Probe to begin into contentious real estate method

THE NSW Department of Fair Trading has launched an investigation into deposit-flicking after the state’s peak body and a petition by conveyancers urging a crackdown on the controversial practice.

Deposit-flicking, where a real estate agent transfers a buyer’s property deposit to a third party until settlement, has been labelled by conveyancers as a financial risk to buyers and a breach of professional obligations.

Concerns have been raised that the practice was an attempt to bypass AML/CTF law reform responsibilities.

In a statement, NSW Fair Trading said it was aware of “concerns raised by stakeholders in the conveyancing and property transaction sectors about third-party service providers deploying various models to hold deposit monies”.

“NSW Fair Trading has engaged industry stakeholders to examine the safeguards in place for buyers, whether real estate agents are acting in accordance with their existing legal obligations and the adequacy of regulatory settings,” a spokesperson told Australian Conveyancer.

“The assessment is ongoing and next steps will be considered as part of that process.

“Consumers should have confidence their money is handled in accordance with the law at all stages of the property transaction process.”

At least 170 conveyancers have lobbied authorities to investigate the controversial practice of deposit-flicking, claiming it posed a financial risk to buyers and is an attempt by some real estate agents to avoid AML/CTF obligations.

Australian Institute of Conveyancers NSW president Jennie Tonner welcomed the investigation, saying it was clear the department wanted “to understand the issues so that they can look into, and come to, a result” after meeting with officials on Monday.

Tonner urged NSW Fair Trading to probe whether deposit-flicking breached an agent’s legal obligation to have a third party hold the deposit on their behalf.

“We believe that it is a breach of the Contract for Sale and Property Stock and Agents Act,” she said.

“I am confident that we will get a clarity and direction by Fair Trading – but I am concerned that we may not get it before the government goes into holdover with the lead up to the next state election. I hope that we will.”

The comments come after AUSTRAC, the federal body enforcing anti-money laundering regulations, said real estate agents were still accountable, amidst deposit-flicking.

AIC NSW has previously said some real estate agents appear to believe that by avoiding holding funds in their trust account, they can bypass the new AML/CTF rules aimed at combatting organised crime that commenced nationwide in July.

Under the “Tranche 2” laws, overseen by AUSTRAC, practitioners must conduct due diligence on clients, report large cash transactions, keep records and report suspicious activity or face potential multi-million-dollar fines.