Plans by the NSW state government to introduce compulsory professional indemnity insurance for principals, part of broader changes to legislation governing the real estate industry, have been applauded by the Real Estate Institute of New South Wales (REINSW).
“Professional indemnity insurance is an accepted and essential risk management tool to help protect consumers when utilising the services of professional advisors,” REINSW CEO Tim McKibbin said.
“For real estate business owners, professional indemnity insurance is also an essential means of financial protection for claims made against them while delivering their professional services.
“I believe it would come as a complete surprise to many consumers that real estate agents in New South Wales have, until now, not been required to carry this type of insurance.”
The proposed change forms part of a review of the Property, Stock and Business Agents Act 2002, which has been initiated by the state government. Comment is currently being sought by the government on the proposed changes.
Frustrated by inaction by successive state governments, the REINSW introduced mandatory professional indemnity insurance cover of $2 million for its members from July 1 this year.
The state-based real estate body said research it had conducted suggested more than 75 per cent of real estate agents have already voluntarily purchased professional indemnity insurance.
“REINSW has campaigned strongly for the past seven years for the introduction of mandatory professional indemnity insurance for the protection of both consumers and real estate business owners,” Mr McKibbin continued.
Other changes being proposed include:
• Broadening the qualifications of auditors of agents’ trust accounts to include members of recognised accounting bodies who hold practising certificates;
• Agents no longer being required to lodge an annual separate statutory declaration with NSW Fair Trading if they did not receive trust money during the financial year;
• Agents only having to lodge their annual audit return with NSW Fair Trading if it is qualified by their auditor;
• Providing a power to the Director-General to order random trust account audits;
• Requiring agents to notify the Director-General each time they open or close a trust account at a financial institution; and
• Amending the requirements relating to the handling of unclaimed trust money, to ensure money is swiftly returned to its rightful owner wherever possible
NSW Fair Trading has released a draft Amending Regulation and is seeking feedback by 5 October 2012. To make a submission, click here.