Land Agents (Registration of Property Managers and Other Matters) Amendment Bill

Introduction and First Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice Reform, Minister for Planning, Minister for Industrial Relations, Minister for Child Protection Reform, Minister for the Public Sector, Minister for Consumer and Business Services, Minister for the City of Adelaide) (15:42): Obtained leave and introduced a bill for an act to amend the Land Agents Act 1994. Read a first time.

Second Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice Reform, Minister for Planning, Minister for Industrial Relations, Minister for Child Protection Reform, Minister for the Public Sector, Minister for Consumer and Business Services, Minister for the City of Adelaide) (15:42): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

The Land Agents (Registration of Property Managers and Other Matters) Amendment Bill 2017 (the Bill) amends the Land Agents Act 1994 (the Act) to provide for registration of property managers and increased consumer protection provisions, colloquially referred to as the Property Management Reforms (the Reforms).

Presently, a person must be registered as a land agent to carry on business of selling, purchasing or otherwise dealing with land or business. An employee of a land agent acting for or on their behalf in relation to the acquisition or disposal of land or business must be registered as a sales representative. This includes commercial property management, but does not extend to residential property management.

The Bill defines the term property manager and requires employees of land agents acting for or on their behalf for this purpose to be registered. This will introduce a class of registration, similar to the sales representative registration, which reflects the different scope of work with targeted requisite qualifications. This recognises the distinct functions of property managers in the real estate sector.

The Reforms respond to issues experienced by Consumer and Business Services (CBS) in the regulation of the real estate industry. CBS receives around 180 calls per month from tenants, property managers and landlords that involve either inadequate service or alleged inappropriate or poor behaviour from a property manager.

Complaints are wide-ranging in nature and frequently include tenants reporting faults such as broken hot water systems but no repairs being done, property owners being billed for work that was never completed and theft or misappropriation of trust monies. For example, allegations of stolen and /or misapplied trust money of $25,000 (a 2015 investigation) and over $70,000 (a 2014 investigation). In both cases, the alleged offenders were residential property managers and CBS could only pursue a prosecution case against their employer, not the individual.

There are three key elements to the Reforms; increasing consumer protection provisions, reducing the regulatory burden on commercial property managers and empowering the Commissioner for Consumer Affairs (the Commissioner) to address misconduct.

The Bill seeks to increase protections for tenants and landlords by ensuring that property managers have satisfied minimum probity requirements and possess the knowledge and skills required to perform property management duties. This includes defining property manager and mirroring existing requirements relating to sales representatives and land agents, such as the entitlement to be registered, cause for disciplinary action and training and supervision.

The Bill reduces the regulatory burden on commercial property managers (currently required to be registered as a land agent or sales representative) by introducing a registration limited to property management with targeted requisite qualifications. Commercial property managers will save time and money, as the requisite qualifications are anticipated to be cheaper, require less time out of the office for training and have a lower periodic fee.

The Bill empowers the Commissioner to take compliance and enforcement action in a timely manner to better protect the community. This includes a new offence relating to fiduciary default, revised penalties that will have a greater deterrent factor, and the suspension or variation of a registration in urgent circumstances.

Presently, a registered land agent is liable under the Act for offences committed by their employees relating to trust account money. However, the land agent may rely on the general defence that the offence was not the result of any failure on their part to take reasonable care. In these circumstances, the land agent may report the conduct, or the Commissioner may refer their investigation to South Australia Police to consider prosecution under the Criminal Law Consolidation Act 1935. Therefore, it is proposed that existing offences relating to trust account money be extended to all persons who receive, deposit, withdraw or otherwise deal with trust money. This will empower the Commissioner to take action against the appropriate individual, whether or not they are registered under the Act (i.e. trust account administrator, accountant, auditor or lawyer).

Further, existing trust account offences in the Act are narrow and primarily relate to the deposit or withdrawal of trust money to or from an Approved Deposit-Taking Institution (ADI). It is proposed to introduce a new offence that more appropriately reflects the dishonest nature of serious misconduct involving the defalcation, misappropriation or misapplication of trust money. For example, ongoing conduct that includes abusing a position of trust, falsifying records to prevent detection, causing financial detriment to property owners and significantly undermining the credibility of the real estate industry. The new offence proposes higher penalties commensurate with the dishonest nature of the misconduct and risk to the community. The proposed penalties are measured in contrast to the maximum penalties of a South Australian Police prosecution for the same misconduct.

