If you are currently in the industry, how the changes affect you depends on the type and level of licence you currently hold. Read on for specific information for Strata Managing Agent’s Licence holders.
There has been an important development in how the new legislation is applied to LICs. Previously Fair Trading advised that only one LIC could be nominated for each business from 23 March. This information has now been revised following queries from industry and further legal review of this requirement.
Fair Trading has now issued further advice to corporation licensees that a business may continue to nominate multiple licensees in charge if it chooses to do so.
This means that corporation licensees previously asked to nominate a single licensee in charge will no longer have to do so. The business can continue to operate with multiple nominated licensees in charge.
The information below has been updated to outline the requirements regarding LICs.
Your licence and authorised functions
From 23 March 2020, the name of your licence will change to Class 2 Agent in Strata Management. You can exercise the functions of a strata managing agent, which include:
- any function of an owners corporation, or
- any function of an association
But you cannot authorise the withdrawal of money from the agency’s own trust account (you can still authorise withdrawals from a trust account held by the owners corporation).
From 23 March 2020, a certificate holder (Assistant Agent) in Strata Management will be unable to enter an agency agreement. Certificate holders can still try to get owners corporations to fill in an agreement, but the agreement is not binding until signed by an Agent. Assistant Agents in Strata Management also cannot affix the owners’ corporation’s seal.
Your employer may ask you to review and sign agreements that have been prepared by Assistant Agents and execute documents requiring the owners’ corporation’s seal. In doing so, you will be responsible for ensuring the agreement or document is correct and complies with legislative requirements. You may be held accountable for any non-compliance.
Why can’t an Assistant Agent bind parties to an agreement?
This is a key reform to increase the overall level of qualification of industry participants to a standard that is more appropriate for the demands of the market today. Under the reforms, the Assistant Agent is an entry level position to allow new entrants to gain the experience and knowledge required to qualify as an Agent.
Choosing to remain at the current entry level will no longer be possible. To remain in the industry, existing certificate holders and new entrants will be required to complete the Certificate IV qualification and undertake a range of experiences to qualify as a Class 2 Agent within 4 years.
Can an assistant agent continue to inspect properties and complete sales inspection reports?
Yes, an assistant agent can continue to inspect properties and complete sales inspection reports for sales or property management. However, both the assistant agent preparing the inspection report and the licensee entering into the agency agreement for the property, will need to ensure that the inspection is carried out properly and be satisfied that the contents of the inspection report are true and accurate.
Can I be held liable for any breaches or inaccuracies in agreements that I sign?
Yes, as a signatory to the agreement, you are confirming the agreement is correct and complies with the legislation. If there is a breach or inaccuracy, you may be penalised.
Nominated Licensees in Charge (LIC)
Under the reforms, any person who is nominated as an LIC must hold a Class 1 Agent licence in the relevant category of work.The reforms place more responsibility and accountability on LICs and in keeping with the importance of this role, the qualification requirements for new entrants will increase to completion of a Diploma in Property Services and at least 2 years’ experience as a Class 2 Agent.
A Class 1 Agent can undertake all functions of a strata managing agent, except authorising the withdrawal of trust monies, unless they are an LIC.
LICs to supervise all or parts of a business
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 LICs 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 the business.
These requirements apply to corporation licence holders and individual licensees who carry on business under a class 2 licence. A class 1 licence holder who carries on business would be the LIC for their business. These licensees are referred to as a ‘principal licensee’ in the Supervision Guidelines (in force from 23 March 2020).
It is up to the principal licensee to determine how they apportion the business. For example, a principal licensee may appoint a LIC for multiple place(s) of business or one for each business area, such as strata, real estate sales or property management.
An LIC cannot act for two or more licensees
As per the current requirements, a person must not act as an LIC for two or more licensees (whether the licence is held by an individual or corporation) unless those licensees are in partnership.
