Licensees who run a business that is regulated under the Property and Stock Agents Act 2002 (the Act)must ensure that no part of the business is left unsupervised by a licensee in charge (LIC).
An LIC is an individual who either:
- carries on business under a Class 1 licence, or
- is employed to be in charge of a business under section 31 of the Act.
An LIC is responsible for the proper supervision of the business of which they are in charge. and must hold a Class 1 licence in the category relevant to the business. For example, a LIC of a real estate agency will need to hold a Class 1 real estate agent’s licence.
A corporation licence holder or an individual who runs a business under a Class 2 licence will need to employ an LIC to supervise their business.
These licence holders are referred to in the secretary’s guidelines for the proper supervision of the business of a licensee as the ‘principal licensee’.
LICs to supervise all parts of a business
A principal licensee can nominate one LIC to be in charge of the entire business, or several licensees to be in charge of different parts of the business – so long as they ensure that no part of the business is left unsupervised.
One LIC can be responsible for multiple parts of a business, but there cannot be more than one LIC in charge of the same part of the business.
It is up to the principal licensee to determine the parts of their business. For example, they may decide to appoint an LIC for a place(s) of business or one for each business area, such as strata, real estate sales or property management.
Alternatively, principal licensees may choose to maintain the same supervision arrangements they had in place prior to 23 March 2020, when each place of business had to have a different licensee appointed to be in charge of that place of business.
LICs to authorise withdrawals from general trust accounts
Only a licensee in charge may ‘authorise’ the withdrawal of money from a trust account
An agent may not authorise the withdrawal of money from a trust account unless the agent holds a Class 1 licence and is currently appointed as a licensee in charge.
This makes licensees in charge ultimately accountable for any trust money released from the agency’s trust accounts.
The Supervision Guidelines also require agencies to maintain operational procedures which include the process to obtain and document the express authorisation of the licensee in charge for all release of trust moneys.
The licensee in charge would need to indicate their approval for each specific release of funds and cannot delegate their authority to authorise the release of funds to anyone else.
Only one licensee in charge for one trust account
Importantly, there may only be one LIC authorising withdrawals from a trust account. If there are multiple trust accounts for the business, the principal licensee must ensure that one LIC is responsible for and able to authorise withdrawal of money from that account.
However, an LIC may be responsible for authorising withdrawals for more than one trust account. These requirements do not apply to trust accounts held by an owners corporation for a strata scheme.
Trust money withdrawals – electronic fund transfers and cheques
Trust money may only be withdrawn from a trust account by cheque or electronic funds transfer. Cash withdrawals are prohibited.
Only the licensee in charge may sign cheques for payments from an agency trust account. This function cannot be delegated.
Effecting electronic funds transfers
The Regulations allow another person in the agency, other than the licensee in charge, to physically disburse funds from a trust account by electronic means.
For example, under instruction from the licensee in charge, the other person may press a button to release funds from a bank account, but only if the licensee in charge responsible for that trust account has first authorised the withdrawal.
For each electronic funds transfer from an agency trust account, a record must be kept of:
- the name of the person effecting the transfer
- the reference number or other particulars sufficient to identify the transfer
- details identifying the ledger accounts to be debited
- the reason for the transfer.
See the Trust Accounts page to learn more about trust account requirements.
An LIC cannot act for two or more licensees
A person cannot 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.
Notifying Fair Trading about the business's licensee(s) in charge
Section 31 of the Act requires any individual or corporation who employs the holder of a Class 1 licence to be the LIC, to notify the Secretary of the licence details of the LIC.
The Secretary must be notified of the name and licence number of the person in charge and the address of each place of business for which the LIC will be in charge. The notification must be received within 5 business days of the licensee assuming duties as a LIC.
If a LIC is temporarily or permanently unable to carry out their duties due to illness, leave or any other reason, the principal licensee must appoint another Class 1 licence holder as a replacement.
The principal licensee will also need to notify the Secretary of the details of any replacement LIC(s) within 5 business days, including their start and finish dates as an LIC.
The supervision guidelines set out specific actions that both principal licensees and LICs must take to ensure the proper supervision of their business.
The principal licensee is responsible for preparing and maintaining written records about their LIC(s) as part of operational procedures for the business, that clearly identifies:
- each LIC for the business
- the dates on which they were the LIC, and
- if there is more than one LIC, the part of the business and which trust accounts each person is in charge of.
Visit the supervision guidelines page for more information about the obligations of LICs.
The key requirements when appointing an LIC are:
- an LIC must hold a Class 1 Agent licence in a category relevant to the business of which they are in charge
- no parts of a business can be left unsupervised by an LIC
- an LIC can be in charge of an entire business, or there may be several LICs in charge of different parts of the business
- there cannot be more than one LIC in charge of one part of the business, but one LIC can supervise multiple parts of the business
- only an LIC can authorise the withdrawal of funds from general trust accounts
- only one LIC can authorise the withdrawal of funds from each trust account
- If a nominated LIC is not available, NSW Fair Trading must be notified of the replacement LIC within 5 business days