Similar to recent amendments to the Building Work Contractors Act 1995, Plumbers, Gas Fitters and Electricians Act 1995 and Second-hand Vehicles Dealers Act 1995, it is proposed to empower the Commissioner to suspend or vary a registration in urgent circumstances. These provisions will only apply where there are grounds for disciplinary action, the alleged offender is likely to continue to engage in the misconduct, and there is danger that a person or persons may suffer significant loss or damage. This aims to minimise consumer detriment and protect the community while the Commissioner considers or progresses a prosecution case.

Lastly, the Bill proposes that individual property managers and sales representatives operating unregistered are liable to the same penalty as their employer and the Commissioner is empowered to commence prosecution proceedings within five years of an alleged offence.

Subject to the passage of the Bill through the Parliament, it is proposed to consult with the real estate sector on the implementation of the Reforms, including the length of the transitional period and requisite qualifications for the property manager registration. Similar to sales representatives, it is anticipated that a property manager registration may be granted by the Commissioner, subject to conditions relating to training and supervision. This will ensure that the Reforms do not create any unnecessary barrier to employment.

The Reforms and measures contained in the Bill have received broad support from the real estate and community housing sectors, including industry and tenant advocacy groups. The Reforms aim to increase protections for tenants, landlords and the broader community engaging the real estate sector.

I commend this Bill to the House.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Land Agents Act 1994

4—Amendment of long title

This clause amends the long title of the Act to include a reference to property managers.

5—Amendment of section 3—Interpretation

This amendment inserts a definition of property manager and registered property manager and makes consequential amendments to the definition of sales representative. A property manager is defined to be a person who, for or on behalf of an agent—

(a) grants leases, tenancy agreements or licence agreements in relation to land (whether or not that land is to be used for residential purposes or for the purposes of a business); or

(b) induces or attempts to induce, or makes representations or negotiates with a view to inducing, a person to enter into such leases or agreements; or

(c) ensures compliance with the terms and conditions of such leases or agreements; or

(d) performs a function of a kind prescribed by regulation.

The regulations may also exclude functions from the ambit of the definition.

A registered property manager includes a person who is registered as a property manager, or a person registered as a sales representative and also additionally registered as a property manager.

6—Amendment of section 6A—Sales representatives to be registered

This clause increases the maximum penalty for breaching section 6A(1) (requirement for a person who acts as a sales representative to be a registered agent or a registered sales representative) from $5,000 to $20,000.

7—Insertion of section 6AB

This clause inserts proposed new section 6AB.

6AB—Property managers to be registered

This clause provides that a person must not act as a property manager for an agent unless the person is a registered agent, is a registered sales representative who is additionally registered as a property manager, or is registered as a property manager. It is also an offence under this clause for an agent to engage a person to perform the functions of a property manager unless the person is registered as an agent, registered as a sales representative and additionally registered as a property manager, or is registered as a property manager under the Act.

8—Amendment of section 8B—Entitlement to be registered as sales representative subject to conditions relating to training and supervision

This clause increases the maximum penalty for breaching section 8B(3) (agent failing to properly supervise a sales representative whose registration is subject to conditions relating to training and supervision) from $5,000 to $10,000.

9—Insertion of sections 8BA and 8BB

This clause inserts 2 proposed new sections couched in similar terms to the provisions relating to the registration of sales representatives.

8BA—Entitlement to be registered as property manager

This clause sets out what is required for a person to be entitled to be registered as a property manager. The person must have the qualifications required by the regulations or, if the regulations allow, the qualifications considered appropriate by the Commissioner (for example, equivalent qualifications from interstate). The person must also not have been convicted of an indictable offence of dishonesty or been convicted of a summary offence of dishonesty in the preceding 10 years, must not be suspended or disqualified from practising or carrying on an occupation, trade or business under a law of this State, the Commonwealth, or another State or a Territory, and must be a fit and proper person.

8BB—Entitlement to be registered as property manager subject to conditions relating to training and supervision

Proposed section 8BB provides that if a person does not have the qualifications required by section 8BA, but otherwise satisfies the requirements of that section, the person may nevertheless be registered subject to conditions that the person undertake training (unless the person has previously failed to comply with such a condition). There is also a requirement that the person be supervised as specified in the regulations, with failure by an agent to properly supervise the person being an offence attracting a maximum penalty of $10,000. Subsection (5) enables the Commissioner to cancel the registration of a person registered under the section.

