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 on holding a Corporation’s Licence.
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.
If you have previously responded to our request to nominate a single LIC, we will disregard your response and the corporation will retain all nominated LIC.
The information below has been updated to outline the requirements regarding LICs.
Select one of the options below to learn more
Your licence and authorised functions
If you are a corporation, you still need a corporation licence to carry out the functions of real estate, strata management or stock and station.
Under the reforms, a number of categories will be grouped into the real estate category.
These include real estate sales and leasing, business brokering and on-site residential property management.
All persons carrying out these functions will transition to the real estate category but be conditioned to the work they were previously qualified for.
A person who holds a real estate agent’s licence conditioned to act as a buyer’s agent will transition to a real estate agent’s licence conditioned to real estate sales and leasing or on-site residential property management.
If a corporation intends to carry out business in all, or more than one, of the different types of work included in the new real estate agent category, they must nominate a person with an unrestricted licence as a Class 1 Agent in Real Estate to be the licensee in charge (LIC) of the business.
These licence holders will have completed the new Certificate IV in Real Estate Practice which covers all these functions.
A corporation that appoints a person who holds a licence as a Class 1 Agent in Real Estate – Sales and Leasing as the LIC may carry out real estate sales and leasing functions or on-site residential property manager functions only, which includes:
- 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 or providing property management services for the leasing of any land.
A corporation that appoints a person who holds a licence as a Class 1 Agent in Real Estate – Business Agent as the LIC may carry out business agent functions only, which includes:
- selling, buying or exchanging 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 or exchange 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.
A corporation that appoints a person who holds a licence as a Class 1 Agent in Real Estate – On-site Residential Property Manager as the LIC may carry out on-site residential property manager functions only, which includes:
- 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.
To be eligible for a corporation licence, a corporation must continue to appoint at least one Director of the corporation to hold a licence relevant to the area of work. A Director may also be nominated as the LIC of the business, if they hold the appropriate Class 1 licence.
Can anyone who is currently a business agent now be a real estate agent?
No, their licence will be conditioned to the functions of business broking only.
Does this mean a buyer’s agent will be able to sell property and manage rentals?
Yes. There aren’t many buyers’ agents in NSW and their functions will be incorporated into sales and leasing functions.
How can a corporation expand their business to operate different types of real estate work?
The corporation must appoint a LIC who has an unrestricted licence as a Class 1 Agent, or a person who holds a Class 1 licence for the relevant category of work.
For example, if a corporation seeks to carry out business agent functions, they must appoint a person who holds a Class 1 Agent in Real Estate unrestricted licence, or a Class 1 Agent in Real Estate – Business Agent licence.
Changes to requirements for a nominated licensee-in-charge
These are the changes affecting nominated licensees in charge (LIC).
LIC must hold a Class 1 Agent licence
A new category of licence and qualifications is being introduced to better reflect the responsibilities and expertise required in today’s industry. A nominated LIC must hold a Class 1 Agent licence in the relevant category. Qualifications for this licence* include completion of a Diploma in Property Services and 2 years’ work experience as an Agent.
*There are different qualifications required for a Class 1 Agent in Real Estate – On-site Residential Property Manager. Visit Onsite Residential Property Manager – Agent’s Licence for more information.
To provide a smooth transition for your business, there are some transitional qualifications that are available. Until 23 March 2021, a person is also eligible for a Class 1 Agent licence in an equivalent category if they:
- are nominated as a licensee-in-charge immediately before 23 March 2020, or
- held an Agent licence for at least 2 years before 23 March 2020, or
- are 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 their licence, and
whohave advised Fair Trading of these details. business name.
If you are a sole trader and have not provided Fair Trading with details of your trading/business name and trust account details, you should email firstname.lastname@example.org 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.
No parts of the business can be left unsupervised by an LIC
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
- 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.
Even if you have previously advised Fair Trading that you intend to nominate a single LIC, you can nominate more LICs if you wish. Complete the Licensee in Charge Nomination Form (PDF) and return it to Fair Trading by 5:00pm 1 March 2020 to ensure your details are updated.
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) you 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.
How is one LIC able to supervise multiple sites and people?
