Supervision Guidelines

 

Licensees who run a business have a legal obligation to ensure the proper supervision of their business. 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).

A 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.

A 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.

It is vital that businesses are properly supervised, particularly as large sums of money and trust accounts may be involved. Poor supervision can cause distress and financial loss for consumers.

A lack of supervision can also lead to claims against an agent for negligence, misleading conduct and fraudulent use of trust money – for which substantial maximum penalties apply from NSW Fair Trading.

Licensees who run a business must ensure proper supervision in accordance with the Secretary’s Guidelines for the Proper Supervision of the Business of a Licensee (referred to as the Supervision Guidelines).

The supervision guidelines set out the requirements for proper supervision of a business, including the steps they must take to prevent fraud, underquoting and misrepresentation. These requirements include:

• supervision of employees engaged in the business
• establishment of procedures designed to ensure that the provisions of the Act and Regulation and other relevant laws are complied with, and
• monitoring employees’ conduct to ensure that those procedures are being followed.

Corporations or individuals who wish to run a business and only hold a Class 2 licence, will need to employ a Class 1 licence holder to be the Licensee-In-Charge (LIC) of their business.

The failure to comply with a clause of the Supervision Guidelines and its requirements as detailed below is a contravention of section 32 of the Act. This offence carries a maximum penalty of 200 penalty units ($22,000) in the case of a corporation, or 100 penalty units ($11,000) in any other case. Contravention of section 32 can trigger disciplinary action under section 191(a) of the Act. This section allows NSW Fair Trading to undertake disciplinary action against a person for contravening a provision of the Act, whether or not the person has been prosecuted or convicted of an offence in respect of the contravention.

Systemic failure to properly supervise the conduct of a business may also be relevant to any consideration as to whether a licensee is a fit and proper person to be involved in the conduct of a business under section 191(e) of the Act. NSW Fair Trading may serve a notice to show cause on a person if they have the opinion that there is reasonable cause to believe that there are grounds for taking disciplinary action against the person. Disciplinary action may range from a caution or reprimand to a disqualification from being involved in the direction, management or conduct of the business of a licensee.

During COVID, NSW Fair Trading extended the period of time being given to agents to “get their business in order” after the introduction of the legislative reforms on 23rd March 2020. Initially, this education period was for six months, but was extended through until 1st April 2021. Active enforcement by NSW Fair Trading of the new requirements (which includes the Supervision Guidelines) will commence from 2nd April 2021.

To meet these requirements as detailed in the Act and also in the Supervision Guidelines issued by NSW Fair Trading, every business must have written procedures on how their agency will comply with the core requirements of the Supervision Guidelines. To address this need in the property industry in New South Wales, we at ACOP have developed a set of proforma documents to assist LICs to tailor their procedures to meet the requirements. Check them out and get your agency in “compliance order” by the end of March.