A key industry figure has urged the real estate sector to address the problem of fraud, amid a Consumer Affairs investigation into a multi-million dollar case of trust account fraud.
LJ Hooker chief executive Grant Harrod said trust account mismanagement is a contagion within the real estate sector that needs to be handled collectively.
“At the end of the day, none of us can afford to lose trust with the consumer and these sorts of events don’t assist us. On this occasion, it’s our brand that’s been affected, but tomorrow it may be another one,” Mr Harrod told REB.
“We need to respond as a group, as an industry collective in making sure that we’re all undertaking everything that we can to help people so we don’t allow them to fall into temptation.”
Mr Harrod said LJ Hooker was taking a multi-pronged approach to focus on education, compliance, support and showcasing role models within the business.
“There are thousands of principals who work unbelievably hard to do everything by the book and are very religious in that regard, so we need to use them more as role models for others.”
Mr Harrod said some principals committed defalcation to help fund their business during downturns or market changes, and LJ Hooker wanted to assist these business owners during difficulty periods.
“We’ve got to work closely with our franchisees in making sure that they are suitably prepared for any of the shifts in their business and certainly not consider areas like the trust account as being something that they should use to help them get out of a particular situation.”
LJ Hooker was considering introducing a compulsory testing and compliance program within the franchise to minimise the incidence of trust account fraud, Mr Harrod said.
“We already have quite a rigorous training program that certainly includes trust account management and how to operate a real estate agency, so what we’re looking at [is] adding to that process and making sure that there’s a very clear understanding around behaviours and processes.”
“In fairness to principals, we’re seeing more and more principals run much larger businesses and that means you’ve got multiple people involved in managing the trust account, so it’s about implementing stronger processes, stronger systems and assisting them in the training of their staff.”
Mr Harrod said it was vital for the public and the industry to understand that only a minority of the industry’s professionals committed fraud. However, the responsibility was on everyone else to address the problem.
“The last thing we want is what has occurred in the financial planning industry, which is suggestion back in Canberra that a royal commission is required.”