Money received from real estate transactions is required by law to be paid into a trust account. These trust accounts must be audited and auditors of the trust accounts have specific duties.
Important questions answered
What do I need to know about receipt of money?
- All money received by an agent for a real estate transaction must be paid to the person who is lawfully entitled to that money, or in accordance with that person's instructions.
- The money must be held in a trust account until it has been paid out (section 122 of the Act(external link)).
- An agent must account for trust monies received.
- An agent must not pay money held in a trust account to any person for a period of 10 working days (after the date received) unless early payment is authorised by all parties to the transaction in writing, or by court order (section 123 of the Act(external link)).
Who can be appointed as an auditor?
A person may be appointed as an auditor if that person:
- is a qualified auditor per section 35 of the Financial Reporting Act 2013(external link)
- is not disqualified on the basis of specified conflicts of interest.
Do I have to let REA know who my auditor is?
If you have been granted an agent’s licence for the first time, you must let us know who you have appointed as your auditor before receiving any money into the trust account. This must include confirmation from the auditor that they are eligible to be an auditor.
Do I have to let REA know if I change my auditor?
If you engage a new auditor, you must notify us before the previous auditor ceases to be engaged or within 20 working days of a change occurring.
Can I use a third party trust account?
It is up to individual agencies to decide how they wish to structure their business and to ensure that they comply with the Act and the Audit Regulations.
Sections 122-125 of the Act set out agents' duties in relation to the receipt of money and the audit of trust accounts.
All money received by an agent for any transaction in their capacity as an agent must be paid into a designated trust account. The Act and the Audit Regulations do not specify that an agent must actually operate a trust account, only that money received must be paid into a trust account.
If an agent chooses to use a third-party trust account, they must notify their auditor and REA that they are doing so and that their own trust account is inactive or closed.
When are reconciliation statements due?
Reconciliations must be done and given to your auditor every month, even if there were no transactions during the month concerned.
Reconciliations are due with the auditor on the 20th of each month except for January when the report is due by the 27th.
How many trust account examinations are there each year?
Auditors are required to examine the trust account at least three times each year as outlined in the following schedule:
2 months to 31 May
1 July - 31 August
5 months to 31 October
1 December - last day of February
5 months to 31 March
1 April - 30 June
The auditor must give REA a signed copy of the annual audit report within 10 working days of completing the final audit for the year.
Failure to supply your auditor with the necessary documents to enable them to comply with the audit schedule may lead to disciplinary action.
Do I need to provide a statutory declaration with each statement I give my auditor?
You need to provide an official statutory declaration with each statement you give to your auditor (Audit Regulation 16(external link)(external link)).
This declaration must be signed by either a Justice of the Peace, barrister and solicitor, a notary public or other official as listed in section 9 of the Oaths and Declarations Act 1957.(external link)(external link)
This statement and declaration must be provided to the auditor three times a year at their request before the start of the audit. The Real Estate Authority does not provide a template for this declaration but recommends you use the wording in Audit Regulation 16(2)(external link)(external link)(external link).
You do not need to provide a statutory declaration with your monthly bank reconciliations.
Do I need to provide written confirmation from the bank?
You are required to provide the auditor with written confirmation from your bank confirming that the account is a designated trust account.
Residential property management
Agents or agencies should maintain separate trust accounts for residential property management transactions. REA does not regulate residential property management, so agencies do not need to notify REA of any residential property management trust accounts they manage.
Trust account examinationsAuditors must examine each trust account at least three times each year in accordance with the specified examinations periods in the following schedule. The examination periods are the same as those set down in the 1977 Audit Regulations.
Two months to 31 May
1 July - 31 August
Five months to 31 October
1 December - last day of February
Five months to 31 March
1 April - 30 June
Trust account annual audit
Auditors must provide an annual audit report to the Real Estate Authority within 10 working days of completing the final audit for the year. This audit report must be signed and use the REA template or be in accordance with it. Auditors must also supply a signed copy of the audit report to the agent. REA will acknowledge the receipt of the audit report submitted within 10 working days.
Prompt reporting to REA
Auditors must promptly report any of the following matters to REA:
- Trust account records that do not clearly show the trust account balances of each client or that are not kept in a manner that enables them to be properly audited.
- Any matter involving dishonesty, or a breach of law on the part of the agency.
- A loss or deficiency of trust account money, or a failure of the agency to account for any trust account money.
- Any failure to comply with the provisions of the Real Estate Agents Act 2008 or the Real Estate Agents (Audit) Regulations 2009 relating to the agency's trust accounts: this includes failure to supply you, in a timely fashion, with the documents you need to fulfil your responsibilities.
- Any other matter such as errors, irregularities, or misstatements in a trust account that the auditor believes should be reported.
- Auditors must advise REA whenever any notification of an inactive or reactivated trust account is received from an agent (in accordance with regulations 25 and 26(external link)(external link)(external link) of the Audit Regulations).
Before a new agency receives any money in respect of their first transaction, they must inform REA of their nominated trust account auditor through a notification of auditor form.
Any fees payable by an agency to an auditor are to be agreed by the agent and the auditor. The cost of auditing any trust accounts is the sole responsibility of the agent.
Are residential property management trust accounts covered?
Trust accounts for residential property management are not covered under the Real Estate Agents Act or Audit Regulations because residential property management is excluded from the definition of real estate agency work. Refer to section 4 of the Act(external link).