, a prescribed form provided by the regulatory authority is to be completed.

Using standard agency forms that comply with legislation and industry requirements can also assist in managing risk.

Example 2

Inducting (onboarding) new real estate agents and support staff, and providing training in agency policies and procedures. The use of these ensures consistency in decisions and actions by removing the range of actions possible in a given situation by an agent and providing an appropriate pathway to follow.

Example 3

Maintaining continuous professional development during employment reduces the risk of unethical practices by improving and ensuring currency of industry knowledge for agents.

3 Ethical standards for privacy, confidentiality and disclosure

3.1 Privacy, confidentiality and security of customer information The confidential and responsible nature of a real estate agent’s work makes it a matter of public concern that the integrity and reputation of a real estate agent should be beyond question. At the start of this topic, it was stressed that one of the fiduciary obligations of a real estate agent acting for a client is to keep information confidential, except where the real estate agent is required by law to disclose it (such as material fact).

Another area of particular focus or concern in real estate is ensure ethical handling of personal information by agents. Agents are privy to a great deal of personal information about their clients, such as divorces, are in financial difficulty or are very ill. The real estate agent might do this believing that it will be beneficial for the sale and that sharing the client’s position may move the sale along more quickly. However, sharing such information without the client’s knowledge is a breach of the agent and principal relationship. It may also prejudice the client’s chances of getting the maximum amount for their property.

Keeping client information secure is vital to providing professional service.

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Example 1: Breach of agent and principal relationship

A real estate agent is negotiating between the vendor and buyer for the sale of a property. The real estate agent believes he/she is near to closing the sale, except for one or two minor details about the buyer’s offer to be confirmed. The real estate agent leaves the agency to quickly buy lunch, but as the agent is crossing the street, the vendor calls the real estate agent’s mobile. Keen to close the sale, the real estate agent discusses the buyer’s offer in a loud voice, so as to talk over traffic noise. Another person, crossing at the same time, hears the conversation. This person is another prospective buyer of the same property. This person has overheard a lot of information about what the offer is and how far short of the vendor’s requirements. This is a breach of the buyer’s

Example 2: Breach of agent and principal relationship

An agency is auctioning a property for a vendor. The vendor is selling due to financial troubles. At a dinner party that weekend, a friend comments on the ‘For Auction’ sign the agency has erected at the property. The real estate agent makes the comment that the vendor is selling because they have financial difficulty and is in need of an urgent sale. It turns out the friend also knows the vendor, and now also has private details of the vendor’s financial affairs.

Potential property buyers often ask the vendor’s agent for the ‘inside scoop’ on what will it take to buy this property? Unethical real estate agents will tell prospects “if you can put in an offer at a certain price, I can get the vendor across the line”.

3.2 Disclosure of material facts A material fact is a fact that would be important to a reasonable person in deciding whether or not to proceed with a particular transaction. Material facts are inherently related to issues of market value. They are facts which: • may be sufficiently significant or relevant to influence decisions on whether to buy,

sell or rent; and/or • what market value would apply to buying, selling or renting.

The disclosure of these facts is another area of real estate practice that often is the focus of ethical issues.

Whilst purchasers and tenants still need to take reasonable steps to inform themselves about a property before they proceed with a purchase or lease, the agent dealing with the sale or lease needs to disclose material facts that may impact on the prospect’s decision to proceed.

When marketing or managing a property transaction it is important to remember that there is a difference between personal information and material facts. Material facts relate to the property and personal information relates to the individual parties involved in a property transaction.

Not disclosing a material fact is not only a breach of the agent legislation, but it is also a breach of the legislative provisions relating to misrepresentation by concealment.

Topic 4: Ethics in real estate

Resource 3: State legislation

Refer to the ‘Toolbox’ in your KapLearn subject room for detailed information on your state’s legislation on material facts.

3.3 Conflicts of interest and referrals While there are many different scenarios that may constitute a conflict of interest, a useful definition is:

A set of circumstances that creates a risk, or perceived risk, that judgement or actions regarding a primary interest will be unduly influenced by a secondary interest.

(Real Estate Institute of New South Wales (REINSW))

A conflict of interest arises when an individual or corporation has competing interests in a single transaction or relationship. Conflicts of interest arise when an agent’s personal or professional interests compete with or are different from those of the agent’s client. Interests can be financial, personal, business, shareholdings or a role in a company as well as the beneficiary of a trust and can be either direct or indirect.

Direct interests involve the agent taking possession of or receiving a benefit personally, whether it is financial or otherwise.

Examples: Direct interest

• when an agent personally buys, leases or takes an option on a property that they hold an agency listing for, or

• where an agent receives a benefit such as shares, holidays, discounted goods or dividends from a company whose services are recommended by the agent to clients.

An indirect interest may arise when the agent assists a person or entity to which they are affiliated to obtain an interest in a property that is subject to the agency’s real estate duties.

Examples: Indirect interest

• when an agent assists an employee, close associate, friend or family member to take some form of interest in a property that is the subject of the agency’s real estate duties, or

• when an agent recommends to a person, a service provider which is operated by or affiliated with a relative, friend, business or other associate of the agent.

Referral fees

Wherever an agent receives a referral fee they must disclose this to ensure compliance with Australian laws. An illegal fee, rebate or commission added by an agency is referred to as a ‘kickback’.

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Example: Disclosure of referral fees

An agent is dealing with a buyer who is interested in purchasing a property through the agent. The buyer asks the agent to recommend a good solicitor to do the conveyancing. The agent recommends a particular solicitor, who gives the agent a fee for each referral they send to the solicitor. Would the purchaser need to know about the referral fee? Yes. The purchaser may think the agent is referring the solicitor because they are the best conveyancers in the area. If the purchaser knew that money was changing hands for the recommendation, they may view the recommendation differently.

Example: Kickback

A landlord’s rental property needs a new hot water system. The managing agent provides a quote from a plumber but does not tell the landlord that the agency receives a 10% referral fee for each job. The landlord finds this out and wonders whether the agent only suggested using the plumber because they want the referral fee. There may have been better contractors to do the job, at a more competitive price.

It is a principle of common law that an agent must avoid conflicts of interest. The obligation for an agent to disclose any conflict of interest is also a specific requirement under the agent rules of conduct and agent legislation.

There is a range of detailed information on disclosing conflicts of interest, including those mentioned above.

Resource 4: Disclosing conflicts of interest

Refer to the ‘Toolbox’ in the KapLearn subject room for more detailed information about what the legislation says about how and when to disclose conflicts of interest.

3.4 Secret commission Fiduciary obligations also refer to the duty not to gain a personal benefit or a benefit for a third party, without the consent of the principal.

Example: Secret commission

A salesperson deals with a particular prospective buyer on one of the agency’s listed sale properties. The salesperson is aware that other salespersons in the agency have prospective buyers who have seen the property and who are interested in putting in an offer. The salesperson advises the buyer that they will need to put in the best possible offer they can, so they are not disappointed if the property is sold to another buyer. The buyer tells the salesperson, if ensured that they are the successful buyer for the property, they will personally give the salesperson $20,000. The buyer says that ‘No one needs to know’, and ‘it will be a payment to thank the salesperson for helping them secure the property’. As an agent, the salesperson cannot accept this money, without the permission of the seller, as otherwise it would be considered ‘secret commission’.

Topic 4: Ethics in real estate

3.5 Price guide recommendations ‘Underquoting’ occurs when an agent makes representations about the price of a property, either through advertising or in one-on-one dealings with a potential buyer, that are less than their reasonable estimate of the property’s selling price.

Underquoting is illegal under agent legislation. Under Australian Consumer Law, it is unlawful to make false or misleading representations in relation to price.

Resource 5: Underquoting

Refer to the ‘Toolbox’ in your KapLearn subject room for detailed state legislation about underquoting, the guidelines, and how to be compliant with the legislation.

4 Strategies to resolve concerns about ethical practice

4.1 Sources of specialist advice about ethical practice

Agency management

As a staff member of an agency, reference manager or supervisor for assistance with understanding ethical issues and the right way to handle certain situations. More experienced and trusted agency colleagues may also be of assistance.

Regulators

One of the functions of the state based real estate regulators is to provide advice to both consumers and agents about compliance with agent legislation. The regulators usually provide downloadable Fact Sheets and have telephone advice lines, as well as the capacity to email for advice.

Industry bodies

While professional industry associations help educate members and maintain high standards and ethical behaviour, they also usually provide advice to members to assist them to comply with the agent legislation.

Technical experts

Sometimes the best source of advice can be a technical expert outside of the industry, such as accountants, lawyers, tax agents etc. Agencies that are part of a franchise can approach the franchise managers for advice.

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4.2 Responding to ethical concerns When responding to ethical concerns, real estate agents need to be aware of other strategies, besides seeking expert advice, particularly when there are discrepancies between the agent or agency practices and real estate standards. Being able to broach the subject of ethical discrepancies can be uncomfortable but is an important skill.

Team meetings could be a good avenue for regular discussions about ethical dilemma in real estate and how the agency believes they should be handled. The agency’s code of ethics should be regularly reviewed. If the agency principal takes the time to explain why the agency’s code of conduct, as well as legislative agent rules of conduct, are in place, it encourages employees to understand the ethical principles behind them.

If employees have an ethical dilemma, they should seek advice from their manager or supervisor. If the issue involves manager or supervisor’s behaviour, they may consider going directly to the agency manager/licensee in charge. Serious breaches of ethics, such as fraud or misappropriation of trust monies (illegal use of another person’s money), are crimes that will need to be investigated for the protection of clients of the agency.

4.3 Communication strategies for ethical practice When communicating with clients, real estate agents should ensure that they use strategies for clear representations of consumer rights and responsibilities. The real estate agent’s aim is for all communication with clients to be clear and transparent, providing quality advice and links to where the client or customer can go for further information.

As certain aspects of a real estate transaction can expose the risk to both the agency and the client, by providing written communication risk can be reduced to both parties.

Example: Ethical practices

The process of submitting offers on a property can be problematic for buyers, who may not understand the process from a legal viewpoint, and what is the role of the real estate agent. By producing a ‘Fact sheet’ on topics such as ‘gazumping’ and ‘submitting offers’, it can reduce the risk of unethical practice or conflicts, hence reducing complaints.

Real estate agents must always provide copies of any documents the client is required to sign. They should also provide information about how clients can lodge a complaint with the agency, and how the complaint will be managed.

Ethical communication has several principles or foundational elements. Communicating fact-based messages honestly and accurately is central to ethical communication. Ethical communication involves being able to freely express messages, with diversity of perspective, being honest and straightforward, but without offending or provoking its audience.

Ethical communication shares access to the resources and facts that helped formulate the message. Freely providing information and sharing resources is another mode to communicate, demonstrating the agency is willing to communicate ethically with its clients.

Topic 4: Ethics in real estate

Communicating in an ethical manner also requires ensuring messages are accessible to a diverse audience, especially if someone’s first language is not English. The use of simple language that is not easily be misinterpreted.

Example: Unethical practices

A real estate agent drafts a message that is not clear and concise. The communication consists of complex language that manipulates the reader and is not suitable for the targeted audience. This type is seen as an unethical form of messaging.

If the messaging is not objective and the writer is communicating their option or the others as fact, then they are not communicating in an ethical manner.

The International Association of Business Communicators (IABC) outlines a code of ethics for all its members, which could be considered as useful advice as communication strategies for ethical practice.

The IABC Code of Ethics states:

I am honest — my actions bring respect for and trust in the communication profession.

I communicate accurate information and promptly correct any errors.

I obey laws and public policies; if I violate any law or public policy, I act promptly to correct the situation.

I protect confidential information while acting within the law.

I support the ideals of free speech, freedom of assembly, and access to an open marketplace of ideas.

I am sensitive to others’ cultural values and beliefs.

I give credit to others for their work and cite my sources.

I do not use confidential information for personal benefit.

I do not represent conflicting or competing interests without full disclosure and the written consent of those involved.

I do not accept undisclosed gifts or payments for professional services from anyone other than a client or employer.

I do not guarantee results that are beyond my power to deliver. International Association of

Business Communicators (IABC)

It is important to understand the role that agency procedures play in communicating ethically. In most cases, a good agency will have outlined in its procedures how it wants employees to deal with common ethical issues, and how to deal with discussing and reporting potential unethical practices. The use of any standard forms, standard agency letters or documents, and standard procedures that an agency has is a good starting point to staying on track with ethical practice.

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Key points • There are some universal ethical principles that apply across all professions,

and there are specific ethical requirements for agents based on the nature of the fiduciary relationship outlined in agent legislation. Acting ethically forms part of an agent’s obligations at law, both under statute and the law of agency practice.

• There are risks to all parties and stakeholders in a real estate transaction if the real estate agent does not act ethically. These risks can be reduced if agents understand ethical considerations in their personal decision making, as well as in compliantly practicing their profession.

• Ethical agents use procedures, forms and documents in managing the risk of ethical behaviour. Written agency procedures provide clear guidelines for staff in how to carry out their job functions in an ethical way.

• Due to the nature of their fiduciary relationship with their client, agents need to clearly understand the ethical standards for privacy and confidentiality. Additionally, agents must disclose conflicts of interest and where the law requires certain specific disclosures such as material facts, full disclosure is provided.

• There are many sources of ethical practice such as agency management, regulatory authorities, industry associations and bodies, and technical experts

• When communicating with clients, real estate agents should ensure that they use strategies for clear representations of consumer rights and responsibilities.

References The Ethics Centre n.d., What is ethics?, viewed 8 April 2020, <https://ethics.org.au/why- were-here/what-is-ethics>.

International Association of Business Communicators (IABC) n.d., IABC Code of Ethics for Professional Communicators, IABC, viewed 8 April 2020, <https://www.iabc.com/about- us/purpose/code-of-ethics>.

Macquarie Dictionary, viewed 8 April 2020, <www.macquariedictionary.com.au>.

Real Estate Institute of New South Wales (REINSW) n.d, viewed 8 April 2020, <https://www.reinsw.com.au/Web/Posts/Latest_News/201507/Representing_both_sid e_Conflicts_of_interest_in_real_estate.aspx>.

https://ethics.org.au/why-were-here/what-is-ethics/

https://www.iabc.com/about-us/purpose/code-of-ethics/

http://www.macquariedictionary.com.au/

https://www.reinsw.com.au/Web/Posts/Latest_News/201507/Representing_both_side_Conflicts_of_interest_in_real_estate.aspx

Topic 5: Working in the real estate industry

Industry Fundamentals NSW

Contents

Overview ............................................................................................................. 5.2

Topic learning outcomes ............................................................................................ 5.2

1 Potential employment arrangements ....................................................... 5.3

1.1 The Real Estate Award ................................................................................... 5.3

1.2 Employee classification levels ........................................................................ 5.3

1.3 Commission payment ..................................................................................... 5.7

2 National Employment Standards (NES) ..................................................... 5.7

3 Employment agreements ......................................................................... 5.8

3.1 Commission, the Real Estate Award and employment agreement ............... 5.9

3.2 Commission only employment ....................................................................... 5.9

4 Industry bodies and their role ................................................................ 5.10

5 Industry codes of practice ...................................................................... 5.11

6 Continuing Professional Development (CPD) .......................................... 5.12

6.1 The role of CPD in developing career and staying up-to-date ..................... 5.12

6.2 Keeping track of CPD .................................................................................... 5.13

Key points .......................................................................................................... 5.14

References ......................................................................................................... 5.15

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Overview To ensure success as a real estate agent, it is important to understand the practical aspects of the real estate industry. A strong knowledge of the industry employment opportunities coupled with a working knowledge of the broad administrative aspects of the industry is essential. This topic covers the aspects of working in real estate such as employment opportunities and some of the administrative aspects like employment arrangements, the real estate reward system, the National Employment Standards and employment agreements.

Topic learning outcomes On completing this topic, students should be able to: • research and explain potential employment arrangements for real estate in the state

or territory of operation • analyse National Employment Standards (NES) and record employer and employee

rights and responsibilities regarding conditions of employment • examine and explain standard terms and conditions for employment in real estate • research and explain regulatory requirements for continuing professional

development for real estate personnel • identify and record opportunities and priorities for continuing professional

development.

Topic 5: Working in the real estate industry

1 Potential employment arrangements Applying for real estate roles can be confusing, as the terminology is unique, and may be used differently across the industry. For example, in some agencies, real estate agents who solely focus on sales have administrative assistants that do a lot of the clerical aspects of this work, but in other agencies, the administrative function of the role is included in the position description of the real estate agent. When applying for roles, an applicant needs to consider the detailed requirements of the job role to ensure they understand exactly what is involved.

Agencies offer full time, part-time (working less than 38 hours) or casual roles. Some agencies employ casual staff with the view of offering full time permanent roles. The main focus of casual roles in real estate is administrative work supporting the sales and property management functions.

Resource 1: Main job roles available in the real estate industry

The Real Estate Institute of Australia (REIA) provides a description for some of the main job roles available in the industry at: <https://reia.asn.au/agents/training/a-career-in-real-estate>.

1.1 The Real Estate Award The Real Estate Award is a national award that sets out the minimum weekly pay rate for the various employee classification levels (see below). Where an employee uses their own vehicle or mobile phone for work, the Award provides for an allowance.

Resource 2: The Real Estate Award

Access and view the Real Estate Award at: <www.fwc.gov.au/documents/documents/modern_awards/award/ma0001 06/default.htm>.

1.2 Employee classification levels The award sets out four employee levels: • Real Estate Employee Level 1 (Associate level) • Real Estate Employee Level 2 (Representative level) • Real Estate Employee Level 3 (Supervisory level) • Real Estate Employee Level 4 (In-Charge-Level).

https://reia.asn.au/agents/training/a-career-in-real-estate

https://www.fwc.gov.au/documents/documents/modern_awards/award/ma000106/default.htm

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Table 1 Examples of indicative job titles and tasks

Table 1 below provides examples of indicative job titles and tasks that apply to these four levels.

Real Estate Employee Level 1 (Associate level)

Description Employees at this level have been classified as a Level 1 employee by the employer. An employee at this level is principally engaged to assist and work under the supervision of the employee(s) at a higher level. An employee at this level will not have responsibility for listing and/or selling of real property or businesses or managing rental or strata/community title properties.

Indicative job titles Indicative job titles of a Real Estate Employee Level 1 (Associate level) include: • property sales assistant or property sales associate • buyer’s agent assistant or associate • property management assistant or property management associate • property officer • leasing officer or assistant • strata/community title management assistant or strata/community title

management associate.

Indicative tasks Indicative tasks at this level may include: (a) assisting an employee(s) at a higher level (b) under the guidance and/or direction of a more senior employee, following

up enquiries with sellers and/or buyers of real property and businesses (c) responding to general enquiries from potential tenants for properties

under management (d) providing support to an employee(s) at a higher level in undertaking a

range of functions associated with the selling, leasing and/or management of real property (including strata title management) and businesses

(e) assisting in the preparation of documentation and correspondence in relation to the sale, leasing and/or management of real property (including strata title management) or businesses. Such documentation and correspondence may include:

• agency agreements • commercial and/or residential leases • advertising material associated with the sale or leasing of real property

and businesses • property inspection reports (ingoing, outgoing and periodic) under the

direction of a more senior person • strata/community title management agreements • the preparation of minutes from meetings of owner’s corporations (f) collecting rents from tenants and/or issuing rental receipts (g) investigating and arranging for the collection of rental arrears (h) prospecting and canvassing under direction of an employee at a higher

level, including phone canvassing, door knocking and letter box dropping (i) in consultation with a more senior employee, arranging maintenance and

repairs to properties under management (including under strata/community title management)

(j) provide support to an employee at a higher level in a range of functions associated with strata and community title management, in accordance with owners’ corporations’ instructions

(k) respond to general enquiries from the owner’s corporation of strata/community title schemes

(l) assisting with auctions of real property or businesses to the extent permitted under real estate law

(m) assisting with property inspections (including open for inspections), including the placement of sign boards, maintaining attendee lists from property inspections, opening and closing homes after inspection

(n) assisting with post sale processes including pest and building inspections, searches and checking progress of the conveyance process, and

(o) preparing and updating rental lists and website material.

Topic 5: Working in the real estate industry

Real Estate Employee Level 2 (Representative level)

Description Employees at this level have been classified as Level 2 by the employer. An employee at this level may perform any of the duties of a Real Estate Employee Level 1 (Associate Level) but will also have responsibility for the listing and/or selling of real property or businesses, for helping clients to buy real property or businesses, or for managing rental or strata/community title properties or for sourcing and/or securing new property managements (including strata title managements).

Indicative job titles Indicative job titles of a Real Estate Employee Level 2 (Representative level) include: • property sales representative or real estate salesperson • buyer’s agent • property management representative or property manager • business development manager • strata/community title management representative or strata title manager.

Indicative tasks Indicative tasks at this level may include: (a) performing market appraisals for sale or lease of property or businesses (b) conducting and/or supervising the preparation of documentation and

correspondence associated with the sale or leasing of property or businesses. Such documentation and correspondence may include:

• agency agreements for both sale and property management • tenancy agreements • rental bond documents • commercial and/or residential leases • advertising material associated with the sale or leasing of real property

and businesses • inventory reports • strata/community title management agreements • property inspection reports (ingoing, outgoing and periodic) (c) conducting or supervising property inspections (ingoing, outgoing

and periodic) (d) organising advertising of a property; (e) organising sign boards for open for inspections (f) conducting inspections with interested parties for property or businesses

that are for sale or lease (g) conducting negotiations between a prospective buyer and seller of

property or a business, or between a prospective tenant and the property owner

(h) using personal initiative to source and secure prospective properties to sell or manage

(i) the listing and/or sale of property or businesses (j) the leasing of commercial, industrial or retail property (k) conducting market research and providing marketing advice to customers (l) conducting auctions of property (m) liaising with conveyancers and solicitors involved in the sale of property or

businesses or in the commercial leasing process (n) assessing and processing tenancy applications (o) organising property repairs and maintenance, including ingoing and

outgoing property condition reports (p) providing advice to property owners and tenants on preventative and

planned maintenance (q) accounting for rents and expenses to property owners (r) liaising with and report to property owners and/or owners corporations (s) appearing before tenancy tribunals and providing advice to property

owners on state and territory residential tenancy matters (including the termination of tenancies)

(t) attending and/or conduct strata management meetings (u) completing strata management documentation (v) carrying out all duties and functions required under a strata managing

agency agreement.

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Real Estate Employee Level 3 (Supervisory level)

Description Employees at this level have been classified as Level 3 by the employer. A principal requirement of an employee at this level is the supervision of employee(s) classified as Real Estate Employee Level 2 (Representative Level). An employee at this level may perform any of the duties of a Real Estate Employee Level 2 (Representative Level) but will also have responsibility for the allocation of duties, co-ordinating work flow, checking progress, quality of work and resolving problems of employee(s) at a lower level.

Indicative job titles Indicative job titles of a Real Estate Employee Level 3 (Supervisory level) include: • property sales manager or property sales supervisor • property management supervisor • strata/community title management supervisor.

Indicative tasks Indicative tasks at this level may include: (a) providing leadership and supervision to Level 1 and Level 2 employees (b) the supervision and/or management of work teams (c) implementing and/or supervising quality customer service (d) monitoring of operational plans (e) assisting in the resolution of customer complaints (f) monitoring safe workplace practices (g) managing personal work priorities and professional development of self

and assisting with the professional development of others in the work team(s)

(h) training employees at lower level by personal instruction and demonstration

(i) involvement in either selling of property or businesses, leasing of commercial, industrial, retail or residential property, or supervision of a portfolio of rental properties or strata/community title schemes

(j) managing the owners corporation processes.

Real Estate Employee Level 4 (In charge level)

Description Employees at this level have been classified as Level 4 by the employer. An employee at this level may perform any of the duties of a Real Estate Employee Level 3 (Supervisory Level). The employee at this level will hold applicable qualification(s) under real estate law and have been appointed by the employer to be responsible for ensuring the business complies with its statutory obligations under real estate law.

Indicative job titles Indicative job titles of a Real Estate Employee Level 4 (In charge level) include: • licensee-in-charge • agency manager.

Indicative tasks Indicative tasks at this level may include: (a) overall supervision and management of the office (b) planning and managing business finances for the organisation (c) ensuring that the office complies with all of its statutory obligations

imposed under relevant real estate law (d) facilitating change and innovation.

Topic 5: Working in the real estate industry

1.3 Commission payment Commission payments are common in the real estate industry. There are two types: • commission payments as an incentive — real estate agents receive a guaranteed pay

rate plus extra payments for each property they sell or lease • commission-only payments — real estate agents only get paid if they sell or

lease properties.

Therefore, with either type of commission, the amount of a real estate agent’s payment is largely dependent on how many properties they sell or lease.

Commission is not just confined to sales roles. For example, property management staff can receive a commission for new properties they bring into the agency, or for growing the profits from the property management portfolio managed by the agency.

It is important that any arrangements for payment of commission are accurately documented and agreed to by both the employer and the employee.

Refer to the heading below, ‘Commission, the Real Estate Award and employment agreement’, for further information. There are strict requirements that must be met for commission-only employment in real estate.

2 National Employment Standards (NES) The minimum employment standards are legislated by the federal government and administered under Fair Work Australia, which is a national workplace relations tribunal. The National Employment Standards (NES) are ten (10) minimum employment conditions or entitlements that have to be provided to all employees, and include minimum employment conditions, which together with minimum wage orders create a safety net for employees.

The national minimum wage and the NES make up the minimum entitlements for employees in Australia. An award, employment contract, enterprise agreement or other registered agreement cannot provide for conditions that are less than the national minimum wage or the NES. They also cannot exclude the NES.

The 10 minimum entitlements of the NES are: • Maximum weekly hours • Requests for flexible working arrangements • Parental leave and related entitlements • Annual leave • Personal/carers leave, compassionate leave, and unpaid family and domestic

violence leave • Community service leave • Long service leave • Public holidays • Notice of termination and redundancy pay • Fair Work Information Statement (FWIS).

The last dot point refers to the requirement that every worker in Australia must receive a copy of the FWIS when they start a new job.

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There are recordkeeping requirements for employers in respect of payslips, time, and wages information stipulated in the NES.

Resource 3: Research the National Employment Standards (NES)

Access the Fair Work Australia website at: <www.fairwork.gov.au/employee-entitlements/national-employment- standards>, and research the NES. Also download a copy of the Fair Work Information Statement (FWIS).

Resource 4: National Employment Standards (NES) and your employment obligations

Access and view ‘What are my employment obligations under the NES?‘ by The Real Estate Employers Federation (REEF) at: <www.reef.org.au/News/ArticleId/142/what-are-my-employment- obligations-under-the-nes>.

3 Employment agreements An employment agreement is a document between an employer and its employees regarding employment conditions. Generally, when an employer extends an offer of employment, they provide the employee with a copy of their employment agreement and commission structure (if applicable) so that they may accept the offer of employment.

An employment agreement, along with the NES, sets out the rights and responsibilities of the employer, as well as the rights and responsibilities of the employees.

An employment relationship is created by entering into a contract of employment via an employment agreement. This contract distinguishes the employer-employee relationship from other types of working relationships e.g. principal-independent contractors.

The Real Estate Industry Award contains several provisions that require the establishment of a written contract of employment. An employment agreement exists to protect the rights of both the employer and employee and sets out the terms and conditions of employment.

It is best practice for an employer to have written agreements with all staff covering full job details, with a copy signed by the employee retained with each employee’s record. If a commission structure is to be paid, the method of calculating the commission and all terms of the structure needs to be outlined clearly and attached to each employment agreement.

Any arrangement made with an employer is to comply with the rules set out in the Real Estate Award, the enterprise agreement or other registered agreement. If it does not, it could mean the real estate agent is not getting the pay or conditions they are entitled to. A commonly used Employment Agreement in real estate is produced by the Real Estate Employers Federation (REEF).

https://www.fairwork.gov.au/employee-entitlements/national-employment-standards

https://www.reef.org.au/News/ArticleId/142/what-are-my-employment-obligations-under-the-nes

Topic 5: Working in the real estate industry

It is important to carefully read the employment agreement provided by the employer and understand it prior to signing. The real estate industry is known to have high staff turnover, especially roles based on achieving sales targets. A common employment condition outlined in the employment agreement is the roles and responsibilities of the employee both while employed, and also post-employment. For example, REEF’s employment agreement template contains a number of clauses that restrain various post-employment activities, including: • the employee not working for a competing business (Non-Compete Restraint) • not soliciting the agency’s clients (Non-Solicit Restraint) • not poaching agency staff (Non-Poach Restraint) • not updating social media profiles to broadcast the details of any new employer

(Social Media Restraint).

3.1 Commission, the Real Estate Award and employment agreement The commission is an incentive paid on top of the minimum weekly pay. The commission amount is agreed between the real estate agent and their employer.

It means the real estate agent is guaranteed to be paid least the minimum wage under the Real Estate Award, plus any agreed commission payments.

When a real estate agent agrees on a minimum wage under the Real Estate Award plus commission, the agreement must: • be in writing • say how the commission will be calculated.

A signed copy of the agreement must be kept by both the employee and employer.

3.2 Commission only employment From time to time, employers negotiate to pay real estate agents commission only payments. Real estate agents who prefer this payment arrangement must meet the below criteria: • have a real estate agent’s licence or be registered or permitted to do the work of a

real estate salesperson under real estate law • have worked in property sales or commercial, industrial, or retail leasing as a

Real Estate Employee Level 2 or higher (other than as a casual employee); or have operated their own real estate business (which involved the sale of property or businesses) for at least 12 consecutive months in the last three (3) years

• be at least 21 years old • not be a part-time employee, a casual, a junior, a Real Estate Employee Level 1 or

a trainee • demonstrate they have achieved the minimum income threshold (unless operated

their own real estate business within the last three (3) years).