The removal of the requirement for an LIC in each business location is an important part of recognising the changing business models and digitalisation that now exists in the industry. The challenge for businesses is to implement sound supervision processes and practices. Each business will need to think about these and how they may be improved. This aims to improve professionalism in the sector.
Other important changes affecting your business
The reforms introduce a number of changes, but there are some that will directly impact the way your business operates and the processes it has in place.
The reforms to trust accounts will mean a change to your business processes. In particular, corporations need to:
- review business processes around the preparation and authorisation of withdrawals from trust accounts to comply with the requirement that an LIC must authorise trust account withdrawals, and that there can only be one LIC assigned to each trust account,
- arrange for separate trust accounts for rental and sales deposits. Many businesses already adopt these practices. If your business provides both sales and leasing and does not have separate accounts, you must obtain a new trust account before 23 March 2020, and
- review business processes to ensure that from 23 March 2020, rental monies (less any authorised expenses) are remitted to landlords at the end of each calendar month, unless the landlord has instructed otherwise.
It is very expensive to operate a trust account. Has the government considered the cost to business?
Yes, these costs have been considered. However, the occurrence and value of trust account defalcations is increasing.
While defalcation on sales deposits involves high values, the occurrence in rental defalcations is more frequent. The changes to trust account requirements is an important consumer protection measure.
It is normal practice to retain part of the rent for future expenses, including repairs. Can an agency still retain these funds?
Only if you have consent from the landlord and the expenses are in the immediate future.
The practice of retaining rent for future payments currently operates on an ad hoc basis. This means that landlords have often been the victim of a defalcation but have not been aware.
Businesses will be expected to have their rent trust account as close to zero as possible and have reasonable grounds for retaining funds.
Restricted role of Assistant Agents
From 23 March 2020, Assistant Agents cannot enter into sales or property management agreements, franchise agreements or contracts for the sale of land.
This includes any employee who is a current certificate of registration holder as at 23 March 2020.
An Assistant Agent may still try to get new clients and arrange for clients to fill in a sales or property management agreement, but the agreement is not binding until signed by a Class 2 or Class 1 Agent.
Your business will need to:
- review the qualifications of your employees to ensure you have sufficient licence holders, and
- develop a process for the review and authorisation of agreements obtained by Assistant Agents.
Can an Assistant Agent still arrange for tenants and landlords to enter a residential tenancy agreement?
Yes, they can still sign these agreements on behalf of your agency.
Can Assistant Agents still enter agreements for services and repairs on managed properties on behalf of the agency?
Qualification requirements for Class 2 and Class 1 Agents
Assistant Agents will be required to qualify for a Class 2 Agent licence within 4 years and must complete at least 12 months’ work experience requirements.
A Class 2 Agent wanting to become a Class 1 Agent must show they have completed specific work experience requirements during a 2 year period.
These work experience requirements are specified in the legislation and individuals will be required to keep a record of their experience.
A Class 1 Agent must sign the record to verify the work experience requirements have been undertaken. Your business will need processes to ensure these logs are appropriately verified.
Fair Trading will develop a template logbook for recording this experience which will be available before the reforms start.
Evidence of experience will not be a requirement for Class 2 or Class 1 Agents who apply for a licence that restricts their functions to only on-site residential property management.
Will an employee who holds a certificate but really just does administrative work need to qualify as a Class 2 Agent within the 4 years?
A person who holds a certificate as an Assistant Agent must obtain the Class 2 licence in 4 years.
After 4 years, the Assistant Agent certificate will lapse.
Unless a person is undertaking real estate agent functions as outlined in the legislation, there is no requirement for them to hold a licence or certificate of registration.
We will provide more information to assist businesses distinguish between licensed activities and administrative work before the reforms start.
Gift and Benefits
Licence and certificate holders must declare any gifts over $60 if the gift or benefit could be considered a conflict of interest.
Your business will need to implement a gift register as outlined in the revised Supervision Guidelines.
Do we have to refuse any gifts from our satisfied customers?
No, the reforms require a licence holder to refuse any gift or benefit that might cause a conflict of interest. A gift from a satisfied vendor, for example, generally does not comprise a conflict of interest.
$60 seems a very low threshold?
The provisions and the threshold are in keeping with other legislation dealing with conflicts of interest. The key consideration is avoiding situations that may cause a conflict of interest.
