Operating an agent trust account can be onerous. There are very specific rules around what you can and can’t do and monetary penalties for breaking these rules can be severe.
To help agencies benefit from our insights each year we look through our reports to see whether similar findings appear and highlight these, so that you can avoid these errors during your next annual audit.
These findings are was very similar to the common trust account mistakes issued by the Office of Fair Trading in 2019. This highlights a greater understanding of legislation is required by agents.
So, what were the top 3 non-compliance for agent trust accounts during 2021
1. Corporate Licence vs Individual Licence
If you are operating under a company structure, your company must have a corporate licence and the trust account must be in the company’s name. If you’re not using a company structure, then the trust account must be in an individual’s name.
The trust account must be opened in line with the licence presented. Where the licence is issued to a corporation, the trust account must be opened in the corporation’s name. It cannot be opened in the name of its director, person in charge or any other corporation or entity.
Similarly, where a licence is issued to an individual, the trust account must not be opened in the name of an unlicensed corporation or other entity
The name of the principal agent and licence number must be shown on receipts. In the case of a corporation this would be the corporation’s name and corporation licence number (not the individual name and licence).
2. Bank Reconciliations
Common issues are completing the trust account bank reconciliation too early or too late and/or not maintaining a hard copy.
Agents must reconcile the following balances as at the last day of each calendar month:
The trust account cash book balance with the trust account ledger balances
The trust account cash book balance with the financial institution’s trust account statement balance at the end of the calendar month – ensuring all deposits are finalised and the correct balance is available.
In addition, Agents must
Complete this within five business days after the end of the month.
Retain hard copies of the trust account ledger and completed cash book reconciliations for at least five years.
3. Rental bond not remitted to the Residential Tenancy Authority (RTA) within prescribed period
An agent must remit rental bonds to the RTA within ten days of receiving the monies.