To successfully complete this assignment you must answer the following questions to demonstrate your knowledge. The assignment will be granted a result of “Competent” if the learning outcomes are achieved or “not yet competent” if not. If a result of “Not Yet Competent” is achieved you will be given the opportunity to resubmit your assignment.
Question 1: Describe the meaning of the term ‘Agency’ and identify the types of agency relationships that a real estate agent may enter into.
Definition of Agency: "Agency" means a fiduciary relationship between a principal and an agent arising out of a brokerage agreement whereby the agent is engaged to do certain acts on behalf of the principal in dealings with a third party. Duties: A licensee who provides services through a brokerage agreement for a seller, landlord, buyer, or tenant is bound by the duties of loyalty, obedience, disclosure, confidentiality, reasonable care, diligence, and accounting.
A. SELLER AGENCY: A SELLER'S AGENT has the duties, as defined by law, to represent the seller's interest in the sale of the property: this generally means a duty to seek a sale, lease, rent, or exchange at the price and terms stated in the brokerage agreement or a price and terms acceptable to the seller or landlord; present in a timely manner all offers and agreements to and from the seller or landlord; account for client funds; disclose all information relevant to the transaction as required by law to the client and maintain the client's confidentiality. These duties may be modified only by written agreement of the parties.
B. BUYER AGENCY: A BUYER'S AGENT has the duties, as defined by law, to represent the best interests of the buyer as a client: this generally means to seek real estate at the price and terms specified by the buyer or tenant: present in a timely manner all offers to and from the buyer or tenant on real estate interest: account for clients funds: disclose all information relevant to the transaction as required by law to the client and maintain the client's confidentiality. These duties may be modified only by written agreement of the parties.
C. SUB-AGENCY: A real estate broker, acting as agent for the SELLER or BUYER, must represent the client's best interest in the transaction.
•The seller may also authorize subagents to represent him / her in marketing his / her property to buyers. The seller may be liable for actions of the broker and any subagents, when said actions occur within the scope of the agency relationship.
•The buyer may also authorize subagents to represent him / her in locating property. The buyer may be liable for actions of the broker and any subagents, when said actions occur within the scope of the agency relationship.
D. DISCLOSED DUAL AGENCY: (UNDISCLOSED DUAL AGENCY IS ILLEGAL) A licensee acting for more than one party whose interests may differ in a transaction with the knowledge and written consent of all parties for whom the licensee acts. If a licensee represents a BUYER in a transaction involving a property which is listed by that same BROKER, or by that BROKER'S company, then a DISCLOSED DUAL AGENCY exists. When DISCLOSED DUAL AGENCY occurs, the full range of agency duties cannot be delivered to both parties. These agency duties will be modified by agreement, so that neither client will be given an unfair advantage. DUAL AGENCY must be disclosed and agreed to in writing by both clients. A DISCLOSED DUAL AGENT may not reveal confidential information regarding, but not limited to:
1.willingness of the seller to accept less than the asking price;
2.willingness of the buyer to pay more than what has been offered;
3.confidential negotiating strategy not disclosed in the sales contract as terms of the sale; or
4.motivation of the seller for selling nor the motivation of the buyer for buying.
If a consumer does not wish to have a licensee act on behalf of that consumer either as a seller agent or a buyer agent yet wishes to enter another relationship with the real estate brokerage firm, the licensee shall clearly describe, in writing, that relationship. The written description of that other relationship shall be signed by all parties to the relationship prior to any services being rendered.
Question 2: Identify two parties who might establish an agency relationship with a real estate agent outlining the purpose of the relationships
1 - The Real Estate Act Rules require that all industry members ensure their role in a transaction is clearly understood by their clients and third parties [Real Estate Act Rules, s.41(e)]. This means mortgage borrowers must clearly understand with whom their mortgage broker has a working relationship. Real Estate Council of Alberta research into mortgage brokerage/consumer relationships has demonstrated that consumers often do not clearly understand their relationship with the brokerage, the role of the brokerage and the relationship the brokerage may have with lenders.
Agency is a relationship established when two parties agree to have one party act on behalf of the other. In an agency relationship, the agent (the industry member) will act on behalf of its principal. In the case of mortgage brokerage, the principal may be the lender or the borrower, or the mortgage brokerage may act as an intermediary.
