Receipt of money
All money received by an agent in relation to a real estate transaction must be paid to the person who is lawfully entitled to that money, or in accordance with that person's instructions. Until the money has been paid out it must be held in the agent's trust account.
An agent must account for trust monies received. An agent must not pay money held in a trust account to any person for a period of 10 working days after the date on which the agent received it, unless payment before the expiry of that period is authorised by all parties to the transaction or by court order.
Do trust accounts need to be audited?
All trust accounts held by agents have to be audited in accordance with the Real Estate Agents (Audit) Regulations 2009 which replace the 1977 regulations.
The new regulations retain the frequency of the audits required for trust accounts operated by agents and the audit periods which are prescribed in the 1977 regulations, but do make some key changes:
- all auditors of agency trust accounts must hold a certificate of public practice from the New Zealand Institute of Chartered Accountants
- conflict of interest requirements disqualifying an auditor from appointment to audit trust accounts are extended
- the nominated auditor no longer has to be approved by the regulator
- agents can use any trust account receipts so long as they contain the specified information
- agents need only send the monthly list of balances and reconciliation statements to their auditor, it does not need to be sent to the Authority or REINZ.
When are agents required to appoint auditors?
Any agent who receives money in respect of real estate transactions must pay that money into a trust account pending payment in respect of the person entitled to the money. Where two or more individual agents work in partnership it is sufficient that the partnership operates a trust account. Where the agent is a company it is sufficient that the company operates a trust account, which any agent working for that company can pay money into.
Who can be appointed as an auditor?
A person may be appointed as an auditor if that person:
- is a chartered accountant
- holds a certificate of public practice from the NZICA
- is not disqualified on the basis of specified conflicts of interest.
If an agent has already engaged an auditor under the 1976 Act who does not meet these eligibility requirements, that person can complete the audit requirements for the year ended 31 March 2010. The agent must, before 1 April 2010, appoint a replacement auditor for the year starting on 1 April 2010 who does meet the eligibility requirements.
When does an agent have to notify the Authority of their auditor?
Under the 2008 Act those granted an agent's licence for the first time must notify the Authority of who has been appointed as auditor, before receiving any money into their trust account. This must include confirmation from the auditor that he or she is eligible to be an auditor.
Those who are already licensed under the 1976 Act have until 17 December 2009 to notify the Authority of their auditor. You can use this form to provide the necessary information to the Authority.
What are the main duties of agents in relation to audits?
Agents must:
- keep clear and accurate client ledger records
- issue receipts for money received
- provide information to auditors when required to do so including monthly balances and reconciliation statements.
What are the main duties of auditors?
Auditors must:
- examine the agent's trust accounts at least three times a year between specified periods and satisfy themselves that trust account money is properly accounted for
- submit a report to the Authority at the end of each audit year
- report any defaults or irregularities of the agent to the Authority.
What is the role of the Authority?
The Authority receives annual reports and may be notified of defaults and irregularities. If it has reasonable grounds to believe that an agent is guilty of improper conduct in relation to someone else's money or property, or that a trust account is being administered fraudulently or recklessly, it can appoint someone to administer a trust account.
The Authority can direct an audit of an agent's trust account at any time and can appoint an auditor to do this.
Do agents have to provide REINZ or the Authority with a certified list of balances in their trust accounts?
From 17 November 2009 agents no longer have to provide REINZ with a certified list of balances in their trust accounts. This information only has to go to the agent's auditor. You do not need to send this information to the Real Estate Agents Authority or REINZ.
What do agents do with trust accounts if not actively engaged in real estate agency work?
If an agent is no longer operating a trust account they must give notice to the auditor that the trust account is inactive and that all money in the account has been paid as required. All relevant trust account records must be given to the auditor at this time.
The auditor must advise the Authority that the account is inactive.
If the agent wishes to reactivate the trust account then they must notify the auditor who must in turn advise the Authority.
What happens if the regulations are not complied with?
Failure to comply with the obligations set out in Audit regulations will constitute an offence.
