In past years there have been a number of property scams that have caused havoc within the real estate industry, Australia wide. These cases have occurred because people have represented themselves as the owner of properties and then undertaken sales transactions to gain financially from the sale of a property that they do not own.
As a result of such cases across Australia, NSW Fair Trading issued a set of guidelines to assist property agents in reducing their client’s and their office’s exposure to fraudulent behaviours. These initial Fraud Prevention Guidelines, issued by the Commissioner in April 2013 have been updated and are now included in the new 2020 Supervision Guidelines. They are underpinned with the aim of minimising fraud within the property industry. Whilst the aim is to prevent fraud being executed, the Guidelines set standards and requirements to be undertaken by agents to address such fraudulent behaviours and minimise the impact on agency clients.
The requirements of agents as set out in the new Supervision Guidelines are linked directly to the Code of Conduct, which is Schedule 1 of the Property and Stock Agents Regulation 2014. Breaches of the Guidelines incur financial penalties and disciplinary action can also be taken under the Property and Stock Agents Act 2002, which can lead to licence cancellation and disqualification.
A principal licensee must prepare and maintain written procedures for the verification of the identity of a party with whom it is proposed to enter an agency agreement. This is the most important question at this point, as we are often asked “is this just for residential sales”. The very easy answer is NO. Clause 4.1 of the Supervision Guidelines states that the Fraud Prevention identification check must be completed whenever an agent is entering into an agency agreement – so very clearly, this means ANY agency agreement, be it sales (residential, commercial, industrial, retail, rural, businesses) or leasing (residential, commercial, industrial, retail, rural, on-site management) or buyers agency agreements. Yes – that’s every type of agency agreement.
These written fraud procedures must provide for the following:
In verifying the identity of a person, a licensee must sight an original or certified copy of:
In the case of the sale of a business, only the first and second requirement apply.
In verifying a proof of identity document, a licensee must ensure:
NSW Fair Trading have identified that in a planned attempt to minimise fraudulent behaviour, that agents are required to obtain significant forms of identification, as detailed above, to ensure that the client that they dealing with, are truly the owner of the property in question.
We recommend that agents utilise a proforma for gathering evidence that they have sighted the appropriate documentation to confirm the identity of the people with whom they are entering into agency agreements. NSW Fair Trading issues a standard proforma – you would simply need to change the words from vendor to landlord as appropriate.