Mortgage brokerages will typically decide between three different relationship options and stick with the chosen option, though in some cases, a brokerage may be open to different relationships with different borrowers and lenders, as the particulars of a given situation dictate.
In the case of mortgage brokerages, the brokerage may have a service relationship with the lender, the borrower or neither – in which case the brokerage would act as an intermediary between the lender and the borrower. The mortgage brokerage and its representative’s role and obligations to the borrower and the lender will vary depending on the nature of the service relationship between the mortgage brokerage and the lender or borrower.
Mortgage brokerages may choose to represent the lender and will treat the borrower as a customer of the brokerage. In this service relationship, the brokerage has an obligation to represent the lender’s best interests, and will owe to the lender general, fiduciary and regulatory obligations.
When representing a lender, the mortgage brokerage may treat the borrower as a customer of the lender. The Real Estate Act Rules defines customer as meaning a person who has contacted, but not engaged or employed, an industry member to provide services. The brokerage will treat the borrower (customer) honestly and exercise reasonable care and skill in providing information with respect to the lender’(s) mortgage options, keep the borrower informed of the progress of the transaction, complete documentation for submission to the lender and communicate information from the lender to the borrower.
For more information about lender relationships, please see RECA Information Bulletin: Mortgage Brokerage – Lender Relationships.
Mortgage brokerages may represent (act on behalf of) only the borrower. In this service relationship, the mortgage brokerage has an obligation to represent the borrower’s best interests at all times. The mortgage brokerage has general, fiduciary and regulatory obligations to borrowers when they are clients of the brokerage. Specifically, because the brokerage is acting on behalf of the borrower, the brokerage will recommend a particular financing option(s) to the borrower, advocate on the borrower’s behalf, and provide confidential advice. The brokerage duties to the lender are to be honest and exercise reasonable care and skill.
For more information about borrower relationships, please see RECA Information Bulletin: Mortgage Brokerage – Borrower Relationships.
2 - Acting as an Intermediary
Mortgage brokerages may act as an intermediary between the borrower and the lender. In such a relationship, the brokerage is authorized to offer mortgage products from one or more lenders to borrowers who are seeking a mortgage. The brokerage duties to the borrower include the following: be honest, exercise reasonable care and skill, gather the borrower’s intended property and financial information to determine the lending options available, disclose and explain appropriate options for the borrower’s consideration, complete and submit documentation to the lender and keep the borrower informed of the progress of the application.
The brokerage duties to the lender are be honest, exercise reasonable care and skill, complete and submit documentation to the lender, disclose what steps were taken to verify information and documentation as part of the application process and keep the lender informed of the progress of the application.
If a mortgage broker industry member were to attempt to represent both the lender and the borrower in the same transaction, it is impossible for that industry member to fulfill his or her fiduciary obligations to both parties. An agent cannot be loyal to two parties in the same transaction nor can an agent act only in the best interests of one party when the interests of the other party are different.
The requirement to disclose relevant information and keep a principal’s information confidential is a conflict. Typically, an agent assumes the role of an advocate on behalf of their principal. If an agent is attempting to represent two parties in the same transaction, it is a conflict of interest and as a result, mortgage brokerages can only act on behalf of the borrower OR the lender.
For more information about mortgage brokerages acting as intermediaries, please see RECA Information Bulletin: Mortgage Brokerage – Acting as an Intermediary.
Required Relationship Disclosure
Regardless of the relationship model a mortgage brokerage chooses, the brokerage – and industry members registered with the brokerage – must ensure that any borrowers with whom they are working (either as clients or customers) understand their relationship with the brokerage and its industry members.
Question 3: Identify three different types of agency agreements an agent may use to enter into a relationship with a principal.
• An actual agency agreement is one that is entered into by both the principal and the agent. It generally takes the form of a written contract between the two parties detailing their agency relationship. The principal will outline expectations of the agent and any limitations on the agency privileges.
From there, the agent is free to negotiate and enter into contractual relationships with third parties that bind the principal, even if the principal isn't present for any discussions. If a breach of contract arises, the third party can sue the principal under the contract terms.
• An apparent agency agreement is one in which the pact between the principal and the agent is implied under the law. Sometimes, a principal will "hold out" an agent as someone who possesses the authority to bind the principal under contracts entered into by the agent.