If the negotiating real estate agent and employer agree with the commission only payment arrangement, the agreement needs to: • be in writing • include how the commission will be calculated.

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A signed copy of the agreement must be retained by both the employee and employer.

The Fair Work website outlines the rules regarding commission only payment arrangement. These rules focus on: • meeting the minimum income threshold amount • the minimum commission only rate • taking leave as a commission only employee • the cessation of payments when employment ends.

4 Industry bodies and their role Various industry groups and associations are contributing to the real estate industry by maintaining high standards through the provision of educational services and self-regulation mechanisms. These groups assist in establishing ethical standards of practice, which in turn help to increase the public image of the industry and encourage competent practitioners to operate.

Industry association memberships can assist members in accessing the latest industry thinking and insights. They also provide a collective voice for individual businesses within an industry, and many of these groups are involved with lobbying and political action.

Table 2 Examples of Real Estate Industry Groups

Australian Livestock and Property Agents Association: <www.alpa.net.au>

A national body representing the interests of livestock and rural property agents.

Australian Property Institute: <www.api.org.au>

A national body representing valuers, land economists and property professionals. Incorporates state and territory affiliated institutes offering education, training and development.

Property Council of Australia: <www.propertycouncil.com.au>

Represents the interests of investors, building owners and managers in commercial, industrial, retail, rural and tourist type property. Provides information, training and contacts.

Real Estate Institute of Australia: <https://reia.asn.au>

An industry association for real estate professionals providing a strong political lobby for the industry. Incorporates state- and territory-affiliated institutes offering a range of services including education and training.

Real Estate Employers Federation: <www.reef.org.au>

Leading employer and workplace relations advisory association for the real estate industry. It provides advice, standard templates and other products to assist real estate employers to meet their legal obligations and guide them in managing your employee relationships.

Australian Property Services Association: <www.myapsa.com.au>

It is the registered trade union representing those who work in an ‘operational capacity’ in the real estate industry. APSA ensures that employees and independent contractors in the property sector have a legitimate ‘voice’ and are properly represented in all matters that affect their profession.

Resource 5: State-based industry association

Refer to the ‘Toolbox’ in your KapLearn subject room to view details of state-based industry associations.

http://www.alpa.net.au/

https://www.api.org.au/

https://www.propertycouncil.com.au/

https://reia.asn.au/

https://www.reef.org.au/

http://www.myapsa.com.au/

Topic 5: Working in the real estate industry

5 Industry codes of practice Topic 2 discusses Legislation in real estate. The real estate industry mandated the ‘Code’ or ‘Rules of Conduct.’ Failure to adhere to the ‘Code’ or ‘Rules of Conduct’ may attract serious legal consequences. However, some industry associations promote voluntary codes of practice to encourage the ethical practice of real estate.

Example: Common codes of practice

One of the most common codes of practice referenced in the real estate industry is the Real Estate Institute of Australia’s (REIA) National Principles of Conduct. These ‘aim to promote and encourage a high standard of ethical practice by REI members and their employees in all dealings with clients, consumers, real estate professionals, regulators and the general public’ (REIA website).

Resource 6: Real Estate Institute of Australia’s (REIA) National Principles of Conduct

Read the ‘Real Estate Institute of Australia’s (REIA) National Principles of Conduct’ at: <http://reia.asn.au/wp-content/uploads/2017/10/Principles- of-Conduct-2012.pdf>.

The Principles of Conduct reflect the legislative requirements and fiduciary relationship from each state and territory. These ‘Principles’ were developed together with the state and territory Real Estate Institutes, taking into account the existing codes of conduct and current legislative requirements. To ‘act in the best interests of their client and in accordance with their instructions except where it would be unreasonable or improper to do so’ and to ‘act ethically, fairly and honestly when dealing with all parties and not allow any person to believe that they are acting for any party other than their client’.

Member associations have their own industry codes of practice as a public statement of the principles, values, and behaviour expected of members of the association. If an agent is a member of an association, and breaches the association’s membership code, usually this will lead to disciplinary action against their membership, such as cancellation of membership. However, this is different from the legal consequences that occur from breaching agent code or rules of conduct.

http://reia.asn.au/wp-content/uploads/2017/10/Principles-of-Conduct-2012.pdf

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6 Continuing Professional Development (CPD)

6.1 The role of CPD in developing career and staying up-to-date A requirement of working in the real estate industry is to register for a Certificate of Registration or Licence with the state regulator. It can only be done once the aspiring real estate agent successfully completes all the educational and work experience requirements.

After securing a role, the newly appointed real estate agent will engage in ongoing learning, coaching and mentoring, as on the job training.

Continuing Professional Development (CPD) is part of ongoing career success, as it ensures currency in the profession. CPD ensures real estate agents overall knowledge is current with regards to the; economic environment, consumer behaviours, technology, and legislative requirements. A common saying is: ‘If you stand still you will get left behind’, as the currency of knowledge and skills becomes outdated.

Rather than seeing CPD in terms of fulfilling mandatory requirements of the industry regulator or mandatory requirements of industry membership, CPD should be viewed as an ongoing process that continues throughout the real estate professional career. CPD is an opportunity to update existing skills and knowledge as well as learn new ones. CPD should be treated as something to be organised, diarised and completed with the same priority as any other important agent duties.

The ultimate outcome of well-planned CPD process is that it safeguards the public, the employer, and the real estate agent as a professional person with a professional career.

CPD is important as it ensures: • that statutory requirements are met (in states where this is required) • that agents’ legislative knowledge about real estate transactions is kept up-to-date. • the ongoing development of agent capabilities, to keep pace with the current

standards of others in the same field • reinforcing the agent’s understanding of industry best practice • that the agent develops an awareness of the changing trends and directions in the

property industry • that the agent continues to make a meaningful contribution to the work team and

are more effective in the workplace • maintaining and enhancing the knowledge and skills to deliver a professional service

to clients and the community • Furthering the agent’s career opportunities, by moving into new positions to then

manage and influence others, potentially improving the agent’s income • that there is greater public confidence in agents as professionals, and in the

real estate industry as a whole.

Many agencies provide internal training, coaching and mentoring to employees, as well as opportunities to complete external courses or attend seminar and conferences.

Topic 5: Working in the real estate industry

The agent’s ownership of their own ongoing professional development ensures currency in knowledge and skills to deliver the high quality of service that safeguards the public and meets the expectations of clients.

Resource 7: Continuing Professional Development (CPD)

Refer to the ‘Toolbox’ in your KapLearn subject room for additional information about your state’s CPD.

6.2 Keeping track of CPD Keeping track of CPD is good business practice. Whether it is a state legal requirement or not, each real estate agent should develop a system to track their completed CPD. In the event a real estate agent misplaces their statement of attainments, training providers can reproduce training transcripts.

The template below can be used to keep track of completed CPD. Some real estate agents create their own personal development plans to keep track of their individual development requirements, as well as budgets, specific dates, and venues for training, statements of completion, etc.

Name: _______________________________________________________________________

Date: _______________________________________________________________________

Desired learning

outcome Learning method Resources needed

Time frame Evidence of

learning

What is your learning goal?

What competency does this goal support?

What will you need to assist you?

When will you begin? How much time will you invest per week? When do you expect to have completed this learning?

How will you demonstrate that you have met this outcome?

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Key points • There is the opportunity to work in real estate on a full time, part time (working less

than 38 hours) or casual basis. Many agencies offer full time roles to employees that have started as casuals, such as doing weekend reception work or assisting in sales and property management duties.

• Most real estate industry employees are mostly covered under the National Real Estate Award, which sets employee levels, minimum pays and indicative tasks.

• The Real Estate Industry Award contains several provisions that require the establishment of a written contract of employment, usually referred to as a Letter of Employment.

• The Real Estate Industry Award, Letter of employment and National Employment Standards together set out the terms and conditions of employment, as well as employer and employee rights and responsibilities.

Topic 5: Working in the real estate industry

References Australian Livestock and Property Agents Association (ALPA) n.d., National body representing the interests of livestock and rural property agents, viewed 8 April 2020, <http://www.alpa.net.au>.

Australian Property Institute (API) n.d., National body representing valuers, land economists and property professionals, viewed 8 April 2020, <https://www.api.org.au>.

Australian Property Services Association (APSA) n.d., Registered trade union representing those who work in an ’operational capacity’ in the real estate industry, viewed 8 April 2020, <http://www.myapsa.com.au>.

Fair Work Commission 2020, Real Estate Industry Award 2020, viewed 8 April 2020, <https://www.fwc.gov.au/documents/documents/modern_awards/award/ma000106/d efault.htm>.

Fair Work Ombudsman n.d., Compliance with Australian workplace laws, Australian Government, viewed 8 April 2020, <https://www.fairwork.gov.au>.

Fair Work Ombudsman n.d., National Employment standards, Australian Government, viewed 13 April 2020, <https://www.fairwork.gov.au/employee-entitlements/national- employment-standards>.

Property Council of Australia n.d., Represents the interests of investors, building owners and managers in commercial, industrial, etc., viewed 8 April 2020, <https://www.propertycouncil.com.au>.

Real Estate Employers’ Federation (REEF) 2019, What are my employment obligations under the NES, 7 May, viewed 8 April 2020, <https://www.reef.org.au/News/ArticleId/142/what-are-my-employment-obligations- under-the-nes>.

Real Estate Institute of Australia (REIA) n.d., Glossary of terms, viewed 8 April 2020, <http://reia.asn.au/consumers/glossary-of-terms>.

Real Estate Institute of Australia (REIA) 2012, Principles of Conduct, viewed 8 April 2020, <https://reia.asn.au/agents/principles-of-conduct>.

Real Estate Institute of Australia (REIA) n.d., A career in real estate, viewed 8 April 2020, <https://reia.asn.au/agents/training/a-career-in-real-estate>.

http://www.alpa.net.au/

https://www.api.org.au/

http://www.myapsa.com.au/

https://www.fwc.gov.au/documents/documents/modern_awards/award/ma000106/default.htm

https://www.fairwork.gov.au/

https://www.fairwork.gov.au/employee-entitlements/national-employment-standards

https://www.propertycouncil.com.au/

https://www.reef.org.au/News/ArticleId/142/what-are-my-employment-obligations-under-the-nes

http://reia.asn.au/consumers/glossary-of-terms

https://reia.asn.au/agents/principles-of-conduct/

https://reia.asn.au/agents/training/a-career-in-real-estate/

Topic 6: Marketing and communication channels in real estate

Industry Fundamentals NSW

Contents

Overview ............................................................................................................. 6.3

Topic learning outcomes ............................................................................................ 6.3

1 General understanding of real estate services .......................................... 6.4

2 Relationship between marketing and communication channels ............... 6.6

2.1 What is marketing? ........................................................................................ 6.6

2.2 Who is a client? .............................................................................................. 6.9

2.3 Who is a customer? ........................................................................................ 6.9

2.4 What is a communication channel? ............................................................. 6.10

2.5 Social media policy ....................................................................................... 6.19

3 Research to understand the market ....................................................... 6.20

3.1 Market analysis ............................................................................................ 6.20

3.2 Market research ........................................................................................... 6.22

3.3 Other investigations ..................................................................................... 6.22

3.4 Creating a marketing plan ............................................................................ 6.23

3.5 Establish marketing objectives ..................................................................... 6.23

3.6 Conduct a SWOT analysis ............................................................................. 6.25

3.7 Make decisions ............................................................................................. 6.26

4 The role of marketing and communication in client and community engagement ........................................................................................... 6.26

4.1 What is community engagement? ............................................................... 6.27

5 Ethical considerations in marketing and communication ........................ 6.28

5.1 What is ethical practice? .............................................................................. 6.28

5.2 Trust and how to become trustworthy ........................................................ 6.29

5.3 Legal obligations ........................................................................................... 6.32

5.4 Rules of conduct ........................................................................................... 6.33

5.5 Advertising ................................................................................................... 6.34

5.6 Unlawful practices in real estate advertising ............................................... 6.34

5.7 Steps for avoiding misrepresentation .......................................................... 6.39

Introduction to real estate

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Summary ........................................................................................................... 6.43

Key points .......................................................................................................... 6.43

References ......................................................................................................... 6.44

Topic 6: Marketing and communication channels in real estate

Overview In real estate, marketing is a major point of focus in all aspects of the industry. From marketing the agency, the agent, services and the property, and how best to connect with all the communication channels.

Topic learning outcomes On completing this topic, students should be able to: • demonstrate a general understanding of services typically provided by a real estate

business • describe the definition, intent and purpose of marketing and how it connects with

the communication channels • describe how marketing connects with the client, customer and the community • explain the ethical practices that must be adhered to in marketing and

communication.

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1 General understanding of real estate services To understand this marketing topic, it is important to understand the typical services provided by a real estate business and the variety of job roles available. A refresher is available below in Table 1.

Table 1 Services offered by real estate agencies

Residential sales The sale of land, property, homes, apartments, units and townhouses, where people live or erect a home.

Sales by auction The auction is conducted by an auctioneer either directly hired by the vendor, or by their chosen real estate agency. Potential buyers (bidders) compete against each other, by making increasingly high offers until only one buyer remains. The house is then sold to that highest bidder by public auction.

Commercial sales The sale of land and property zoned for commercial or business purposes.

Industrial sales The sale of land zoned for industrial purposes and factories, warehouses etc.

Business broking The sale of an actual business or income-producing commercial enterprise, such as hotels, shops and other business entities

Residential property management

The leasing and management of residential property.

Project management The sale or leasing of multiple properties on behalf of a developer or builder.

Commercial, industrial and retail management

The leasing and management of property used for retail, business, commercial and industrial enterprises.

Strata management & community management

The management of property developments on behalf of an owners’ corporation or neighbourhood association with common property, and shared facilities and amenities such as buildings, lifts, swimming pools, etc.

Stock and station agency The sale, leasing and management of rural land and property, and/or the sale of livestock stock and agistment.

Buyers agency Locating and securing property for buyers.

On-site residential property management

Leasing and management of property specifically within a development where the real estate office is located.

Holiday lettings Leasing and management of property usually for short-term periods to casual occupants.

Within a real estate office, there will be a wide range of personnel undertaking the different roles. In smaller offices, some of these roles may be combined, and larger businesses may have many staff with different specialised roles.

Topic 6: Marketing and communication channels in real estate

Table 2 Common roles in the real estate industry and their main responsibilities

Roles Responsibilities

Licensee-in-charge The licensee in charge is responsible for proper supervision of the business carried and for the actions of all employees. This person must be licenced. May be the owner of the business, or if the owner does not have a real estate licence, they may employ someone to undertake the licensee-in-charge role.

Principal Owner of the business. As stated above the owner may or may not also be the licensee-in-charge.

Office manager Manages staff and responsible for office administration.

Team or department manager

In larger offices, there could be multiple managers for different teams, e.g. Sales team manager, Property management team manager, Administration team manager etc.

Sales manager Trains, guides and mentors the sales team to provide excellent service and meet key performance indicators (KPI’s)/ targets.

Sales agent Must be either Registered or Licenced. Main role is to obtain properties to sell (listings) and sell those properties. Other roles may vary depending on the size and structure of agency.

Sales assistant Must be either Registered or Licenced. Assists sales agents above by completing administrative tasks associated with the sales function.

Sales executive Oversees various activities leading up to the purchase and sales of properties, for e.g. promotion of property sales on advertisement media and listing services, overseeing the preparation and approval of documents such as purchase agreements and lease contracts.

Auctioneer Must be licenced as a real estate agent and have an additional Auctioneers accreditation. Auctions property for sale. Some sales agents are also Auctioneers.

Marketing manager Administers advertising and marketing for the agency. This may include creating property ads, proofing ads created by agents, uploading ads in relevant websites/ print media, monitoring customer response to marketing.

Property manager Must be either Registered or Licenced. Manages rental properties including listing, checking tenant applications, property inspections, dealing with landlords and tenants, organising repairs and all tasks required to manage the property on behalf of the landlord.

Leasing agent Must be either Registered or Licenced. Shows property to potential tenants, check tenancy applications, process new tenants to their rental properties, maintenance and repair management.

BDM (Business development manager)

Must be either Registered or Licenced. Obtains new listings (properties to rent); liaises with landlord; creates marketing, shows property to potential tenants.

Receptionist Does not have to be registered or licenced however it is advisable this role is at least registered. Main role is to manage phone calls and initial enquiries, manage generic office emails, attend to any visitors or clients coming into the office. May also assist with some administrative works as required by the team.

Bookkeeper Does not have to be registered or licenced however it is advisable this role is at least registered. Maintains financial records for the agency.

Accountant Must have accounting qualifications. Maintain accounting of general and trust accounts.

These roles and responsibilities will vary depending on the size of the agency and the agency’s office structure.

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2 Relationship between marketing and communication channels It is crucial that any marketing activity is aligned to attract the desired audience, therefore choosing the appropriate communication channel is a necessity. Let’s start by first understanding the key question — ‘what is marketing?’

2.1 What is marketing? Marketing is a combination of many things that help to raise the profile of a business amongst its target clientele. Many people think that marketing is advertising and promotion of a business and its services, but actually, advertising and promotion are just one small component of marketing.

In the real estate industry, marketing is about perceiving our business through the eyes of our clients and customers, so that the business can operate and serve customers in a way that generates the desired income and profits. Marketing involves a range of criteria including the originality of the business concept, the nature of the strategic business plan and the decisions and actions taken to create sales and business opportunities. The famous marketing expert Peter Drucker observed some decades ago that marketing is “the whole business seen from the point of view of its final result, that is, from the customer’s point of view.” Drucker believed that an organisation only had two functions: innovation and marketing. Source: Drucker, P 1963.

Today marketing is a serious business discipline that carries an entirely different connotation to that which it did even as little as a decade ago. One of today’s leading experts in marketing, Philip Kotler, describes marketing as meeting needs profitably. He goes on to suggest that most of us believe that we meet the needs of our clients and customers successfully, but our businesses are not set up to do it from the most profitable perspective. Often, this is an exercise of trial and error. He goes on to say that marketing is the homework that you do to hit the mark that satisfies the needs of the target market exactly. Source: Kotler, P n.d..

Marketing today includes identifying what customers and clients want, providing them with the right range of products and services, establishing an attractive and profitable pricing model, informing the target clientele about a business has to offer and then delivering the products and services in the best possible way to create repeat and referred business.

Another definition of marketing is:

The management process through which goods and services move from concept to the customer. It includes the coordination of four elements called the 4 P’s of marketing — Product, Price, Place and Promotional:

Product: Identification, selection and development of a product

Price: Determination of its price

Place: Selection of a distribution channel to reach the customer’s place

Promotional: Development and implementation of a promotional strategy. (BusinessDictionary.com)

Topic 6: Marketing and communication channels in real estate

The 4 P’s model above is also referred to as the ‘marketing mix’. This model was first proposed (McCarthy EJ 1960) and continues to be used as a fundamental framework for marketing decision-making.

Table 3 below shows how the essential elements of marketing, the 4 P’s, can be drawn together to create an effective campaign. This table demonstrates the components available for each of these elements and how the business owner or marketing manager needs to critically determine and then match specific criteria to develop the overall ‘marketing mix’ for the agency’s overall marketing strategy.

Table 3 Creating an effective marketing campaign using the 4 P’s marketing mix model

Element Component Variables

Product Design What are the features of the product being sold & its benefits for the consumer?

Options Is there a choice, e.g. multi-list, exclusive, open?

Quality Is it a high-level service or minimum service ‘model’ or ‘option’?

Range Does it have a general or niche market appeal? Will it impact negatively on other services already provided by the same company?

Packaging Is this the image & perception that the company wants in the market?

Price Costing Establish profitability and have price positioning options

Positioning Is the good/service viewed as being good value, and is it competitive?

Discount Do discounts apply? And how will this impact on the market position and overall market image?

Instalments & credit Free advertising or seek client investment in marketing? Will there be an instalment plan for clients? Will marketing be included in fees charged or will it be a separate cost?

Sensitivity Will there be situations where price will be vulnerable to market trends or changes and may be a barrier to the market, e.g. high level of foreclosures in an area?

Value adding What services and extra touches can be added to create better value for money, e.g. frequent flyer points when a credit card is used?

Competition How will a competitor react to the price? Can they successfully undercut it or offer better options?

Place Coverage What is the relevant Business Development Area (BDA) and how many people and properties will be serviced?

Channels Will there be personal marketing, social marketing, geographic marketing or direct marketing through database management systems?

Location Who are the client/customers, where are they, how accessible are they?

Control Do they have pre-existing loyalties and agreements with other providers and how easy will these be to break?

Access Is there a need to allocate personnel to look after certain clients, regions and property portfolios or can it be managed through one centralised system?

Cost What will the costs be to service the client base and will the service options be viable?

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Element Component Variables

Inventory What tools are needed to service a BDA e.g. software programs, staff to keep database up to date, cost of reviews, people to distribute flyers and visit potential clients etc.?

Promotion Advertising Is there a niche market or is a mass media approach more suitable? How regular will advertising be? What electronic and media publications should be selected? What will be the market reach, cost, impact and wastage to successfully reach a point of sale?

Personal marketing How will this occur, to who and where? What message should be conveyed and how will it be conveyed, e.g. sporting clubs, business groups, schools, professional organisations etc.?

Promotions Will individual employees be able to run their own promotions and be featured on their own signage and advertisements? Will there be a focus on all media outlets or focus on just one? Will there be a heavy presence on the internet or will it be more newspaper or television based? Will there be stringent guidelines on brand and logos or is there flexibility?

Publicity Will special promotions, features, television and radio appearances, office openings, seminars and events be undertaken for clients and customers? Will there be a publicist or a PR consultant and what role will they play in agency promotions?

Branding What is the agency’s image? How will consistency of brand be maintained? How will brand be protected and have its value maintained? What message should the brand portray to consumers?

Guarantees How do people know they will get what is promised? How should testimonials be gathered and used to re-assure clients and customers that they will receive value for money and excellence in service?

Consistency How do people know that the agency will offer the same standard service regardless of who it is dealing with?

Repeat business How will it be measured and determined that people are satisfied with products and services and will re-use the agency? What type of post-sale surveys are being conducted? How are loyal clients and customers being rewarded?

Sphere of influence How well is networking being undertaken to ensure that the business is leveraging other supporters and happy past customers and clients?

Example: Applying the 4 P’s to real estate

Product: The agency, the agent, and their services is the product which is developed — to suit their clients and customers

Price: Price needs to be determined for the agency, the agent for their and the properties — to best service their clients and customers

Place: The agency/agent will need to determine the best channel — to attract clients and customers to distribute the product

Promotional: Strategies to develop plans and implement an effective marketing campaign — reflecting the clients and customer’s needs

As demonstrated in the above example marketing is based on thinking in terms of customer needs and their satisfaction. At this point it is important to note the difference between Client and Customer within the real estate industry as outlined below.

Topic 6: Marketing and communication channels in real estate

2.2 Who is a client? A client may be defined as ‘someone who uses the services of a professional person or organisation’.

A client in the real estate industry is generally considered to be the person or party who engages or employs the agent to provide a service under an agency agreement and who pays the agent’s fees.

In industry terms, a client could be: • A vendor who engages an agent to sell • An owner who engages an agent to lease or manage • A buyer who engages the services of a buyer’s agent • An owner’s corporation or community group who engages an agent to manage

their affairs.

2.3 Who is a customer? There is another, larger group of people that agents will come in contact within real estate. Whilst this group does not directly pay for the service, without them, the agent would not earn any fees or attract future business.

Therefore, this group, which are often referred to as customers, can include:

• Prospective vendors or owners • Buyers or prospective buyers • Existing or prospective tenants • Any other person seeking the advice of the agent.

Whilst agents may be employed by the client, they also have legal and business obligations to be fair and ethical with anyone that they have dealings with. A professional industry such as real estate should consider anyone who comes to them as either a client, or a potential client.

With this basic understanding of marketing and who the industry clients and customers are, there is the requirement for the agent and business to analyse how to connect and develop a communication message to engage these groups of people.

In summary, marketing is the process of supplying and satisfying the needs and wants of the target client base for a business. In the real estate process, the business owner will have a successful marketing strategy if they can match the business offer (services and products which are called the supply) to the researched needs and wants of their client/customer base (the demand).

What customers and clients are saying and what they want should be the heart of agency decision-making, so the agency must have mechanisms in place to gather, record and monitor the external environment if it is to maintain profitability and market dominance. Having a good marketing strategy which includes the best suitable communication channels to reach the targeted audience, the clients and customers is a benefit to all.

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2.4 What is a communication channel? The definition of communication channel is:

A medium through which a message is transmitted to its intended audience, such as print media or broadcast (electronic) media

(BusinessDictionary.com)

In the real estate industry, there are many channels of communication to promote services and products to intended consumers; the clients and customers.

Following is an analysis on the advantages and limitations of the leading promotional media channels. These observations should be taken into consideration when deciding on which option to use, how it should be used and how to maximise use of the selected media.

Newspapers

Although newspapers, especially printed versions, may be on readership decline, the local community editions can be a very good channel to connect with the community.

To achieve the best value from newspapers, it is recommended the agent or business establish a strong relationship with the area representative from the newspaper and meet with them regularly to find out the best offers and how to take advantage of certain promotions. These representatives will also give advice on readership, the best time to advertise, and where to advertise. They can often arrange for editorial and specials to maximise the advertising dollars, and also arrange for part of a franchise or marketing group to bulk buy media space for discounted rates and special media offers.

In terms of artwork for print media, the agency should access a quality graphic designer who can digitally prepare advertising items to the specifications of each newspaper (most newspapers have different specifications) to ensure speedy submission and quality reproduction. Most agencies will use special design houses for this service. If a member of a franchise group, this service is sometimes performed by the franchise marketing division.

Marketing experts state that it’s not about having advertisements read by a customer; it’s about having it read or seen first. The best way to do this is to ensure that the advertising is professionally designed and has a clear layout, is in the right position in the paper, and has a strong headline or object which will capture interest. Experts also claim that advertisements that look like editorial or useful free information that people must have or know work effectively. Marketing experts also advise that if advertisement is formatted and boxed like a news story, the readership with increase substantially.

Topic 6: Marketing and communication channels in real estate

Table 4 Advantages and limitations of newspaper marketing

Advantages Limitations

• Customers view information in newspapers as current and up-to-date.

• Short lead time with little preparation required.

• Broad acceptance by consumers. • Backed by sound market research indicating

the market segments who are active readers. • Can select most appropriate section relevant to

target market segment. • Costs are known in advance. • Can be very cost effective if readership is high. • Internet circulation

• Short life of publication. • A lot of similar competition. • Message can be lost because newspapers are

too big and now divided into specific sections. Unless an advertisement is in the right section it may not be seen.

• Circulation declining for daily papers. However, internet circulation increasing.

• Some market segments no longer read newspapers.

• Need to choose the right publication. • Modern papers are not flexible enough for

agents who wish to advertise outside of the real estate section.

Internet

Internet can be used for a range of marketing options. In real estate it as a communication tool, an informational tool and a marketing tool. It is one of the main communication channels to connect with the desired audience.

When using the internet for marketing, agents or agencies should connect with experts to ensure that the right methods are used to maximise exposure. For instance, this could include search engine marketing, display advertising, email marketing, affiliate marketing, interactive advertising, online brand and reputation management.

There is also another area of growth in internet marketing: social media. This comprises blog marketing, content marketing and viral marketing via platforms such as Facebook, Instagram and LinkedIn. Refer later in this topic more on social media.

When establishing the web presence of a business, an expert should be consulted who can guide the agent or agency through the process of growing and promoting the business using online media to full advantage. When establishing a web presence, it does not simply mean ‘building a website’ or participating in a number of other providers’ websites. A clear plan with a strategy and goals is what is required so that the web designer can implement the right presence for the business online.

When devising an internet marketing strategy, it is advisable to create a comprehensive online campaign with activities that: • promote the company online • include websites and links to other complementary and partner websites • include blog sites • feature articles and press releases • feature online market research • email marketing • advertise the agency services • advertise the agency listings • run special promotions for listings.

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Experts can also advise on the key information businesses need to display online so that potential customers can find out as much as possible about the business and the people behind the business.

The following is a quote from Glenn Nicholas, co-director of online marketing agency Publicity Ship:

If you’re looking to expand your services out to a national market, you can probably position yourself as a property expert, or real estate expert, and you ask, what would be the difference? If you look at it instinctively, you might make a choice based on your own perception of what people are after and what that means. But if you did keyword analysis and realised that for the top 40 searches that people are actually doing over the internet, ‘real estate’ gets used 14 times more than ‘property.’ Now what difference would that make to your publicity campaign, your marketing and your whole positioning?

(Dynamic Business Magazine)

It is also important to consider the correct business model to use in the agency marketing. Real estate tends to focus on lead-based criteria and sites that promote advertisements for individual property campaigns. An agent must make clear to a web designer that the site needs quality content, with many inbound links. Where possible, agencies should form alliances with other compatible industry organisations, e.g. financiers, valuers, research companies etc., so that their web traffic may be captured and vice versa. Also, major real estate business sites should be used to full advantage. For instance, the majority of agents advertise on major national websites including: • Realestate.com • Domain.com.au • Myhome.com.au • Homehound.com.au

Personal and agency marketing can also be featured on these sites through the purchase of banners and the ability to link a customer back to the agent’s website.

https://www.realestate.com.au/buy

https://www.domain.com.au/

https://www.myhome.com.au/

http://www.homehound.com.au/

Topic 6: Marketing and communication channels in real estate

Table 5 Advantages and limitations of internet marketing

Advantages Limitations

• Fastest growing media with worldwide coverage.