Various changes to the legislation will mean your agreements need to be updated from 23 March 2020.
Changes include disclosing specific material facts when inducing a person to enter a contract, and the restriction on Assistant Agents from entering into an agency agreement.
As a corporation licence holder, you should be aware of the new CPD requirements for your employees. A LIC may also be subject to penalties if an employee fails to meet their CPD obligations. Key changes to CPD include:
- The requirement to complete CPD on an annual basis starting on 23 March each year.
- The requirement for a Class 2 Agent to undertake 6 hours of CPD each year. Of this, 3 hours are compulsory topics determined by Fair Trading, and 3 hours are elective topics.
- The requirement for a Class 1 Agent to undertake 9 hours of CPD each year. Of this, 3 hours are compulsory topics determined by Fair Trading, and 6 hours are elective topics. 3 hours of the elective topics must be related to business management.
- The requirement for an Assistant Agent to undertake at least 3 competency units of a relevant Certificate IV qualification for CPD each year.
- 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.
Fair Trading is developing an online reporting tool for the completion of CPD which will be available later in 2020. Before this is ready, individuals should retain their own record of completion of CPD.
For more information on CPD refer to the CPD requirements.
Licence duration and fees
From 23 March 2020, Corporations, 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* are as follows:
|1 year||3 years||5 years|
|Class 2 Agent||$484||$1026||$1568|
|Class 1 Agent||$733||$1347||$1961|
|1 year||3 years||5 years|
|Class 2 Agent||$342||$844||$1426|
|Class 1 Agent||$449||$1063||$1677|
The corporation will also retain its current licence number ‘for life’. Even if the corporation make changes to the type of licence it holds, or leaves the industry and later returns, it will retain the current licence number.
*Fees current as at 23 March 2020 and may be subject to CPI increase from 1 July 2020.
How to change my existing licence to the new one
Corporations with a licence current as at 23 March 2020 will automatically transition to a new corporation licence under the reforms.
At the next renewal, the licence will be issued with the new licence title.
Fair Trading have written to corporations who currently have more than one LIC to determine which person(s) will be an LIC from 23 March 2020. Corporations must ensure that no part of the business is left unsupervised by an LIC.
Applying for, renewing or changing my licence or certificate of registration
To assist you manage your licence, Fair Trading is developing a new licensing system which will be available from 23 March 2020.
The online licensing system improves our services with:
- digital lodgement for all applications, changes and renewals
- faster processing times on some applications
- simple application processes
- the option to record your preferred or anglicised name on your licence, and
- improved SMS and email updates to you on the progress of an application and reminders about your renewal.
The system will be further enhanced over the next year to provide you with an electronic log to record and authorise employees experience requirements and their completion of CPD topics.
We will be collecting information from you about your employees, so we can better connect you and improve monitoring of compliance.
This additional information will also assist us in delivering a better public register for consumers and improved consumer protections through enhanced monitoring of industry compliance.
The new system will be available through Service NSW and you will receive links and further information about how to connect to your licence information.
How to prepare for the changes
There are a number of important things for corporations to do before the changes start:
- Respond promptly to Fair Trading if you receive a letter about your nominated LICs.
- Make sure your corporation licence is current as at 23 March 2020. If your renewal date is around this time, make sure you renew promptly.
- Make sure that no part of your business is left unsupervised from 23 March 2020. You can either nominate an LIC for the entire business or several LICs for different parts of the business carried out under the corporation licence. However, there cannot be more than one LIC of the same part of the business.
- Review your business processes to implement the new requirements, including:
- having separate trust accounts for sales and rent
- reviewing the process for the release of rent payments at the end of each calendar month
- reviewing the process for the preparation and withdrawal of trust money
- having updated processes for the preparation and withdrawal of trust money, where only an LIC can authorise withdrawals and one LIC is assigned to each trust account
- ensuring you have Class 1 and/or Class 2 Agents who can authorise agency agreements prepared by Assistant Agents
- ensuring that your employees comply with the new CPD requirements
- managing the stock of your current agreements until new ones become available.
- Get familiar with the revised Rules of Conduct and Supervision Guidelines.
- Register an account with my.service.nsw.gov.au if you don’t already have one.
- 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.