Decision ris proposal for national licensing of the property occupations

Nominees

The Occupational Licensing National Law Act 2010 (National Law) provides that when a body corporate applies for an agency licence (real estate, business agent or strata managing agent licence), the applicant must nominate a nominee who holds the relevant licence for the licence being applied for by the body corporate. It is also proposed that the nominee must be a director of the company, or an employee.

Rationale

The requirement for a nominee addresses the issue of a business entity, in itself, being unable to possess technical skills and expertise. Agency licences will be available for real estate agents, business agents and strata managing agents. The requirement will assist the regulator with compliance and enforcement activities.

A body corporate may choose to have more than one nominee. A business requiring a nominee will be required to have a nominee at all times and will be required to notify NOLA if the business no longer has a nominee. In situations where the nominee is no longer employed or able to operate as a nominee, NOLA would have the discretion to authorise a business to operate for a set period with an interim nominee under prescribed conditions.

In all jurisdictions the introduction of nominees for licensed companies is a similar concept to current arrangements. While the term ‘nominee’ is not used each jurisdictions requires the identification of a licensed person in different ways. A principal licensee must be in charge of the agency business in Queensland. Western Australia has a requirement for a person in bona fide control for licensing firms and body corporates, plus stipulates the number of people constituting the firm or body corporate who must be licensed. In South Australia, a body corporate must ensure that the agent's business is properly managed and supervised by a registered (licensed) agent. In New South Wales and the Australian Capital Territory a corporation must have at least one director who also holds an individual licence in their own right. A real estate business (corporation) must be managed by a licensed real estate agent in Victoria and Tasmania, and the Northern Territory requires a person identified as a business manager and this person must be a licensed agent.

There was substantial discussion among jurisdictions on whether the role of the nominee should be set out in the national licensing legislation and the extent to which a nominee should be responsible for the supervision of other staff carrying out the licensed work to an appropriate standard. As there are substantial differences between jurisdictions on the current role of ‘nominees’, it was agreed that the role should not be defined in the national licensing legislation or regulations, but will continue to be set under the separate state and territory legislation relating to the conduct of licensees and businesses. Therefore, the nominee must agree to hold the responsibility of nominee, as set out in the relevant jurisdictional conduct legislation.

Stakeholder consultations

There was strong support for a nominee to be identified when a body corporate or a person in their capacity as a member of a partnership does not hold the relevant technical skills (licence) applies for an agency licence; real estate, business agent or strata managing agent. Specific feedback was sought on the requirements for a nominee in the electronic survey and 49 per cent of respondents support the proposal with only 18 per cent disagreeing. A significant proportion of respondents (33 per cent) did not express an opinion. Paper based and template styled submissions did not offer a comment on a nominee requirement.

Based on the logic above, and the strong stakeholder support, it is proposed that when a body corporate does not hold the relevant technical skills (licence) applies for an agency licence, they will be required to nominate a nominee who holds the relevant technical skills. It is also proposed that the nominee will be a director or an employee.

As outlined above the requirement for a nominee will be a minor change in approach all jurisdictions. It is expected that the majority of business in the property occupations would already employ an existing licensee who could act as a nominee. A cost has not been included in this RIS; however, the extent of this cost is expected to be minimal and would not be likely to materially affect the results.

Exemptions

The National Law makes it an offence for an individual or business entity to undertake regulated work unless that individual or business entity holds a licence or is exempt. Identified classes of persons have been proposed as exempt from licensing and are listed earlier in this chapter.

Rationale

Exemptions are only applied when it is considered that the benefits of allowing the work to be done by unlicensed persons outweigh the costs associated with consumer risk (for example, A local government or local council leasing residential properties) or there are other regulatory controls in place (for example, a person who holds a financial services licence under the Corporations Act 2011 (Cwlth)). In the case of the regulated work for the property occupations, there are a number of professionals for whom the sale or lease of property is part of their ordinary duties and it was considered unnecessary that they be captured by a duplicative regulatory requirement.

An exemption from licensing is proposed for a person who is carrying out regulated work that consists only of leasing residential real property for less than three months. i.e. resident managers for holiday lettings. Resident managers act as letting agents for those owners who choose to use the services of an on-site letting agent in short-term (holiday) and can also manage long-term let apartments in strata properties. Resident managers are currently only licensed in Queensland and New South Wales. Payments are usually paid by credit card transaction, thus the risks are minimal. Attachment F contains an overview of risks associated with the property occupations.

Stakeholder consultations

There was general support for the exemptions proposed in the Consultation RIS, and the inclusion of an exemption from licensing for the sale, purchase and leasing of non-residential property transactions between related entities. However, a small number of submissions expressed the view that the exemptions may be too broad. For example, the view was expressed that a financial practitioner undertaking business agency work should not be exempt from holding a business agent’s licence. The exemption for an executor was also questioned by a respondent.

A handful of submissions argued that short-term letting arrangements of less than three months should not be exempt from a licensing requirement. The concerns are about the linkages licensing has with management rights contracts, and that the contractor can no longer satisfy the contractual conditions in short-term letting complexes. A confidential submission stated that:

‘The ASIC Policy Statement 140 (PS140) sets out “what promoters and operators of serviced strata schemes must do to comply with the Corporations Law”. Section 140.43 also exempts operators who are “licensed to conduct letting services under the law of a State or Territory.’

As mentioned above, the licensing of short-term letting is only regulated in New South Wales and Queensland. There has been no evidence to suggest there are any difficulties with complying with the Corporations Act 2011(Cwlth) in the jurisdictions that do not license this area of work.

The classes of person exempt from licensing proposed in the Consultation RIS received strong support and it is proposed that these will be included in national licensing. As discussed earlier in this chapter, the proposal for exempting non-residential property transactions between related entities will also be included.