Only an LIC can withdraw funds from general trust accounts
From 23 March 2020, withdrawing general trust account funds is restricted to LICs only. Only one LIC can authorise the withdrawal of funds from any one trust account. However, an LIC can be responsible for authorising withdrawals from multiple trust accounts.
Businesses will need to review their processes for preparing and authorising withdrawals to ensure they comply with this requirement.
If the nominated LIC is not available, a principal licensee must advise of the replacement LIC
If the nominated LIC is away from the business (for example, due to ill health or leave) the business must appoint a temporary LIC in their place. From 23 March 2020, you will need to advise Fair Trading within 5 business days of the details of the person temporarily replacing the LIC. The replacement LIC must hold a Class 1 Agent licence in the relevant category and will be responsible for discharging the duties of an LIC.
What arrangements are in place if I am currently nominated as a LIC or run my own business?
To provide a smooth transition for business, there are some transitional arrangements that will apply.
If you are an Agent who falls within either of the following categories, you will be automatically transitioned into a Class 1 licence on 23 March 2020, unless you advise us otherwise:
- agents who are currently nominated as an LIC for a corporation, and
- operators of small businesses or sole traders who run their business under their individual licence, have a current business name and trust account associated with your licence, and have advised Fair Trading of these details.
If you are a sole trader and have not provided Fair Trading with details of your trading/business name, you should email email@example.com with this information before 1 March 2020. If your information is not updated, you may not be automatically transitioned to the Class 1 licence and will need to apply for this after 23 March 2020.
There is also a pathway available until 22 March 2021 for agents who are not currently an LIC to obtain a Class 1 licence. A person is eligible for a Class 1 Agent’s licence in an equivalent category if they have a current licence on 23 March 2020 and held an Agent licence for at least 2 years before 23 March 2020.
In order to take advantage of this transitional pathway, you will need to apply for a Class 1 licence before 23 March 2021. If you do not apply within this time, you will need to complete a Diploma in Property Services and 2 years’ work experience to qualify for a Class 1 licence.
This transitional pathway aims to ensure that businesses have the capability to maintain business continuity by having a pool of Class 1 licence holders, in case the nominated LIC is unavailable.
Won’t everyone who’s held a licence for 2 years just apply for a Class 1 licence?
As a Class 1 Agent you will have significantly more CPD requirements and incur higher fees when applying for, renewing and restoring your licence. It is expected that only those persons who have a genuine need to hold a Class 1 licence will apply.
Can I hold a Class 1 licence and not be the nominated LIC?
Yes. It is expected that many companies will want to retain persons qualified as a Class 1 Agent to provide supervision, leadership and to provide relief when the nominated LIC is absent, if required.
How does a business withdraw trust funds if the nominated LIC is unavailable?
A licensee can nominate a replacement licensee in charge at any time, so long as that person holds a class 1 licence in the appropriate category of work. Under the new laws, an agency must notify Fair Trading within 5 business days of the details of the person (temporarily or permanently) replacing a nominated LIC. The replacement LIC will be responsible for discharging the duties of an LIC. Use of electronic banking facilities while the licensee in charge is away from the office should help to minimise the need for agencies to appoint an alternative licensee in charge.
Licence duration and fees
From 23 March 2020, Class 2 and Class 1 Agents will have the option to renew their licence for a period of 1, 3 or 5 years.
Licences fees have been adjusted to reflect the new levels of licences. The application and renewal fees can be found here.
You will also retain your current licence number ‘for life’. Even if you make changes to the type of licence you hold, or leave the industry and later return, you will retain your current licence number.
Why have some fees increased?
The fee structure has changed to better reflect the risks and responsibilities and licence processing requirements for each role in the new licence framework.
Part of the fee is a contribution to the Compensation Fund to cover consumer losses arising from an agent’s failure to account for money.
As the responsibility for releasing funds from a trust account now sits with LICs only , the contribution has increased for Class 1 Agents, and reduced for Assistant Agents and Class 2 Agents.
Processing components of the fee have been adjusted so that these are proportionate to the requirements for each role.
