News & Media
Industry campaigns to protect consumer indemnity fund
7 Aug 12
Proposed changes to the real estate laws in South Australia would allow the State Government to access the Agent’s Indemnity Fund and possibly leave consumers with no compensation in cases of professional negligence, according to the Real Estate Institute of South Australia (REISA).
Under legislative amendments, currently proposed by the State Government, the Agent’s Indemnity Fund could be accessed by the Government for the purposes of “administering the Land Agents Act and the costs of administering the Land and Business (Sale and Conveyancing) Act 1994 in relation to agent or sales representative”.
The Agents Indemnity Fund is comprised of interest from agent and covenyancer trust accounts. Money is paid into a trust account when the agent is holding money on behalf a client (for instance when paying a deposit to purchase property or paying rent in advance). Essentially, the trust account is a holding account for other people’s money. Any interest earned on trust funds is always paid to the Agents Indemnity Fund. According to the 2010-2011 Consumer and Business Services Annual Report, over $91m in total assets is retained in the Fund.
REISA President, Mr Greg Moulton, said this proposal is sending alarm bells through the industry as the Indemnity Fund has always been in place to offer compensation to people who may have suffered financially as a result of illegal actions by a real estate agent or conveyancer and to provide quality information and training to the industry and consumers.
The Australian Institute of Conveyancers (SA Division) has also expressed concern about the breadth and impact of the proposed amendment.
“If the Government is able to access this fund for general administration purposes, it may be bled dry and not be able to provide adequate compensation for those who have a genuine need in the future,” Mr Moulton said.
“REISA is already concerned about the Fund as in the 2012-2013 Budget Papers, the Indemnity Fund is classified as revenue.”
“REISA would be very happy to sit down with the Government and the Australian Institute of Conveyancers (SA Division) to discuss what would be appropriate uses for the Indemnity Fund, but we simply can’t support the Fund being opened to run the administration of Consumer Affairs.”
“Vendors and purchasers already contribute over a billion dollars to State Government coffers every year in property taxation and other impositions to fund the State.”
“Now the Government wants to take the interest on consumer’s money to fund a Government department. Where does it stop?”
Further explaining why administration costs should come from Government coffers, REISA said that the industry already makes a significant financial contribution through licensing.
“Each sales representative and agent already pays at least $197 per year to retain their license and new entrants pay this amount, plus a $255 application fee, so this totals significant funds, not to mention the burden of property taxation our sector bears the brunt of.”
“Fundamentally, REISA is opposed to this change as the Fund is all about consumer money. It needs to be preserved to ensure that consumers always recourse to financial compensation in the case of a serious financial loss at the hands of an unscrupulous agent or conveyancer.”
“Whilst the amount in the Fund appears high, the last major claim was a class-action relating to a failed mortgage broking firm and it took $13.5m from the Fund. That type of claim was excluded more than a decade ago.”
“Put simply, people involved in real estate deserve adequate protection, in case of fraud, and access to quality information which help them through one of the biggest financial purchases of their lives.”
“The REI is going to fight hard to protect this Fund and we genuinely hope the Government reconsiders their position on utilising these funds.”