• Wide audience can be reached for a fraction of the costs associated with newspaper advertising.

• Consumers can research products before committing.

• Consumers can order a service online and at their own convenience.

• It is instant information with no waiting. The product, service and marketing message is there when the consumer wants it.

• The market can be targeted to an activity, e.g. people want to upload pictures of houses, download a brochure, use a repayment calculator etc.

• Activity can be specifically measured so responses to marketing may be traced, measured and tested almost instantaneously.

• The customer can get immediate responses and results to their enquiry.

• Excellent accountability for reviewing the effectiveness of a marketing campaign.

• Some market segments don’t have access to the latest online technology and find it difficult to navigate a website.

• Overly large or complicated web pages that take too long to open or do not respond when opened.

• Addresses a mass audience rather than on-to-one, so lacks personalisation.

• Can be difficult to target demographic and behavioural market segments.

Radio

Radio marketing is generally most effective when it complements another marketing campaigns being run concurrently. For instance, a print media campaign or a television campaign supplemented with radio has been proven to maximise impact on both brand and product marketing.

Radio is considered a background medium that can be used to economically maximise other high-impact mediums. Radio advertising is renowned for two key components in marketing. One is ‘resonance’, the way a message is extended after its key promotion has been run. In other words, a message is delivered in a high-impact campaign such as TV and then ‘run on’ for a longer period of time on radio for maximum penetration. The other feature is its ‘magnification’, which is the leverage that a campaign can build off radio. Magnification occurs when the TV creative is transposed to radio and the message is magnified so that to the listener it becomes dominant and authoritative.

Table 6 Advantages and limitations of radio marketing

Advantages Limitations

• Short lead time for a campaign. • Higher frequency of adverts means maximum

exposure faster. • Relatively low cost for a large customer reach,

when aired at prime times • Different stations and times of day can target

certain market segments.

• Short exposure so need frequency for impact. • Low attention by market as a laid-back

medium. • Customers are passive, not active. • Sound only. Because it is not visual can’t use

demonstration and can’t cater to 80% of population who are visual retainers of information.

• High wastage. • Declining audience

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Television

Television is by far one of the most effective media a business can use for a marketing campaign. The most popular forms of marketing on television are through television commercials, ‘infomercials’, product placement, and sponsorship. Many agents in smaller communities also use television to run their own property programs featuring local homes for sale and discussing market trends with local property identities.

The television commercial is considered the most effective form of mass marketing, and also why it is the most expensive form of all advertising. Today we see banners and logos being digitally keyed into the background of the news, weather and sporting programs. Product placement is also becoming more common on TV. This is where popular television programs use and even endorsing a certain brand or product. For instance, it is very common now on US television to see movies and popular day time programs with real estate agent signage in the background, a RE/MAX balloon drifting through the sky or a realtor wearing a Century 21 blazer showing a prospective couple through an apartment.

For a commercial to be effective, it must have the right frequency or airplay. It was once common to have commercials of 60 seconds. However, today the common commercial is 30 seconds and played around 3–4 times in an hour. Some companies are even producing 10-second commercials that act as a hook to the main commercial and serve to create resonance and recall for the main commercial.

Table 7 Advantages and limitations of television marketing

Advantages Limitations

• More people spend time watching TV than any other medium (3 hours a day). It is in 97.5% of all Australian homes.

• Best way to kickstart a campaign and to build momentum.

• Builds brand name and reputation quickly. • TV is the most engaging of all media —

it resembles reality and uses demonstration and vision to maximise impact of the senses.

• It is an ideal cornerstone to launch other marketing campaigns from.

• Strengthens the performance of other media when there is an integrated campaign.

• When people see it, they believe it.

• High cost for air time and production makes it prohibitive for most businesses.

• Long lead times and extensive planning required.

• Need frequency for best impact and retention. • Passive audience. • High wastage. • Content and participants have to be media

friendly for maximum impact.

Topic 6: Marketing and communication channels in real estate

Magazines

Magazines have long been a favourite medium of Australian consumers and still play an important role in marketing select products and services. There are two important factors that an agent needs to know when considering magazine advertising: • The magazine must be the right category • The magazine must have the right target readers.

The major upside of magazines is that they are renowned for developing an image of a new company, product or service. While some advertising media, e.g. direct mail and newspapers, limit a business’ ability to use high quality images and unique artwork and design, with magazines there is an extraordinary amount of artistic creativity to be capitalised on. Magazines allow for more complex layouts than other print media (such as newspapers and direct marketing) and can be a showcase for advertisements that are full colour and high-quality gloss. Magazines are also ideal for a real estate business that wants to boost its credibility and leave a strong first impression with its selected market segment.

Real estate agencies that deal with exclusive properties (typically in the top 10% price range for a region) market extensively in magazines that cater specifically to a specific target market segment. Some franchises have their own magazine (such as Belle property, McGrath estate agents) and these are generally distributed in local communities and businesses, such as cafes.

Magazines can be used in a number of ways in real estate. They can be used for display advertising where the agent can either feature properties for sale or rent or advertise its services to the public. The magazine can also contain a lift-out or real estate feature specially prepared for the publication. The agent can run an advice column or simply place an editorial or an advertorial with current market comments, and tips on how to present a home for sale or on how to maximise market price through renovation and design makeovers. Some agents have also built strong brand recognition and personal profile in magazines by being featured in the social pages with high-profile local identities and where they are seen playing an important role in supporting local causes and charities.

Table 8 Advantages and limitations of magazine marketing

Advantages Limitations

• Engages reader one-to-one. • Easy to target specific market demographics. • Message is seen by the right people who are

the ones most likely to buy a certain product or use certain services.

• Ideal for marketing with smaller budgets. • Readily available, distribution is taken care of. • Excellent for creating a strong image. • Builds authority with readers and is a highly

trusted source of information. • Long duration. • Low wastage. • Most versatile of all print media.

• High cost compared with other print media options.

• Long lead time (1–6 months). • Low readership with narrow market focus. • May miss passive market opportunities. • Needs more preparation in artwork and

graphic design. • Higher level of research to ensure that

content is relevant to reader and will keep them engaged.

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Outdoor advertising and billboards

The use of signage to communicate an agency message places advertising in geographically identified areas in order to capture customer attention. The most obvious method of using signage is through billboards, which are generally located in high traffic areas. This is an exciting type of promotional option and can create excellent brand awareness, especially for particular campaigns and when launching a new agency, product or service.

Fixed billboard advertising has the sole purpose of attracting attention and displaying a clear, precise message to the mass public. For a billboard to be effective it must be in a high-profile location with a high volume of passing pedestrian or vehicular traffic. The exposure of a billboard on a main thoroughfare in a regional area can be to the same volume of people on a daily basis as a television commercial. Mobile billboards are also growing in popularity as a marketing medium. These are flat campaign units which are transported along designated routes to attract maximum attention prior to the commencement of or during a campaign.

Statistics on billboard advertising by ‘Billboards Australia’ (as of January 2020) • 78% of Australians notice outdoor advertising each month • 74% see billboards every day, several times a week • Drivers spend 7.5 hours in the car, making on average 10 trips per week • 88% of people surveyed say brands on billboards stand out • 72% of Australians travel on roads to and from work • 67% of Australians have seen billboards in the past week • 46% of people believe billboards bring new products to their attention Source: <www.billboardsaustralia.com.au/why--outdoor/statistics> (viewed 15 February 2021).

Table 9 Advantages and limitations of billboards marketing

Advantages Limitations

• High impact. • 24-hour marketing. • Great for attracting attention to new brand,

product or service. • Excellent geographic marketing to a specific

market location. • Second-widest market exposure after

television.

• Can only communicate limited messages. • Not interactive. • Not flexible (expensive to change

message regularly).

In real estate, mobile displays can also take the form of tents and shade tarpaulins used for community events, A-frames, and quality free-standing display banners used in shopping centre displays and special promotions. When considering what an agency needs in terms of outdoor advertising collateral, portable displays for the following should be considered: • target advertising • one-day and long-term campaigns • conferences and seminars • sporting events • shopping centre displays • public service and community advertising.

http://www.billboardsaustralia.com.au/why--outdoor/statistics

Topic 6: Marketing and communication channels in real estate

The signage collateral must contain the same, consistent brand message and image that has been established in the strategic plan. Consistency of information and the look and feel for the agency is extremely important in this style of promotion and any deviation can significantly confuse the target market and deliver a mixed message.

Generic agency signage

Agency signage promoting properties for sale and for rent is an excellent marketing tool not just for the individual property being promoted, but for the agency in general. The rules for any agency signage are: • Keep the brand clean and easy to recognise. • Keep the sign simple. There should be no more than 7–9 words on a generic sign

(including phone numbers and names) and there should be no more than three elements included on the sign, for instance, 1. brand or agency name; 2. type of offer; and 3. action details.

• Colours should be bright and contrasting so the message can be clearly read from a distance and at all hours of the day.

• The background should enhance the message, not compete with it. • Do not use a tight or jumbled type text. Best type text is wide spaced, bold and

lower case with minimal caps. • Less is more when outdoor advertising on any signage.

Social media

Social media describes any website or service that facilitates using a piece of media to share an idea, advertise, promote, or deliver content. Social networking describes any website or service that facilitates people communicating one to one or one to many in a conversation. Source: Klososky, S 2010.

Social media can now fulfil many different functions relating to business communication. It can be used to help market, advertise and promote a business and its products to customers. Social media can be used to build relationships with the media, stakeholders, customers and employees purely through dialogue, interaction and listening with the technology. Social media also works as a tool for communication within an organisation or business, and as a customer service tool, as well. Answering customer questions, concerns, praise and grievances is now an everyday task for many businesses.

In summary, social media can be used in and by businesses for: • marketing • promotion • advertising • public relations • media relations • stakeholder relations • customer relations • employee relations • internal communication • information dissemination • customer service.

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While social media has provided some amazing opportunities for businesses to engage, interact and build relationships with their customers, it has also other influences on business communication.

Businesses have less direct influence on customers than they did in the past. Social media users would rather hear about someone else’s experience with a business than from the business directly.

Because social media is ‘24/7’, customers expect businesses to be this way, too. When customers ask a question, they expect a timely response. Such expectations have placed more pressure on businesses to closely monitor their social media profiles and be ready to respond when necessary.

Social media is seen by much larger audiences and is therefore much more widely scrutinised. Errors are seen quickly and shared widely. Word-of-mouth, positive or negative, can spread much faster and further than ever before with social media.

Additionally, businesses must now compete for social media exposure with friends and relatives within their followers’ own networks. This means that businesses must create messages that cut through all of the other content on newsfeeds.

Another recent requirement is for businesses to have unique ‘personalities’ in terms of their social media brand and presence — any combination of entertaining, comedic, shocking, accessible or authentic, to name but a few attributes. This can be quite challenging for businesses that have never had to be presented in this way before. Rather than complaints being dealt with discreetly and away from the public eye, they are now on full public display, which can have a damaging impact on a business’ reputation if not handled appropriately.

Table 10 Advantages and limitations of social media marketing

Advantages Limitations

• Customers view information as current and most up-to-date.

• Direct access to a wider network of people. • Instant, available immediately. • Information can be disseminated quickly. • Broad acceptance by consumers. • Large reach. • Greater opportunity to communicate brand

messages across a range of platforms. • Ability to converse with people easily. • Business can become aware of issues with

customers and rectify them quickly. • Access to data about followers. • Can select most appropriate section relevant to

target market segment. • Costs can be relatively cheap. • Can be very cost effective if readership is high. • Social media network. • Opportunity for businesses to ‘do it

themselves’ if desired, or can outsource if preferred.

• Various formats — blogs, podcasts, pictures, videos (see examples below)

• Short life of publication. • A lot of similar competition. • Greater pressure to produce content. • Message can be missed by intended market,

depending on individuals’ settings. • Uploading constant information can be

overwhelming. • Increase in staffing to monitor and respond to

customer queries, complaints and brand mentions.

• Can be time consuming. • Same information in different platforms. • Need to choose the right content. • Time: need to interact by ‘commenting’, not

just ‘liking’ posts. • Information is permanent. • Negative word-of-mouth travels further and

faster. • Customers listen to peers more than

organisations. • Complaints aired in public. • Significant time required to build a social media

following. • Mix of work and personal life may be exposed.

Topic 6: Marketing and communication channels in real estate

Examples: Social media and social media platforms

Blogs The property market: <www.thepropertymarket.com.au/blog>

Commercial property guide: <www.commercialpropertyguide.com.au/blog>

Podcasts The property couch: <thepropertycouch.com.au>

Elite agent: <https://eliteagent.com/topics/elevate-podcast>

Facebook Realestate.com.au: <www.facebook.com/realestateAus>

Australian Property Manager Community:

<www.facebook.com/groups/Australianpropertymanagerco mmunity>

Instagram Slider Guy: <www.instagram.com/sliderguy/?hl=en>

McGrath Estate Agents: <www.instagram.com/mcgrathestateagents/?hl=en>

LinkedIn Positive real estate: <www.linkedin.com/company/positive-real-estate>

Tom Panos: <www.linkedin.com/in/tompanos>

Twitter & YouTube LJHooker-Twitter: <https://twitter.com/ljhooker?lang=en>

RateMyAgent: <www.youtube.com/channel/UC0n6WkcEC7pij0Svj2b_h_Q>

2.5 Social media policy Most businesses have social media policies, often tied into their codes of conduct, which inform employees of the rules regarding social media use, not only in the organisation, but in their own private lives.

Social media risk

There are many risks associated with a business using social media.

Resource 1: Risks and rewards of social media for businesses

Watch the YouTube video, Risks and Rewards of Social Media for Businesses at: <www.youtube.com/watch?v=ssE_Z6B2E8I>.

https://www.thepropertymarket.com.au/blog

https://www.commercialpropertyguide.com.au/blog/

https://thepropertycouch.com.au/

https://eliteagent.com/topics/elevate-podcast/

https://www.facebook.com/realestateAus/

https://www.facebook.com/groups/Australianpropertymanagercommunity/

https://www.instagram.com/sliderguy/?hl=en

https://www.instagram.com/mcgrathestateagents/?hl=en

https://www.linkedin.com/company/positive-real-estate/

https://www.linkedin.com/in/tompanos/

https://twitter.com/ljhooker?lang=en

https://www.youtube.com/channel/UC0n6WkcEC7pij0Svj2b_h_Q

https://www.youtube.com/watch?v=ssE_Z6B2E8I

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Summary

Overall the main communication channels in marketing are: • social media platforms — Facebook, Instagram. • blogs • podcasts • newspapers • internet • radio • television • magazines • billboards and other outdoor advertising • generic signage.

By having an understanding of the direct types of communication channels, the business can then adapt the marketing best suited to attract clients and customers to their product or service and achieve the best outcome for the agency to understand its market.

3 Research to understand the market All marketing must be based on market research, which will tell us what we need to know about the marketplace. This is known as the operating environment of a business. In marketing, research is categorised as primary and secondary research. Primary research is information that has been derived from direct fieldwork and observations, and secondary is research undertaken from data and information provided by other sources.

It is essential that market research is conducted before any business planning can be put into action. Without essential market intelligence gained from the research, finalisation of any planning relating to viability of the business, profitability, nor the types of services and products delivered is possible.

3.1 Market analysis Market research involves the gathering and analysis of information about the dynamics of the operating environment, including the types of clients and customers that exist in a business development area, the type of real estate services that can be introduced to or generated from the area and the extent to which the business expected to stimulate and attract interest. Market research is conducted through a variety of methods including: • Analysis of statistics and data generated from providers such as Australian Bureau of

Statistics (ABS), Core Logic (RP Data), Australian Property Monitors, RealEstate.com.au, the Real Estate Institutes of each respective state and independent consultants specifically retained for market research such as Michael Matusik Property Insights.

Topic 6: Marketing and communication channels in real estate

Table 11 Market analysts: Their services

Australian Bureau of Statistics (ABS): <www.abs.gov.au>

The ABS is Australia’s national statistical agency, providing trusted official statistics on a wide range of economic, social, population and environmental matters of importance to Australia.

Australian Property Monitors: <www.apm.com.au>

One of their services is real-time property data. information below: Over 11.5 million property records gives a complete picture of a property. Details of the estimated value, suggested sale-price, sale history and property attributes arms you with all the relevant information.

Core Logic (RP Data): <www.corelogic.com.au>

CoreLogic is the largest provider of property information, analytics and property-related risk management services in Australia and New Zealand.

Michael Matusik — Property Observer: <www.propertyobserver.com.au/michael- matusik.html>

Information below: The website will offer wisdom on winning ways with property commentary from key economic and industry practitioners. We won’t overlook the property fundamentals, conveyancing clues, legal rulings and tax advice.

Real Estate.com.au: <www.realestate.com.au>

Go to the News page and The property market trends for current property news.

Real Estate Institute of Australia (REIA): <https://reia.asn.au>

The Real Estate Institute of Australia (REIA) is the national professional association for Australia’s real estate sector. REIA is a politically non-aligned organisation that provides research and well-informed advice to the federal government, opposition, professional members of the real estate sector, media and the public on a range of issues affecting the property market.

Real Estate Institutes (REI) in each State or Territory

The REI’s can provide a variety of data: • REIA • REIACT • REINSW • REIQ • REIV • REISA • REIWA • REIT

Local Councils Local council websites can provide locality data.

• Surveys and questionnaires administered by professional organisations to determine key characteristics, needs and wants from the market place.

• Observation by driving, walking and monitoring a selected business development area for a period of time to determine lifestyle characteristics, habits, trends and preferences of the people who live in an area. This includes a visual analysis of how they live, the styles of properties they live in, where they shop and eat, where the children go to schools and play sport etc.

https://www.abs.gov.au/

https://www.apm.com.au/

https://www.corelogic.com.au/

https://www.propertyobserver.com.au/michael-matusik.html

https://www.realestate.com.au/

https://www.realestate.com.au/news/

https://www.realestate.com.au/news/property-market-trends/

https://reia.asn.au/

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3.2 Market research Any market research must have clear objectives, including to obtain information that can be used, monitored and reviewed as the agency moves from its initial stages of growth to become an established business. Essential information to be gathered includes: • Who are the predominant types of buyers in the market? Are they investors,

owner-occupiers? Are they families, first home buyers or retirees? • Who are the most likely sellers to emerge in the area and why? Will they be young

families upgrading or older people downsizing? Will they be staying in the area or moving to another region?

• What is the size of the potential market? Is there a chance that the market will grow or retract over the next 5, 10, 15 or 20 years?

• Is there any predominant demand pattern that is emerging for particular real estate services? For instance, are there more second home buyers emerging that can support an investment-led market in the area?

• General economic wellbeing of the area. Are businesses thriving and are more opening or are they struggling to exist? Is the area dependent on one major employer or source of business which makes it more vulnerable to market swings? Or is there a variety of work sources and economic attractions for industry and jobs to thrive?

• Can any new opportunities be foreseen that may emerge in the area or region in the near future? What are they and how to capitalise on them? For instance, is there a lot of land available in the area that can be subdivided? Does town planning include major re-gentrification of your area with strong redevelopment opportunities?

With the right research at the outset, it will help in establishing a clear picture of where the business is at and what potential the business has to grow and prosper. The market research must provide enough information to clearly know who the potential customers and clients will be, what products and services will be developed for them, what fees and commissions to charge, the distribution methods for those services and products, the advertising and promotion to reach the desired market and what point of difference can be developed to outperform the competitors.

3.3 Other investigations Apart from formal research, a business should conduct investigations into the business idea and concepts to ensure that they fit and will work in the chosen market. The research is usually referred to as preliminary or exploratory research as it is carried out informally by the business owner and is assessed and reviewed through personal analysis and discussion with colleagues, rather than more formal methods. Informal research would include the following activities: • investigating the number of competing agencies in the area, where they are located

and the services they offer • monitoring competitors’ signage and advertising to determine their market share • Investigating the volume of private sales, including those made by developers direct

to the public • investigating private rentals and internally managed investments • talking to town planners regarding potential changes to the area • noting renovations and refurbishment of properties as opposed to sales.

Market research should be part of every business’ marketing plan.

Topic 6: Marketing and communication channels in real estate

3.4 Creating a marketing plan

Set strategic objectives

For a marketing plan to be successful, it must be very clear on the organisation’s strategic objectives. It is important not to confuse objectives (what is desired to be achieved) with strategies (how it is to be achieved). A strategic objective might be “We want to be the number one property management agency in the area by year XX with an excess of 600 managements secured under exclusive agreements”, or “we want to be the top agency in our franchise group in terms of gross commission income for the state within 3 years of commencing business.” Another objective may be, “we require our marketing to be systematic and well researched for best results. Our marketing will have set measurable market targets which will be known throughout the organisation.” Having clear objectives from the outset helps to keep the plan on track, or bring it back on track when the objectives are revisited at any stage of the marketing process.

Generate marketing strategies

A marketing strategy is the way an objective can be achieved. Sometimes this will be referred to as the marketing mix or the four ‘Ps’. Refer to the earlier section What is marketing? for information on the 4 P’s. A reminder, the ‘P’s’ stand for: • Product — what are its benefits to the target market segment? • Price — How will you price it to attract the most appropriate target segment? • Place — Who are our clients and customers and where will they come from? • Promotion — How will they be reached?

The four Ps are an excellent way to build a strategy if this is the first time a business is preparing a strategic marketing plan.

The information in a strategic marketing plan is an integral part of the agency’s overall strategic plan and must be assessed carefully and based on market facts and research, not on customary practice or habits. This is an opportunity to build a solid foundation and develop a strategy that will be relevant, refreshing to the market, and most importantly, effective in attracting business for the organisation.

This is also the stage where the key decisions will be made regarding brand awareness, logos and market perception. We will focus on how to generate effective market strategies more in the future topics in this course.

3.5 Establish marketing objectives Marketing objectives are based on what the business wants to do. These objectives must be focused on what services to be delivered, what products will be associated with the services, and which markets they will be delivered to.

Objectives are more extensive and long term than goals. For instance, a goal is something that is set as a guide to achieve in the short as well as long term and should be reviewed regularly. Objectives, however, are the concrete foundations or building blocks of the business. In other words, the goals should lead to the objective which, if researched and established correctly at the outset, should never change.

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These objectives should be SMART — Specific, Measurable, Achievable, Realistic and Time-based. For example: “My agency will have 8% of the total sales market for Leederville in its first year of trading.”

Objectives do not include terms such as ‘increase, maximise, dominate etc.’ in their vocabulary.

Figure 1 Goal setting using the SMART model as demonstrated by Brian Tracy

Source: Tracy, B 2018.

Objectives must be based on a thorough analysis, including an external market audit and a SWOT analysis. See below for details on SWOT.

Topic 6: Marketing and communication channels in real estate

3.6 Conduct a SWOT analysis SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis is an important exercise in weighing up the critical Strengths, Weaknesses, Opportunities and Threats which need to be considered when finalising a marketing plan. The Strengths and Weaknesses relate to the information obtained in the research above regarding the business’ internal environment, while the Opportunities and Threats will use the information from the external business environment. In other words, the Strengths and Weaknesses are factors that management can control while the Opportunities and Threats are factors that management has no control over. However, through their identification these factors can be anticipated, evaluated and exploited through the marketing strategy that is adopted. When completing this SWOT analysis, it is important to only use key data that is relevant to the agency’s major source of business income and profitability.

Figure 2 Example of SWOT

Source: Kaplan Professional 2020.

It is recommended that businesses review their SWOT quarterly.

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3.7 Make decisions After the research is undertaken, organised and reviewed critically in terms of external and internal influences on the business, it is time to make assumptions from the data and create the strategic drivers of the marketing plan. These drivers are the choices that management needs to make to determine the direction, scope, visibility, behaviour and culture of the business. These drivers can include a wide range of assumptions that, if interpreted correctly, will provide the agency with its core business focus and business identity. Some of the strategic drivers that can be determined from the research and SWOT analysis include: • A change in market focus: instead of specialising in, say, residential home

sales, research indicates that there is a viable opportunity for a business to also specialise in investment apartments.

• Redefine the scope of the business: a business was going to provide services in residential, commercial, business sales and property management, but instead decides to specialise in, say, commercial sales and leasing as a gap is identified in the market for these services.

• Decide on the ‘internal culture’ of the business so that a competitive energy is fostered to ensure that employees and contractors are committed to the agency’s objectives and goals.

• Determine the business’ core market segment.

All of these decisions should be based on accurate information, and careful estimates of what can be achieved based on historical evidence. For instance, if making assumptions about the investment market in the area, those assumptions must draw on hard evidence of past sales and rental data, along with conservative estimates of market share and rates of return.

Experts advise to limit the number of strategic drivers based on the core operations. In most cases, successful organisations have no more than three or four key strategic drivers from which all other marketing energies flow.

4 The role of marketing and communication in client and community engagement The main aim of marketing is to develop an understanding of the clients and customers within the environment that the business is in and then ensure the products and service to attract these clients and customers are made available by the business.

Although as discussed previously, there are many communication channels to market products and services; however, word of mouth, networking and simply getting to know people is highly advantageous for the real estate agent and the agency. Successful agents will know the neighbourhood of their area or their ‘patch’ and as most real estate agencies are generally classified as small businesses who are centrally located within the suburbs, it is important that they interact and integrate within the community.

Topic 6: Marketing and communication channels in real estate

4.1 What is community engagement? Integrating with the community may involve collaborating with other businesses in the community. For example; an agent may be a regular customer at the local café, and in turn the café owner may authorise the agent to leave their brochures or magazines for patrons to peruse; the agent may then promote the café to their clients by adding a voucher to their listing or settlement kits.

Other examples to integrate with the community are: • holding fundraising activities such as ‘fun runs’ • participating in school and street fetes • participating in council activities • public speaking at local events — talking about the business and the market,

the business or personal involvement of its employees in the community • sharing information via newsletters and editorials in local media • podcasts with content that would benefit the community — e.g. information on new

regulations, new developments in the area • sharing information on small businesses experience or other passions/interests that

may help others. This may be created via interviews and sharing the recording or use of social media platforms

• community competitions such as photography, art/painting.

It is important for the business and the individual to have an annual plan for these activities and equally important to have the staff/ team volunteer to participate.

Creating relationships with other business and interacting with the community will provide a medium for an agent or business to become known and also the opportunity for the agent to get to know their potential clients and customers — what their needs and wants may be, and what progress and changes may be occurring in the area.

Community engagement may be extended by use of online social media platforms. It is important to monitor these regularly and have rules as any community does.

Further interpretation on client and community engagement is to develop an opportunity to strengthen relationships with the community by collaborating, leading to better decision making. When done in a meaningful way, it contributes to building trust between the community and the business.

Community engagement is a planned two-way process by which others in the community are given the opportunity to provide input that enhances decision making processes on issues that may impact on their interests. Community engagement strengthens the trust between the community and the business by providing a platform for the community to have their voices heard, their views considered and acknowledged.

Example: How real estate agencies engage on client-community marketing

Access and view the LJ Hooker franchise at: <www.ljhooker.com.au/about- us/community-and-foundation>.

https://www.ljhooker.com.au/about-us/community-and-foundation

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5 Ethical considerations in marketing and communication The real estate industry encourages the highest level of ethics in business practice to promote and preserve the right to own, use, exchange and transfer real property. It is imperative the industry know ethical standards, understand why they are important, and abide by them and this includes applying the same to marketing and all methods of communication.

Examples of unethical communication to avoid: discrimination in real estate transactions, as well as any act of misrepresentation, exaggeration or intentional act of deception, also known as fraud. Unethical practice is prohibited in all aspects of real estate practice including advertising, property disclosure, listing agreements, inducements, the holding of money and contract facilitation. See below for details on what constitutes ethical and unethical practice.

As has been identified thus far, marketing is the aim to connect people to products and services. To achieve this successfully it must be carried out professionally and ethically. In real estate there are rules of conduct to be abided by for all registered and licenced agents. The wording of the rule may differ between states/territories however the general message is to always act ethically by being honest, fair, professional, trustworthy.

Resource 2: Legislation relating to rules of conduct

Refer to the ‘Toolbox’ in your KapLearn subject room for legislation relating to rules of conduct.

5.1 What is ethical practice? Ethical practice refers to the standards of professional conduct that any industry professional is expected to uphold.

Following is a list that can define what ethics is: • compassionate • empathetic • morals • do the right thing the right way • focus on the client and customer requirements more than; thinking about the sale • add value and be helpful; customise • be lawful — understanding the legal requirements and how to be fair.

Resource 3: Ethics Centre

Refer to the Ethics Centre for more information on ethics at: <https://ethics.org.au/why-were-here/what-is-ethics>.

As an agent any operational marketing decision will need to be made in line with ethical and legislative requirements. Ethics with reference to marketing means applying standards of fairness, or moral rights and wrongs to marketing decision making, behaviour, and practice.

https://ethics.org.au/why-were-here/what-is-ethics

Topic 6: Marketing and communication channels in real estate

One of the main attributes of being ethical is to be trusted and be trustworthy. Trust is seen as a top business priority and reputation that will attract clients and allow business to care for their investment. However, having people’s trust does not necessarily mean that the agent or business is trustworthy.

5.2 Trust and how to become trustworthy Being trustworthy means that people in the organisation behave ethically because it’s the right thing to do and through people’s personal experiences with the organisation a solid reputation and trust is built.

