Trust account handbook - Department of Commerce - wa.gov.au

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needs to maintain all documents and records relating to a trust account in a manner that enables them to be conveniently and properly audited by the agency’s auditor. Refer: section 49(6) of the Act Other duties of agents relating to audits are discussed in part three. 1.13 Fees and disbursements Under section 49(4) of the Act, disbursements of money from a trust account must be directly associated with the settlement of the real estate or business transaction that incurred those disbursements. An agent is required to transfer any settlement fee entitlement, gained from a settlement transaction, from the trust account to their agency’s general account before using that entitlement to meet general operating expenses. The agent cannot pay general operating expenses or personal expenses direct from the trust account. Fees should be transferred to the agent’s general account at least weekly, as best practice. In addition, an agent is only entitled to a settlement fee if all the following requirements have been met: • the settlement agent is licensed and holds a current triennial certificate when the services are provided (section 43(1)); • the settlement agent has a valid appointment to act in writing (signed by the person for whom the services are being provided) before the services are rendered (section 43(1)); and 8 • the appointment to act complies with the requirements of section 43(2).Upon request from the client, the settlement agent must provide a scale of remuneration and an estimate of the cost of the services in respect of the particular settlement. Refer: section 43 and 44 of the Act Recovery of disbursements – cost-recovery only Settlement agents may recover disbursement costs incurred in the course of a settlement from their clients. Disbursement costs include telephone calls, facsimiles, photocopying, postage and stationery. Where disbursements of this nature are being recovered, Consumer Protection considers it best practice for settlement agents to keep an individual record on the client’s file to verify the actual expenses were incurred and claimed. Agents should always keep in mind that the recovery of disbursement expenses is based on cost-recovery only. As labour costs are part of the settlement fee, they are not to be included in calculating disbursement charges. For example, the agent’s labour in photocopying cannot be charged as a disbursement. Agents sometimes have difficulty working out recovery costs for photocopying. A suggested method to calculate photocopy costs is for the agent to calculate the cost of a single sheet of paper plus the operational cost per copy (how much the photocopier costs to copy one sheet of paper). First, the operating cost of the photocopier must be determined, which is done by adding the average cost of leasing or renting a photocopier per month (if the agent owns the photocopier, the average can be determined by spreading the cost over the life of the photocopier, usually three to five years), plus the monthly average maintenance charge. To work out the operational cost per copy, the operating cost of the photocopier is then divided by the total number of copies per month, (the usual operational cost per page is between two to three cents). SETTLEMENT AGENTS’ TRUST ACCOUNT HANDBOOK
The following calculation can be used to work out the net cost per period: Net cost per period = Cost of paper per month + operational cost (average cost of photocopier per month) + average cost of maintenance charge per month Number of copies per month Settlement agents who have been keeping individual disbursement sheets for a sufficient period of time may use that information to work out a flat charge to all clients for disbursements. However, the charge must still be justified on the basis of a minimum cost of recovery. To do this, calculate the lowest number of each type of disbursement for a basic settlement for both seller and buyer For example, the lowest number of phone calls in a basic settlement would be used as a basis for developing a flat charge for all settlements where disbursements are involved. Agents cannot use the average because this would result in some clients being overcharged, which is prohibited by the Act. Agents using a flat charge method should keep individual disbursement sheets for a period of time at regular intervals to ensure charges remain accurate and can therefore be justified. Where an agent charges disbursements greater than the actual cost incurred, the excess amount could be considered as remuneration. If total remuneration exceeds the scheduled fee, the agent could be in breach of the Act. 1.14 What must an agent do on becoming aware that a trust account is overdrawn? Section 49C(3) of the Act requires the financial institution and the agent to inform the Commissioner whenever a settlement agent’s trust account is overdrawn. Regardless of the amount overdrawn or whether the overdrawn amount is a result of a bank error, Consumer Protection must be notified immediately. The notification must include the name and number of the trust account and the amount by which the trust account is overdrawn. The notification must be sent to the Commissioner. This is to be done within five working days, as required by Consumer Protection. Agents should also be aware of the requirements of Rules 23 and 24 of the Settlement Agents Code of Conduct 1982 (the Code of Conduct). Rule 23 of the Code of Conduct requires agents to immediately balance their trust account if it becomes deficient, and to inform everyone who could be affected by the deficiency. Rule 24 of the Code of Conduct states that a licensee must not place their clients’ money into a trust account they know to be deficient. For guidance on what to do in the event of fraud or theft from the trust account, please see part four. Further comments in respect of trust account practices are made under Section 2.1 Principles of Trust Account Practice. Refer: section 49C(3) of the Act 9 SETTLEMENT AGENTS’ TRUST ACCOUNT HANDBOOK
Page 1 and 2: Government of Western Australia Dep
Page 3 and 4: Table of Contents Introduction.....
Page 5 and 6: Introduction The Settlement Agents
Page 7 and 8: 1.5 Types of trust accounts General
Page 9: 1.10 What trust documents and recor
Page 13 and 14: PART 2 TRUST DOCUMENTS AND RECORDS
Page 15 and 16: cross-referenced against the interi
Page 17 and 18: • amount received; and • the to
Page 19 and 20: 2.8 Buffer account Agents sometimes
Page 21 and 22: Regular monitoring of trust account
Page 23 and 24: Example: Trust account reconciliati
Page 25 and 26: 3.3 What are an agent’s responsib
Page 27 and 28: As well as advising Consumer Protec
Page 29 and 30: PART 4. PREVENTING THEFT AND FRAUD
Page 31 and 32: everse the transaction. Agents shou
Page 33 and 34: GLOSSARY Act (The) The Settlement A
Page 35: Department of Commerce Consumer Pro

Trust account handbook - Department of Commerce - wa.gov.au

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