June 2008

When "must" an Agent invest a deposit?

A deposit should only be invested if it is to be held by the Agent as stakeholder for at least 60 days. But you need a written authority to invest from both the buyer and seller. Here’s why.

Section 380(1) of PAMDA allows Agents to invest the deposit they hold as stakeholder (with both the Sellers and the Buyers written directions) if the Agent is going to hold the deposit for longer than 60 days i.e. settlement is at least 60 days away. 

The standard REIQ contract, however provides (in both community title and house/land contracts - clause 2.3) that if you are instructed to invest the deposit by the buyer or the seller "and it is lawful to do so", you must invest the deposit.

The qualification "and it is lawful to do so" is very important.

Section 384 of PAMDA specifies that payments from an Agents trust account may only be made in accordance with that Act. Section 380(1) states the only allowable methods of drawing funds from an Agents trust account and specifies that for an investment, the written authority from both the buyer and the seller is required.

Accordingly, notwithstanding the words contained in standard condition 2.3 of the REIQ contract, the deposit should only be invested if it is to be held by the Agent as stakeholder for at least 60 days and the Agent has received a written authority to invest from both the buyer and seller.

Remember to get both the sellers and the buyer’s tax file numbers when getting their authorities to invest as these will be required by the financial institution where the investment is made.

Should you have any queries regarding any conveyancing or PAMDA issues call 1300 LAW LAW (1300 529 529).

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