A recent survey report by the Governance Institute of Australia found that in business, real estate agents had the lowest ethical score of 25% and the highest unethical score of 46%. The CEO of the Institute, Megan Motto said:

It seems that one of the biggest topics of conversations at the moment is around ‘trust and ethics’ and ‘Trust in our institutions, our organisations, and in particular around the ethical conduct of us as a society’.

(cited in Real Estate Business, 2019)

Resource 4: Real Estate Business (REB) article

Refer to the full article note above by Real Estate Business (REB) at: <www.realestatebusiness.com.au/breaking-news/19182-real-estate-agent- struggle-on-ethics-index>.

Trust is becoming the ‘product’ that clients and customers look for in their decision making.

In essence ‘trust’ is embedded in legislative requirements, by way of the fiduciary obligations of agent relationship.

The role of an agent is to act on behalf of a client (known as the principal), to locate an appropriate third party to engage in a legal relationship with the principal concerning a property.

Fiduciary duty

A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom they owe duty of care (being the client). They must not put their personal interests before the duty and must not profit from their position as a fiduciary, unless the principal consents.

A real estate agent is considered to be in a fiduciary relationship with their client. A fiduciary (from the Latin word fiduciarius, meaning ‘holding in trust’ and from fides, meaning ‘faith’) is a legal or ethical relationship of confidence or trust between two or more parties. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter.

https://www.realestatebusiness.com.au/breaking-news/19182-real-estate-agent-struggle-on-ethics-index

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When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his/her own benefit in relation to the subject matter. The client is entitled to the best efforts of the fiduciary on his behalf and the fiduciary must exercise all of the skill, care and diligence at his disposal when acting on behalf of the client. In such a relation, good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.

A person acting in a fiduciary capacity is held to a high standard of honesty and full disclosure in regard to the client and must not obtain a personal benefit at the expense of the client.

The fiduciary obligations of a real estate agent include: • To comply with the principal’s instructions as outlined in the agency agreement or

appointment to act. The extent of the agent’s authority is specified in this document and an agent must only act within their authority to do so.

• To act in the principal’s best interest, i.e. treating the principal’s property and money as if it were their own but within the boundaries set by legislation.

• To exercise due care, skill and diligence when carrying out duties. • To keep the principal’s money separate from their own. • To keep all information confidential. • Not to engage in a conflict of interest and disclose to the principal any personal

interest the agent may have. • Make no secret profit or gain from their obligations towards their principal.

Example 1: Agent breaches of fiduciary obligations

A salesperson is asked by a prospective purchaser: ‘why is the vendor selling?’ The salesperson answers: ‘They have bought another property and must move very quickly’.

In this situation, the salesperson has released information about their client in an effort to instil a sense of urgency, however unless they have been authorised to do so, they have breached confidentiality. It can be also argued that they may not have acted in their principal’s best interests by encouraging someone to place low offers because of the urgency factor. The fact that the salesperson must sell the property to get paid by their agency appears to be more important here than getting the best result for their principal. They appear to be placing their interest ahead of their principal’s.

Topic 6: Marketing and communication channels in real estate

Example 2: Agent breaches of fiduciary obligations

An agent who is experienced in managing residential property is asked by a client to manage his/her commercial properties as well. The agency staff, including the senior property manager, are only trained in residential management, and the agency licensee mainly works in a sales capacity. The agency wants to encourage the client to give the agency more business, so accepts the management of the commercial properties despite having very limited knowledge or experience with this type of property. The agency licensee decides to manage the risk by sending staff to do specialised intensive training in this area, however, due to unexpected staff turnover, then decides not to proceed.

Six months into the management of the property, the agency staff make errors due to their lack of expertise, and these errors cost the client significant income. In this situation, the agent is not acting in the principal’s best interests in accepting this management without the appropriate skills. They have also not exercised due care, skill and diligence. Having accepted the management, the agency owes the client a higher level of care and skill and would more than likely be responsible for compensation to the client for their mismanagement.

Example 3: Agent breaches of fiduciary obligations

A relative of an agent has been looking for a number of weeks for a property to lease without finding anything suitable. It gets close to the date that the relative must vacate, and the agent advises the relative that he/he has a new listing available. The agent presents his/her relative’s application to the landlord, but decides not to advise the landlord that the prospective tenant is a relative.

At a later point in the tenancy, the landlord finds out from the neighbours and is furious with the agent because the landlord believes the rent has deliberately been kept lower than market level to the advantage of the agent’s family. In this situation, the agent should have disclosed this information to the client. The client would rightfully feel that the information was not disclosed, in order to obtain an advantage.

Example 4: Agent breaches of fiduciary obligations

A salesperson is selling a property for a vendor and there is a large amount of interest expressed by prospective buyers. One of the prospective buyers wants to put in an offer and approaches the salesperson with the proposition that if the salesperson will assist them to be the successful buyer, the buyers will pay the salesperson personally $10,000.

The salesperson approaches the vendor with the offer which is accepted. The salesperson accepts the $10,000 payment, without disclosing this to the vendor. This is the taking of secret commission, a profit made by an agent, in the course of his employment, without the knowledge of his principal.

Note: The above examples would be illegal and unethical hence creating a bad reputation for the agent and agency, as well as resulting in a low level of trust including tainting the agent’s personal profile.

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5.3 Legal obligations Other legal obligations of marketing are summarised, on the Australian Competition & consumer Commission (ACCC) website.

The following is a summary of the content from the ACCC website.

Real estate agent obligations

It is unlawful for real estate agents to: • intentionally mislead the customer • lead the customer to a wrong conclusion or impression • give the customer a false impression • leave out or hide important information (e.g. in fine-print disclaimers) • make false or inaccurate claims.

It makes no difference whether the agent meant to mislead or deceive — it is how it was perceived that matters.

False or misleading claims

To reduce the chances of misleading the customer, real estate agents must take care to: • disclose all information relevant to the price of the property • advertise the selling price based on a reasonable market appraisal or the price the

seller has indicated they are likely to accept • not make false claims about the price of the property • not advertise or under quote a property at a price significantly less than the selling

price to attract interest in the property • not make false claims about the location, characteristics or use that can be made of

the land.

False claims about price

A real estate agent might make false claims about the price by: • advertising a property as 'passed in' at a price higher than what was actually bid at

an auction • claiming that the vendor has already rejected offers more than the buyer is willing to

pay, when no such offers have been made and/or rejected • advertising a property at a price that is less than a previously rejected offer unless

the seller is now prepared to accept a lower offer.

http://www.accc.gov.au/consumers/health-home-travel/real-estate#real-estate-agent-obligations

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Other legislative requirements

Table 12 Examples of other legislative requirements

Legislative requirements To source further information

Anti-discrimination and Equal Employment Opportunity

Australian Human Rights Commission (AHRC): <www.humanrights.gov.au>

Consumer protection, fair trading and trade practices. When marketing and operating a business, owners need to understand and comply with laws and codes of practice that ensure fair trading in the marketplace.

Australian Competition and Consumer Commission (ACCC): <www.accc.gov.au> Example: Guide to advertising selling: <www.accc.gov.au/publications/advertising-selling> State and Territory based Fair Trading Offices

An agent’s advertising must meet the requirements of the Australian Consumer Law (ACL)

Australian Consumer Law (ACL) is administered by the Australian Competition and Consumer Commission (ACCC) and each State and Territory’s consumer law agency: <www.accc.gov.au/consumers/health-home- travel/real-estate>

Workplace Health and Safety (WHS) Relates to the provision of a healthy and safe working environment for any people who work for a business, as well as people who come into contact with the business.

Safe Work Australia: <www.safeworkaustralia.gov.au>

Privacy The need to be transparent on how the information gathered by agents/agencies is used, disclosing and security relating to information gathered.

Office of Australian Information Commissioner (OAIC): <www.oaic.gov.au>

Property sales and management Refer to state-based agent and/or tenancies legislation. Refer to the ‘Toolbox’ in your KapLearn subject room.

5.4 Rules of conduct Each state and territory legislative industry act will contain subordinate legislation which includes Rules or Codes of Conduct by which all agents and their employees must abide. They will be an expansion of and compliment the common law duties of an agent such as the fiduciary obligations listed above. For example, generally the Rules of Conduct require an agent to be honest and ethical with all parties involved in a transaction, act with professionalism and keep client information confidential.

Breach of these rules may lead to fines, loss of licence, and other consequences.

Please refer to your state or territory legislation to access the Rules or Codes of conduct. The Rules or Codes are usually in the subordinate laws or by-laws and are sometimes highlighted under agent’s links on the governing authority web site.

https://www.humanrights.gov.au/

https://www.accc.gov.au/

http://www.accc.gov.au/publications/advertising-selling

https://www.accc.gov.au/consumers/health-home-travel/real-estate

http://www.safeworkaustralia.gov.au/

http://www.oaic.gov.au/

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5.5 Advertising Advertising is one of the most vulnerable areas of real estate when it comes to litigation. This is because: • making representations to the public that by the very nature of advertising must

appeal to the emotions and excite people enough to attract a response • everyone interprets an individual opinion/situation differently • advertising copy is subject to error • everything is in writing so there is indisputable proof.

Difference between marketing and advertising

Marketing is the full planning, implementation and control of all the steps involved in the process to match clients and customers to the products and services being offered.

Advertising is one component of the marketing process e.g. creating an ad and using a communication channel to promote it.

5.6 Unlawful practices in real estate advertising Some of the unlawful practices in real estate advertising are: • bait advertising • false or misleading representations • representations of land characteristics • claims about the future • advertising multiple lots • misleading conduct.

Further detail on some of these practices are below.

Bait advertising in window and internet displays

Agents must be aware that bait advertising includes offering properties for sale that are no longer available for sale or offering properties for lease that have already been leased.

If a sale property is under contract or sold, this must be indicated on all advertising material. If a rental property has had a holding fee taken, this would need to be noted on any ads or window cards for the property if they remain on public display following receipt of the holding fee.

If agents display photos of properties in their window suggesting that they are for sale or lease when they are not, the agency may be in breach of section 35 of Australian Consumer Law (ACL, Part 3-1). It could be argued that if the photos or displays were being used to attract enquiry that will then be directed to other properties, this could be deemed as bait advertising.

The same scenario applies to signage being deliberately placed on properties which are no longer for sale or lease, or those that are ‘advertisers’ only, that is, where no intention of being sold or leased ever applied.

Topic 6: Marketing and communication channels in real estate

Under ACL, a person who offers goods or services at a specified price must also do so for a reasonable period and in reasonable quantities, having regard to the advertisement and the nature of the market.

Clearly disclosing that there are only a certain number of items at a particular price, or that the offer is only for a specific time period, can be important for compliance with this provision.

False or misleading representations

Under section 29 of the ACL, a person is prohibited from making false or misleading representations in connection with the supply, possible supply or promotion of goods or services.

Below are some examples of false or misleading representations banned by the ACL.

A false or misleading representation that: • goods are of a particular standard, quality, value, grade, composition, style or model

or have had a particular history or particular previous use • services are of a particular standard, quality, value or grade • goods are new • a particular person has agreed to acquire goods or services • purports to be a testimonial by any person relating to goods or services • concerns a testimonial by any person; or a representation that purports to be such a

testimonial, relating to goods or services • goods or services have sponsorship, approval, performance characteristics,

accessories, uses or benefits • the person making the representation has a sponsorship, approval or affiliation • is with respect to the price of goods or services • concerns the availability of facilities for the repair of goods or of spare parts for goods • concerns the place of origin of goods • concerns the need for any goods or services • concerns the existence, exclusion or effect of any condition, warranty, guarantee,

right or remedy, or • concerns any actual or implied requirement for a person to pay for a contractual

right equivalent to a statutory consumer guarantee or any other statutory right or benefit that person may enjoy.

Two newer types of representations are included which relate to areas of concern for consumers: testimonials and statements about guarantees, conditions and warranties for goods and services.

Section 30 of the ACL also specifically prohibits certain types of false or misleading representations about sale etc of land.

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Characteristics of the land

Common representations about characteristics of land relating to real estate include: • suitability for particular types of rural production • suitability for residential development • profitability of a business associated with the land • drainage, water supply and topographical features • area dimensions of the land or of buildings • physical condition or state of repair of buildings or other improvements • access to the land.

When an agent advertises or promotes real estate, they cannot use ‘puffery’ in breach of the Act; this means statements that are exaggerated or cannot be substantiated. For example, statements such as ‘the land can never be built out’ should be capable of being substantiated by town planning information available.

Furthermore, general expressions such as ‘Absolute beach front’ or ‘Absolute river frontage’ should be correct and not exaggerated. Technically, to be absolute, the property must be right on the water’s edge without any other public access between the property and water.

If an agent advertises ‘city views’, those views must be reasonably enjoyed from the property and should not be views seen from the roof or a small, insignificant part of the property. Agents must also ensure that photographs taken on the land or from the building, and included in any advertising or promotion, must be ‘as representative as possible of the entire property or development’.

The Act also requires that representations about potential or permitted use of land or buildings must take into account any legal restrictions that may affect the property. These include town planning requirements, restrictive covenants, easements, and other orders such as injunctions.

Statements about the permitted legal use of the land under an anticipated regulation should not mislead potential buyers into believing that the regulation has already been enacted.

Topic 6: Marketing and communication channels in real estate

Case study: False and misleading representation of land characteristics

An agent issued a brochure advertising features of a building being offered for sale on behalf of its seller. One of these features, according to the brochure, was the potential to strata title the property. What the brochure failed to mention was that a survey report available to the agent had shown that the building encroached beyond its title boundaries and this would make strata title conversion very difficult.

Benlist Pty Ltd initially purchased the building for the purpose of converting it to a hotel but later decided to strata title it instead. When it learned of the strata titling problem, it sued the vendor and the agent for damages.

Even though the buyer’s interest in the property was not primarily for its strata title conversion potential, the Judge held that the representation was misleading as to ‘the use to which the land is capable of being put or may lawfully be put’.

The Judge subsequently ordered the agent and the vendor to pay the purchaser damages of $1.5 million plus interest.

Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990).

Resource 5: Advertising and selling guide

Access and read another example ‘Advertising and selling guide’, noted on the Australian Competition and Consumer Commission (ACCC) website at: <www.accc.gov.au/publications/advertising-selling>.

Example: False and misleading representation

A real estate agent claims that a golf course will be developed in the area within the next year as a major selling point to the properties sold. The agent continues to make these claims despite knowing there are no plans to develop a golf course. The agent is misleading potential purchasers by suggesting there are such plans when the agent has no reasonable grounds to do so.

Claims about the future

A business that makes a claim about future matters (including predictions or projections) must have reasonable grounds for doing so at the time of making the claims. If it does not, then the business can be guilty of misleading or deceptive conduct. It is the responsibility of the business that made the claim to show that it had reasonable grounds to make the statement. It is important that agents consider, or adequately address, the range of uncertainties and variables involved when making claims about the future.

https://www.accc.gov.au/publications/advertising-selling

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Price and advertising

The ACCC monitors price closely in advertising and believes that price representation is critical to competition. The ACCC requires that real estate advertisements that feature price should state prices clearly and must not use terms that simply refer to a weekly or monthly payment instead of the full price of the service.

Agents must also be careful that promotional material should not depict extras if they are not available in the advertised price. For instance, using photographs showing a completed home including driveway, landscaping and fencing must not be used if these ‘extras’ are not included in the advertised price. This is clearly considered misleading to prospective buyers.

Agents who are involved in sales ‘off the plan’ or selling new house and land packages must be especially careful with representations made by the builder or developer. Under such circumstances the agent will be held liable for a representation if the product cannot be provided to the buyer as claimed.

If an agent is promoting new properties that have a list of finishes and inclusions, ensure that the representation is made in writing from the builder or developer and not the agent. It is also wise to promote this fact separately from the agent’s advertising, and not to include any promise on the agent’s letterhead or use the agent’s logo along with the representation. This means that the agent’s promotional brochures should not include any representation or promises about finishes or inclusions. These instead should be separated from advertising and be kept in a prospectus statement made by the seller.

Advertising multiple lots

When advertising multiple lots in a strata/unit title complex or land subdivision, an agent must ensure that the price being quoted is representative of the average price, not a ‘one-off’ low lead-in price. Unfortunately, it is a common practice to promote projects and land subdivisions from ‘starting at’ prices. Agents and developers should provide average selling prices of the project, so those buyers are not misled by a ‘one-off’ low priced lot. The average price must be easily seen in all advertising material and not be in small print.

It is also important to change the advertising content as soon as the low-priced lot has sold. To continue advertising at the low lead-in price when the subject property has sold is considered bait advertising.

Topic 6: Marketing and communication channels in real estate

Example: From ACCC on advertising

Sellers could also be misled about the average price of the units or blocks if more than one is being offered for sale.

For example, most buyers would interpret the statement, ‘45 blocks from $10,000’ to mean that there was a range of prices for the blocks and that some would be priced at or around $10,000. But if there was only one at that price and the next considerably more expensive, a statement like this would be misleading.

There is nothing wrong with expressing prices in general terms such as $200,000–$280,000. But it would be preferable also to state the approximate price of the majority of blocks and to update your advertising as sales occur. It would obviously be misleading to continue with the original advertisement once the cheaper blocks were sold.

Misleading conduct The highest risk area in real estate sales relates to misleading or deceiving a seller or buyer. For example, if an agent decides to advise the seller to ‘freshen up’ a property by taking it off the market for a short time and then re-advertising it as a ‘brand new listing’, this is likely to mislead buyers into thinking that the property is newly available when it is not.

Anybody who relies on what an agent says or relies on the agent’s advertising and loses money because the agent has misled or deceived them can take the agent to court and recover damages. Even if a loss is not sustained, however, the buyer may still lodge a complaint with the ACCC or the state Office of Fair Trading and the agent may be convicted of an offence and heavily fined.

5.7 Steps for avoiding misrepresentation The problem of misrepresentation can develop purely from an agent’s ignorance or lack of knowledge about the listed property. Developing this knowledge, in combination with the consistent application of the following advertising guidelines, will assist agents in not making a misrepresentation.

Advertising guidelines: • State the full price, not just an instalment or deposit. If quoting a ‘starting’ price

or ‘priced from’ figure, always include an average price in advertising copy. • Ensure accuracy by always checking facts and figures before finalising advertising copy. • Licensee or sales manager to check all copy before finalising production

or placement. • Ask the seller to check the accuracy of copy and any statements made about the

property, as well as sign these off to confirm the accuracy of the information that has been provided.

• Reveal all the terms and conditions of an offer, and make sure that these are possible to abide by.

• Update advertising. If the cheapest property sells, the starting price in the advertisement must be updated. Also ensure any properties featured in display material are updated with sold or under-contract signs and stickers.

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Identify the agency in all marketing material

It is important to clearly identify who the agent is in all advertising material. It is essential that a Principal/Licensee ensures that registered employees and contractors are correctly representing the fact that they are an agent in all advertising and promotional activities.

Salespeople working at a real estate agency are not to place advertisements in any form of media or signage without clearly identifying the agency by which they are employed. If the agent is a licensed agent working within an office, the agent must identify the name of the licensed agent (individual or corporation) and the agency from which they operate.

It is an offence to advertise so it appears that the representation is being made by a private individual and not a real estate agent.

All signage must contain the registered business name and trading name of the agency.

Spam Act 2003

Spam is a generic term used to describe electronic ‘junk mail’: unwanted messages sent to a person’s email account or mobile phone. In Australia, spam is defined as ‘unsolicited commercial electronic messages’. This includes email, SMS, MMS, instant messaging, and all other forms of electronic communication.

The Spam Act 2003 regulates unsolicited commercial electronic messages in Australia.

The Act sets out that commercial electronic messages must have the following features: • consent — it must be sent with the recipient’s consent. They may give express

consent, or consent may be inferred from their conduct and ‘existing business or other relationships’

• identify — it must contain clear and accurate information about the person or organisation that authorised the sending of the message

• unsubscribe — it must contain a functional ‘unsubscribe’ facility to allow the recipient to opt out from receiving message from that source in the future.

The Australian Communications and Media Authority (ACMA) is a statutory authority within the federal government portfolio of Broadband, Communications and the Digital Economy.

ACMA is responsible for the regulation of: • broadcasting • the internet • radiocommunications • telecommunications.

The Spam Act provides a range of enforcement options, and ACMA determines an appropriate action on a case-by-case basis. Formal warnings are used by ACMA to indicate concerns about alleged contraventions and allow for the business or individual to take compliance action to prevent any future contraventions.

Topic 6: Marketing and communication channels in real estate

Telemarketing

In real estate it is common for agents to conduct telemarketing calls to prospective clients and customers as well as sending marketing via emails, letter box drops and post. One of the general rules of conduct in regards to making these calls is not to harass. If an agent or agency has breached this rule they may be fined and other disciplinary actions may apply.

In ACMA’s website there is detailed information on: ‘What is spam?’; ‘How to stop getting spam?’; and guides on how the consumer can protect themselves from unwanted calls.

Resource 6: Australian Communications and Media Authority (ACMA) on spam and telemarketing

Access and read the Australian Communications and Media Authority (ACMA) content about spam and telemarketing at: <www.acma.gov.au/spam-and-telemarketing>.

Below is a summary of the main points on telemarketing:

For telemarketing calls (other than research calls)

The following must be identified at the commencement of the call: • the name of the employer of the person who made the call • the purpose of the call • who caused the call to be made.

For research calls

The following must be identified at the commencement of the call: • the name of the employer of the person who made the call • the purpose of the call.

Calling times

Telemarketers and researchers are only able to call during the times set out below, unless the consumer has consented to being called at that time. The term ‘consent’ has the same meaning as in the Act.

Table 13 Calling times

Type of call Weekdays Saturday Sunday National

public holidays

Telemarketing calls 9:00 am – 8:00 pm 9:00 am – 5:00 pm No calls allowed No calls allowed

Research calls 9:00 am – 8:30 pm 9:00 am – 5:00 pm 9:00 am – 5:00 pm No calls allowed

Source: Australian Communications and Media Authority (ACMA) n.d.

https://www.acma.gov.au/spam-and-telemarketing

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Do Not Call Register Act 2006

It is illegal for telemarketers to call Australian phone numbers which are mainly for personal or domestic use and whose owners have put them on the Do Not Call Register. There are a number of exceptions, such as market research calls, charities, and political parties, however agents must abide by this legislation.

The Do Not Call Register legislation is regulated by ACMA as is the Spam Act.

Resource 7: Australian Communications and Media Authority (ACMA) FAQs

Access and read the Australian Communications and Media Authority (ACMA) ‘Industry FAQs’ at: <www.donotcall.gov.au/industry/industry-faqs> in order to understand your obligations.

Privacy legislation

Australia has Federal privacy laws that agents must consider when marketing. In Australia, the Office of the Privacy Commissioner (OAIC) is the regulatory body for this act. Privacy law revolves around asking people for permission to collect and use their information, and obligations to disclose what information is being kept and for what purpose, and obligations relating to the correction of inaccurate or disputed information.

Resource 8: Summary of the Australian Privacy Principles

Access and read the Privacy Commissioner’s own summary about the Australian Privacy Principles at: <www.oaic.gov.au>.

Resource 9: The Australian Privacy Principles

Access and read the Australian Privacy principles at: <www.oaic.gov.au/privacy/australian-privacy-principles/australian-privacy- principles-quick-reference>.

Other legislative aspects of marketing in Australia that agents need to consider are the requirements of the Australian Standards Bureau, which administers Australia’s system of advertising self-regulation through the Advertising Standards Board (ASB) and the Advertising Claims Board. The Advertising Standards Board provides a free public service for complaint resolution. It provides determinations on complaints about most forms of advertising in relation to issues including the use of language, the discriminatory portrayal of people, concern for children, portrayals of violence, sex, sexuality and nudity, and health and safety. The ASB website contains information about advertising standards and making complaints about advertising at: <www.adstandards.com.au>.

Resource 10: The top 10 advertisements complained about in 2019

The top 10 advertisements complained about in 2019 can be found at: <https://adstandards.com.au/media-releases/ad-standards-reveals-top-10-2019>.

Fortunately, none of the advertisements were related to the real estate industry, however, it is still a good reference for agents to learn what not to do.

https://www.donotcall.gov.au/industry/industry-faqs

http://www.oaic.gov.au/

https://www.oaic.gov.au/privacy/australian-privacy-principles/australian-privacy-principles-quick-reference

http://www.adstandards.com.au/

https://adstandards.com.au/media-releases/ad-standards-reveals-top-10-2019

Topic 6: Marketing and communication channels in real estate

Summary This topic covered overall information to develop an understanding of the communication channels available, benefits of market research, what is and isn’t ethical and lawful in advertising and marketing. With this overall understanding the agent can then consider their personal profile, which will be covered in the next topic.

Key points • Marketing is the process of supplying and satisfying the needs and wants of the

target client base. • Real estate marketing involves the right mix of Product, Price, Place and Promotion. • By having an understanding of the direct types of communication channels,

the business can then adapt the marketing best suited to attract clients and customers to their product or service to achieve the best sales outcome.

• Real estate marketing should reflect expectations of clients for real estate service and a real estate agency should aware of ways of resolving issues when their client service provided does not align with client expectations.

• Both the agent itself, as well as the agents and agent representatives working in the agency have the need to use ethical profiles in their marketing.

• Real estate advertising must take into account what is considered ethical and lawful in advertising and marketing, including consideration of the privacy, consumer protection and state-based agent legislation.

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References Ad Standards, Media releases 2019, Ad Standards reveals the top 10 of 2019, 19 December, viewed 8 April 2020, <https://adstandards.com.au/media-releases/ad- standards-reveals-top-10-2019>.

Australian Bureau of Statistics (ABS) n.d., viewed 8 April 2020, <https://www.abs.gov.au>.

Australian Competition and Consumer Commission (ACCC) 2019, Advertising & selling, viewed 8 April 2020, <https://www.accc.gov.au/publications/advertising-selling>.

Australian Competition and Consumer Commission (ACCC) n.d., Real estate agent obligations, viewed 14 April 2020, <www.accc.gov.au/consumers/health-home- travel/real-estate#real-estate-agent-obligations>.

Australian Communications and Media Authority (ACMA) n.d., Industry FAQs, viewed 8 April 2020, <https://www.donotcall.gov.au/industry/industry-faqs>.

Australian Communications and Media Authority (ACMA) n.d., Industry standards, viewed 8 April 2020, <https://www.donotcall.gov.au/industry/industry- overview/industry-standards>.

Australian Communications and Media Authority (ACMA) n.d., Spam and telemarketing, viewed 8 April 2020, <https://www.acma.gov.au/spam-and-telemarketing>.

Australian Government Office of the Australian Information Commissioner (OAIC) n.d., Australian Privacy Principles, viewed 8 April 2020, <https://www.oaic.gov.au/privacy/australian-privacy-principles>.

Australian Human Rights Commission (AHRC) n.d., Anti-discrimination laws, viewed 8 April 2020, <https://www.humanrights.gov.au>.

Australian Property Monitors n.d., viewed 8 April 2020, <https://www.apm.com.au>.

Billboards Australia n.d., Billboard advertising facts and figures, viewed 8 April 2020, <http://www.billboardsaustralia.com.au/why--outdoor/statistics>.

BusinessDictionary.com n.d., Marketing definition, viewed 8 April 2020, <http://www.businessdictionary.com/definition/marketing.html>.

Core Logic (RP Data) n.d., viewed 8 April 2020, <https://www.corelogic.com.au>.

Dynamic Business Magazine n.d., Online marketing, viewed 8 April 2020, <https://dynamicbusiness.com.au/topics/technology/online-marketing.html>.

Ethics Centre n.d., Meaning of ethics, viewed 8 April 2020, <https://ethics.org.au>.

Klososky, S 2010, Manager’s Guide to Social Media, McGraw-Hill Education, New York.

Kotler, P n.d., American marketing author and professor, viewed 8 April 2020, <http://www.philkotler.com>.

Matusik, M n.d., Property observer, viewed 8 April 2020, <https://www.propertyobserver.com.au/michael-matusik.html>.

McCarthy, EJ 1960, Marketing mix, cited in Oxford , viewed 8 April 2020, <https://www.oxfordreference.com/view/10.1093/oi/authority.20110803100143321>.

Network Northwest 2013, Risks and Rewards of Social Media for Businesses, [online video], YouTube, 19 November, viewed 8 April 2020, <https://www.youtube.com/watch?v=ssE_Z6B2E8I>.

https://adstandards.com.au/media-releases/ad-standards-reveals-top-10-2019

https://www.abs.gov.au/

https://www.accc.gov.au/publications/advertising-selling

https://www.accc.gov.au/consumers/health-home-travel/real-estate#real-estate-agent-obligations

https://www.donotcall.gov.au/industry/industry-faqs/

https://www.donotcall.gov.au/industry/industry-overview/industry-standards

https://www.acma.gov.au/spam-and-telemarketing

https://www.oaic.gov.au/privacy/australian-privacy-principles/

https://www.humanrights.gov.au/

https://www.apm.com.au/

http://www.billboardsaustralia.com.au/why--outdoor/statistics

http://www.businessdictionary.com/definition/marketing.html

https://www.corelogic.com.au/

https://dynamicbusiness.com.au/topics/technology/online-marketing.html

https://ethics.org.au/

http://www.philkotler.com/

https://www.propertyobserver.com.au/michael-matusik.html

https://www.oxfordreference.com/view/10.1093/oi/authority.20110803100143321

https://www.youtube.com/watch?v=ssE_Z6B2E8I

Topic 6: Marketing and communication channels in real estate

Office of the Australian Information Commissioner (OAIC) 2014, The Australian Privacy Principles fact sheet, OAIC, 12 March, viewed 8 April 2020, <https://www.oaic.gov.au/privacy/australian-privacy-principles/australian-privacy- principles-quick-reference>.