There will be no written agreement between the two parties, but circumstances would lead any reasonable third party to believe the agent was in a position to negotiate and contract for the principal. If the court finds this belief reasonable, it will likely hold the principal liable under a theory of implied agency, even though no written and signed agency agreement exists.
• Respondeat superior is a Latin term meaning "let the master answer." This is a legal concept in which employers can be held liable for the activities of their employees under a theory of agency. Three general questions must be answered in the affirmative for an employer to be held liable to the injured third party for the acts of the agent.
First, was the employee's activity within the scope of the employee's employment? Secondly, was the activity within the employee's job responsibilities? Last, was the agent acting with an intent to benefit the principal? If the answer is "yes" to these inquiries, the principal will likely be held liable to the injured third party for the agent's negligent acts.
Question 4: Identify three main duties and responsibilities of each of the following key personnel: Licensee-in-charge: Each place of business must be in the charge of a licensee, who is responsible for the proper supervision of the business carried on there and for the actions of all employees.
An individual licensee is responsible for the supervision of their own place of business. A licensee who has more than one place of business must employ a licensee to be the person in charge at each other place of business. A corporation that holds a corporation licence must employ licensees to be in charge of each of the corporation’s places of business.
A licensee cannot be in charge of more than one place of business or act for more than one licensee at a place of business. In very limited circumstances, the Commissioner for Fair Trading may grant an exemption from the licensee-in-charge requirements.
A licensee cannot be employed to be in charge of a place of business if they are also the licensee-in-charge of another place of business.
A licensee-in-charge of a place of business must hold a licence in the category relevant to the type of business carried on there. For example, a person in charge of a real estate agency business must hold a real estate agent’s licence.
In limited circumstances, the Director General may grant an exemption from the requirement that each separate agency office be under the charge of a separate licensee. For more information refer to the Exemptions to licensee-in-charge-rule.
Property Manager: There are a multitude of specific duties which a property manager needs to fulfill in the role of their employment. The first duty related to being a property manager is the leasing or selling of a real estate property. In order to engage in the leasing or selling of the property, the property manager must make necessary marketing contacts to have the property listed so that the general public can show interest in leasing or buying the property. Once prospective tenants or purchasers have responded to an ad placed by the property manager, that individual is then responsible for showing the property to the interested parties and relaying all of the pertinent information regarding the property to those individuals.
The property manager also must deal with a great amount of paperwork in their position. Some pertinent documents which need to be completed by the property manager include lease agreements, purchase and sale agreements, rules and regulations, and contract work documents such as maintenance and repair work orders. Once the paperwork is completed the property manager must then be sure to file the documents with necessary parties and keep records thereof in a neat, orderly manner.
An individual who is a property manager will also be responsible for analyzing quite a bit of pertinent data. There are many documents and information which property managers review on a daily basis. Items such as zoning regulations, tenant laws, federal laws, tax information, property values and more are all things which a property manager should review on a frequent basis. This will aid the property manager in doing their job to the best of their ability and ensuring that they are up to date on all current information relating to their property and real estate in general.
The property manager is also in charge of employees that work at the specific property. This includes leasing agents, maintenance workers and more. The property manager will oversee the work that these individuals do, address any complaints or concerns issued by the employees and take care of payroll for such employees. This individual is the head of the property office in many cases and is the one which other employees at the property must answer to.
With regard to tenants and owners at the property, the property manager is whom they will most likely address their concerns with should they have any issues which arise concerning their tenancy or ownership at the property. Some issues which the property manager will need to address with the tenants and/or owners include maintenance, security and overall functioning of the property.
The property manager is also the individual who is responsible for inspecting the property to ensure that everything is in working order and contact repair workers should anything need to be fixed on the property. The property manager should be able to take a proactive role with regard to fixing items and making frequent inspections to see that everything is working in a safe and appropriate manner.
Lastly, the property manager is one who acts as a liaison between tenants and the building owners or employees and the building owners. The specific duty of the property manager in this regard is to ensure that all parties correspond appropriately and work out any misunderstandings or grievances when necessary to do so.
Salesperson: It's important to understand what legal responsibilities your real estate salesperson has to you and to other parties in the transactions. Ask your salesperson to explain what type of agency relationship you have with him or her and with the brokerage company.
Seller's representative (also known as a listing agent or seller's agent). A seller's agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is created by a listing contract.
