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.
Operating a trust account
Every agency must ensure any money received in respect of a real estate transaction is deposited in a designated trust account. If you are an agent working as a company, the company can operate the trust account and any agent working for the company can pay money into it. If you are in partnership with other licensees, the partnership can operate the trust account.
You can use a third-party trust account
All money you receive for any transaction in your capacity as an agent must be paid into a designated trust account, but you do not have to operate that account yourself.
If you switch from using your own trust account to a third-party trust account, you must inform us and your auditor. You must also arrange for a final audit report of your trust account to be completed by your auditor in addition to filling out the prescribed form from our website to notify us of the closure.
Download the notification of inactive of closed trust account form.
Money must be held for 10 working days
Recording trust account money
Every agency must keep trust account records in a manner that enables them to be properly audited. Each receipt, payment, and transfer must be promptly and clearly recorded in the ledger for each client so the funds can easily be traced backwards and forwards.
Regulation 6(4) of the Audit Regulations states you must keep trust account records for at least seven years from the date of the last transaction. If you have paper records, you may turn these into electronic records after three years.
Trust accounts must be audited
Trust accounts that hold money related to your work as a licensee must be audited by a qualified auditor at the times and in the manner set out by the Real Estate Agents (Audit) Regulation 2009 (Audit Regulations).
Relevant legislation that covers the audit regulations:
You must pay out (including any interest) to the person entitled to it
All money you have received for a real estate transaction must be paid to the person who is lawfully entitled to that money or in accordance with their instructions. It must be held in the trust account until it is paid out. You are expected to account for all trust money you have received.
Banks do not normally pay interest on trust funds. If any interest is earned on trust account funds, it must be paid to the person entitled to it.
If you are in doubt as to who is lawfully entitled to any money, you must take all reasonable steps to learn, as soon as practically possible, who is entitled to the money. The funds should be held in the trust account in the meantime.
You must provide a written summary of the money held
You must provide a written summary of account to the person that is lawfully entitled to the money. This account must state the particulars of the money you received in the trust account and how the funds have been allocated. This account must be provided in writing as soon as you are asked by the relevant client, and in any case no later than 28 days after the money was received in the agency trust account.
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.
Download the notification of auditor form [PDF, 136 KB].
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.
The referenced sections of the Act can be foundhere(external link)(external link).
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.
Residential property management is not covered by the Real Estate Agents Act
The information on this page relates only to real estate transactions. Agents or agencies should maintain separate trust accounts for property management transactions.
All nominated auditors will receive a letter from REA that contains information on auditing an agency's trust accounts.
Requirements for qualification as a nominated auditor
A person may be appointed as the auditor of an agency's trust accounts if they:
- are a qualified auditor under section 35 of the Financial Reporting Act 2013.
- are not disqualified from auditing the agency's trust accounts under regulation 11 of the Real Estate Agents (Audit) Regulations 2009.
See section 37 of the Financial Reporting Act 2013 for information on the appointment of a partnership as an auditor.
Required standard for audits
A trust account audit should be conducted to the standard required of a reasonable assurance engagement as specified by the Standard on Assurance Engagements 3100 (SAE 3100).
Download the SAE 3100 standard(external link).
Duties of auditors
The specific duties placed on auditors are summarised below. Auditors should also be familiar with the full details of these duties by referring to the Real Estate Agents (Audit) Regulations 2009. (external link)
It is an offence to fail, without reasonable excuse, to comply with the regulations. The penalty is a fine of up to $15,000.
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.
Download the notification of auditor form [PDF, 136 KB].
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).
Audit programme guide
REA has developed an audit programme guide in two formats to assist auditors in meeting the minimum requirements of the 2009 Audit Regulations. Auditors are not required to complete this guide or return it to REA.
Closing trust accounts or making them inactive
The trust account you use may be deactivated for a number of reasons, such as changing jobs, starting a company of your own or entering into a partnership with another agent.
Inform your auditor
You must inform your auditor in writing that the account is inactive and that all money that was in it has been paid to the appropriate people. You must provide the auditor with all unaudited trust account records and receipts which they should keep while the account remains inactive.
If you stop conducting business as an agent
If you stop conducting business as an agent, you must close your trust account and have a final audit carried out on the account within 20 working days. If you are suspending your licence, you should inform us that the trust account will be inactive.
If you want to reactivate the trust account you must notify the auditor who must then let us know.