An Urgent Call To Action

22 October 19

AN URGENT CALL TO ACTION!


If you own management rights in NSW or if you are looking at joining the management rights industry in NSW, then read on as there is something that you urgently need to do.


First and foremost, contact your local MP right now and tell him/her how proposed changes to the NSW real estate licensing laws will almost certainly kill off the goodwill value of your business!


This is not a scare tactic – this is real and this proposed legislation will commence on 23 March 2020.


The Issue

Commencing in March next year, the Property Stock and Business Agents legislation will be amended so that the current On-Site Residential Property Managers licence will no longer exist. This licence allows on-site managers to carry on a letting business in their complex, without having to upgrade to a full real estate agent’s licence.


Moving forward, there will only be three classes of licence issued by the Office of Fair Trading:


1. Certificate of Registration (Assistant agent);
2. Class 2 licence (Licensed agent);
3. Class 1 licence (Licensee in charge).


Assistant agents will perform entry level roles only while they obtain the qualifications and experience necessary to become a fully licensed agent (ie a Class 2 licensee). For example, they will not be permitted to enter into a contract or transaction on behalf of any party (except for a residential tenancy agreement) and they must be appropriately supervised by a Licensee in Charge (with a Class 1 licence) when carrying out those functions.


Assistant Agents must have it at least one year’s practical training (plus complete the required training/educational modules) before progressing to a Class 2 Licensed Agent.


A Class 2 licence is the equivalent to the current full agent’s licence, except a Class 2 agent cannot be a licensee in charge of a business or operate a trust account.


To become a Class 1 Licensee in Charge, a person must have held a Class 2 licence for at least two years. In addition, further training/modules are required to be completed.


Existing licences will be “grandfathered” and licensees will transition to the equivalent licence under the amended Act.


The problem will be with new entrants to the industry. They will now have a three year transition period before they can run their own business and operate a trust account (ie one year working as an Assistant agent and a further two years working as a Class 2 agent).


Where are the buyers of your business going to come from?


In reality, the only potential buyers for a management rights business moving forward will be existing Real Estate Agents who hold a Class 1 licence or the bigger operators like Accor and Oaks that will have access to Class 1 licensees.


The “Merimbula” Exemption


When these changes were first muted, the management rights operators in Merimbula (south of Sydney) were quick to contact their local member and policy makers in the Office of Fair Trading and were successful in obtaining a complete exemption from the operation of the Act in circumstances where there are no more than 20 lots in a complex. In Merimbula, the average management rights complex varies between six and 12 lots.


So under this exemption, any manager of a residential complex that has no more than 20 lots will no longer be required to hold any form of real estate licence (nor will they be required to operate a trust account) to conduct a short-term or long-term letting business.


But why 20 you may ask? Why not 50 or 100?


The NSW Government apparently takes the view that complexes with a small number of units in the letting pool do not represent a risk to the public. From enquires I and others have made, we can find next to no cases where on-site residential property managers have been convicted of stealing from their trust account.


ARAMA Representations


ARAMA (the peak body for the management rights industry) has made submissions to the NSW Government and continues to meet with the key Government policy advisors to push the industry’s concerns about the devastating effect this proposed legislation will have on the management rights industry in NSW.


ARAMA’s first and foremost position has been that the On-Site Residential Property Managers licence should remain. Why change something that works perfectly well?


However, if the legislation changes are too far advanced and this cannot happen, ARAMA’s fall-back position is that the exemption from the licensing requirements of the Act for complexes with no more than 20 lots should be changed so that the exemption extends to on-site residential property managers who hold caretaking and/or letting agreements with the Owners Corporation. In other words, the number of units in the complex should be irrelevant. The key question should be – does the on-site manager have authorisation from the Owners Corporation to carry on caretaking and/or letting in the complex and, if so, the manager is exempted from any requirement to hold a licence.


So where to from here?


Unless the Government listens to the industry and makes the appropriate changes before Christmas this year, the legislation will roll out in its current proposed format in March 2020.


Existing managers in NSW need to urgently contact their local MP and arrange a face-to-face meeting to explain to their MP how this proposed legislation is going to completely kill the saleability of their business – which in many cases is everything they and their family have accumulated over their working years!

 

Article Written by Col Myers of Small Myers Hughes Lawyers

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice. 

Additional Documents

Click here to download: 2019_11_Nov___An_Urgent_Call_to_Action.pdf

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