Real Estate.com.au n.d., viewed 8 April 2020, <https://www.realestate.com.au>.

Real Estate Institute of Australia (REIA) n.d., viewed 8 April 2020, <https://reia.asn.au>.

Real Estate Business (REB) 2019, Real estate agents struggle on ethics index, REB, November, viewed 8 April 2020, <https://www.realestatebusiness.com.au/breaking- news/19182-real-estate-agent-struggle-on-ethics-index>.

Safe Work Australia n.d., viewed 8 April 2020, <http://www.safeworkaustralia.gov.au>.

Tracy, B n.d, Smart Goals: 101: Examples, A free template, and a quick worksheet for writing them, viewed 9 April 2020, <https://www.briantracy.com/blog/personal- success/smart-goals>.

https://www.oaic.gov.au/privacy/australian-privacy-principles/australian-privacy-principles-quick-reference/

https://www.realestate.com.au/

https://reia.asn.au/

https://www.realestatebusiness.com.au/breaking-news/19182-real-estate-agent-struggle-on-ethics-index

http://www.safeworkaustralia.gov.au/

https://www.briantracy.com/blog/personal-success/smart-goals/

Topic 7: Develop a personal profile

Industry Fundamentals NSW

Contents

Overview ............................................................................................................. 7.2

Topic learning outcomes ............................................................................................ 7.2

1 Client expectations for service in the real estate industry ........................ 7.3

1.1 Basis of an ethical client-agency relationship ................................................ 7.3

1.2 Communicating effectively with clients ......................................................... 7.5

1.3 Clarifying and assessing client requirements ................................................. 7.7

1.4 Surveys ......................................................................................................... 7.10

2 Record ways to resolve outstanding matters arising from client expectations ................................................................................. 7.13

2.1 Handling complaints ..................................................................................... 7.13

2.2 Skills needed in managing client expectations ............................................ 7.15

Summary ........................................................................................................... 7.16

Key points .......................................................................................................... 7.16

References ......................................................................................................... 7.16

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Overview An agency’s success lies in the quality of the people it employs, and in nearly all cases, a client’s relationship with their primary contact at the agency will determine whether they have a positive or negative impression of the agency overall. The personal profile includes the agency, it’s people, and how others perceive them.

Topic learning outcomes On completing this topic, students should be able to: • describe the importance of personal profile in attracting potential clients and

understand the general expectations of clients in the real estate industry • create an ethical personal profile for marketing • record ways of resolving matters relating to client expectations.

Topic 7: Develop a personal profile

1 Client expectations for service in the real estate industry A client is the person, team or other business that uses the services of the agency. There can be both internal or external clients that the agent should consider: • Internal clients — people or a team within the agency, e.g. property management

staff, salespersons and managers. Internal clients can also include those who assist in delivering services to the client. For example, solicitors, tradespersons, conveyancers, suppliers of stationery and signs, valuers, etc.

• External clients — those who are not employed by the agency and who use the agency’s services, e.g. sellers, landlords, tenants and prospective buyers.

All clients, whether internal or external, will have an expectation of a standard or quality of services to be provided to them, especially those who are paying a fee for that service such as the landlord or seller.

The first part of developing a personal profile in real estate is to understand client expectations. The agent and agency may then ensure they have the requirements to meet these expectations and thereby build successful and ethical relationships with their clients.

1.1 Basis of an ethical client-agency relationship When landlords or sellers appoint an agency, they are often giving the agency access to their most valuable personal asset. In many cases, the client’s relationship with the property is not simply a financial one; often there will also be an emotional attachment. As such, a critical element of a successful client-agency relationship is respect and trust between the client and agent or agency.

Landlords and sellers trust the agent and agency when they hand over the keys to their property to provide access when nobody is at home. They trust the agent and agency will behave responsibly and ethically, will act in their best interest and will do the utmost to achieve the best possible outcome for the client. Clients believe and expect that the agency will do everything it says it will do and trust it to respect their home and privacy.

Professionalism and the law demands the agent and agency maintain privacy and act honestly and professionally in all dealings.

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Personal information

Personal information means information or an opinion (including those forming part of a database), whether true or not, and whether recorded in a material form or not, about an individual whose identity is apparent, or can reasonably be ascertained, from the information or opinion.

An agent frequently handles personal information from clients and customers. When vendors list their property for sale, or when purchasers buy a property, they must provide personal information, such as contact details, bank details, address, for example. When prospective tenants complete an application for tenancy to vie for a property for lease, they need to supply a large amount of personal information, such as employment details, rental ledgers from previous managing agents, and personal references.

To help secure integrity, trust, and prevent breaches relating to privacy, agents must adhere to keeping the personal information of others private and secure. The following are examples of situations in which the privacy breaches have occurred.

Example 1: Privacy breaches when dealing with client/customer information — tenant privacy

A property manager is in the middle of checking tenant references for a new prospective tenant when he/she is interrupted by another tenant who has called into the agency without an appointment. The property manager invites the tenant into their office and, in the following discussion, leaves the office temporarily to photocopy something for the visitor. Whilst the property manager is away from the desk, the tenant is able to view personal details of the prospective new tenant.

Example 2: Privacy breaches when dealing with client/customer information — client privacy

A seller and a buyer are in negotiations for the sale of a property. The agent decides to submit an offer in a relaxed environment to the seller and to do this invites the seller to meet over a cup of coffee at the local café. One of the patrons sitting within earshot happens to be a friend of the prospective buyer. They overhear information that leads them to believe that the seller is in financial difficulty and needs to sell urgently.

Example 3: Privacy breaches when dealing with client/customer information — tenant privacy

A villa is leased to a single female, who is the only person on the lease. The agent receives a call from a person who claims to be her relative and has flown from overseas for a surprise visit. He knows the street number for the unit block, but asks him to confirm the unit number this tenant lives in. The agent provides the unit number and a few days later are advised by police that the tenant has been seriously assaulted by her ex-partner, against whom she had taken out an AVO.

Topic 7: Develop a personal profile

The features of an effective client-agency relationship

The features of an effective client-agency relationship include: • mutual respect • rapport • a relationship that is clearly understood • both parties fulfilling their responsibilities as set out in agency agreements or

other contracts • the agency’s compliance with ethical standards and legislative requirements • effective communication • an awareness and respect of cultural differences • record-keeping and reporting • ultimately, achieving an outcome that is successful for both parties.

Note: The above reference of agency-client relationship applies to both internal and external clients.

More information on communication is given below, as there is much to understand on this broad area of real estate practice.

1.2 Communicating effectively with clients Effective communication with the client will establish their expected standards and ensure these expectations continue to be met.

The client will also need to feel confident that any problems or conflicts will be dealt in an appropriate manner. For example, when a landlord uses a managing agent to manage their rental property, they will expect that the management fee includes the monitoring and controlling of any rental arrears, as this is acting in the landlord’s best interest.

Internally, if an administration staff member receives a draft advertisement to publish on the internet, they would expect to receive it before the deadline for it to be legible and conform to agency policy and relevant legislation.

An agent needs to ensure that respect for cultural differences or any physical impairment is embodied in the communication activities to uphold both consumer protection and anti-discrimination legislation in dealings with clients. For example, when commencing the tenancy and signing the residential tenancy agreement, a hearing-impaired tenant will need written communication or a signer present to ensure they fully understand their rights and responsibilities.

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Effective two-way communication

Effective two-way communication is critical in establishing and maintaining client relationships.

For communication to be effective, it must: • be non-judgmental • explore problems • provide sufficient time for questions and responses • use appropriate words and behaviour • use clarifying and summarising questions • use clear and concise language • use verbal and non-verbal communication • use active listening • use culturally appropriate communication • use plain English.

Communication is a process that involves the transfer of a message or idea via a communication medium from a sender to a receiver; in other words, an exchange of information from one person to another.

Qualities of an effective communicator

An agent who communicates effectively will: • put the other person at ease • choose a suitable location • pay attention • never do all the talking • clarify understanding • listen well • deliver complex messages clearly • smile • consider cultural differences and avoid stereotyping or judging • use feedback effectively • understand and use non-verbal cues • use a medium of communication appropriate to the situation (phone, email in person) • establish rapport • ask the client for input • manage and maintain the relationship.

In regard to the agency’s clients — landlords and sellers, the terms and conditions of the client-agency relationship are defined in the agency agreement. It must be properly completed, and all terms must be discussed, understood, agreed on and completed with no blank spaces left in the document. Any changes must be recorded in writing, signed and dated by both parties.

When both parties fully understand their parts of the contract, it forms the basis for a positive ongoing relationship.

Topic 7: Develop a personal profile

1.3 Clarifying and assessing client requirements Enquiries from clients may be received by agents in the following ways: • email • inspections • office • open houses • referrals • telephone • website • social media platforms • networking.

The enquiries received may relate to any of the following (note that this is not an exhaustive list — other queries may be received): • agency services • property development • property investments • property management • property sales.

As with all aspects of dealing with potential and current clients, effective interpersonal skills are the key to accurately assessing a client’s needs. The first step in communicating effectively is building rapport.

Building rapport with clients

Building rapport is the first step in the communication process. Although, ‘building rapport’ is something that people often do naturally, it is also something that can be improved upon. It is important to be aware of how the agent’s actions, values, and behaviour can influence a client’s first impression of the agent — and vice versa.

Rapport can be defined by the following terms: • relationship • bond • link • affinity • connection • empathy.

Rapport reduces conflict and fosters co-operation. It helps achieve results and is essential for effective communication, including to fully understand and empathise with their needs and satisfy expectations.

To build rapport, agents need to listen actively and ask relevant questions to understand the needs of a prospective client. An agent should always be clearly aware of what people want from the agency.

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Planning the order in which agent intends to ask these questions will assist in building rapport. For example, asking a seller why they wish to rent out their property instead of selling, and it turns out that it is because they cannot afford the mortgage, is not the best way to establish a great relationship.

Asking easy questions first will allow rapport to grow, after which the agent may change the direction of the conversation if necessary. Agents should remember that all discussions with clients are confidential, and clients may feel the need to establish a relationship with the agent before trusting them with private information.

The use of open-ended questions will often encourage the client to get involved in the discussion. It increases the opportunity for establishing rapport — the answers to open questions can provide agents with insights that may lead to a successful conclusion.

Agents should remember that the idea of asking questions is to listen to the answers and use the information gained, so they should not ask more than one question at a time. It is much more effective for an agent to listen to the client without interrupting, and then to paraphrase to show understanding. The aim of the agent should always be to establish and then meet the needs of the client.

Once the agent has a good understanding of the clients’ expectations, they can then better plan and create their marketing profile accordingly.

In summary, to build a personal marketing profile, remember the following: • be ethical • adhere to legislative requirements • communicate with clients by building rapport, being transparent and following

through on commitments • be professional in marketing • build business and professional networks • network in the community • make use of communication channels • participate in community and service organisations • utilise personal promotional materials such as business cards, flyers, brochures,

website • be up to date with market and legislative knowledge • maintain a high standard of professional presentation • know the target market • be visible in the local community.

Topic 7: Develop a personal profile

Building a personal profile

Figure 1 How to build a personal profile

Step 1: Add your professional experience

List your skills, expertise, education (e.g. certificates, degrees, diplomas, classes taken, etc.), experience and awards and discuss your work ethic.

Purpose: To demonstrate your qualifications and show that you are a hard-working agent that is capable of meeting clients’ requirements and expectations.

Step 2: Personalise your profile

Provide some general information about your personal life outside of work. (e.g. family, pets, sports, hobbies and special interests).

Purpose: To build rapport with your clients and show that you are a real person and not just a real estate agent.

Step 3: Link yourself to the real estate area

Demonstrate your knowledge of your area and how long you have been a real estate agent there. Include information about where you have lived in the past and how long you have been a real estate agent there. If you are new to the area, mention why you moved there and all the things you love about the area.

Purpose: To build trust and rapport with your clients.

Step 4: Add a photo

Add a professional, high-quality portrait headshot.

Purpose: To create a visual calling card and personally connect with prospective clients.

Step 5: Add your contact details

Provide your phone number, business address, website address and links to any social media platforms, affiliated businesses, partnerships or companies or charities that your agency may sponsor.

Purpose: To inform prospective clients of any businesses you may be aligned with and to provide a point of contact.

Step 6: Utilise social media platforms

Post your profile on websites such as OpenAgent and Local Agent Finder and social media platforms such as Facebook, LinkedIn and Instagram.

Purpose: To promote you and your real estate agency and generate leads.

Step 7: Format

Use a professional font with standard font sizes and use italics, bold and underline minimally. Aim for a medium length profile of two to three paragraphs or about 250 to 500 words. If it is any longer than that, your readers may lose interest.

Purpose: To connect with prospective clients.

Step 8: Proofread and review

Ensure your profile uses correct spelling and grammar and is error-free. Read every word out loud and then have a friend, family member or colleague read it and provide you with feedback. Your personal profile represents you and your agency’s brand.

Purpose: To ensure accuracy and readability.

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1.4 Surveys One important method agents can use to acquire an understanding of expectations of this broad base of clients is by conducting surveys. Surveys are a useful tool for quickly, simply and cheaply reaching a broad audience.

There are many companies who specialise in assisting in the survey process. Some offer a full-service survey process (including creating the survey, sending it out, and analysing the results), and others simply provide templates for those that wish to do the work themselves. Below is a list of some companies for research: • Australian Survey Research: <https://aussurveys.com> • Survey Manager: <www.surveymanager.com.au/about-us> • Survey Monkey: <www.surveymonkey.com/mp/real-estate-survey>.

Survey Monkey has templates specific for the real estate industry. Below is an excerpt from their website:

…Want to understand what your buyers have in mind, or what’s motivating your sellers? Use a survey to gather more insights. Want to grow your real estate agency or business? Use a questionnaire to do market research or prospect for referrals…

(Survey Monkey)

The above briefly explains what an expected outcome from the survey would be.

https://aussurveys.com/

https://www.surveymanager.com.au/about-us/

https://www.surveymonkey.com/mp/real-estate-survey/

Topic 7: Develop a personal profile

Survey examples

Figure 2 Sample of questions for property management

1. Why did you choose XYZ to manage your property?

(a) Purchased property through XYZ

(b) I know the property manager

(d) I know a staff member in the business

(e) I have another property with you

(f) Advertising

(g) A friend recommended me

(h) A relative recommended me

(i) Other.

2. How would you rate our service overall?

0 1 2 3 4 5 6 7 8 9 10 (Poor) (Outstanding)

Comments:

3. How likely is it that you would recommend our company to friends or relatives?

0 1 2 3 4 5 6 7 8 9 10 (Poor) (Maybe) (Likely) (Highly likely)

4. Please provide your comments on how we may improve our service to you.

Comments:

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Figure 3 Generic sample of a customer service survey

1. How would you rate our communication frequency and clarity?

0 1 2 3 4 5 6 7 8 9 10 (Poor) (Outstanding)

Comments:

2. How would you rate our service overall?

0 1 2 3 4 5 6 7 8 9 10 (Poor) (Outstanding)

Comments:

3. How likely is it that you would recommend our company to friends or relatives?

0 1 2 3 4 5 6 7 8 9 10 (Poor) (Maybe) (Likely) (Highly likely)

4. Please provide your comments on how we may improve our service to you.

Comments:

The agent should gather the surveys and analyse the results to develop an understanding of the client’s expectations from the business and the industry. The survey results are a record of how the agent and agency’s practices align with the client’s expectations.

These results may provide the following information: • An understanding of the clients’ experience with the agent or the agency • A guide on how the agent or the agency are performing; for example, are there any

service quality complaints? • identify any potential areas the business or agent may need to improve on.

Example: Real estate surveys — feedback

A common piece feedback in the real estate industry is a lack of return calls or no follow-up by agents. If this is uncovered in survey data, the individual agent should be more attentive to ensure they follow up with information as promised, and an agency may introduce policies, procedures or training for its agents to improve follow-up. For example, the agency could create a policy on responding to enquiries within 24 hours and being transparent with information.

Topic 7: Develop a personal profile

In addition to the knowledge of client expectations gained from survey data, let’s also look at what else may be relevant in developing good ethical relationships with clients.

2 Record ways to resolve outstanding matters arising from client expectations Real estate is a people business where the agent is effectively the mediator in transactions of property between clients (sellers and landlords) with customers (buyers and tenants) under client authority. At times there will be disputes, misunderstandings, and outstanding matters arising from client expectations. It is imperative that a business implements and records processes to resolve and track any outstanding matters. Pending or outstanding matters if not addressed on time can become a complaint.

2.1 Handling complaints If a complaint is received, the following are steps that may be followed by an agent to manage it.

Steps to handling a complaint effectively

Step 1: Listen

Resist the temptation to argue with the client. Instead ask questions to get to the bottom of the situation. What is the client really upset about? The agent should rephrase what the client says so the knows the agent understands the issue. Further information is given below on what clients may wish to achieve by complaining which may assist in this process.

Step 2: Don’t be defensive

Being defensive will get in the way of listening to the client. The agent should allow the client the time to be heard. A defensive approach will build a wall in agent-client relationships.

If it is a mistake, the agent should fix it immediately and apologise.

Step 3: Look for lessons in the situation

The agent should then check to see if there is anything in the office procedures that can help in avoiding a similar mistake again.

The agent should research the problem before making any decisions. This involves finding out what actually happened. Questions that can be asked are: Is a system in the office not working correctly? Does it need to be fixed? Has the client misunderstood something?

If the situation was caused by something within the control of staff at an agency, the agent should find a way to fix it for the future. This may involve revising processes, and/or retraining staff.

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Step 4: Re-educate the client when necessary

The agent should try to help the client understand the process to guard against future misunderstandings. They should set clear client expectations for this client moving forward.

Step 5: Know that if one client complained, there may be others feeling the same way

The agent should understand that if this has happened with one client, there may be others who have been similarly impacted. These people should be approached and offered the resolutions discussed below.

Step 6: Give the client a choice of possible resolutions

The agent should consider how to make it right with the client (or clients, if others have been found). The aim should be to negotiate a way that works for all parties that is equitable to all.

Step 7: Thank the client for helping with their business

As painful as they can be, complaints from clients often are an indication where improvements are required. The resulting changes may be a very positive step for the agent and their agency.

Step 8: Follow up with those who complained to be sure they are fully satisfied

If a process or a system is altered, and it changes the way of doing business, the agent should follow up on clients who are affected by the change. Following up on complaints and a satisfactory resolution of a complaint improves agent-client relationships.

In some states, it is a legal requirement to have a complaints system in place. The companies’ insurance policy might insist on a complaint register also.

One of the main aims in any business is to stay in business, and what happens when someone complains can have a significant impact on business operations. With this in mind, every complaint should be viewed as an opportunity, not a problem.

Clients complain about all sorts of things. Regardless of the nature or seriousness of the complaint, all complaints should be dealt with professionally.

When people complain, they either want action to be taken to solve the problem or some sort of compensation for the actual damage or loss caused. Sometimes they want both. They also want to be heard.

An agency wants: • to become aware of where its service delivery may need to be reviewed • the client to then go and tell others how well the agency handled the complaint • the client to give the agency additional business in the future. For example, a tenant

may become a landlord one day and want to deal with the agency based on how well it handled the situation and the complaint.

The agency should have a process in place on how to handle the complaint and resolve it as quickly as possible. It should have a process where all complaints are recorded and analysed so that action can be taken to prevent it from happening again.

Topic 7: Develop a personal profile

All employees should have training and understand the agencies complaint resolution process.

The more serious complaints will be handled by the office manager or the principal.

2.2 Skills needed in managing client expectations There will be critical skills that an agent will need to successfully implement steps in handling client matters. Agents need good communication, negotiation and conflict resolution skills as well as patience in managing client expectations. It is important to listen actively to the client.

These skills take time to learn but can be developed with persistent effort and encouragement. As with the development of any skill, continual practice and refinement will produce results.

Communication skills

Refer to section 1.2 ‘Qualities of an effective communicator’

Negotiation skills

Good negotiation skills include: • preparation • achieving desired outcomes • understanding goals and needs • finding solutions • managing conflict • remaining calm and objective • seeking a win-win outcome where possible.

It is worth investing time in developing effective negotiation skills that will result in lasting solutions that develop trust and respect, rather than undermine relationships.

Conflict resolution skills

Good conflict resolution skills include: • not being defensive • letting the other person explain themselves and actively listening • maintaining a calm tone • showing a willingness to compromise or collaborate • not taking things personally • paying close attention to non-verbal communication • prioritising resolving the conflict over being right • knowing when to apologise and forgive • focusing on the conflict at hand and not past ones • using humour, when appropriate • being mindful of the importance of the relationship.

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Summary Developing a personal profile involves creating a personal brand in the real estate business. It includes how to present oneself and deal with others; individually and within the community groups both personally and via media (social and print media). It also involves being able to effectively manage any outstanding matters with clients.

Key points • Seeking feedback from clients, for example via surveys, are a record of how the

agents and the agency’s practices align with the client’s expectations. • Once the agent has a good understanding of the clients’ expectations, they can then

better plan and create their personal marketing profile. • Effective complaint handling is vital in an industry such as real estate, which is based

on referral business. It requires the agent to have good communication skills, including the ability to build rapport.

References Australian Survey Research n.d., viewed 9 April 2020, <https://aussurveys.com>.

Survey Manager n.d., viewed 9 April 2020, <www.surveymanager.com.au/about-us>.

Survey Monkey, n.d., Real estate surveys, viewed 9 April 2020, <https://www.surveymonkey.com/mp/real-estate-survey>.

https://aussurveys.com/

https://www.surveymanager.com.au/about-us/

https://www.surveymonkey.com/mp/real-estate-survey/

Topic 8: Client engagement practices for marketing property

Industry Fundamentals NSW

Contents

Overview ............................................................................................................. 8.2

Topic learning outcomes ............................................................................................ 8.2

1 General expectations of clients for property marketing............................ 8.3

1.1 Client engagement in marketing .................................................................... 8.3

1.2 The marketing plan ........................................................................................ 8.3

1.3 Distribution of the marketing plan ................................................................. 8.5

1.4 Keeping the client informed ........................................................................... 8.5

2 Property representations ......................................................................... 8.6

2.1 Misrepresentation .......................................................................................... 8.6

2.2 The concept of marketing .............................................................................. 8.7

2.3 Maximising awareness ................................................................................... 8.7

2.4 Create demand for the property .................................................................... 8.8

2.5 Creating a unique/positive image of the property ........................................ 8.9

2.6 Encourage customers to act ........................................................................... 8.9

2.7 Achieve the best possible price for the property ........................................... 8.9

2.8 Risks to the agency by poor marketing and communication practices ....... 8.10

2.9 Strategies to minimise risk in marketing ...................................................... 8.11

3 Evaluating marketing ............................................................................. 8.14

3.1 Success in marketing .................................................................................... 8.14

3.2 Measure results ............................................................................................ 8.16

3.3 Internet reports ............................................................................................ 8.17

3.4 Monitoring/measurement activities ............................................................ 8.18

3.5 Conclusion .................................................................................................... 8.18

Key points .......................................................................................................... 8.19

References ......................................................................................................... 8.19

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Overview As part of the processes of listing, selling and managing property on behalf of the client (being the owner or the landlord), an agent will need to have strategies to market the property to attract the right target audience. In doing so, the agent will achieve the best outcome for the client.

Topic learning outcomes On completing this topic, students should be able to: • understand real estate marketing and marketing plans • apply knowledge of client engagement practices when marketing property • apply marketing strategies to attract the target audience • evaluate the results from a variety of marketing practices.

Topic 8: Client engagement practices for marketing property

1 General expectations of clients for property marketing Marketing of the property being sold or leased must be handled professionally by the agent to achieve the desired outcome. For this to occur, the agent will need to be abreast of the market and have the knowledge to share with the client. With so many marketing communications channels available, it is imperative to conduct market research to match the property to the best target audience; and this would be a standard expectation of a client.

1.1 Client engagement in marketing When a client engages an agent to lease or sell their property, they expect the agent to: • be honest and have integrity • be responsible • be ethical • always act in their best interests • be available always • be knowledgeable • answer all questions • always be punctual • be well presented • help them with advice • understand legislation • take care of the marketing and entrust them on the best options available.

With the above points in mind, a clear, personalised, detailed and professional marketing plan should be created for the client and followed through.

1.2 The marketing plan A good marketing plan includes: • details of the property, e.g. property type, features, location, size • information about other comparable properties in the area that have previously been

sold or leased and properties that are currently on the market • location information such as demographics and features of the suburb,

e.g. transport, schools, lifestyle • examples of the types of marketing communication channels, e.g. emails,

online advertising • a clear structure of price offerings, options and benefits • options for the best sales method, e.g. private treaty, auction, or Tender/Expressions

of Interest (EOI) • tips on the best way to present and market the property • a list of tradespeople that may assist with any necessary repairs or maintenance • a marketing schedule detailing when and where advertising will appear.

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The below samples demonstrate how these items may be incorporated into an agent’s marketing calendar and schedule.

Figure 1 Example marketing calendar for a property being sold via auction SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY

13 (October)

14 Internet live x 11

E-brochures Signboard installed

15 Database email

outs

16 Midweek open 6.00–6.30 pm

Owner feedback

18 Asian papers × 3:

2 × Chinese papers

Korean paper

19 Saturday

Open home W1 11–11.30 am

20 Real estate

Domain reports

21 Call back buyers from open home Owner feedback

22 Owner report

Owner meeting

23 Midweek open 6.00–6.30 pm

Owner feedback

24 E-brochure

distributed to database

25 Asian papers × 3: 2 × Chinese papers

Korean paper

26 Saturday

Open home W2 11–11.30 am

27 Real estate

Domain reports

28 Call back buyers from open home Owner feedback

29 Owner report

Owner meeting

30 Midweek open 6.00–6.30 pm

Owner feedback

31 E-brochure

distributed to database

1 (November) Asian papers × 3: 2 × Chinese papers

Korean paper

2 Saturday

Open home W3 11–11.30 am

3 Real estate

Domain reports

4 Call back buyers from open home Owner feedback

5 Owner report

Owner meeting

6 Midweek open 6.00–6.30 pm Reserve price

meeting

7 E-brochure

distributed to database

8 Asian papers × 3: 2 × Chinese papers

Korean paper

9 Saturday auction

on site at 3 pm View from

2.30 pm

Source: Kaplan Professional 2020.

Figure 2 Example of items an agent’s marketing schedule for a property for sale

Marketing schedule

Property address:

Seller name:

Item Cost Publication date

Local news — Property Week Advert: (approx. 130 mm (wide) × 57 mm (high))

$xxx.00 10 January 20XX

$xxx.00 17 January 20XX

$xxx.00 24 January 20XX

$xxx.00 31 January 20XX

$xxx.00 6 February 20XX

Website: • realestate.com.au (minimum of 6 photos) highlight for 1 month • domain.com.au (including 5 photos) highlight for 1 month

$xxx.00 10 January 20XX

Social media: Facebook, Instagram $xxx.00 17 January 20XX

Signage insert: (approx. 700 mm (wide) × 3,500 mm (high)) $xxx.00 17 January 20XX

Execute brochure: (50 × 4 pages with property details in full colour) $xxx.00 17 January 20XX

Your investment in marketing (inclusive of GST) $x,xxx.00

Total investment in marketing (inclusive of GST) $x,xxx.00

Plus, you will also receive: • Prominent signage: (approx. 1,200 mm (wide) × 900 mm (high) • Digital photography • ‘Basic’ brochures: (A4 size single page — full colour) • Open houses (including pointers) • Window card: (A4 size window display — full colour)

No charge No charge No charge No charge No charge

17 January 20XX

Client x

Salesperson x

Topic 8: Client engagement practices for marketing property

1.3 Distribution of the marketing plan Once the marketing plan is completed, the agent must discuss it with the owner and have them sign the plan, confirming their agreement and acknowledgment of the content including the fees.

Once the marketing plan is completed, the agent must provide a copy to: • the client • the office administrator or the marketing assistant.

For the agency: • retain a copy in the property listing file • retain a personal working copy.

As soon as the marketing plan has been approved by the owner and the funds have been received from the client, the agent should immediately complete the following: • book all press advertising either directly with the local media advertising

representatives, the advertising agency or the media buying agency • advise the signage contractor to create the signage • provide the residents of the property with a program of open for inspection times

(this includes the tenant(s) in a rental property) Check the relevant state’s tenancy laws to ensure the required statutory notice is provided

• provide the owner’s corporation and resident managers with inspection advice (if applicable)

• issue appropriate entry notices to the tenant(s), as required under the state legislation

• book photographers and graphic artists, if required • arrange for an internet display to be created • write the advertising copy for the brochure(s), signage, internet, newsletter(s) and

newspaper advertising • arrange the first open for inspection and property preview, if appropriate.

1.4 Keeping the client informed During the entire marketing campaign, an agent must keep the owner informed of all advertising being placed and the outcomes of the marketing and promotional activities.

A good way to achieve this is for the agent to send the client a weekly report that includes copies of all advertising placed, a summary of inspections and feedback received about the property.

It is essential that the office administrator or personal assistant monitors the advertising expenditure to ensure that the marketing campaign does not go over budget. If the budget reaches the limit authorised by the client, the agent is then required to seek instructions from the client regarding any further marketing activities.

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2 Property representations Representations about the features of a property must be accurate and complete. There are legal obligations to comply with and if the law is breached, the agent and the agency can receive significant penalties, including court action for the most serious offences.

In representing the property in marketing, the law states that the advertising must not be misleading or misrepresent the property in any way.

