Real estate and property industry reforms started on 23 March 2020.
Major reforms to the regulation of real estate and property agents commenced on 23 March 2020, alongside major reforms to residential tenancies legislation.
The Hon Kevin Anderson MP, Minister for Better Regulation and Innovation, has recorded this video message about completion of the reform project.
Statement of Regulatory Intent issued
The Commissioner for Fair Trading has issued a Statement of Regulatory Intent as an assurance to the industry about NSW Fair Trading’s enforcement intentions for the first 6 months of operation of the new laws. The statement is in force immediately and expires on 1 October 2020.
The Commissioner’s statement commits to an educative approach to assist agents to comply with the new laws in the first 6 months. Enforcement action will not be taken against non-compliance with the new requirements that started on 23 March 2020. More active enforcement will commence from 1 October 2020 onwards. As indicated in the Commissioner’s statement, Fair Trading retains the option to take enforcement action against higher-risk breaches of previously existing requirements.
Information on Continuing Professional Development (CPD) requirements
What are the changes
Restructured licensing system
The licensing system is being significantly restructured, with licences and certificates of registration in three categories:
- Real estate (with or without restrictions)
- Stock and station
- Strata management.
The current real estate agent, business agent and on-site residential property manager licences are being rolled into the real estate agent’s licence category. Under the new unrestricted real estate agent’s licence, an agent may carry out the following functions:
- business agent
- on-site residential property manager, and
- real estate sale or leasing functions.
As part of the transition to the new licensing system, people who hold a licence or certificate of registration as a business agent/salesperson, on-site residential property manager/registered manager or real estate agent/salesperson may be issued with a real estate agent’s licence or certificate of registration, restricted to carry out functions relevant to the same area of practice.
For example, a current business agent’s licence holder will transition to a real estate agent’s licence that is restricted to business agent functions.
A person may later apply to have the restriction removed from their new licence or certificate of registration, after they have completed the relevant qualification requirements.
There is no change to the stock and station and strata management categories, which will continue to be issued as separate licences or certificates of registration.
The new system includes 3 licence levels. These are determined by the applicant’s qualifications and experience in the sector:
- certificate of registration as an assistant agent
- class 2 licence as a licensed agent
- class 1 licence as a licensed agent or licensee in charge of a business
New entrants to the industry need to obtain a certificate of registration as an assistant agent and perform entry-level roles while they obtain the qualifications and experience necessary to become a fully licensed agent (class 2 or class 1 licence).
A person who is the licensee in charge of a business will need to obtain a class 1 licence.
Current holders of a licence or certificate of registration will automatically hold an equivalent level of licence on 23 March 2020.
- a person who holds a certificate of registration as a stock and station salesperson will hold a certificate of registration as an assistant stock and station agent
- a person who holds a strata managing agent’s licence will hold a class 2 strata managing agent’s licence.
Applicants can choose a licence duration of 1, 3 or 5 years, providing more choice on what works best for their business and budget.
The standard 3 month restoration period will apply for expired licences.
All certificates of registration will be issued for a fixed term of 4 years, with no extensions of time or renewals allowed beyond that time. This establishes a clear training pathway for assistant agents to advance to a class 2 or class 1 licence as they build on work experience and improve their knowledge of the industry.
By the end of the 4 years, the certificate of registration holder can either obtain a class 2 licence or cease working as an assistant agent. A person may apply for a new certificate of registration 1 year after the expiry of their previous certificate of registration.
Restricted functions for different licences
An agent will have different functions they can carry out, depending on their level of licence, or if they hold a certificate of registration.
Certificate of registration holders will have restrictions on the kinds of activities they may perform as an assistant agent, such as being unable to bind parties into an agency agreement or a franchising agreement.
Class 2 and class 1 licence holders may exercise all functions in their area of practice. However, only the nominated licensee in charge of a business can authorise the withdrawal of money from a trust account.
Licence or certificate of registration holders will be authorised to continue carrying out their current functions in their area of practice after 23 March 2020. However, they will also need to comply with the new legislative requirements according to their level of licence.
Appointing licensee/s in charge and trust account requirements.
Currently, NSW laws require a different LIC to be in charge of each place of business.
From 23 March 2020, an LIC may be nominated to be in charge of an entire business or there may be several licensees responsible for different parts of the business carried out under a licence – so long as no part of the business is left unsupervised by an LIC. However, there cannot be more than one LIC for the same part of business.