Subagent. A subagent owes the same fiduciary duties to the agent's principal as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not representing the buyer as a buyer's representative or operating in a nonagency relationship, shows property to a buyer. In such a case, the subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer-customer can expect to be treated honestly by the subagent. It is important that subagents fully explain their duties to buyers.
Buyer's representative (also known as a buyer's agent). A real estate licensee who is hired by prospective buyers to represent them in a real estate transaction. The buyer's rep works in the buyer's best interest throughout the transaction and owes fiduciary duties to the buyer. The buyer can pay the licensee directly through a negotiated fee, or the buyer's rep may be paid by the seller or by a commission split with the listing broker.
Disclosed dual agent. Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to the clients. Instead, dual agents owe limited fiduciary duties. Because of the potential for conflicts of interest in a dual-agency relationship, it's vital that all parties give their informed consent. In many states, this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.
Question 5: Identify the three main forms of business ownership
1 - Risks and Liabilities : In large part, the best ownership structure for your business depends on the type of services or products it will provide. If your business will engage in risky activities -- for example, trading stocks or repairing roofs -- you'll almost surely want to form a business entity that provides personal liability protection ("limited liability"), which shields your personal assets from business debts and claims. A corporation or a limited liability company (LLC) is probably the best choice for you.
To learn more about the advantages and disadvantages of each type of business structure, see Ways to Organize Your Business, a chart that compares the pros and cons of each.
Formalities and Expenses
Sole proprietorships and partnerships are easy to set up -- you don't have to file any special forms or pay any fees to start your business. Plus, you don't have to follow any special operating rules.
LLCs and corporations, on the other hand, are almost always more expensive to create and more difficult to maintain. To form an LLC or corporation, you must file a document with the state and pay a fee, which ranges from about $40 to $800, depending on the state where you form your business. In addition, owners of corporations and LLCs must elect officers (usually, a president, vice president, and secretary) to run the company. They also have to keep records of important business decisions and follow other formalities.
If you're starting your business on a shoestring, it might make the sense to form the simplest type of business -- a sole proprietorship (for one-owner businesses) or a partnership (for businesses with more than one owner). Unless yours will be a particularly risky business, the limited personal liability provided by an LLC or a corporation may not be worth the cost and paperwork required to create and run one.
2 – Income taxes :Owners of sole proprietorships, partnerships, and LLCs all pay taxes on business profits in the same way. These three business types are "pass-through" tax entities, which means that all of the profits and losses pass through the business to the owners, who report their share of the profits (or deduct their share of the losses) on their personal income tax returns. Therefore, sole proprietors, partners, and LLC owners can count on about the same amount of tax complexity, paperwork, and costs.
Owners of these unincorporated businesses must pay income taxes on all net profits of the business, regardless of how much they actually take out of the business each year. Even if all of the profits are kept in the business checking account to meet upcoming business expenses, the owners must report their share of these profits as income on their tax returns.
In contrast, the owners of a corporation do not report their shares of corporate profits on their personal tax returns. The owners pay taxes only on profits they actually receive in the form of salaries, bonuses, and dividends.
The corporation itself pays taxes, at special corporate tax rates, on any profits that are left in the company from year to year (called "retained earnings"). Corporations also have to pay taxes on dividends paid out to shareholders, but this rarely affects small corporations, which seldom pay dividends.
This separate level of taxation adds a layer of complexity to filing and paying taxes, but it can be a benefit to some businesses. Owners of a corporation don't have to pay personal income taxes on profits they don't receive. And, because corporations enjoy a lower tax rate than most individuals for the first $50,000 to $75,000 of corporate income, a corporation and its owners may actual have a lower combined tax bill than the owners of an unincorporated business that earns the same amount of profit.
3 - Unlike other business forms, the corporate structure allows a business to sell ownership shares in the company through its stock offerings. This makes it easier to attract investment capital and to hire and retain key employees by issuing employee stock options.
But for businesses that don't need to issue stock options and will never "go public," forming a corporation probably isn't worth the added expense. If it's limited liability that you want, an LLC provides the same protection as a corporation, but the simplicity and flexibility of LLCs offer a clear advantage over corporations. For more help on choosing between a corporation and an LLC, read the article Corporations vs. LLCs.
Question 6: Identify in which statutory documentation you would find the ‘Rules of Conduct’?