2.1 Misrepresentation

Example: Misrepresentation of a property’s characteristics

A real estate agent misinforms potential buyers about the characteristics of a property by advertising ‘beachfront lots’ for properties that are not on the beach.

Example: Misrepresentation of a property by using false images/photography

A real estate agent: • uses stretched or elongated images, giving the impression that the

property is larger than it really is • digitally removes undesirable property features such as power lines.

The following information about what agents should and should not do relating to advertising is from the Australian Competition & Consumer Commission (ACCC) website.

What agents should do in advertising

When presenting information about products or services to customers, agents should: • give current and correct information • use simple language • check that the overall impression is accurate • back up claims with facts and documented evidence where appropriate • note important limitations or exemptions • correct any misunderstandings • be prepared to substantiate.

https://www.accc.gov.au/business/advertising-promoting-your-business

Topic 8: Client engagement practices for marketing property

What agents should not do in advertising

When presenting information about products or services to customers, agents should not: • guess the facts • omit relevant information • make ambiguous or contradictory statements or use unnecessary jargon • make promises that cannot be kept, or make predictions without reasonable basis • offer goods or services without a reasonable basis for believing they can

be delivered.

2.2 The concept of marketing Simply put, marketing is designed to attract the prospect (i.e. the prospective buyer or tenant) to the product (i.e. the property listed for sale or lease).

When real estate is marketed, the focus must be on: • maximising awareness of the property to as many targeted customers as possible • creating demand for the product • building a unique/positive image of the property • encouraging customers to act • achieving the best possible price for the property.

2.3 Maximising awareness There is an old saying: ‘You cannot sell something if people do not know about it!’ Sometimes agents will also quote the saying, ‘You cannot sell a secret!’ Maximising awareness is doing just that. It is saying to a potential customer ‘look at me — I am here and I am available!’.

Marketing creates interest in a property. It should get people talking about a property. If enough people know about it, there is a high chance of it reaching the target customer who will ultimately be the new resident.

As the popularity of social media platforms grows, it has become a regular practice for agencies to use it to market properties. However, the type of social media and the content provided must be chosen carefully. It is important to maintain a consistent marketing campaign and to create a social media marketing plan that best represents the agent and the agency.

A sample social media checklist is shown in Figure 3 below.

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Figure 3 Social media checklist

Source: Template from Microsoft Word.

2.4 Create demand for the property Good marketing can create so much interest that people who had previously not been in the market will be compelled to make an enquiry and act to secure their opportunity to purchase or lease this highly sought piece of real estate. Just focus on the success of the project marketers and investment marketers over the last ten (10) years. These marketing experts have convinced people that they should be investing in properties that have not even been built. The majority of these buyers would never have considered a purchase without the seed being sown through clever focus marketing targeting a perceived market need.

Topic 8: Client engagement practices for marketing property

2.5 Creating a unique/positive image of the property The image of a property is the message that the property is sending out to the market. Sometimes the agent may have to re-evaluate whether the image of the property or the project is the right one for the target customer. For instance, if a property has a lot of signage on it through different agencies, it is sending a message that says, ‘I am overpriced, I am desperate for a sale, and I have a problem because I have not sold yet’.

Now think about the message this property is sending when it has an auction board posted on it: ‘I am serious about selling, I am genuine and my owners care enough to sell me by auction’.

Sometimes the marketing of a property can relay the wrong image altogether. For example, it could be portraying a trendy young jet-set image when in fact it is ideal for customers who want a quieter lifestyle and quality surroundings.

Ensure that the marketing is sending the right message to consumers — that, yes, the property is genuinely for sale or lease; yes, the owners are realistic about their price expectations; and yes, the marketing strategies being used confidently promote these aspects. The positive image created through the marketing strategies will tell the consumer it is genuine.

2.6 Encourage customers to act One of the most important aspects of a marketing campaign is to connect with one right customer — not numerous unsuitable customers. Furthermore, the customer must be given every reason to inspect the property and be helped to make a purchase decision.

At times, agents or agencies may actually make it difficult for the customer to get to know a property and attend a property inspection. Indeed, up till recently, one school of real estate promoted the fact that if the customer was genuine, they could be made to wait and to fit in with the agents and property owner’s agenda. The modern school of thought is ‘treat the customer with respect and provide information and a great service, especially pre-educating through the internet and market research. Let the marketing do most of the work’. The inspection and negotiations can then be the closing stage of a transaction rather than the starting stage.

2.7 Achieve the best possible price for the property Properties that are well promoted to the correct target market tend to achieve higher prices. It is because the marketing has exposed the property to the correct market base, often outside the local area. At the same time, if the image of the property has been enhanced to the right market, and demand has been stimulated, then customers react positively to the product.

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Example: Marketing of properties

Compare the two examples below and consider which would achieve the best price: • Suburb: $600,000 Older style family home featuring 4 bedrooms,

rumpus room, two bathrooms and double car garage. Needs some work. Contact Fred on 1413 2345

• Suburb: $600,000 Magical older home with big rooms and space to move. Yes, it needs some work — but homes like this are not built today. Redecorate the four double bedrooms to suit your modern lifestyle and seize the opportunity to design your own home theatre system into the expansive rumpus room. You will be impressed with what you see. Meet Fred Smith on site today, 2–4pm, or visit the home on www.realestate.com.au for your preview.

2.8 Risks to the agency by poor marketing and communication practices The risks involved by poor quality of marketing, service and communication practices may result in: • potential loss of income • damage to reputation • negative media • longer time spent on the market • more stress for the agent, agency, and the client • potential fines and compensation claims if activities were found to be unlawful • overall, resulting in loss of clients and business.

With the constant growth in digital advertising tools it is less common to come across bad advertising or make mistakes. Most agencies would outsource photography to the industry professionals, but at times some agents may be in a rush to get a property on the market and in the process, they may be doing themselves and their client a disservice.

http://www.realestate.com.au/

Topic 8: Client engagement practices for marketing property

2.9 Strategies to minimise risk in marketing Some strategies to assist in reducing risk in marketing are discussed below.

Creating a marketing plan

Writing and researching for a marketing plan gives agents a chance to: • identify the target market and understand how the product or service meets the

client needs • identify competitors and what the target customers think about the agency’s

competitors’ strengths and weaknesses • position the brand, products and services so that the target market sees the business

as better than, or different from, the competition • set specific, measurable goals and time frames for the marketing activities • map out a strategy to reach target audience, including the messages, channels and

tools in use.

Advertising content

In order to find the most appropriate buyer, it is beneficial to both the seller and the agent to provide well displayed advertising with good content that is aligned to the right target market. The advertisement should demonstrate knowledge, expertise and professionalism.

When creating the advertisement, writers should: • use a powerful headline • tailor the message to suit the target audience • talk about the benefits • have a call-to-action • use exciting images • use testimonials if relevant • always deliver on what is promised.

Outsourcing

It is a good business decision to employ a marketing agency.

A marketing agency can: • establish brands for property developments • develop go-to-market strategies • offer training in LinkedIn and other online marketing, to create or update websites • create lead pages • post on their social channels to keep them professional and active • prepare business awards • run social media and other digital marketing campaigns to promote developments

and more.

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Example: Marketing agencies

Some marketing agencies to research are: • The Creative Collective: <www.thecreativecollective.com.au/real-

estate-industry-websites-marketing> • Chronicle Republic: <www.chroniclerepublic.com> • The Property Agency: <https://thepropertyagency.com.au/WhoWeAre> • Campaigntrack: <www.campaigntrack.com/what-we-do>.

Resource 1: Excerpt from Campaigntrack on their product/service

With Campaigntrack, every facet of your property, agent and office marketing can be created, delivered and managed flawlessly. Free your business with software that incorporates a host of features designed specifically to aid in the everyday management of property marketing, and services that will propel your campaigns to new heights. From the most sophisticated marketing operations to the simplest product order…

(Campaigntrack 2019)

Marketing is more than just advertising and logos

Marketing can cross many areas of the business, including: • how the customers are greeted on the phone • service procedures • staff presentation • office presentation • car presentation (not an expensive car but ensure it is clean) • email signature of all staff • confidence of all staff • agents’ knowledge • agents’ reputation • agents’ integrity.

Hence by being attentive to all of the above, helps marketing to develop a positive and successful perception of the brand relating to staff and the business. Further to these general strategies a major fundamental in successful marketing and minimising risk is ensuring systems are in place and being followed.

Systems

The areas where systems can be implemented include: • People — Who will be responsible for carrying out the activities identified? • Process — How will they be done? • Physicals — The actual tools and collateral needed for the strategy to be acted on • Partnerships – Who are agents and agencies working with?

https://www.thecreativecollective.com.au/real-estate-industry-websites-marketing/

https://www.chroniclerepublic.com/

https://thepropertyagency.com.au/WhoWeAre/

https://www.campaigntrack.com/what-we-do/

Topic 8: Client engagement practices for marketing property

Table 1 Systems: Critical areas of implementation of marketing practice

Element Component Variables

People Recruitment Target agency personnel who are compatible with the agency brand, its image and agency culture.

Culture Establish a service-oriented focus by promoting an agency vision. Culture must be consistent through policies and procedures, codes of professional behaviour, business standards and demonstrated in agency correspondence, documentation and general presentation.

Training Build skills, knowledge and right attitudes to service and quality outcomes. Select right content through needs analysis, trainers, coaches and mentors.

Networking The ability to connect with the right people to leverage the agency business to the maximum.

Communication Is the agency using the most current and relevant communication systems to service its client base and to enhance its market impact?

Process Systems Does the agency have the right software and systems in place so it can operationally produce, implement, manage and measure agency marketing activities?

Procedures Does the agency have policies & procedures in place that underpin and guide all marketing activities? For example, who checks copy for appropriate content and accuracy? Does the client sign off on advertising before it is placed? Who monitors source of enquiry and who monitors response and conversion rates?

Accessibility How easy it is to do business with the agency? Are the hours of operation compatible with those of the target market? Can people pay by credit card or EFTPOS? Does the agency have enough staff to open the office on weekends and does it have enough staff to ensure security of properties when open for inspection?

Interaction How well do the agency staff respond to people? How do they answer phones and what is the agency email response standard? Are people kept waiting for service? How quickly and courteously do the staff follow up on matters? Is the selling and rental process generally a good experience in terms of service standards?

Physical Image First impressions really count and relate to the office, cars, signage, marketing collateral and people. Is there consistency in image and does it promote professionalism and trust? Is this image compatible with the target market segment?

Approaches Are there a wide range of ‘touch points’ where there are plenty of opportunities for people to meet with an agent, visit displays and feel welcome to initiate a conversation/contact?

Layout Is the office, display area or agency website inviting and easy to navigate? If someone wanted to talk with the agent privately, can they? Does the layout suit the services that the agency delivers and is it compatible with the style of products and services it promotes?

Displays Does the display material look clean, modern and professional? Does it maximise exposure?

Partnerships Professional relationships

Are relationships that are strategic to business development fostered? For example, are business mentors used and are professionals used for valid assessment, feedback and advice

Alliances Is the agent a member of a professional development group such as REI? Does the agent have membership of Multi List or is there a formal and informal referral and conjunctional relationships established with other compatible agencies to promote and foster business?

Networks Does the agency associate with other compatible businesses so everyone can benefit from an association? For example, Chamber of Commerce or Progress Association?

Integration Is the business so well accepted and integrated into the community and business culture that the agency has top of mind awareness when people think of real estate? For example, does the local paper or the radio and TV station contact when they need a comment about the real estate market?

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3 Evaluating marketing Many agencies get embroiled in day-to-day operational issues and do not plan for agency marketing activities to be monitored, evaluated and managed for required improvements. Marketing strategies that are achieving favourable results can be continued into the upcoming year and beyond. Strategies that are not working should be adjusted or alternative marketing activities may need to be introduced.

3.1 Success in marketing Success of a marketing strategy is measured in more ways than just how much revenue was generated. Metrics called key performance indicators — or KPIs — can be tracked that help to evaluate in detail how well a strategy is working.

Example: Results of a marketing campaign

A manager can track how many customer inquiries were received in a given period after a major marketing initiative such as an advertising campaign and can also track how many of these inquiries resulted in successful sales. This information demonstrates whether the marketing message got through to target customers and how effective the sales staff was in converting the enquiry into a sale.

A business must have methods and tools for measuring the results of their marketing practices.

Examples of typical measuring tools include: • research to assess before and after awareness levels with customers and

the media • media coverage compared to the competition • the number of followers and their levels of influence on social

media sites • budgetary control • timescales — ensuring activities are completed on time • number of enquiries • increase of visitors to the website and the levels of interaction users

have with the website • increase in sales.

Customer response in all its varied forms can help to determine what type of reactions the marketing creates. Surveys, online and in person, general customer service feedback and online commentary can all reveal what the customers think of the marketing and which campaigns have the greatest impact. Simple questions like ‘how did you find out about our promotion of XYZ?" can reveal which initiatives are reaching the customer and which market segments are becoming agency’s customers.

Is the marketing reach expanding? If so, the effectiveness of the marketing plan may be the probable cause. Marketing may make its way into new areas via customer recommendation/referral or natural growth may indicate a good customer service experience and an effective marketing message. The expansion of the marketing budget is another sign that the plan is working well and has gained more support from management.

Topic 8: Client engagement practices for marketing property

When developing the marketing plan, consideration is also required towards the evaluation process.

Example; ‘Success Indicator’ as a measurement tool

The marketing activity below provides an example of how a ‘success indicator’ can be built into the original marketing plan. Marketing activity

Guidance: Once you have defined your marketing mix, the next step is to detail the specific activities that you will undertake to achieve your marketing objectives. As you create these activities, keep referring back to your marketing mix — it will help you to assess which activities are worth the time and effort to implement.

What steps or activities will you undertake to achieve your marketing objectives?

Marketing activity/milestone Person responsible Date of expected completion

Cost ($)

Success indicator

Print advertising, online advertising, mail-out, giveaway, media release, event, website, blog/social media, public relations, branding and artwork, or publications and catalogues.

Who is responsible for completing

this task?

When do you expect to

complete the marketing activity?

Estimated cost of activity

What indicator/ measurement result will need to be met

before this activity is considered a success?

Example: Cost versus benefit

The reality of limited resources in a small business makes it imperative that the business owner allocates marketing resources carefully. The agency and its team must assess the likelihood that the marketing dollars spent to implement its strategies will achieve positive results. Strategies are accompanied by tactical plans — the specific steps to implement them and the cost. In evaluating strategies, also assess whether the agency has skilled personnel and financial resources to implement them effectively.

Example: Long-range impact

When evaluating strategic choices, consider potential long-range benefits, not just immediate results. For example, allocating part of the marketing budget to charitable or community projects and activities, such as sponsoring local youth sports teams, helps build goodwill within the community. The positive image created for the agency may translate to acquiring customers over the long term.

Example: Positioning versus competitors

Competitors will want to take existing customers from the agency and compete to acquire new customers at a more rapid rate. Monitor competitors’ marketing, pricing as well as other strategic actions they may be taking to gain an advantage. When monitoring a strategic marketing plan, a major objective is devising strategies to counter those of the competitors that are negatively impacting a business.

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8.16 CIVREP-NSW1_T8_v2

Example: Growth opportunities

If the agency does not keep innovating and evolving it risks reaching a state of stagnation. Part of the evaluation of a marketing process requires an assessment of the best growth opportunities for the agency and devise actions — strategies and tactics — to take advantage of them. For example, the agency might expand with new services to what it currently offers to customers, expanding the territory by entering new markets, or aggressively marketing to customer groups it may not have gone after in the past. At the end of the strategy evaluation process, the agency will be able to rank these opportunities according to which ones offer the greatest sales potential.

3.2 Measure results Agents who measure results will be far more effective in the long term as they have learnt to monitor outcomes and where necessary switch their marketing mix to strategies that work more effectively. By focusing on campaign effectiveness agents can track the marketing campaign and monitor a return on investment (ROI).

Agents must have systems that objectively record and evaluate the impact of promotional activities in accordance with agency activities. The first step of this process is to set up a basic system to record all enquiries and then monitor outcomes over each quarter. In the case of the exercise above, if agents are aiming for an increase in auction listings and have quantified the target as 10 in 6 months, then the first quarter results should indicate whether the agent is on track with the objective. If not, then agents have time to re-evaluate their strategy and bring marketing back on track.

It is also important that customer/client management systems are established as soon as marketing commences. It is essential that agents are able to record key information from every new customer or client in the system. This helps agents gauge whether or not the marketing is reaching the right market segment and if customers or clients are responding appropriately.

Key information that should be entered into the customer/client management system includes: • name and contact details • the reason for the enquiry, e.g. purchase, selling, renting, management, developer,

other • whether it is an investor or owner occupier • the source of the enquiry, e.g. print media, direct marketing, internet, open house,

signage, referral, other • how soon they are ready to act, e.g. immediate prospect, near term prospect,

long term prospect • the type of property, e.g. house/unit/land, price range, terms • the value of the proposed business — insert potential income against each entry • if the lead was converted and if so, how long it took • if there is an opportunity for repeat business.

Topic 8: Client engagement practices for marketing property

If agents are running a major media campaign through the print or electronic media or a billboard campaign, then the most common method for measuring the impact of the advertising is a Rating Point (rp) or the more accurate Target Rating Point (trp). These measures refer to the percentage of available consumers in a selected geographic location that can be reached by the selected media via the selected campaign at that particular time. The target rating point is the more accurate reading as it provides a percentage of the particular target market segment reached at a particular time. An example is the ACNielsen ratings that are conducted regularly on television and radio advertising. Billboard companies and newspapers can provide similar information and research as part of their service to advertisers who market with them. Social media platforms such as Facebook, YouTube and Instagram can provide details of the marketing results.

3.3 Internet reports Internet marketing is easier to measure than other forms of marketing. Agents can either ask their internet provider to measure responses and report on a daily or weekly basis, or they can use their own software program to check responses on every internet touch point they have with agency customers and clients.

The sales analysis provides valuable information for the agent’s business including visitor enquiry rates, the number of times customers visited the agency website before buying, and exactly where enquires and sales are coming from and which advertising or web channel is driving sales. Modern software programs can now track banners, display advertisements, internet campaigns, and e-newsletters and will help agents to focus on their advertising dollars towards advertising that is proven to work for their business. Most importantly, it can also guide agents on how to save money by discovering the advertising campaigns that don't give an investment return.

There are a range of reports that agents should be gathering from their internet marketing. They include: • Trend analysis — Are agent sales, visitors and conversion rate increasing or

decreasing compared to yesterday, last week or last month? • Search engine analysis — Which search engines are generating sales? Reports should

indicate how many sales and visitors received from each engine, allowing agents to better focus their search engine optimisation efforts.

• Keyword analysis — What search engine keywords are people using that actually generate sales?

• Advertising campaigns — Agents should be able to track their return on investment for all of their advertising and promotions and see exactly which campaigns are generating sales. Campaign tracking activities for real estate should include email newsletters, directory listings, banner advertising and any other advertising or promotion that agents do.

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8.18 CIVREP-NSW1_T8_v2

3.4 Monitoring/measurement activities

Example: Marketing review

The impact of marketing should be reviewed periodically. List the details of each review in the table below.

Marketing activity Date of review

Monitoring methods Review outcomes

Print advertising, online advertising, mail-out, giveaway, media release, event, website, blog/social media, public relations, branding and artwork, or publications and catalogues.

e.g. Month/ Year

What tools did you use to measure/monitor the

impact of your marketing activities?

What were the results for the promotional

period? What were your sales/profit figures?

How many new/repeat customers did you

receive? How many customers visited your

website?

3.5 Conclusion There will be times when agents will be tempted to explore options outside of their plan. Agents should always be aware of new marketing tools and new ways of reaching objectives and not be afraid to experiment. However, calculate the risk and determine the impact on objectives if the new option is not successful. Agents will have many marketing opportunities offered to them. For instance: • local sponsorships • Yellow Pages advertising • voucher promotions • new website offers • social media marketing • special newspaper and magazine campaigns.

All will play a part in creating awareness, profile and brand recognition for businesses. Agents should ensure they stay focused when reviewing marketing campaigns and the options available. Although it is easy to be side-tracked by new offers and critical comments from agency staff and well-meaning colleagues, in the end, the ultimate outcome will be that agents’ objectives have been met as per their plan, and target market segment has been reached and that it has responded favourably.

Topic 8: Client engagement practices for marketing property

Key points • To meet client expectations, a clear, personalised, detailed and professional

marketing plan should be created for the client and followed through. • During the entire marketing campaign, agents must keep the owner informed of all

advertising being placed and the outcomes of marketing and promotional activities. • Whether agents create marketing in-house, or outsource it, agents should continually

research and stay up to date with the latest marketing strategies and ideas. • Part of planning a marketing campaign is planning how the agent will report on and

evaluate their marketing. • Agents must have systems that objectively record and evaluate the impact of

promotional activities in accordance with agency activities. • It is also important that customer/client management systems are established when

agents begin marketing.

References Australian Competition & Consumer Commission (ACCC), 2019, Advertising and selling guide, March, viewed 7 May 2020, <https://www.accc.gov.au/publications/advertising- selling/advertising-and-selling-guide>.

Australian Competition & Consumer Commission (ACCC) 2019, Australian businesses hit hard by email scams, Scamwatch newsletter, 1 May, viewed 7 May 2020, <https://www.scamwatch.gov.au/news/australian-businesses-hit-hard-by-email- scams>.

Australian Competition & Consumer Commission (ACCC) 2016, Avoiding unfair business practices: A guide for businesses and legal practitioners, March, viewed 7 May 2020, <https://www.accc.gov.au/publications/avoiding-unfair-business-practices-a-guide-for- businesses-legal-practitioners>.

Campaigntrack 2019, Real estate marketing design, viewed 7 May 2020, <https://www.campaigntrack.com/?gclid=Cj0KCQiAjfvwBRCkARIsAIqSWlN9HjUZg3Kt2W nGi-lK4QkRt0u3VCvYW7eFL2Ar5ebr_AWcGjuETqoaAo0sEALw_wcB>.

https://www.accc.gov.au/publications/advertising-selling/advertising-and-selling-guide

https://www.scamwatch.gov.au/news/australian-businesses-hit-hard-by-email-scams

https://www.accc.gov.au/publications/avoiding-unfair-business-practices-a-guide-for-businesses-legal-practitioners

https://www.campaigntrack.com/?gclid=Cj0KCQiAjfvwBRCkARIsAIqSWlN9HjUZg3Kt2WnGi-lK4QkRt0u3VCvYW7eFL2Ar5ebr_AWcGjuETqoaAo0sEALw_wcB

Topic 9: Examine trust accounts

Industry Fundamentals NSW

Contents

Overview ............................................................................................................. 9.2

Topic learning outcomes ............................................................................................ 9.2

1 Analyse legislation relating to the operation of trust accounts in real estate ............................................................................................ 9.3

1.1 The definition of trust money ........................................................................ 9.3

1.2 Interest earned on trust monies .................................................................... 9.5

1.3 Opening a trust account ................................................................................. 9.5

1.4 Trust account records .................................................................................... 9.5

1.5 Trust investment accounts ............................................................................. 9.6

1.6 Trust account terminology ............................................................................. 9.6

1.7 Flow of information ........................................................................................ 9.8

2 Purpose of trust accounts in real estate ................................................... 9.9

2.1 Rent monies (source documents) .................................................................. 9.9

2.2 Sales monies (source documents) ................................................................ 9.10

2.3 Other accounts ............................................................................................. 9.10

2.4 Conclusion .................................................................................................... 9.17

Key points .......................................................................................................... 9.17

References ......................................................................................................... 9.18

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9.2 CIVREP-NSW1_T9_v2

Overview At any time in Australia, real estate agencies hold many millions of dollars in their trust accounts. These funds are held ‘in trust’ for customers or clients of the agency. It does not matter how large or how small the amount is that is held in the trust account, it belongs to someone else: the customer or client.

The very name of this account ‘trust account’ implies that those who have funds deposited in the trust account ‘trust’ the agency to manage, monitor and finally disburse these funds in accordance with their written instructions.

Along with the enormous responsibility for holding and managing trust account money, there comes a legal accountability to consumers who have entrusted the agency with their money.

There are very strict processes and procedures outlined in the various state/territory relevant Agents Acts for managing these funds. Hereinafter this will be generically referred to as ‘the Act’.

Resource 1: State/Territory Agents Act

Refer to the ‘Toolbox’ in your KapLearn subject room for information on how to access the relevant State/Territory Agents Act.

A real estate agent is required to maintain two separate books of account: • general trust account • general account (also known as general business account).

The general trust account is the account where trust money is deposited, whilst the general account is the operating account for the business.

Under the agent’s fiduciary duty to the client and, more broadly, the real estate consumer, an agent is required to keep separate accounts and financial records as they relate to agency, personal and trust account records.

The basic duty of care bestowed on an agent through his or her fiduciary duty to the client, requires the agent ‘to keep proper books of account and not let their own money mix with the money of the principal’.

Topic learning outcomes On completing this topic, students should be able to: • have a general understanding of legislation relating to trust accounting operations • describe what trust money is • explain the overall movement of a transaction through a trust account • understand the purpose of trust accounts in real estate • review trust account transactions.

Topic 9: Examine trust accounts

1 Analyse legislation relating to the operation of trust accounts in real estate

1.1 The definition of trust money Trust money is money handled on behalf of someone else, under an appointment to act as their agent. It might include payments for residential, commercial or retail rent, sales deposits, utilities if they are not already included in the rent, advertising expenses, maintenance costs, strata levies and bonds.

The role of a real estate agent is to facilitate property transactions between sellers and buyers, and landlords and tenants.

These transactions all involve the transfer of money from one party to another and the agent, being the negotiator and facilitator of their client’s property transaction, may well also be involved in the transfer of that money or may be required to hold that money whilst the transaction completes.

That money does not belong to the agent, it belongs to one of the parties involved in the transaction, and the agent has been ‘entrusted’ to hold those funds for a period of time until the transaction is completed. The timescale may range from a day or two up to several months, depending on the transaction.

What is significant is that the agent has no rights to that money, which is referred to as ‘trust money’.

Trust money cannot be held in the agent’s general operating bank account, it must be kept separate. Every agency that is likely to receive or hold client funds is required to operate at least one trust account, set up specifically for the purpose of holding client funds.

As defined in the glossary by Department of Mines, Industry Regulation and Safety WA, a trust account is a special type of bank account ‘where money is received or held by an agent (including any member of the agency’s staff) on behalf of another person in relation to real estate, business or settlement transaction.’

Trust accounts are governed by legislation and real estate agents in Australia are required to have a trust account when holding client money.

All trust money must be held in a trust account in the real estate agent’s name. The real estate agent is required to open and maintain a trust account in the name of the estate agent (if a sole trader) or the corporation which holds the real estate licence. The funds are to be held at an authorised financial institution to hold deposits of trust money.

Examples of money received ‘for or on behalf’ of any person, would be deposit and purchase money, bond and rental money, and money with a direction for use.

Money ‘with a written direction for its use’ includes advertising and marketing money or search fees paid in advance by a client. The written direction for its use would be recorded in the Agency Agreement, or on a contract as a special condition agreed to by all parties.

In reality, though, if money is received from a client, or potential client of an agency, by any employee of the agency, it should be considered as trust money. If there is any doubt as to whether the funds are trust money or not, it is recommended that agents should err on the side of caution and treat it as trust money.

https://www.commerce.wa.gov.au/publications/guide-auditing-trust-accounts-real-estate-agents-business-agents-and-settlement-agents

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9.4 CIVREP-NSW1_T9_v2

Best agency practice is to have two types of general trust accounts: • A general sales trust account, and a • A general rentals trust account (or general property management trust account)

The general trust account holds trust money belonging to different people, for different amounts, and deposited at different times. For these reasons, the general trust account earns no interest for the agent or the individual clients, and all fees and charges that the trust account incurs are transferred across to the general account (operating account). However, in some states the trust account is permitted to earn interest (which is calculated by the deposit-taking institution), which is forwarded to the relevant government authority.

Trust money must be paid into a trust account, whereas non-trust money should be deposited in a general business account.

The example below shows what money goes into a general trust account and what money goes into a general account.

Example: General trust account versus general account

General trust account General account

Payment for or deposits on: • sales of land, buildings and accompanying

chattels, including ‘off the plan’ sales • sales of businesses • shares in a company that entitles the shareholder

to occupy land, buildings and accompanying chattels

• options to purchase land, buildings and accompanying chattels

• options to purchase shares in a company that entitles the shareholder to occupy land, buildings and accompanying chattels

Payments from trust accounts where the estate agency is entitled to receive them, such as: • commission • management fees • disbursements and general

expenses

Payments for estate agency services where these payments are not required to be deposited in a trust account; for example, commission or management fees.

Rental bonds or security deposits on: • commercial, industrial or storage land, buildings

and accompanying chattels, unless the lease agreement specifies another arrangement agreed to by the parties to the lease.

• residential land, buildings and accompanying chattels, prior to lodgement of the bond with the Residential Tenancies Bond Authority

• holiday accommodation for more than 90 days

Rent on: • residential, commercial, industrial or storage

leased land, buildings and accompanying chattels • residential accommodation for a rental period of

more than 90 days

Fees received in advance for advertising of: • land, buildings and accompanying chattels for

sale or lease • businesses for sale

Costs of outgoings and utilities (for example, council rates, water, electricity, payments to tradespeople, insurance) relating to land, buildings and accompanying chattels for sale or lease

Source: Consumer Affairs VIC 2020.

Topic 9: Examine trust accounts

Other money received and paid out in the course of running the business, (such as office overheads) is not trust money and therefore does not fall within trust accounting requirements.