10—Substitution of section 11B

Section 11B is replaced.

11B—Registration card to be carried or displayed

Current section 11B requires a natural person registered under the Act to carry the person's registration card and to produce it on request by authorised officers or persons with whom they have dealings. The new section has the effect of extending these requirements to registered property managers.

11—Insertion of Part 2AA

This clause inserts Part 2AA and section 11BA into the Act.

Part 2AA—Suspension or variation of registration in urgent circumstances

11BA—Commissioner may suspend or impose conditions on registration in urgent circumstances

This section gives the Commissioner a new power, in urgent circumstances, to suspend a registration or to impose conditions on a registration where there are reasonable grounds to believe that a registered person's conduct constitutes grounds for disciplinary action and a danger of significant harm, loss or damage to another person. The section also grants appeal rights to the District Court. This section is similar to sections included in recent times in other occupational licensing Acts such as the Building Work Contractors Act 1995, the Plumbers, Gas Fitters and Electricians Act 1995 and the Second-hand Vehicle Dealers Act 1995.

12—Amendment of section 11C—Commissioner may cancel, suspend or impose conditions on registration

This amendment extends the application of this section to property managers.

13—Amendment of section 12—Interpretation of Part 3

This amendment makes a minor change to the definition of trust account, required for a better fit with the amendments to section 13 of the Act.

14—Amendment of section 13—Receiving and dealing with trust money

The amendments to section 13 extend the reach of this section to include property managers, other persons who receive trust money in relation to an agent, and persons who are entitled to deposit money into, withdraw trust money from, or deal with trust money in, an agent's trust account. There are specific obligations on such persons when receiving and dealing with trust money, and also an additional subsection that makes it an offence for agents, sales representatives or any of those additionally specified persons to cause a defalcation, misappropriation or misapplication of trust money.

15—Amendment of section 14—Withdrawal of money from trust account

This section is cast in the passive voice to enable consistency with the amendments in the previous clause.

16—Amendment of section 29—Indemnity fund

These amendments extend the application of section 29 to property managers.

17—Amendment of section 42—Interpretation of Part 4

This clause inserts a definition of property manager to reflect the fact property managers must now be registered under the Act.

18—Amendment of section 43—Cause for disciplinary action against agents, sales representatives or property managers

This clause amends section 43 with the effect of applying the disciplinary provisions to registered property managers as well as registered sales representatives and registered agents.

The amendments also match the amendments made by clauses 6, 7 and 9 of the Bill with the effect that property managers must be fit and proper persons in order to be registered, not just after registration. (There will still be cause for disciplinary action under section 43 if events have occurred after registration such that the person is not a fit and proper person to be registered.)

19—Amendment of section 47—Disciplinary action

This clause amends the definition of prescribed offence to include a reference to the proposed new offence against section 13(3) set out in clause 14 of the Bill.

20—Amendment of section 49—Delegations

This clause amends section 49 to extend the ability of the Commissioner to make a delegation to a person under an agreement between the Commissioner and an organisation representing the interests of property managers (as well as sales representatives and agents).

21—Amendment of section 50—Agreement with professional organisation

Section 50(1) of the Act provides that the Commissioner may, with the approval of the Minister, make an agreement with an organisation representing the interests of agents or sales representatives, for the organisation to undertake a specified role in the administration or enforcement of the Act. This amendment extends the operation of this section to organisations that represent the interests of property managers.

22—Amendment of section 61—Prosecutions

This clause amends section 61 to extend the time within which a prosecution for an offence under the Act must be commenced from 2 years to 5 years from the date the offence is alleged to have been committed (other than for an expiable offence). Currently, section 61 requires the Minister's authorisation for a prosecution to be commenced after 2 years, but within 5 years.

23—Amendment of section 62—Evidence

This amendment extends the operation of section 62 to property managers, with the effect that the Commissioner may issue a certificate that a person was or was not registered as a property manager on a specified date as constituting proof, in the absence of proof to the contrary of that fact.

24—Amendment of section 65—Regulations

This clause provides that the regulations may make provisions of a savings and transitional nature as a consequence of this measure. Such a regulation may take effect from the commencement of this amendment (and if that is a date earlier than the publication of the regulation, only if the provision does not operate to the disadvantage of a person by decreasing the person's rights or imposing liabilities on the person).

Debate adjourned on motion of Mr Treloar.