Letting agents’ hidden rewards: Shhh….it’s a secret!
LookUpStrata
15 November 2016

This article about Letting Agents has been supplied by Wayne Stevens (UOAQ President) Unit Owners Association of Queensland (UOAQ).

‘Don’t even ask’ has been the general rule up to now. But change is in the air….

There was a recent decision from the Queensland Civil and Administrative Tribunal (QCAT) which may be of considerable interest to unit owners in Queensland, especially those who have short-term letting arrangements with letting [rental] managers. It certainly will be exciting their interest.

The matter involved a real estate agent who had a contract with unit owners, in a Gold Coast resort, to provide property letting (renting) services under a PAMDA Form 20a.

illegally retaining a reward

The question to be decided by QCAT concerned whether the letting agent was liable to disciplinary action for illegally retaining a reward exceeding the amount stated in the prescribed PAMDA Form 20a.

The alleged secretly retained rewards involved:
• General cleaning fees.
• Foxtel access fees.
• Excess commissions for WOTIF-sourced tenants.

It was claimed the illegal rewards arose because, although the agreed fees for cleaning and for Foxtel access were correctly stated/disclosed in the Form 20a, the letting agent’s actual costs for cleaning and for Foxtel access were sometimes less than the fees charged to the owners. For example, the letting agent may have charged $64.90 for a ‘One Bedroom Clean’, but only paid the cleaners $30.00…yielding a net profit of $34.90 per clean. Similarly, while Foxtel may have charged the letting agent only $55.00 per unit per month, the letting agent may have charged each lot owner $84.80 per month ie providing the letting agent with a net profit of $29.80 per unit per month.

Regarding the WOTIF-sourced tenants, the claims of illegal rewards concerned an alleged practice of calculating the letting agent’s commission on the gross amount paid to WOTIF, rather than net amount after deducting WOTIF’s up-front commission.

First call of the Referee
The charges were originally heard by an occupation regulation tribunal.

The Tribunal Member ruled the excess charges were not illegal, and therefore the letting agent was not liable for disciplinary action in relation to these particular charges… see: Chief Executive, Department of Justice and Attorney General v Peterson Management Services Pty Ltd [2015] QCAT 473.

Then… up to ‘The Bunker’
An appeal was then lodged with QCAT, on a point of law.

The Appeal Tribunal (Justice Carmody and Member Dr. Forbes) found against the letting agent, ruling that there had been disciplinary breaches regarding all three matters: ie the undisclosed rewards were illegal.

Accordingly, the Appeal Tribunal remitted the proceedings back to the occupation regulation tribunal, for determination of appropriate sanctions, rulings on costs etc.

(This appeal decision issued 24th October 2016. It is cited as Chief Executive, Department of Justice and Attorney General v Peterson Management Services Pty Ltd [2016] QCATA, but has not been published yet.)

There are three very important things to remember

•	The appeal decision is not an anti-profit decision. It is about non-disclosure.
•	It is not yet known what sanctions, if any, will be imposed by the occupation regulation tribunal.
•	The letting agent has a right of appeal against the Appeal Tribunal’s decision.

As you would expect, this Appeal Decision, and any forthcoming sanctions, may have profound financial implications for many of the letting agents in our strata community. We would not be surprised, then, if there is an appeal.

It may also prompt a whole wave of fresh contracts, to ensure there is appropriate disclosure.

We will keep you informed as things develop.

In the meantime, and unless it is overturned on appeal, the QCAT appeal decision is good law.

You may care to ask your letting agent how much they pay for the designated services currently included in your contract, and how they calculate the commissions when tenants are sourced via WOTIF etc.

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