The Rules of Conduct
Contained within the PSBA Regulations are the “General Rules of Conduct applying to all licensees and registered persons”. These are minimum standards that the agent must follow. Some of the requirements are that agents must:
• have knowledge of the Act and Regulation
• comply with the Act and Regulation
• conduct their business with honesty, fairness and professionalism
• exercise reasonable skill, care and diligence in their dealings
• follow clients’ instructions and act in their best interests at all times
• refrain from employing high pressure tactics, harassment or harsh conduct
• avoid any act that would place their interests in conflict with the client’s interests.
Also contained in the Regulation to the Act are rules specific to different categories of agent, for example real estate salespersons, stock and station agents and strata managers.
Question 7: If you are employed as a real estate agent, you must hold a licence or certificate of registration. Name three (3) other roles in the property industry where you must hold a licence or certificate of registration
real estate agent
real estate salesperson
Question 8: How old do you need to be before you can hold a Real Estate agents licence?
18 years old
Question 9: Under what circumstances should a receptionist hold a certificate of registration? Explain your answer with examples.
A receptionist is someone in a clerical and secretarial position that involves serving as the face and voice of a company, while coordinating communication between a company's customers and its employees. In a real estate company, a real estate receptionist must exhibit excellent telephone skills and an attention to detail required by the nature of the business. The educational requirements of a real estate receptionist include the minimum of a high school diploma, while many have additional training. Combined, a real estate receptionist's responsibilities can be roughly categorized as customer service, clerical, organizational; he or she may also act in some official capacities, such as acting as a notary public for certain documents.
Customer service and excellent telephone skills are some of the major responsibilities of this position. A real estate receptionist is often a customer's first official contact with a real estate office, even if it is only in the form of a voice. In a solo or a multi-agent office, a real estate receptionist keeps up with agent locations, listings and the status of contracts. He or she takes messages from involved parties — potential buyers, sellers, title firms, law practices and other agents — and relays them to the appropriate individuals.
Receptionists also keep track of the multiple appointments necessary in real estate, notifying the involved parties to ensure smooth operation of the business. Depending upon the size of the real estate office and the number of practicing real estate agents within it, a real estate receptionist may also be responsible for basic clerical duties and word processing. These activities may include typing contracts for buyers or sellers, and managing outgoing agency correspondence. He or she may also be responsible for updating home listings for publication, either online or in a newspaper; in some offices, the responsibility of the real estate receptionist may extend to updating an agency's website and online listings as well. Clerical duties might also include the organization and ordering of general office supplies as well as those related to the trade such as outdoor signage, target brochures and business cards. Receptionists are often also responsible for receiving and sorting incoming mail to specific agents, the office manager or agency owner and the office accountant for any company bills of fees owed.
Most employed in this role have a minimum of a high school diploma. Many receptionists have an educational background in secretarial skills, and a significant percentage have certificates or associates degrees in a related area. While a certification as a real estate agent is not usually necessary, it can also be helpful for candidates applying to these positions.
Question 10: What is the purpose of Continuing Professional Development (CPD)?
Growth and success in the ever-changing world of work is increasingly about individuals taking responsibility for their personal development. Our evolving culture requires that individuals be accountable for self-direction, to practice self-management of their own learning and to actively search for wider experience and opportunity. This does not take place in isolation. The self-development process should also bring direct benefit to the team in which the individual works and the organisation as a whole.
As part of the Advanced Professional Qualifications for Business Change Professionals a Continuing Professional Development programme has been developed which runs in parallel with the organisation’s own performance management and appraisal system and, with a minimum of paperwork, can result in an annually renewable, recognised qualification.
Question 11: If you are a salesperson or property officer, how many points to do require each year for the purposes of CPD?
12 points and 4 extra for each other sector
Question 12: The main aim of the Australian Consumer Law (ACL) and the Competition and Consumer Act is to protect the interests of consumers. Describe the main areas that affect the real estate industry.
Banks, consumer financing institutions, credit card companies, investment firms, credit unions, insurance companies, and other organizations involved in the management of monetary instruments make up what is known as the finance industry. In order to make sound economic decisions, various individuals and entities need in-depth information about the overall performance of the finance industry, as well as performance information on specific sectors. Finance industry analysis is complex, but relies on factors such as geography, past performance, current trends, and future outlook. Products offered, government regulation, factors that influence economic growth, and performance of the leading businesses are also analyzed to help forecast what might happen in the future.