1.2 Interest earned on trust monies If the trust account is permitted to earn interest, the Act requires the deposit-taking institution where the trust account is maintained to pay the interest within a specified timeframe to the nominated statutory authority. The interest is usually calculated on the daily balances of all money held during the month and applied to those balances is the prescribed percentage of the trust account rate applicable to the institution and notified by the relevant statutory authority.

1.3 Opening a trust account When opening a trust account at an authorised deposit-taking institution, the licensee concerned must ensure that the authorised deposit-taking institution is notified in writing that the account is a trust account required by the Act.

The Act requires the financial institution to be ‘an approved deposit-taking institution’ and places the responsibility on the deposit-taking institution to meet the guidelines and criteria for notifying the relevant statutory authority that an account has been opened, along with furnishing particulars regarding the account.

1.4 Trust account records The licensee must keep full and accurate records of all funds paid or received as a result of a sale or transaction. A transaction is deemed to be a sale, purchase, rental or exchange. This topic will cover all the records of account that must be maintained for the trust account.

The Act stipulates that certain records must be kept by a licensee in relationship to the operation of a trust account. These records are: • consecutively numbered trust account receipt forms in duplicate • a trust account deposit book of trust account deposit forms in duplicate • a trust account cash book • a trust account journal of consecutively numbered folios • a trust account ledger • trust account ledger trial balance • trust reconciliations.

Documents relating to the trust account must be printed with the name and a description of the trust account in all the books and records of the licensee. This information must also be printed on all cheques drawn on the trust account.

In addition, all trust account documents must include the name of the Licensee Corporation, licensee or firm of licensees and must contain the words ‘Trust Account’.

The licence particulars should be printed as a prefix of the account name, followed by any other necessary identifier, e.g. Highview Pty Ltd T/a Highview Realty Trust Account.

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9.6 CIVREP-NSW1_T9_v2

The identifier at the end of the account’s name could include a name or other matter to identify the person on whose behalf money in the account is being held.

Because most of this documentation is electronically generated through software programs, the legislation ratifies information that has become accepted best practice when operating with electronically generated records.

It is, however, the responsibility of the agent to ensure if current programs being used do not comply with the requirements of the Act, and they contact their software provider to make the appropriate changes.

1.5 Trust investment accounts There are circumstances whereby an agent may be instructed by parties to a transaction to open a trust investment account. This is a trust account that holds funds relating to a single transaction only. Once the transaction has completed, the account is closed and is no longer operational.

Unlike a general trust account, the trust investment account only earns interest for the parties to the transaction. An example of situations where a trust investment account would be opened may include: • a sale where a buyer has placed a deposit on a contract with a long-term settlement, or • where a buyer has purchased a property ‘off the plan’ where there will be a

long-term settlement. Please note, however, that in most ‘off the plan’ sales the developer’s solicitor will hold the deposit money in a solicitor’s trust account. This trust account also earns interest for the parties to the sale.

Establishing a trust investment account

There are strict provisions established under the Act that apply to the establishment of a trust investment account. For example, there must be written instructions from the parties to the transaction agreeing to the investment of the amount. These instructions must include ‘direction’ of the investment. An instruction for direction of investment includes how any interest earned is to be apportioned on settlement of the sale, or termination of the sale.

1.6 Trust account terminology Some common terminology in trust accounting.

Bank reconciliation

The bank reconciliation is where we compare our internal trust accounting to the ‘accounting’ of the financial institution of the agency.

Cash books/journals

Cash books/journals are a list of all money received and all money paid out. They are used to summarise the trust account transactions for a set period of time. This can be a week, a month or a quarter. In real estate, the period is one month. The general journal is used for internal purposes.

Topic 9: Examine trust accounts

Ledgers

A ledger is set up for each client on whose behalf an agent holds funds. This is where the concept of ‘double entry’ bookkeeping is encountered. Several ‘special ledgers’ are set up, e.g. bond ledger, commissions ledger (for property management commissions), and GST ledger. Ledgers would be set up for those tradespeople who would carry out maintenance works for the agency over the course of the month. A ‘bank ledger’ is also set up to keep a record of all the individual trust account ledger entries.

Source documents

Source documents are the documents from which the transaction generates. Examples of source documents would include, receipts, bank statements etc.

Trial balance

The trial balance is the internal test on how well an agency has posted the journal entries into the ledgers.

Trust account receipts register

Since the trust account is vulnerable to risk, a sound business strategy to minimise any risk is to establish a trust account receipts register. The trust account receipts register is not a formal document but is in place to help preserve the integrity of the trust account receipts. This ensures that the receipts must be used in numerical order. Usually the register is kept with stationery items including the trust account receipts. The agency should document the process of accessing the trust account receipts (the employment authority should authorise access to the Trust account receipts register).

A ‘paper trail’ connects all the trust account documents. There are legal documents that must precede the generation of any trust account documents, such as the agency agreement, tenancy agreements, employment agreements etc.

Example: Trust account receipts register Trust account receipts register

Date Printer Receipt number

Rec’d by Completed Signed off Auditor

Example: Completed trust accounts receipts register Trust account receipts register

Date Printer Receipt number

Rec’d by Completed Signed off Auditor

12/09/2020 Go Print 100–200 Jenny 4 May 2020 Jenny S Checked by Kim

12/09/2020 Go Print 201–300 Tom 7 May 2020 Tom K Checked by Kim

12/09/2020 Go Print 301–400 Jenny 8 May 2020 Jenny S Checked by Kim

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9.8 CIVREP-NSW1_T9_v2

As each batch of trust account receipts is taken from the stationery store, a person who has been authorised by their Employment Authority should sign them off. Likewise, when a batch is completed, they should be signed off. This document would be made available for a trust account audit.

1.7 Flow of information The flowchart in Figure 1 below demonstrates the ‘flow of information’, or how a transaction must move through the trust account.

Topics 10 and 11 from this subject will cover completing the practical components of the trust account process.

Figure 1 Trust account process

Source: Kaplan Professional 2020.

Topic 9: Examine trust accounts

When a licensee is responsible for the correct management of trust account money, they must be able to clearly demonstrate that the trust account is managed correctly, by providing evidence that: • the operating or general account matters have been managed separately to the

trust Account • all money into and out of the trust account has been properly documented • the ‘paper trail’ is clearly evident • the trust account is managed as per the legislative guidelines • risk management strategies have been implemented to protect trust account money.

To ensure that the above criteria are being met in relation to the management and operation of the trust account, licensees must comply with all the requirements of the relevant Agents Act in their state relating to the auditing of trust accounts.

Resource 2: State regulatory authority

Refer to the ‘Toolbox’ in your KapLearn subject room for state/territory auditing requirements.

2 Purpose of trust accounts in real estate Trust accounts exist to protect everyone involved in the real estate transaction. They should provide clear and transparent detail of the propose for which the money was received, paid or transferred.

They are heavily governed by legislation and failure to comply can result in financial penalties and even loss of licence.

The main trust accounts in a real estate agency is rent monies and sales monies and there must be a clear trail of money coming in and going out. In some states, it is becoming law for agencies to have separate trust accounts for property management and sales; although this practice is common in the industry as it can facilitate auditing processes.

2.1 Rent monies (source documents) The purpose of trust accounts relating to rent collection is to: • keep a record of rent collected • provide detail of a rental period.

The purpose of trust accounts relating to the release of rent monies paid into it includes: • transfer of rental bonds to the appropriate statutory Rental Bond authority.

Bonds must be transferred within the time frame required by the Residential Tenancies Act in each state, using the required documentation for each state’s authority

Note: Most rental bonds are now paid by the tenant directly to the state Rental Bond authority via the authority’s online payment system. However, if a bond is paid to an agent, it is trust account money and is receipted by to the ‘Bond Ledger’, and therefore in the trust account records these bonds will be disbursed from the ‘Bond Ledger’.

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9.10 CIVREP-NSW1_T9_v2

• rental money paid to the landlord. This is most commonly facilitated through electronic transfer of money

• disbursement or payment of accounts on behalf of the client. The money will under such circumstances be paid on behalf of the client through prior written instruction on the agency agreement

• finalisation of a rental or management agreement. Under such circumstances the ledger will be closed off and all money fully accounted to the client, less the agreed expenses and outgoings.

2.2 Sales monies (source documents) The purpose of trust accounts relating to monies collected from the sale of a property includes: • marketing funds paid by the owner • deposit funds received from the buyer • disbursement or payment of accounts on behalf of the client. e.g. gardening and

other expenses as authorised by the owner • final disbursement of funds at settlement once authority (‘order on the agent’ has

been received).

2.3 Other accounts Other general accounts in trust accounting are discussed below.

Suspense account

Sometimes the agency may receive funds and have no idea where they originated from or for what purpose — because funds must immediately be receipted, these funds are held in a ‘suspense account’ until it becomes aware of who paid the money and where it belongs. The ‘particulars’ entry would be something like: ‘funds electronically transferred with no attached details’. When the client is identified, the funds are transferred into the client account via the general journal.

Itemised account (tax invoice)

A licensee is required to fully account to a person directly concerned with a transaction within the specified period of receiving written notice from that person. The account must be fully itemised and must be in compliance with the Act. This is sometimes known as the account sales.

The agent must ensure that the GST component in commissions, fees for service and other charges and expenses are clearly itemised for tax purposes.

Regulatory requirements for operating trust accounts

By law, all real estate agency businesses must have their trust accounts opened in an authorised financial institution.

Topic 9: Examine trust accounts

Resource 3: Register of authorised deposit-taking institutions

Access and read ‘Register of authorised deposit-taking institutions’ at: <www.apra.gov.au/register-of-authorised-deposit-taking-institutions>.

For a list of the authorised financial institutions applicable to agents, firstly refer to the state or territory regulator or fair trading department.

Once the account is opened, there are operational trust accounting requirements that must be followed.

Books of prime entry

After receiving or creating the source documents, the transaction will progress to the next part of the process. The majority of real estate agencies have software programmes that handle and complete the trust accounting process. For the purposes of this subject, manual process of trust accounting has been followed. If agents understand the manual process of trust accounting, they will be much better at troubleshooting should problems arise in computerised systems. Whether agents are using a manual system or a computerised system, the process is exactly the same.

Reflect on this

Over reliance on a computerised accounting system without understanding the nature of its inputs, the process of handling data and processing required outputs, is an unwise practice.

The next step is to create the cash books/journal, which are known as the books of prime entry. The journals are: • trust cash receipts (TCR) journal • trust cash payments (TCP) journal • general Journal.

The trust cash receipts journal and the trust cash payments journal are both used to reconcile the trust account, and to determine that the agency receipts and payments of the trust account money tallies with the financial institution’s records of the agency trust account.

Trust cash receipts (TCR) journal

The trust cash receipts journal is a description of all the funds received into the trust account over a set period of time. The trust cash receipts journal is balanced at the end of each month.

The trust cash receipts journal must be completed with the following particulars: • the date the money is received and with details of the ledger account to be credited. • the name of the person from whom the money is received • the name of the person on whose behalf the money is received • a brief description of the matter for which the money is received • the amount received • the trust account receipt number • the date the trust money is paid into the licensee’s trust account.

https://www.apra.gov.au/register-of-authorised-deposit-taking-institutions

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9.12 CIVREP-NSW1_T9_v2

Money received by electronic funds transfer must be entered in the trust cash receipts journal on the day when the licensee becomes aware of the receipt of the trust money.

Example: The trust cash receipts journal Trust cash receipts journal

September TCR 1

Date Rec. No. Received from

Account Particulars Ledger folio

Amount ($)

Bank

1/9/2020 2000 J Dalton Hudson F Trust

2 weeks rent, unit 12/7

Rosepetal Rd

500.00

TCR 1: This is the folio number of the trust cash receipts journal. This number will be transferred to the individual ledgers when they are created.

Date: The date the money was received. Receipt number: The number on the trust account receipt is inserted in

this column. Received from: The name of the person paying the money. Account: Name of the person on whose behalf the money is

collected. Particulars: A brief description of the transaction. Ledger folio: In the example, the column is left blank, as the ledger is

not yet created. When the ledgers are created, we will return to the journals and enter the ledger folio numbers against the relevant transaction.

Amount: All received amounts are recorded in this column; this includes funds deposited by way of electronic transfer.

Bank: The amount deposited in the financial institution. If we banked once today, and the deposit included several amounts of money from different people, paid in different ways, the Bank column will only show the total amount banked. This amount is checked against the bank statement when it is received.

Example: Entries in trust account

A receipt must be written before a trust cash receipts journal entry can be made. A journal entry must be created before a ledger entry can be made. Funds cannot be disbursed unless there are funds in the individual client account. Check daily cash books are being maintained (both manual and computerised systems).

Topic 9: Examine trust accounts

Trust cash payments (TCP) journal

The trust cash payments journal is a description of all the funds disbursed from the trust account over a set period of time.

The trust cash payments journal must be completed with the following particulars: • the date the money was paid • the name of the person to whom the money is paid • the name of the person on whose behalf the money is paid • a brief description of the matter • the amount paid • the cheque number or the electronic fund transfer number.

Example: The trust cash payments journal Trust cash payments journal

September 2020 TCP 1

Date Chq no. Paid to Account Particulars Ledger folio

Bank ($)

4/9/2020 0001 Gibson Watson Refund deposit 3 Dairy Rise Ct.

Less Termination penalty

9,500

TCP 1: This is the folio number of the trust cash payments journal. This number will be transferred to the individual ledgers when they are created.

Date: This is the date the funds were paid. Cheque number or Transfer number: Insert the cheque number or the electronic funds

transfer number in this column. Paid to: This is the person to whom the funds are being paid. Account: Insert the account (or ledger) where these funds

came from. Particulars: Record a brief description of the transaction. Ledger folio: Insert the ledger folio number showing where the funds

came from. For the above exercise this column will remain empty as ledgers not created.

Bank: Insert the amount paid in this column. All individual payments are entered in the bank column. This column is then used to check that these amounts have been processed by the financial institution, and to make note of any ‘unpresented cheques’, when reconciling the trust account.

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9.14 CIVREP-NSW1_T9_v2

Dishonoured cheques

Dishonoured cheques are treated through the cash payments journal.

Example: Dishonoured cheques

A buyer has paid a deposit to purchase a property by cheque. A trust account receipt has been written and the cheque deposited in the bank, and an entry made into the trust cash receipts journal. A ‘paper trail’ for the funds is created. In a day or two a written advice is received from the bank informing the cheque has been returned. An agent will immediately contact the payer of the dishonoured cheque and request cash replacement and payment of the bank fees incurred.

Depending on whether an agent is operating a manual trust account or a computerised trust account, the action taken will differ. Technically the correct action is to reverse the receipt. Because the receipt has already been entered into the cash receipts journal, it is impossible to reverse it. A dishonoured cheque requires prompt action as when dealing with a trust account.

Example: Manual process

An entry is made in the trust cash payments journal and looks like the following example. Note there is no cheque number recorded, or ‘paid to’ recorded, because no cheque is written. The entry is to make the ‘books balance’.

Trust cash payments journal September 2020

TCP 1

Date Chq no. Paid to Account Particulars Ledger folio

Bank ($)

4/9/2020 Smith Chq. Returned from bank,

dishonoured.

700.00

Agents do not need to provide a receipt for a cheque or an electronic funds transfer (EFT) payment if they recorded the payment electronically, unless the person making the payment requests a receipt.

If using third party trust accounting software, refer support guidelines/learning manual from provider.

Dishonour fees

A dishonoured cheque will also incur bank fees. The bank fees for the dishonoured cheque are not part of the trust account. The trust account fees and charges are placed in the general (or operating) account, because the bank charges are placed into the general account, the bank fees would not be receipted on a trust account receipt.

Topic 9: Examine trust accounts

Accepting money after previous payment has been dishonoured

When the payer has been contacted, and returns to the office with replacement cash, including cash for the bank charges, the new or replacement payment is treated as a new transaction, and a new receipt should be written for this amount. In the ‘particulars’ section of the trust account receipt and the trust cash payments journal, agents may choose to record ‘2 weeks rent, Honeysuckle Drive 1/3/2020 to 14/3/2020, replacing payment returned from the bank’.

General journal

The general journal is an internal mechanism whereby certain funds can be deposited. The general journal is the mechanism whereby mistakes are rectified and multiple payments are made to one entity. As part of the ‘paper trail’ it is important that an external person (auditor) can identify the money trail, and an agent cannot erase, cancel or move money across ledgers.

A general journal does not create a ledger account. It is merely a mechanism.

Every ledger entry must be preceded by a journal entry.

Examples of how the general journal are used are shown below.

Example: Rectifying errors

An agent may have received $200 rent on behalf of an owner (Clarke), and accidentally credited these funds into Sparke’s account. Mistakes in transcribing can happen. Because trust accounting must be transparent at all times, an error should not be covered up. One of the main uses of the general journal is for these errors to be rectified. An agent cannot receipt the money again, if it is already receipted. However, the general journal can be used to move the funds from Sparkes’ ledger into Clarkes’ ledger. The funds cannot move across ledgers, however they may be moved into the general journal prior to being transferred again into the correct ledger.

Example: The general journal General journal

GJ 1

Date Particulars Ledger folio Debit ($)

Credit ($)

Date: This is the date of the transaction. It may be the date it was identified as an incorrect ledger entry or at the end of the month when transferring multiple payments to the one entity.

Particulars: Details of the transaction. Ledger folio: This is the ledger folio reference the funds have come from. A separate ledger folio reference must be entered when the

funds move out of the general ledger. (See example below). Debit: These are funds moving from the general journal, which are

to be recorded in this column. Credit: These are funds moving into the general journal, which are

to be recorded in this column.

Industry Fundamentals NSW

9.16 CIVREP-NSW1_T9_v2

Example: A transaction recorded in the general journal General journal

GJ 1

Date Particulars Ledger folio Debit ($)

Credit ($)

15/08/2020 Funds incorrectly posted to Sparke’s Account, instead of Clarke

S1 200.00

15/08/2020 Funds deposited to Clarke account C1 200.00

Example: Making multiple payments to one person

An electrical contractor may have twenty-five (25) invoices for payment at the end of the financial period. Rather than make twenty-five (25) transfers, it is more efficient and practical to make one transfer representing the total of the twenty-five (25) invoices. The amounts would be transferred out of the individual landlord’s ledger, into the general journal, and then these funds would be transferred again into a special ledger that has been established for the contractor. Further examples of multiple payments to the one entity would be the payment of Bonds, and GST.

Reflect on this

Accounting software that permits editing of transactions. Turning OFF such options is highly recommended to preserve the audit trail and integrity of trust accounting records.

Ledgers

When the trust cash receipts journal has been entered, it is time to create the ledgers. The ledgers are set up for individual clients, sellers or landlords, GST, property management commissions, bonds, contractors, and so. Trust account money deposited into the trust account now must be allocated to the ‘owner’ of the money. Ledgers are not set up for buyers or tenants.

Refer to the flowchart in Figure 1. The ledgers are known as the books of secondary entry. As mentioned earlier, money cannot be paid out of the trust account unless it is in the trust account, so before writing a cheque or electronically transferring funds, agents must check that the individual’s ledger has the available funds to support the payment.

Key concept: End of month trust accounting

If using a manual trust accounting system, it would be advisable to enter the journal entries into the individual ledgers immediately after entering the funds into the journal. It will take the pressure off for the ‘end of the month’ process. In a computerised system, the system automatically creates the journal and the ledger entries.

Topic 9: Examine trust accounts

2.4 Conclusion Although manual processes for accounting has been explained, it would be rare for a business to use manual systems. The overall requirement is that all transactions must be transparent indicating what was received, for what purpose, and what was disbursed and for what purpose.

Computerised systems

It is standard for the industry to use computer software systems to facilitate the trust accounting process.

Resource 4: Property accounting systems

Some of the property accounting systems used are: • Console: <www.console.com.au> • Property me: <www.propertyme.com.au> • REI Master: <www.reimaster.com.au> • Rockend: <www.rockend.com>.

It is recommended the business conduct thorough research on property accounting systems to ensure its compliancy capabilities align with the business standards and the regulatory requirements.

Key points • Trust money is money handled on behalf of someone else, under an appointment to

act as their agent. It might include payments for residential, commercial or retail rent, sales deposits, utilities if they ae not already included in the rent, advertising expenses, maintenance costs, strata levies and bonds.

• The licensee must keep full and accurate records of all funds paid or received as a result of a sale or transaction. A transaction is deemed to be a sale, purchase, rental or exchange.

• Source documents such as receipts are created when trust monies are received. The next step is to create the cashbooks/journals, which are known as the books of prime entry, being trust cash receipts journal (TCR), trust cash payments (TCP) journal, general journal.

• Contingencies such as dishonoured cheques or other discrepancies need to be planned for an agency’s trust account system.

https://www.console.com.au/

https://www.propertyme.com.au/

https://www.reimaster.com.au/

https://www.rockend.com/

Industry Fundamentals NSW

9.18 CIVREP-NSW1_T9_v2

References Australian Prudential Regulation Authority (APRA) 2020, Register of authorised deposit-taking institutions, viewed 5 May 2020, <https://www.apra.gov.au/register-of- authorised-deposit-taking-institutions>.

Consumer Affairs VIC (CAV) 2020, What is an estate agent trust account , viewed 5 May 2020, <https://www.consumer.vic.gov.au/licensing-and- registration/estate-agents/running-your-business/trust-accounts/what-is-a-trust- account>.

Console, Property management software, viewed 14 May 2020, <https://www.console.com.au>.

Department of Mines, Industry Regulation and Safety 2020, Glossary, Government of Western Australia, viewed 5 May 2020, <https://www.commerce.wa.gov.au/publications/guide-auditing-trust-accounts-real- estate-agents-business-agents-and-settlement-agents>.

Property me 2020, Property management software, viewed 5 May 2020, <https://www.propertyme.com.au>.

Reimaster, Property management software, viewed 14 May 2020, <https://www.reimaster.com.au>.

Rockend, Property management software, viewed 14 May 2020, <https://www.rockend.com>.

https://www.apra.gov.au/register-of-authorised-deposit-taking-institutions

https://www.consumer.vic.gov.au/licensing-and-registration/estate-agents/running-your-business/trust-accounts/what-is-a-trust-account

https://www.console.com.au/

https://www.commerce.wa.gov.au/publications/guide-auditing-trust-accounts-real-estate-agents-business-agents-and-settlement-agents

https://www.propertyme.com.au/

https://www.reimaster.com.au/

https://www.rockend.com/

Topic 10: Establishing controls applicable to real estate trust accounts

Industry Fundamentals NSW

Contents

Overview ........................................................................................................... 10.2

Topic learning outcomes .......................................................................................... 10.2

1 Responsibility for trust account activities and risk minimisation ............ 10.3

1.1 Responsibility for trust account activities .................................................... 10.3

1.2 Minimising risk ............................................................................................. 10.4

1.3 Storage of information ................................................................................. 10.5

2 Audit responsibilities for trust accounts ................................................. 10.6

2.1 Audit period ................................................................................................. 10.6

2.2 Auditor qualifications ................................................................................... 10.6

2.3 Auditor’s duties ............................................................................................ 10.7

2.4 Internal audit ................................................................................................ 10.8

2.5 Overdrawn trust accounts ............................................................................ 10.9

2.6 Trust money disputes ................................................................................... 10.9

2.7 Simple trust accounting principles ............................................................... 10.9

2.8 Summary .................................................................................................... 10.10

Key points ........................................................................................................ 10.10

References ....................................................................................................... 10.10

Industry Fundamentals NSW

10.2 CIVREP-NSW1_T10_v2

Overview This topic discusses the use and ownership of trust accounts. It examines funds held in trust accounts, agents and agency’s responsibilities, limitations, controls, risks and general management, and auditing requirements when operating trust accounts.

Within a real estate agency practice, as covered in previous topics, the licensee is at all times responsible for the trust account. There are significant penalties for any breach of the Agents Act relating to the trust account provisions. Penalties vary pending on the breach and the different laws in each state/territory.

Note: Where reference is made to ‘the Act’, refer to the ‘Toolbox’ in your KapLearn subject room for weblinks and state-based reference material.

Topic learning outcomes On completing this topic, students should be able to: • understand who is responsible for trust money handling in the real estate agency and

what those responsibilities are • describe practices to minimise risk • explain general auditing requirements.

Topic 10: Establishing controls applicable to real estate trust accounts

1 Responsibility for trust account activities and risk minimisation Within a real estate agency practice, the licensee is at all times responsible for the trust account.

There are significant penalties for any breach of the Act. Because these funds do not belong to the agency, there have to be limitations set and controls implemented to ensure the correct management of these funds.

Resource 1: Operating trust accounts in each state/territory

Access and read the following information and guidelines on operating trust accounts in each state/territory: • Australian Capital Territory: Access Canberra website

Agents Practice Manual • New South Wales: NSW Fair Trading website Trust accounts • Queensland: Queensland Government website

Dealing with trust accounts in the property industry

• Victoria: Consumer Affair Victoria website Trust accounts.

1.1 Responsibility for trust account activities Further to legislative regulations on handling trust monies, the agency licensee in charge needs to implement best practices for general office procedures to handle transactions, including who should be responsible for them.

Example 1: Administration staff responsibility

A client walks in to the office to pay for marketing or rent fees — A designated administration staff locates the client’s file, accepts and receipts funds paid by the client at the office. This staff member may be the receptionist or other designated administration support staff.

Example 2: Accountant responsibility

A general trust account bank statement is received, listing the daily deposits credited to the account. These bank statements are reconciled by the agency’s accountant to check all deposits are allocated and credited to the correct property.

Example 3: Accountant responsibility

If the accountant locates any unidentified deposits or a deposit with no reference credited to the agency’s trust account, the accountant needs to transfer these funds to a suspense account.

https://www.accesscanberra.act.gov.au/ci/fattach/get/49539/1437609715/redirect/1/filename/Agents+practice+manual.pdf

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/running-a-property-agency/trust-accounts

https://www.qld.gov.au/law/laws-regulated-industries-and-accountability/queensland-laws-and-regulations/regulated-industries-and-licensing/regulated-industries-licensing-and-legislation/property-industry-regulation/managing-your-property-agency-or-business/dealing-with-trust-accounts-in-the-property-industry

https://www.consumer.vic.gov.au/licensing-and-registration/estate-agents/running-your-business/trust-accounts

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10.4 CIVREP-NSW1_T10_v2

Example 4: Accountant responsibility

Disbursements of payments to creditors — best practice is to have the agency’s accountant process these payments. Prior to payment it should be checked and authorised for payment by the agent overseeing the property.

1.2 Minimising risk The following strategies may assist in minimising the risk of trust account fraud.

To help prevent fraud or misappropriation of funds, there are simple steps to assist the licensee manage trust accounts in a real estate agency: • Ensure there is more than one person responsible for the issuing of trust account

receipts and banking. Having more than one person responsible for these tasks means that the trust account is not controlled solely by one person.

• It is a requirement that the trust account be audited at least once a year, therefore, ensure audits are scheduled and conducted on time.

• Take an active interest in the operations of the trust account. • Ensure there are clear job descriptions and signed employment authorities in place at

the agency. • Do not sign trust account cheques without sighting the accompanying statement and

knowledge of the circumstances of the disbursement. • Ensure strict password controls are in place and change passwords regularly. • If there is something in relation to the trust account or bookkeeping processes that is

not clear, ask an accountant or take an auditor’s advice.

Where cash is involved

Although cash payments are less common, there may be times where it is necessary or businesses that will accept cash payments for rents, deposits and other payments. To minimise risk, two office colleagues should go to bank the money or organise and outsource a security banking service. However, this risk is reduced with the use of internet banking practices.

Disbursing trust funds

When disbursing trust funds, have another staff member check the disbursements against the client’s written instruction.

This is a ‘double check’ on the processes involved in disbursing trust account funds. Always check that the client ledger has sufficient funds to handle the disbursement.

Job sharing

As mentioned earlier in this subject, it is important for the licensee not to have just one person responsible for the management of a trust account. It is a good business strategy to have others skilled in some or all of the different operational areas of the business, as this gives the licensee a ‘fall back’ when a staff member is away or leaves the business.

Topic 10: Establishing controls applicable to real estate trust accounts

Regularly change passwords

In trust accounting and other online business activities, the use of password protection is vital when operating these accounts. For example, when accessing internet banking site, RP Data, the software for sales and property management etc., the business is protected by online security and password protection. Use of two-factor authentication puts the business in a less vulnerable position.

Policy and procedures manual

Take the time to create and implement secure policies and procedures. These should be documented in a manual, and all staff should ‘sign off’ on this manual through their employment authority. The manual should also be reviewed on a regular basis. Policy and procedures in relation to trust accounts are mandatory in some states.

1.3 Storage of information There are no restrictions on the technology that can be used to make and keep records. Records can be kept on paper or by electronic means. The manner the licensee decides to keep the records must be orderly and accessible, for a specified period. However, agencies should consider keeping these records for up to seven years, as the limitation period for some claims may be longer than the specified time.

With computerised records, the licensee is responsible for the maintenance of all trust account records. This includes maintaining computer software that has the capacity to record, maintain and back up trust account information. If there is a problem with the software or the computer, the agent is fully responsible and may be fined if information is lost.

The Act states that if the accounts and records are maintained by computerised accounting systems, the licensee must ensure that: • a trust ledger account must not be deleted unless it has a zero balance and a printed

record has been kept of the ledger • the computer system must be capable of keeping records in chronological sequence • after the end of each month a printout must be made of: – the balance of the ledger account – the reconciliation, and – the reconciliation with the financial institution’s records • the computer system is backed up at least once a month • backed up data must be stored on a USB or other electronic device.