How to change my existing licence to the new one
Most Agents won’t need to do anything straight away. If your licence is current as at 23 March 2020, you will automatically become a Class 2 Agent under the reforms.
When you next renew, you will receive your new licence with the new licence name.
If you are interested in becoming a Class 1 Agent under the transitional arrangements, you can apply for the Class 1 licence from 23 March 2020.
If you are currently an LIC we will automatically update your licence to a Class 1 licence in the relevant category on 23 March 2020, so that you can continue working as a LIC without disruption to your business.
If your company wants to make any changes to the LICs before the changes commence, notice of these changes must be made to Fair Trading by 5:00 pm on 1 March 2020.
Can I use my current licence?
Yes, you can use your current licence until you next renew your licence.
Will my licence number change?
No, you will retain your current licence number.
Do I need to change my business cards and other published information?
This will depend on how you refer to your current position. You can still use the terms ‘Real Estate’ and ‘Agent’.
What if I haven’t renewed my licence by 23 March 2020?
As long as your licence is renewed within the restoration period (3 months from the expiry date), you will be automatically transitioned to hold a Class 2 licence in the equivalent category.
If you renew or restore your licence after 23 March 2020, you will also automatically transition.
If your licence expired within 12 months before 23 March 2020, you will need to reapply but will be qualified based on your existing Certificate IV qualification.
Alternatively, if you have held an equivalent licence for 2 or more years between 23 March 2015 and 22 March 2020, you will also satisfy the qualification requirements.
Continuing Professional Development (CPD)
CPD will also undergo significant change and you will have new requirements. Compliance with the CPD requirements will continue to be a condition of holding your licence.
Key changes to CPD include:
- You will need to complete CPD on an annual basis, starting on 23 March each year.
- A Class 2 Real Estate Agent is required to undertake 6 hours of CPD each year. Of this, 3 hours are compulsory topics determined annually by Fair Trading and 3 hours are elective topics.
- A Class 1 Real Estate Agent is required to undertake 9 hours of CPD each year. Of this, 3 hours are compulsory topics determined annually by Fair Trading, and 6 hours are elective topics. 3 hours of the elective topics must be related to business management.
- Compulsory topics are delivered by industry associations, government agencies and approved entities. The details of approved providers will be available on our website before the reforms start.
- Individuals can have their licence or certificate of registration suspended if they do not comply with their CPD requirements.
For more information on CPD, refer to the CPD requirements.
If I have completed other CPD since my last renewal, will this credit towards my first year?
If the CPD was based on any of the specified elective topics, it may be counted towards the first year. More information is available in the CPD requirements.
Do I need to keep a record of CPD? Will I need to make a statement verifying I have completed my CPD?
You will need to keep your own records. Licence holders must retain their records for 3 years.
Under the current CPD arrangements, the CPD year and reporting is linked to your licence renewal.
Going forward, licences may be issued for 1, 3 or 5 years. This means the current practice of having CPD reporting periods aligned to an individual’s renewal date must cease.
How to prepare for the changes
There are a number of things you can do to prepare for commencement of the changes:
- Make sure your licence is current as at 23 March 2020. If your renewal date is around this time, make sure you renew promptly.
- Be aware, if you are currently a nominated LIC, you will be transitioned to a Class 1 Agent licence. If you do not want to retain a Class 1 Agent licence, you can ask for this to be changed to a Class 2 Agent licence at your next renewal.
- Talk to your employer about changes in your business processes. For example, what will be the process for authorising agreements prepared by Assistant Agents? Are there new business processes for trust accounts?
- Check your business cards and promotional material to make sure your job title is accurate.
- Get familiar with the revised Rules of Conduct and Supervision Guidelines (in force from 23 March 2020).
- Register an account with my.service.nsw.gov.au if you don’t already have one.
- Make sure you subscribe to our Property Matters eNewsletter. We will use this eNewsletter to communicate important information about the reforms.
If you have questions not answered here, please contact us on 13 32 20.