Industry analysis, whether for the finance industry or another industry, uses many of the same basic factors. First, analysts must narrow down the geography involved, such as state, country, region, or global financial services. Once the location is determined, the size of the industry is measured, along with any regulatory considerations involved. Trends within the industry are identified, based on past and present performance.
Future projections, known as forecasts, are then estimated and summarized into reports, articles, or other published opinions, collectively known as a finance industry analysis.Also known as the finance and insurance industry or simply financial services, the finance industry wields great influence over other industries and economies. Availability of credit, performance of investment vehicles, costs and risks associated with insurance, and similar factors can greatly affect the cost of living, cost of goods, and government tax revenues of a particular region. Analytical results can also indicate consumer confidence and the future growth potential for certain industries.
Monitoring and analyzing the performance of various sectors within the finance industry helps investors, businesses, consumers, and government agencies make economic decisions about the future. Economic experts and numerous interested organizations specialize in such finance industry analysis to help in the decision-making process.
For example, using finance industry analysis, economic experts can spot a downward trend in consumer financing. Such a trend might indicate that fewer consumers are taking out personal loans, thus paying less in interest charges. Alternatively, the downward trend could indicate that fewer lenders are approving loans. Further analysis would be needed to determine if other finance industry sectors are experiencing the same downward trend, thus indicating possible economic concerns.
Changes in government regulations are another area of intense interest regarding finance industry analysis. When tighter restrictions are placed on financial services, the effects can be monitored through careful industry analysis that compares pre-regulation and post-regulation performance. Experts can then expound on the consequences or benefits of the new regulation and projections for how the regulations will affect future growth of an industry.
Question 13: Identify an act of discrimination that could occur in the property industry. Include an example of how this situation may occur and how it can be overcome.
•Discrimination in the sale or rental of housing. A person may not refuse to sell or rent after a bona fide offer has been made, nor may a person refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny a dwelling to any person because of race, color, religion, national origin, sex, handicap or familial status.
•Discrimination in advertising for sale or rental. An advertisement in any form that indicates any preference, limitation, or discrimination based on race, color, religion, national origin, sex, handicap or familial status, or that indicates an intention to make such a preference, is prohibited. This prohibition applies to the publisher of the advertisement as well as to the party who places the advertisement. It extends to all advertisements regardless of the medium used.
•False representations of unavailability. A person may not falsely represent to any person because of one of the seven protected classifications that a dwelling is not available for inspection, sale, or rental when that dwelling is in fact available for inspection, sale, or rental. This prohibition creates an enforceable right to truthful information for every person.
•Blockbusting. This is a process through which individuals, such as real estate brokers, artificially stimulate sales of residential property by making representations to homeowners regarding the migration of a particular racial, ethnic, religious, or social group into the neighborhood. The brokers prey on the homeowners' bigotry and fear to increase sales, resulting in depressed market values of property and instability in the neighborhood.
Blockbusting is specifically prohibited under 42 U.S.C. § 3604(e), which makes it unlawful for anyone to induce or try to induce any person to sell or rent any dwelling by making a representation regarding the entry or prospective entry into the neighborhood of one or more persons of a particular race, color, religion, sex, handicap, familial status or national origin.
•Steering. This is a practice used by real estate brokers and agents to preserve and encourage patterns of racial segregation by ''steering'' or directing members of racial or ethnic groups to buildings or areas occupied primarily by members of their own racial or ethnic group and away from buildings and neighborhoods inhabited by members of other races or groups. Though not specifically prohibited under the FHA, the means through which steering is most commonly accomplished, such as unlawful refusals to sell or rent and discrimination in terms or conditions, are prohibited.
Question 14: Define the meaning of trust money. What are the responsibilities of the licensee-in-charge relating to the receipt, holding and disbursement of trust money? A typical trust fund transaction begins with the broker or
salesperson receiving trust funds from a principal in connection with the purchase or lease of real property. According to Business and Professions Code Section 10145, trust funds received must be placed into the hands of the owner(s) of the funds, into a neutral escrow depository, or into a trust account maintained pursuant to Commissioner’s Regulation 2832 not later than three business days following receipt of the funds by the broker or by the broker’s salesperson.