It must be kept in a safe off-site location. Generally kept at the Principal’s home.

Resource 2: State/Territory Agents Act

Refer to the ‘Toolbox’ in your KapLearn subject room to access the State/Territory Agents Act and review the legal requirements for trust account management in your state/territory.

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10.6 CIVREP-NSW1_T10_v2

2 Audit responsibilities for trust accounts As the licensee in charge is responsible for the correct management of trust account money, they must be able to clearly demonstrate that the trust account is managed correctly, by providing evidence that: • the operating or general account matters have been managed separately to the

trust account • all money into and out of the trust account has been properly documented • the ‘paper trail’ is clearly evident • the trust account is managed as per the legislative guidelines • risk management strategies have been implemented to protect trust account money.

Resource 3: Auditing requirements in your state/territory

Refer to the ‘Toolbox’ in your KapLearn subject room for auditing requirements in your state/territory.

2.1 Audit period The audit period is most commonly the financial year. The audit period ends on the 30 June. Again, the responsibility is on the licensee to ensure that an adequate period of time has been allowed for the audit and the report to be lodged.

Severe penalties can apply if the report is not lodged by the required date; or the report is not completed in accordance with the requirements of the Act; or the licensee has not provided the appropriate books, papers, documents accounts etc. The licensee is putting their real estate agent’s licence at risk by failure to lodge the audit report by the required date.

2.2 Auditor qualifications To be considered eligible to audit a real estate agency trust account the auditor, is required to be: • a registered company auditor within the meaning of the Corporations Act 2001 (Cth),

or • a person who has been nominated by the person whose records and documents

are to be audited and who has been approved by the relevant licensing authority in writing.

• a person that is registered on the ASIC Registered Auditor Dataset

A person would not be qualified to act as an auditor if: • they have at any time in the last two years been an employee or a partner of the

person whose records or documents are to be audited, or • they are a licensee, or a shareholder in a corporation that is a licensee and has not

more than 20 shareholders.

https://data.gov.au/data/dataset/asic-registered-auditor

Topic 10: Establishing controls applicable to real estate trust accounts

2.3 Auditor’s duties When conducting the audit of the licensee’s trust account, the auditor will be investigating the trust account and seeking evidence to demonstrate the competent management and operation of the trust account in compliance with the legislative guidelines. In completing an audit, the auditor will: • list all the details of all general trust accounts, including the bank statement balance

at the end of the audit period. In some bigger agencies there may be up to nine general trust accounts in operation

• list all the details of all trust investment accounts, including the bank statement balance at the end of the audit period

• give full details of any breaches that are discovered during the audit process • attach copies of the trust account reconciliation statements and the trial balances for

each general trust account and every trust investment account held by the licensee • record all computer system software used in the operation and management of the

trust accounts • check all statements of account to ensure the information provided to a client is as

per the guidelines of the legislation • check the statements of account to ensure the correct commission has been charged

as per the instructions on the agency agreements • check that trust money is banked in accordance with the legislative guidelines • investigate the issuing of trust account receipts • ensure the trust account receipts comply with the legislative guidelines • check to ensure all funds withdrawn from the trust account are drawn by way

of cheque or electronic transfer • check to ensure all cancelled receipts and cheques have been retained

(the numerical integrity of the receipts and cheques has been preserved) • check daily cash books are being maintained (both manual and computerised

systems) • check the cash books are balanced at the end of each month • check the trust account has been reconciled at the end of each month • check to ensure the General Journal truly records transfers between accounts • sight that each client has a separate ledger • the ledgers are maintained in accordance with the requirements of the legislation • sight trial balances for each month • check that no individual client ledger is overdrawn.

The authorised deposit taking institutions also take a ‘watchdog’ role in the management and operation of an agency trust account.

Example: The role of deposit taking institutions

The authorised deposit taking institution is required to notify the relevant authority of the following circumstances within a specified timeframe: • when a trust account is overdrawn • when a trust account cheque is dishonoured.

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10.8 CIVREP-NSW1_T10_v2

2.4 Internal audit A major component of the operation of trust accounts is the control process that works to minimise and eliminate errors and fraud. It is best practice for all businesses to conduct an ‘internal audit’ to ensure the compliancy of the end of year audit and to pick up on any other irregularities in the accounting processes.

Some of the main focus points of an internal audit are that the following in place: • policies and procedures for the employees to follow, particularly in terms of

recording procedures • reliable reporting systems to measure efficiency and effectiveness, this includes

clearly delineated lines of authority and responsibility • financial management system with easily monitorable input and output • procedures and policies consistently followed by all staff, including management • organisational charts, which allow for clear lines of authority and responsibility so

that any gaps in procedure can be clearly identified • performance standards and benchmarking that align with the set procedures to

ensure that the system is being utilised appropriately and fulfilling requirements • careful employee selection with experience to match responsibilities. Personnel

responsible for the financial management of the business must be competent and well trained. It is imperative that they are suitable qualified, have appropriate experience in the relevant software and that they undertake continuing education. Most importantly, background checks will assist in judging integrity

• job rotation, which reduces the incidence of fraud • maintenance of accurate and adequate records • divided responsibilities for related transactions so that verification of tasks can be

achieved. Responsibilities where possible should be separated between operations and recording and accounting for transactions

• separate record keeping and asset control • mandatory vacations ensure long term fraud and theft are minimised • reviews of external audits to test the system • an audit trail using source documents, on which all employees are informed and

educated.

Applying and adhering to principles and procedures may minimise the risk of errors and fraud.

In any agency it is important to conduct an analysis of procedures to ensure the assets of the business and the clients are being protected at all times.

In addition, the agency’s financial management systems need to reflect the outcome of trust account transactions so that an audit is easily able to track the payment of funds from the trust to the general account and create a paper trail.

Effective internal control systems require first and foremost a commitment from the agency’s management to protecting the assets, as well as communicating and implementing such systems.

One issue that may arise and alert the business of errors or misuse of trust accounting systems/procedures is when the account becomes overdrawn.

Topic 10: Establishing controls applicable to real estate trust accounts

2.5 Overdrawn trust accounts If there are discrepancies in the accounting or potential misuse has occurred, it may result in the account being overdrawn. If this occurs two things need to happen: 1. The agency’s licensee in charge, must notify the regulator (specific to their

state/territory, e.g. Fair Trading) within a specific time frame of the account becoming overdrawn.

Example: Overdrawn trust accounts: NSW

In NSW, the time frame is within 5 days.

The following must be notified to the regulator: • the name and number of the trust account • the amount the account is overdrawn • the reason for the account becoming overdrawn • what did the agency do rectify the situation and if it has been resolved

and back in credit. 2. If the agency does not notify the regulator, the bank (or authorised deposit taking

institution) of where the trust account is held is also responsible to notify the regulator if/when a trust account becomes overdrawn.

Best practice is for a real estate business to have and follow procedures to ensure transactions are processed correctly. It is also important for the business to have a ‘safe’ environment where staff can alert the licensee in charge (or management) if they see any errors on any receipts or statement that they may come across.

2.6 Trust money disputes Sometimes in a real estate transaction, there will be a dispute over the money being held in a trust account. If the licensee becomes aware of a dispute, it is important that any trust account money held on account of one or more parties to the dispute not be released until written notification has been received from all parties or their representatives.

Occasionally a dispute may escalate and become a legal matter where the court will decide ownership of the money. In this case, the licensee would then probably be advised to forward the money in dispute to the courts.

2.7 Simple trust accounting principles To avoid disputes here are some simple trust accounting principles to follow: • All trust money must be deposited into the relevant trust account and be tracked and

reported. • Trust accounting software transactions must match bank account transactions. • Always be transparent when receipting and withdrawing money. • Avoid cash, if possible, as cash can increase own’s risk and will also need to be

banked manually.

Industry Fundamentals NSW

10.10 CIVREP-NSW1_T10_v2

2.8 Summary It is clear that the management and handling of trust account funds carries major responsibilities for the licensee. There are clear guidelines established for this and while most licensees appoint staff skilled in business or trust accounting, ultimately it is the licensee who is responsible for supervising the operation of the trust account and who is fully accountable for any irregularities or shortcomings that may place other people’s money at risk.

Key points • Within a real estate agency practice, the licensee is at all times responsible for the

Trust Account. There are significant penalties for any breach of the Act. • Each employee in a real estate agency plays a role and has responsibilities in

safeguarding client trust account monies. Whilst the role of a real estate agent may not directly involve handling trust funds, there should be awareness of the agency’s responsibilities and especially what to do in the event when a potential discrepancy or issue is identified.

• Audits, both internal and external (legislative requirement) have a key role to play in maintaining robust compliance procedures for a real estate trust account.

• In the instance of a dispute over trust monies, it is important that any trust account money held on account of one or more parties to the dispute not be released until written notification has been received from all parties or their representatives.

References Access Canberra, Agents Practice Manual, viewed 5 May 2020, <https://www.accesscanberra.act.gov.au/ci/fattach/get/49539/1437609715/redirect/1/ filename/Agents+practice+manual.pdf>.

Australian Securities & Investments Commission (ASIC) 2016, ASIC – Registered Auditor Dataset, 23 March, viewed 5 May 2020, <https://data.gov.au/data/dataset/asic- registered-auditor>.

Consumer Affairs Victoria n.d., Licensing and registration, viewed 5 May 2020, <https://www.consumer.vic.gov.au/licensing-and-registration/estate-agents/running- your-business/trust-accounts>.

Fair Trading NSW, n.d., Trust accounts, viewed 5 May 2020, <https://www.fairtrading.nsw.gov.au/housing-and-property/property- professionals/running-a-property-agency/trust-accounts>.

Fair Trading QLD, n.d., Dealing with trust accounts in the property industry, viewed 5 May 2020, <https://www.qld.gov.au/law/laws-regulated-industries-and- accountability/queensland-laws-and-regulations/regulated-industries-and- licensing/regulated-industries-licensing-and-legislation/property-industry- regulation/managing-your-property-agency-or-business/dealing-with-trust-accounts-in- the-property-industry>.

https://www.accesscanberra.act.gov.au/ci/fattach/get/49539/1437609715/redirect/1/filename/Agents+practice+manual.pdf

https://data.gov.au/data/dataset/asic-registered-auditor

https://www.consumer.vic.gov.au/licensing-and-registration/estate-agents/running-your-business/trust-accounts

https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/running-a-property-agency/trust-accounts

Topic 11: Standard transactions in real estate trust accounts

Industry Fundamentals NSW

Contents

Overview ........................................................................................................... 11.2

Topic learning outcomes .......................................................................................... 11.2

1 Standard transactions that occur in real estate trust accounts ............... 11.3

1.1 Receipts ........................................................................................................ 11.4

1.2 Accounting to clients .................................................................................... 11.4

1.3 Calculating agency commission ................................................................... 11.6

1.4 End of month requirements ......................................................................... 11.8

1.5 Outsourcing ................................................................................................ 11.10

1.6 Fidelity claims ............................................................................................. 11.10

1.7 Trust accounts and cyber crime ................................................................. 11.11

Key points ........................................................................................................ 11.12

References ....................................................................................................... 11.12

Industry Fundamentals NSW

11.2 CIVREP-NSW1_T11_v2

Overview As previous topics have explored, in trust accounting there are many tasks and steps to follow to ensure that the handling of the account is conducted according to best practice. This is especially important because the trust account involves the handling of other people’s money.

This topic provides an overview of the standard transactions that occur in real estate trust accounting, and the best practice processes that should occur to ensure they are completed correctly. Common inaccuracies, and why they can occur, will also be explored.

With the prevalence of online communication and social media access, cyber crime, including email scams, are also now a critical area for agents to be aware of in relation to the best practice running of trust accounts. Agencies must not only have in place strong policies and procedures surrounding the conducting of transactions in trust accounts, but also around cyber security, for all staff in the agency.

Note: Where reference is made to ‘the Act’, refer to the state/territory legislation on trust accounts in the ‘Toolbox’ in your KapLearn subject room.

Topic learning outcomes On completing this topic, students should be able to: • understand the standard transactions that occur in real estate trust accounting • describe trust accounting processes as required by legislation • explain end of month requirements • describe daily and weekly trust accounting best practices • have an understanding of why inaccuracies may occur • explain the potential risk cyber crime poses to trust accounts.

Topic 11: Standard transactions in real estate trust accounts

1 Standard transactions that occur in real estate trust accounts Trust money might include payments made to an agency for: • rent • sales deposits • holiday accommodation • utilities that are not included in rent • advertising expenses • property repairs organised on behalf of the client • bonds.

Sales money

Trust monies for sales transactions are: • marketing fees paid by the vendor • settlement statement — the release of trust account funds on settlement of a sale

requires written notification from both buyer and seller or their representatives, for example, solicitors acting for buyer and/or seller.

Settlement money may be: • termination — for example, a buyer may terminate the contract to purchase under

the cooling off period, or they may be unable to secure finance, etc. The trust account funds may only be released with written notification from both the buyer and seller or their representatives.

• other fees — such as cleaning or maintenance fees, as authorised by the vendor.

Property management money

Trust monies for property management transactions are: • rent paid by tenants • transfer of rental bonds to the appropriate statutory Rental Bond authority. • payment of rent monies to landlord • disbursement or payment of accounts to creditors on behalf of the client. • end of month statements • end of financial year statement (tax statement). Note: Rental bonds must be transferred within the time frame required by the Residential Tenancies Act in each state, using the required documentation for each state’s authority. Most states and territories are now required to use an online bond lodgment system and details can be checked on the state/territory regulator website.

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1.1 Receipts The trust account receipt must be a ‘snapshot’ of the transaction (like those noted above). When an agent receives trust money in a transaction, they must complete a receipt immediately. In the case of a direct deposit or electronic funds transfer, on the day they become aware they have received it.

Example: Sample of a completed trust account receipt

P Irvine Licensee ATA Trust Account

Trust Account Receipt No.: 675

Date: 02/08/2020 Cash/Cheque/Electronic transfer

Cheque details: Received from: David and Jill Anderson Particulars: 2 weeks rent, 65 Primrose Court, Valkerie From 2nd August 2014 to 15th August 2020

Amount: Five hundred dollars $500.00

Account: Gibson Signed: _____________________________

Ledger Ref. No.: G12

The Residential Tenancies Act in each state/territory may specify slightly different requirements for a rental receipt.

The numerical integrity of the receipts must always be preserved. This means that the receipts must be filled out and issued in strict numerical order. A licensee must retain: • any original receipt that is not issued to the person from whom the trust account

money is received • any original receipt that is cancelled after it is prepared • duplicate receipts.

1.2 Accounting to clients A written statement of account must accompany all payments from the trust account. Furthermore, the account must be in writing and state: • the amounts in relation to the transaction • how the amounts have been paid • the source and the amount of any rebate, discount, commission or benefit that the

licensee has received whilst acting on behalf of the client.

If an agent is involved in rent collection and property management, this will be the end of month statement for all managed property.

If related to a sales transaction, then this would be at settlement of the sale and only after receiving authority instructions from the buyer’s solicitor (this is called ‘order on the agent’). The agency would be holding the deposit paid by the buyer and the agency can then provide the statement to the seller, listing any expenses and the commission amount to be deducted.

Topic 11: Standard transactions in real estate trust accounts

The statement provided by the agent outlines all the funds received relative to the transaction, and the funds disbursed on behalf of the client relative to the transaction.

How is payment made?

The Act states that the licensee must give an account to the client. There are specific timeframes in which an agent must account to the client — commonly at least once per month to a landlord and, at settlement of a sale, to a seller. The time periods are contained in the relevant agents Act.

Resource 1: State/territory legislation

Refer to the ‘Toolbox’ in your KapLearn subject room for state/territory legislation.

An agent is required to pay money from the transaction fund by cheque or via electronic transfer so that there is a record of payment. This then becomes the last part of the ‘paper trail’. When the cheque leaves the agency, the record of the cheque is the cheque butt. It is critical that the butt is retained as it is a ‘snapshot’ of the transaction. If it is an electronic transfer, it will be referred to as a ‘digital’ transaction.

Example: Sample of a cheque and cheque butt

The cheque and the cheque butt could look like this: GREATER BANK BRISBANE 

DATE: 15/08/2020

PAYEE: J.P. Arthur

Settled sale to M.M. Gripe. 54 Primrose Court, Valkerie

Balance of deposit

CHQ: $5,678.00

LEDGER REF. # A1

001

DATE: 15/08/2020

PAYEE: J.P. Arthur

AMOUNT: Five thousand, six hundred and seventy eight dollars

$5,678.00 ATA Trust Account

Signature

001

All cheque butts must be kept with the licensee’s records of account. If a mistake is made in writing out a cheque, the cheque and the cheque butt must be kept to preserve the numerical integrity of the cheques.

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Electronic transfer

If funds have been disbursed electronically, the licensee must keep a transaction report from the financial institution, which contains the following: • the name of the person effecting the transfer • information sufficient to identify the transfer • the ledger to be debited and the ledger reference number • the date of the disbursement • the amount of the disbursement • the account name and number to which the trust money was disbursed • reasons for the transfer.

All the transaction reports must be kept in the licensee’s records of account.

Once the agent has created a source document, the funds must continue through the trust account so there is a clear record or ‘paper trail’ outlining the receipt, deposit and disbursement of money, as instructed.

1.3 Calculating agency commission The end-of-month fees and commissions paid to the agency must be calculated accurately. In a computerised system these are automatically calculated.

Key concept: Agency commission

Some guides to follow when calculating the commission include the following: • Always pay the agency last. This means, in a manual system, the fees

and commission payable to the agency must be calculated first. The owner will receive the balance (less any other outgoings).

• The ledgers must show the commission as being the last amount paid. • The commission is based on the rent received, not the balance in the

ledger at the end of the month. For example, if a landlord has received $800 in rent during the month, and has paid out $650 in outgoings (e.g. plumbing, electricity), the agency is paid commission on the $800, not the balance in the account of $150.

• To calculate commission (for example, based on an all up 8.5% charge for fees and commissions): with a calculator, enter the total amount of rent paid, multiply this amount by the commission charged, and hit the % button. Example: $800 × 8.5% = $68.

Topic 11: Standard transactions in real estate trust accounts

Example: End of month statement to a landlord

This statement contains: • the agency details — XYZ Real Estate Pty Ltd, contact details, ABN • the landlord details — John Smith and Annabelle Jones • property address • tenant’s name • weekly rent amount • dates paid from–to • period — number of weeks paid • amount paid in dollars • credit (if any extra was paid) • summary listing disbursements • the net amount to be paid/transferred to the landlord.

XYZ Real estate Pty Ltd 100 Kaplan Street ZZZ Suburb 2000

State/Territory Australia ABN: 12 345 678 910

www.xyzrealestate.com.au Ph: + 61 001 412 658 Email: [email protected]

John Smith & Annabelle Jones PO Box 123 YYY Suburb 2000 State/Territory Australia

Agent ABN: 12 345 678 910 Primary Owner Statement for

Period ending: 20/12/2019 Reference: SMI&JON/MOO

TAX INVOICE

John Smith & Annabelle Jones

Property Tennant Rent ($)

Paid from

To Periods Paid ($)

Credit ($)

10/24 Moon Street YYY Suburb 2000

Kevin Orange 590.00 W1 29/11/19 27/12/19 4 2,360.00 0.00

Date: 24/12/2019 Disbursements & sundry receipts Debit ($)

Credit ($)

Total rent collected from tenants: 2,360.00

* Management fees: 107.38

* Admin and sundries: 5.00

Plus GST on items marked * 11.24

123.62 2,360.00

NET AMOUNT TO BE PAID: 2,236.38

Transferred to your bank account: $2,236.38

http://www.xyzrealestate.com.au/

mailto:[email protected]

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1.4 End of month requirements The licensee must prepare trial balance statements and keep the original as part of the trust account records.

Trial balance

A trial balance is a comparison between: • The total cashbook transactions showing the amount that is in the trust bank ledger

(the difference between the total receipts and the total payments of the cashbook will be the balance in the trust bank according to the records)

and • The ledgers without a nil balance.

If the amount in the bank ledger and the total of amounts in the clients’ ledgers do not match or balance, then obviously an error has been made because all ledgers should include every entry made in the cashbook.

Generally, this comparison should happen within 15-21 days of the end of each month.

Resource 2: Trust accounting regulations

Refer to the ‘Toolbox’ in your KapLearn subject room for state/territory regulations.

The licensee is required to reconcile the bank account with the transactions that have taken place in that month. This is known as the bank reconciliation. The bank reconciliation is a cash control measure designed to eliminate known differences between the bank account and the cash book. Any unknown differences could be caused by errors or fraud and therefore need to be investigated.

If there is a difference between the agency’s records and the bank statement received from the financial institution holding the trust funds that require adjustment, the following applies: • If the bank statement is correct, adjustments are entered in the cash book. • If the cash book is correct, adjustments are entered on the reconciliation.

To minimise issues or errors at month end, it is best practice to follow good daily, weekly and monthly procedures.

Suggested checklists to use are discussed below.

Topic 11: Standard transactions in real estate trust accounts

Daily checklist of banking procedures

Trust money received

1. Has all trust money received today been receipted? 2. Has a receipt been provided to all payers demanding a receipt for trust money

received today? 3. Have all duplicate, cancelled and original receipts (not issued), generated today,

been filed?

Trust deposits

1. Has all trust money received from the prior working day been banked today? 2. Was the deposit to the bank accompanied by a deposit slip totaling the amount

banked? 3. Has the duplicate deposit slip provided to the bank been filed?

Trust cheques/EFT

1. Have all trust cheques/ETF payments, that have been prepared in accordance with the procedure, been signed and sent out and processed?

2. Has all information required to support the payment been recorded? 3. Has all information required to be captured for the cash book and ledger account of

principals been recorded?

Financial record keeping

1. Have all transactions (cheques/EFTs/receipts) of the preceding day been posted to the: • cash book • individual trust ledger accounts?

Monthly checklist of banking practices

Cashflow

1. Have all the transactions for the preceding month been entered? 2. Has the cash book been totalled and balanced? 3. Have all trust bank statements been received and filed? 4. Does the cash book reconcile to the trust bank account? 5. Has the trust bank account reconciliation been signed and filed?

Trial balance

1. Have all trust ledger account trial balances been printed and filed? 2. Have the total individual balances of the trust accounts been prepared and filed? 3. Has a comparison been made resolving discrepancies between the total of the trust? 4. Has the trial balance and cash book reconciliation been prepared and filed?

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1.5 Outsourcing Outsourcing end of month processes is an option for agencies.

One such company offering these services is End of month angels.

Resource 3: Outsourcing the management of trust accounts

Access and read ‘Complete trust account management for real estate agencies’ at: <www.endofmonthangels.com.au/services/trust-account- management> and ‘Pre-end of month checklist for your cloud-based software’ at: <www.endofmonthangels.com.au/pre-end-of-month- checklist-for-your-cloud-based-software>.

1.6 Fidelity claims Unfortunately, there have been claims against real estate agents over time as a result of fidelity breaches. Experts believe that this has been caused by a number of changes in the typical real estate business environment, for example: • larger agencies with more reliance on untrained or temporary staff • less supervision by the licensee due to business performance pressures • the reluctance of some agencies to limit the volume of cash being taken in

transactions • heavy reliance on computerisation and systems with minimal or no personalisation

supervision and checks of computing and banking processes • smaller agencies with one employee in total control of the trust process and minimal

supervision.

Some of these problems are reducing as most agencies have moved towards a cashless office. However, there are cases where cash is being misappropriated on a sophisticated level, especially where the perpetrator controls or undertakes internet banking and is able to move large amounts of money relatively easily between accounts with virtual anonymity.

Resource 4: Trust accounting fraud and account hacking

Access and read the following articles relating to trust accounting fraud cases and hacking of accounting via emails: • Former Unique Estates founder Nicolette van Wijngaarden sentenced to

more than three years jail for trust account fraud • Six agencies closed following trust account fraud • Beware hacking scam targeting business email accounts – News alert.

https://www.endofmonthangels.com.au/services/trust-account-management/

https://www.endofmonthangels.com.au/pre-end-of-month-checklist-for-your-cloud-based-software/

https://www.domain.com.au/news/nicolette-van-wijngaarden-sentenced-to-more-than-three-years-jail-for-trust-account-fraud-911431/?fbclid=IwAR3tdSYZQDfqg8Q0e87s5Yfxl0bCboCZC_PHfGRC96ayAM-wAtqYimtvnbE

https://www.realestatebusiness.com.au/breaking-news/10577-six-agencies-closed-following-trust-account-fraud

https://www.consumer.vic.gov.au/latest-news/beware-hacking-scam-targeting-business-email-accounts-may-2019-news-alert

Topic 11: Standard transactions in real estate trust accounts

1.7 Trust accounts and cyber crime In addition to the trust account fraud and risk minimisation strategies already discussed in Topic 10, it is also critical that real estate agencies implement online security procedures to ensure fraudulent trust account activity does not occur as a result of cyber crime.

One example of how this can occur is where access of trust accounts or trust account details can be gained by hackers via scam email communication.

Resource 5: ‘Scamwatch’ newsletter

In an excerpt from the Australian Competition & Consumer Commission (ACCC) ‘Scamwatch’ newsletter, ACCC Deputy Chair Mick Keogh said:

Scammers are hacking business email systems and impersonating the intended payment recipient. The scammers request changes to bank account details so that the business makes the payment to the scammer instead of the legitimate business.

(ACCC, Scamwatch 2019)

Hence added policies and procedures relating to awareness of email hacking incidents and best practices is a must for all businesses to adhere to.

Guidelines to avoid hacking by scam emails

Suggested guidelines for all staff to follow: • Do not open messages if the sender is unknown. • Be suspicious of messages that are not addressed directly, or do not use the

recipient’s correct name. • Do not reply to (or forward) chain letters received by email. • Think carefully before clicking on any links or opening any attachments. • If a message seems suspicious, contact the person or business separately to check if

they are likely to have sent the message. Use contact details through a legitimate source and not those contained in the suspicious message. Ask them to describe what the attachment or link is.

• Before clicking a link (in an email or on social media, instant messages, other webpages, or other means), hover over that link to see the actual web address (usually shown at the bottom of the browser window). If the web address is unrecognized, try searching for relevant key terms in a web browser. This way the article, video, or webpage can be searched for without directly clicking on the suspicious link.

• Ensure up-to-date anti-virus software is installed on any device used to access email.

Key concept: Protecting one’s business when using email

For further tips on how to protect one’s business when using email, read ‘Stay smart online’ on the Australian Cyber security centre website.

https://www.staysmartonline.gov.au/protect-yourself/protect-your-stuff/email

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Key points • Inaccuracies, errors, potential fraud and scams can affect trust accounting. These can

be minimised by following legislative requirements, and policies and procedures set by the business to adhere to rules and regulations.

• In trust accounting there are many tasks and steps to follow. When dealing with other people’s money there are extra implications to the business and staff. Hence to ensure a task or step is not forgotten, it is always best practice to follow a checklist, strictly every time.

• Licensee-in-charge supervision is essential, on-the-spot random checks as well as having strict guidelines on internet and email use procedures. In addition, using good software systems will simplify the processes and increase accuracy.

References Australian Competition & Consumer Commission (ACCC) 2019, ‘Scamwatch’ newsletter, 1 May, viewed 5 May 2020, <https://www.scamwatch.gov.au/news-alerts/australian- businesses-hit-hard-by-email-scams>.

Australian Cyber security centre n.d., Stay smart online, Australian Government, viewed 5 May 2020, < https://www.staysmartonline.gov.au>.

Australian Securities & Investments Commission (ASIC) n.d., Registered Auditor Dataset, viewed 5 May 2020, <https://data.gov.au/data/dataset/asic-registered-auditor>.

Consumer Affairs Victoria 2019, Beware hacking scam targeting business email accounts – News alert, 6 May, viewed 5 May 2020, <https://www.consumer.vic.gov.au/latest- news/beware-hacking-scam-targeting-business-email-accounts-may-2019-news-alert>.

Domain 2016, Six agencies closed following trust account fraud, 3 May, viewed 5 May 2020,<https://www.realestatebusiness.com.au/breaking-news/10577-six- agencies-closed-following-trust-account-fraud>.

Domain 2019, Former Unique Estates founder Nicolette van Wijngaarden sentenced to more than three years jail for trust account fraud, 21 November, viewed 5 May 2020, <https://www.domain.com.au/news/nicolette-van-wijngaarden-sentenced-to-more- than-three-years-jail-for-trust-account-fraud- 911431/?fbclid=IwAR3tdSYZQDfqg8Q0e87s5Yfxl0bCboCZC_PHfGRC96ayAM- wAtqYimtvnbE>.

End of month angels n.d., Offering end of month services, viewed 5 May 2020, <https://www.endofmonthangels.com.au>.

https://www.scamwatch.gov.au/news-alerts/australian-businesses-hit-hard-by-email-scams

https://www.staysmartonline.gov.au/

https://data.gov.au/data/dataset/asic-registered-auditor

https://www.consumer.vic.gov.au/latest-news/beware-hacking-scam-targeting-business-email-accounts-may-2019-news-alert

https://www.realestatebusiness.com.au/breaking-news/10577-six-agencies-closed-following-trust-account-fraud

https://www.domain.com.au/news/nicolette-van-wijngaarden-sentenced-to-more-than-three-years-jail-for-trust-account-fraud-911431/?fbclid=IwAR3tdSYZQDfqg8Q0e87s5Yfxl0bCboCZC_PHfGRC96ayAM-wAtqYimtvnbE

https://www.endofmonthangels.com.au/