To trust or not to trust

In an article I wrote a few months ago I discussed the position that the Office of Fair Trading had adopted, principally on the Sunshine Coast about funds being deposited into resident managers’ trust accounts when the funds were not actually trust funds.

Although the OFT had not prosecuted any managers for such conduct, at least one manager had received a compliance notice from the OFT indicating that failure to comply with the notice would result in prosecution.

Many managers had adopted what might be called the precautionary principle – if in doubt, put the money in the trust account. You would think that acting in that way would be seen as more appropriate than the alternative of placing funds into your general account even though you were not sure if that is where they should go.

The action by the OFT caused much angst in the industry and the matter was taken up by ARAMA with the OFT and the responsible minister, attorney-general Jarod Bleije. At a meeting on the Sunshine Coast some weeks ago, the attorney-general was asked about this issue and those present elaborated on the raft of problems that the approach of the OFT was causing. Mr Bleije had a good grasp of the issue and undertook to have his department work with ARAMA on a solution.

It is pleasing to report that after a series of meetings and communications with ARAMA, the OFT will (if it has not already done so at the time this article is published), issue a press release clarifying the OFT’s position on the relevant provisions in PAMDA, provisions that will appear in similar format in the new Property Occupiers Act to commence (hopefully) later this year.

The OFT meaningfully engaged with ARAMA to come up with a sensible, straight forward and practical press release that will bring relief and clarification to many managers. The essential elements of OFT’s position as I understand it are set out below.

To better understand these points, it is important to remember that PAMDA requires that funds received for a transaction (for example, supply of accommodation) by a letting agent must, and are the only funds that can, be paid to the agent’s trust account. There is a specific exception that allows the payment of funds comprising trust monies and non-trust monies which cannot be practically divided, to be paid to the trust account (in which case the non-trust funds must be withdrawn from the trust account within 14 days of receipt). A typical example of that would be where a guest makes a single payment for accommodation and tours.

The essential points as I understand them then are:
• Where a letting agent receives funds which are entirely trust monies, or a combination of trust and non-trust monies, they must be banked to the agent’s trust account.
• Funds received for a matter related to a transaction (eg a guest charges a tour or meal to the room account) may be paid to the agent’s trust account.
• Funds received from a person who is not a guest or resident (and therefore not part of, or related to, a transaction) must not be banked into the trust account.
• Non-trust monies paid to a trust account must be withdrawn from the trust account within 14 days of receipt – the agent does not have to wait until making a disbursement of funds to owners. Indeed, non-trust monies may be transferred immediately to an agent’s general account.
• Deposits for accommodation where the guest’s stay has not yet been allocated to a unit should be paid into, and may remain within, the trust account, until the unit is allocated and the owner becomes entitled to it.

OFT has advised that whilst it will continue to monitor compliance with, and seek to educate managers about, their obligations in relation to receipting trust and non-trust monies, OFT will not take enforcement action where non-trust monies have been banked to a trust account by mistake or out of caution.

The outcome achieved through the involvement of the attorney-general and the representation of managers’ interests by ARAMA is a victory for common sense and practicality. The next challenge will be to convince the policy makers to support an amendment of the new act to allow for the non-trust monies to be removed, not within only 14 days from receipt, but instead within 14 days from month’s end so that this can occur at the same time as the manager is accounting to owners for their funds.

Related Articles

0 0 votes
Article Rating
Notify of
Inline Feedbacks
View all comments
Check Also
Back to top button
WP Tumblr Auto Publish Powered By :
Would love your thoughts, please comment.x