A trust account is set up as a means to separate trust funds from non-trust funds. Although it can certainly be argued that keeping trust funds in a trust account will not prevent a dishonest broker from misusing the funds, separating client’s funds from the broker’s own funds provides a better physical and accounting control over the trust funds.
An important reason for designating a trust fund depository as a trust account is the protection afforded principals’ funds in situations where legal action is taken against the broker or if the broker becomes incapacitated or dies. Trust funds held in a true trust account cannot be ‘‘frozen” pending litigation against the broker or during probate.
Trust funds also have better insurance protection if deposited into a trust account. The general counsel of the FDIC, in an opinion in 1965, held that funds of various owners which are placed in a custodial deposit (trust account) in an insured bank will be recognized for insurance purposes to the same extent as if the owners’ names and interests in the account are individually disclosed on the records of the bank, provided the trust account is specifically designated as custodial and the name and interest of each owner of funds in the account are disclosed on the depositor’s records.
Each client with funds deposited in a trust account maintained with a federally insured bank is insured by the FDIC up to $100,000, as opposed to just $100,000 for the entire account, as long as the regulatory requirements are met.
Question 15: The Commissioner of Fair Trading can take disciplinary action against licensees and certificate of registration holders. Name three (3) grounds for disciplinary actions.
1 – A Licensee must have written procedures instructing employees of the agency as to thier duties in regard to daily or next day banking practices of the agency with respect to the recepit of trust money. The licensee must be able to provide details of the process which the licensee uses to ensure employees comply with the procedures.
2 – A licensee must have written procedures requiring the licensee to counduct a review of trust account cash flow on a monthly basis. The review must inclued a process which show that the amounts banked to the trust account have been verified using the financial institiution's records as source documents .
3 – A Licensee must maintain and be able to demonstrate that listing agents employed by the agency use a checklist in the property sales process for each matter to ensure that the following requirments are met.
Question 16: With reference to Question 15, describe three (3) actions the Commissioner can take against licensees or certificate holders if they are found guilty of a breach of discipline. 1 - Penalty notices are a quick and efficient means of dealing with minor offences. NSW Fair Trading can serve a penalty notice on a person if there is evidence that they have committed an offence under the Act or Regulation. If the person does not wish to have the matter determined by a court, they may pay the amount of the penalty within the time specified in the notice.
Payment of the penalty is not regarded as an admission of liability and prevents further disciplinary action from being taken for the offence, but does not affect any civil claim arising from the matter. The aim of the penalty notice scheme is to encourage changes in an agent’s conduct to achieve compliance with the laws. NSW Fair Trading has guidelines on the use of penalty notices to ensure that the integrity of the penalty notice scheme is maintained and that it is used consistently and only for appropriate offences, that is, offences of a minor or technical nature.
Circumstances where stronger disciplinary action would be more appropriate might include repeat or deliberate offences or behaviour that has caused serious detriment to consumers. When new penalty notice offences are introduced, it is NSW Fair Trading’s policy to proceed with gradual implementation in the first six months. During this time on-the-spot notices are not issued and all penalty notices must be approved at a supervisory level before being issued. 2 - Penalties
Penalties under the Act reflect the seriousness of offences. For example, a person who commits trust account fraud will be guilty of an indictable offence and liable to imprisonment for a term of up to 10 years. A maximum penalty of $22,000 will apply for unlicensed trading by a corporation and $11,000 for an individual. Similar penalties apply for collusive practices at auction sales. Disciplinary action by the Director General may be reviewed by the Administrative Decisions Tribunal.
3 - Show cause notice
The Director General can serve a show cause notice on a person where there are grounds for taking disciplinary action against the person.
A show cause notice gives the person the opportunity to make a submission to the Director General to demonstrating the reasons why he or she believes that the proposed disciplinary action should not be taken. A person to whom a show cause notice has been issued is able to seek legal assistance in the preparation of a submission.
The issue of a show cause notice is usually the first step taken in a procedure which may result in a licence being suspended or cancelled or a person being disqualified from holding a licence.
In situations of serious risk, the Director General may immediately suspend a licence or certificate when issuing a show cause notice.
Show cause notices:
•are issued in writing
•give the person at least 14 days to respond
•indicate the range of penalties and action which might be taken under the Act, and
•describe the alleged conduct for which the action is proposed to be taken.
A person who receives a show cause notice can make oral or written submissions to the Director General. For more information, go to the Notice to