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Principals' 'attitude' towards PM a factor in fraud

06 August 2014 Elyse Perrau

A prominent property management trainer has said a change in the attitude of principals towards property management could prevent cases of fraud.

Leading Property Managers of Australia (LPMA) director Darren Hunter believes increasing penalties is not going to change the core issues that cause fraud in the first place.

“I believe certainly if the issues are publicised a lot in the media, that will bring attention,” he told Residential Property Manager, “but one of the key areas that has to change is really the principals' attitudes towards their property managers.”

Mr Hunter said one of the main areas in which fraud takes place is in cases when only one person is assigned to manage the trust account.

“So, one person in control instead of multiple people keeping each other in check,” he said. “Generally, it is a person with trust that is caught in trust fraud. It is having too much trust and not any accountability.

“Another key area in property management is where management are not approving creditors,” he added.

This occurs when a new tradesperson is entered into the company system as a new creditor, Mr Hunter said.

“Management needs to have control over that and approve creditors, because a property manager can set up a new tradesperson [when] it is, in fact, false and it is themselves and they are actually now just paying themselves,” he said.

“The biggest fraud I am aware of that happened in Australia happened that way. A property manager paid himself $600,000-$700,000 by setting up a false creditor as a false tradesperson when it was himself."

Mr Hunter said there were, however, ways in which the likelihood of fraud occurring could be lessened.

“The solutions here are having more than one person on the trust account; management keeping a very close eye on the trust account; having very tight control over one interim receipt book in the office; stopping cash coming in when it comes to the first two weeks rent and the bond; and management only [approving] new creditors entered into the system to make sure that they are genuine,” he said.

“That should stop 80 per cent of property management fraud.” 

Principals' 'attitude' towards PM a factor in fraud
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