In most property sales in Queensland the Agent will hold the deposit as the nominated deposit holder.
The Agents Financial Administration Act 2014 (Section 17) allows a Real Estate Agent to invest the deposit they hold as deposit holder if:
a. the Agent has the written consent of both the Seller and the Buyer, and
b. the Agent receives the amount for a sale, and
c. the Agent will hold the deposit for more than 60 days after the amount is received by them.
The standard REIQ contract (fifteenth edition for residential contracts and eleventh edition for residential lots in a community title scheme) however, in clause 2.3 states that:
- an agent who is the deposit holder,
- who is instructed to invest the deposit by either the Seller or the Buyer, and
- it is lawful to do so,
MUST invest the deposit with a financial institution in an interest-bearing account in both parties’ names.
When is it lawful for the Agent to therefore invest the deposit?
Section 21 of the Agents Financial Administration Act 2014 states that payments from an Agents trust account may only be made in a way permitted by that Act.
The deposit, therefore, despite the standard contract term, can only be invested by the Agent as deposit holder if:
a. the Agent will hold it for at least 60 days, and
b. the Agent has written authority from both the Seller and the Buyer to invest it.
Even if the Agent receives instructions from the parties to invest a deposit, they are not able to do so if the period from when they receive the deposit to settlement is less than 60 days.
Clause 2.3(4) of the REIQ contract also provides for the agent to obtain the sellers and the buyer’s tax file numbers to give to the financial institution.
It is important to also advise both the parties before investing the deposit:
- to seek independent financial advice;
- to remind them that the terms of the contract determine how the deposit and interest will be distributed; and
- that the deposit is invested at the risk of the party who is ultimately entitled to it.
If you have any queries on deposits or property matters, you are welcome to contact us.