Kolmeo’s chief executive officer Scott Bateman explains the importance of maintaining transparency in real estate and why trust accounts should be left in the past.
On Monday morning I woke up to the headline that New South Wales Fair Trading had fined 20 real estate agents over trust account issues.
It’s not the first time this has happened and it probably won’t be the last.
But it’s important to recognise that most of those that trip up in this area aren’t bad people.
Most don’t deliberately set out to do the wrong thing.
Sometimes bad things happen to good people, and even good people can have a rough time.
It again raises the issue of whether trust accounts are the most effective way to protect all of the parties involved.
At Kolmeo, our argument is that trust accounts are outdated and it’s time the various state bodies recognise this and modernise the relevant legislation to ensure the original goal of the trust account, protecting owners and tenants, is still met.
At present, the rules vary by state and this creates confusion, with agencies lacking the clarity needed to embrace the myriad new solutions designed to work without a trust account, or with limited use of one.
The industry currently has to comply with a framework that was created before we had the internet, let alone the numerous technological advances we’ve seen since.
Trust accounts have been a part of our industry for as long as most who currently work in it.
While it’s important to recognise trust accounts were introduced to protect the interest of owners and tenants, the headlines this week must force us to question how well they’re working.
If we go way back in time, real estate agents had to go house to house, collecting people’s money, which meant the agent then had access to all of the funds.
The tenant relied on the agent to verify their rent had been paid and the owner relied on the agent to give them the money they were owed. This was a huge responsibility, and one that was fraught with risk.
Consequently, trust accounts were an important and appropriate solution to a problem we had no other reasonable way to solve back in those times.
However, in today’s day and age, a trust account is no longer the most effective way to provide this protection.
At Kolmeo, we want to bring about an important change in how Australian’s view and use property management.
We have extensive industry experience and we have run trust account management teams for agencies across Australia for more than 15 years via our previous offering called Agentplus.
We know the logistics and the responsibility involved in this process.
But when we stepped back and looked at the model, we realised it could be better solved through technology.
That’s why we decided to invest in a platform that enables money to move from person to person, without being held in any kind of account that people have access to.
This provides greater trust, safety and, most importantly, transparency amongst owners, tenants and property managers.
From a technological perspective, the legislation that the industry has to comply with has not kept up with the times.
With laws varying from state to state, it can be confusing for owners with investment properties in different locations.
From an agency’s perspective, it adds costs and risks that simply don’t need to be there.
In essence, the outdated legislation is stifling innovation that could improve things for all concerned.
Kolmeo takes the complexities of property management and makes it easier for everyone.
Payments are made within the platform, with all parties being notified when they are paid.
A record is kept, regardless of new property managers coming on board or the portfolio changing hands.
The owner and the tenant’s money is not available for someone to dip into and our ledgers cannot be manipulated.
Kolmeo delivers greater transparency for owners, as they are as connected to their property as they are to their internet banking.
What has happened with the 20 agents fined this week is another reminder that we are leaving fallible humans in control of large sums of money.
Granted, there are insurance schemes in place to protect the owner or tenant when their funds are stolen, but why haven’t we learnt from this and addressed the root cause of the issue?
This is the equivalent of finding faulty wiring in your home and just installing a smoke detector so when the inevitable fire happens, at least an alarm goes off.
It’s time the various state bodies recognise this and modernise the legislation to ensure it is most effective at its original goal – protecting owners and tenants.