These requirements apply to:
- corporation licence holders
- individual licensees who carry on business under a class 2 licence, and
- a class 1 licence holder who carries on business (who would be the LIC for their business).
These licensees are referred to as a ‘principal licensee’ in the Supervision Guidelines.
It is up to the principal licensee to determine how they apportion the business. For example, a principal licensee may appoint an LIC for multiple place(s) of business or one for each business area, such as strata, real estate sales or property management.
Increased qualification and Continuing Professional Development (CPD) requirements
Entry standards are increasing for licence and certificate of registration holders.
For example, a class 2 licence holder must hold their licence for at least 2 years, complete work experience requirements and a relevant diploma to be eligible for a class 1 licence.
However, current licence and certificate of registration holders will automatically transition to the equivalent level of licence without having to complete further education, either on 23 March 2020 or at their next renewal date.
Assistant agents and licensed agents must complete CPD training annually as a condition of holding their licence or certificate of registration.
The new CPD requirements divide CPD into compulsory and elective topics.
Licence holders will be required to undertake a minimum number of hours of CPD per year. Assistant agents will need to complete at least 3 competency units from a Certificate IV qualification each year, to ensure that they will be eligible to apply for the relevant class 2 licence.
See the CPD requirements for more information.
Disclosing specific prescribed material facts
It is currently an offence for an agent to induce a person to enter into a contract or arrangement by concealing a material fact.
The new regulations specify the kinds of facts that an agent knows or should reasonably know and must disclose to a prospective purchaser. These include that the property:
- flooded from a natural weather event or was affected by bush fire in the last 5 years
- has significant health or safety risks
- is listed on the loose-fill asbestos insulation register
- has been the scene of a crime of murder or manslaughter in the last 5 years
- has been used for the production or supply of a prohibited drug or plant in the last 2 years
- is, or is a part of, a building that contains external combustible cladding to which:
- a fire safety order, or a notice of intention to issue a fire safety order, has been issued requiring the building to be rectified regarding the cladding
- a building product rectification order, or a notice of intention to issue a building product rectification order, has been issued requiring the building to be rectified regarding the cladding
- a development application or complying development certificate application has been lodged for rectification regarding the cladding.
The agent will be liable if they fail to disclose these facts, whether or not they intended to conceal them from the prospective purchaser, if they knew of the fact, or should have reasonably known about the fact.
Extended rules of conduct
The regulations introduce new rules of conduct which apply to both agents and assistant agents.
Payment of rental income monthly to landlord
An agent must pay rental money received on behalf of the landlord under a residential tenancy agreement to the landlord at the end of each month, unless the landlord has instructed otherwise.
This ensures that rent is passed on in a timely manner and landlords are aware if there has been a failure to account in their rental income.
Maximum dollar value of gifts and benefits
An agent must not request or accept any gift or benefit from another person that is valued at $60 or more, if it could be considered to give rise to a conflict of interest.
The amount reflects the value of a gift that would be unlikely to induce an agent to alter their conduct by receiving or being promised the gift or benefit.
Separate trust accounts for rental and sales money
The licensee in charge of the business will need to establish separate trust accounts for rental money and sales money.
Many businesses already maintain separate trust accounts for rental income and sales deposits.
This requirement improves the accountability and transparency of agents by ensuring they do not mix rental and sales money in a single trust account.
How will the changes affect me?
Information for current licence and certificate holders
If you are currently in the industry, how the changes affect you depends on the type and level of licence you currently hold. For companies and business operators, you may also need to change the way you organise your business.
Detailed information about how the changes affect you is available on these pages:
Real Estate (including Buyer's Agent)
On-site Residential Property Management
Stock and Station
Previous licence and certificate holders
If your licence or certificate has now lapsed and you would like to return to the industry, you will also be impacted by the changes.
The Property, Stock and Business Agents Act 2002 (the Act) is the primary legislation that governs the conduct of agents working in this industry. The Act has been amended by:
- the Property Stock and Business Agents Amendment (Property Industry Reform) Act 2018 (the Amendment Act),
- Schedule 2.12 of the Fair Trading Legislation Amendment (Reform) Act 2018, and
- Schedules 1.6, 1.8 and 1.9 of the Better Regulation Legislation Amendment Act 2019.
From 23 March 2020, the Act will be called the Property and Stock Agents Act 2002.
The changes to the Act are supported by a set of regulatory instruments, including: