The software inside a real estate agency, and what trust law asks

In this article

Written by

Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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A seller meets an agency through a person. An owner of a rental property meets it through a monthly statement. Behind both sits a stack of software that most clients never see: a database of people and properties, a ledger of money held on trust, a system that tracks leases and repairs, a tool for filling in and signing forms, and an app on a property manager's phone.

Most of that stack is unregulated in any direct sense. Queensland law does not say what a customer database must look like. One part is different. Where software keeps the records of money an agent holds for other people, the Agents Financial Administration Act 2014 and the Agents Financial Administration Regulation 2014 say in detail what the records must contain, what the system must be unable to do, what must be printed, and what an independent auditor must report each year, down to the name and version of the program.

This guide walks through the categories of agency software in general terms, then reads the Act and the regulation for what they require of the systems that touch trust money, and ends with what an owner or seller is entitled to see. It names no product and recommends none. Every rule below was read in the text on the Queensland legislation website; the regulation is the version shown as current from 1 July 2022.

Sources: Agents Financial Administration Act 2014, sections 35 and 36; Agents Financial Administration Regulation 2014, section 17.

Five kinds of software in one office

The categories below are a general description of how the work of an agency divides, not a market survey. Many products cover more than one category, and a small office may run two programs where a large one runs six.

Customer relationship management software, usually shortened to CRM, is the agency's memory. It records who enquired about which property, who owns what, and what was said. Listings are generally created in it and sent from it to the advertising sites.

Trust accounting software keeps the books for money that belongs to clients: deposits paid by buyers, rent collected from tenants, and funds held to pay expenses.

A property management system runs the rent roll. In practice it is often joined to trust accounting, because rent received has to be receipted, recorded against the right owner and paid on.

Digital forms and signing tools produce the documents that used to be filled in by hand, and store the signed result.

Inspection apps let a property manager record the state of a property on a phone or tablet and turn the notes into a report.

The right-hand column of the table is the one that matters for the rest of this guide. Wherever a "yes" appears, the system is keeping records the trust legislation prescribes.

The law regulates the agent, not the program

The regulation has a section written for software. Section 4 is headed "Using software to keep books, accounts and records", and it applies where a principal agent uses what the regulation calls a computerised accounting system to keep the trust records listed in section 3.

Its wording sets the pattern for everything that follows. Each duty begins with the principal agent: the principal agent must ensure that the system does this, or cannot do that. The maximum penalty for each requirement is stated as 10 penalty units, and it falls on the agent.

Nothing in the regulation as read sets up a scheme for approving, certifying or registering a product. The text does not tell a software supplier to do anything. That has a practical meaning for an agency choosing or changing a system: a supplier's assurance that a product complies is a commercial statement, while the legal question is whether the principal agent can show that the records the system keeps meet each section.

The trust records themselves are listed in section 3: a register of receipt forms, numbered receipt forms in duplicate, deposit forms in duplicate, a cash book, a ledger, a journal with numbered pages or entries, and full and accurate accounts of amounts paid or received. The same section requires them to be kept in a way that can be properly audited. Software does not replace the list. It is one way of producing every item on it.

What a trust accounting system must do

Section 4 contains four functional requirements. Read together, they describe a ledger that remembers everything.

No deletion of a live account. The system must not allow a trust ledger account to be deleted unless the account has a zero balance and a record of the account, as it stood immediately before deletion, is kept.

No overwriting. An amendment to the particulars of a transaction recorded on the system must be made by a separate transaction recorded on the system. A mistake is corrected by a new entry that reverses or adjusts the old one, and both remain visible.

Chronological output. Any record of information the system produces must be produced in chronological sequence.

A history of changes to the standing details. The system must be capable of keeping, in chronological sequence, a record of any change to four things: the name and address of a person for whom trust money is held, the description of the matter, the amount of trust money held for each person, and the financial institution account number of the trust account.

The fourth requirement is the least obvious and perhaps the most protective. A change to a client's name, or to the bank account number recorded for the trust account, is exactly the kind of quiet edit that would be hard to notice later. The regulation asks for a system that keeps the trail.

The section also pulls part of the record out of the computer. Within 5 business days after the end of each month, a hard copy must be made of the trust ledger balances and of the reconciliations, where the system is used to produce them. And immediately before a ledger account is deleted, a hard copy of it must be made and kept in the principal agent's records.

Receipts: what the system has to capture

The receipt is the first record of any trust money, and sections 6 to 10 of the regulation describe it closely enough to read as a specification.

Each receipt form must be clearly headed "Agents Financial Administration Act 2014 Trust Account Receipt" and must be consecutively and uniquely numbered. The duplicate must also be headed "Office Copy" or "Duplicate Copy". The register of receipt forms must hold the number of every form the agent holds and must be updated within 2 business days of a form being brought into use.

Timing depends on how the money arrives. If it comes by direct deposit or electronic transfer, the receipt must be completed on the day the principal agent becomes aware the money has been received. In any other case it must be completed immediately on receiving the money.

Section 9 lists what a completed receipt contains. The main items are:

• the principal agent's name and licence number;
• the date the money was received and the date the receipt was completed;
• the name of the person completing the form, with that person's signature if the form comes from a receipt book or is a hard copy of a computer entry;
• the person for whom the receipt is completed and the person on whose behalf the money is received;
• a brief description of the matter and the amount in figures;
• how the money was received, for example in cash, by cheque, by direct deposit or by electronic funds transfer.

For rent there are two more: the address of the rented premises and the day up to which the rent is paid. That last item is why a rent receipt generated by a property management system shows a "paid to" date and not only an amount.

Under section 10, a legible duplicate of every receipt stays in the agent's records, a cancelled form is kept with a brief note of why it was cancelled, and the receipt is given promptly to the person if it is requested.

Electronic transfers and the bank's own report

The regulation treats electronic transfers separately from cheques, and several of the sections involved were amended in 2021. Its approach is to make the agency keep the financial institution's record of each movement alongside its own.

For money coming in, section 12 requires an agent whose trust account receives deposits by electronic funds transfer to obtain, at least once each week, a transaction report statement from the financial institution showing the deposits made, and to keep it.

For money going out, section 14 requires the agent to keep a transaction report statement from the institution showing the date and amount of each payment and the account name and number to which it was paid. Where a payment is made through what the regulation calls a bill payment platform without an account number being stated, the statement must instead show the name of the person paid, the name of the platform and the unique transaction reference.

The cash book has to match. Under section 16, a payment by electronic funds transfer is entered within 2 business days, with the date, the amount, the details of the receiving account or platform, the unique transaction reference, the person on whose behalf the payment is made, a brief description of the matter and the ledger account to be debited. The ledger entry for the same payment carries the same unique reference under section 20.

The design is a cross-check. The agency's system says what it paid and to whom. The institution's statement says what actually left the account and where it went. An auditor can lay one against the other, reference by reference.

The daily, weekly and monthly rhythm

Put in order, the time limits in the regulation make a calendar that a trust accounting system either supports or leaves to the bookkeeper.

The month-end step deserves a closer look, because it is two reconciliations and not one. Section 17 requires the cash book balance at the end of the month to be reconciled with the trust ledger balances, showing each trust creditor's name and the amount held for that person. It then requires the balance on the financial institution's statement to be reconciled with the cash book balance.

Section 18 says what the second reconciliation must contain: the statement balance, any trust money on hand and the date it was received, each outstanding deposit with its dates, any electronic deposits shown on the statement but not yet entered in the cash book, each outstanding cheque with its number, amount and date, and the cash book balance. The first reconciliation proves that the total the agency holds equals the sum of what it owes each client. The second proves that the total matches what is in the bank.

Underneath both is section 19: a separate ledger account for each person on whose behalf trust money is received. A system that pooled several owners into one ledger could balance to the cent and still fail the regulation.

The monthly backup comes from section 27, which requires enough capacity and backup capability, a backup at least once a month, and storage of the backup somewhere other than the principal place of business or business address.

The audit: where the software is named

The Act, not the regulation, sets the audit, and Part 3 is devoted to it.

An agent must appoint an auditor within 1 month after opening a trust account, and within 1 month after the appointment must give the chief executive the auditor's name and address and evidence that the auditor accepted. Section 29 says who may act: a person registered as an auditor under the Corporations Act, or a member of one of three named accounting bodies who holds a specified membership designation.

The audit runs to a fixed annual cycle. Under section 33 a licensee's audit month is the eighth month after the month in which the licence was first issued, and the same month each year after that, unless the chief executive states another month. The audit period is the 12 months ending on the last day of the audit month.

An unannounced examination may not be made within 2 months after the last day of the audit period or within 2 months after another unannounced examination, so the two visits are spread through the year. The chief executive may extend the 4-month filing period on written application. Failing to have the accounts audited and the report filed carries a stated maximum of 200 penalty units or 2 years imprisonment.

Section 40 lists what the audit report must contain, and it is here that the software appears by name. Along with the trust account names and numbers, a statement of whether each account has been satisfactorily kept, the dates of the unannounced examinations, details of any overdrawn trust account or overdrawn ledger, the serial numbers of receipts and details of amounts held for more than 3 months, the report must state the name and version of the software used. The reconciliation details prescribed by section 18 of the regulation are part of the report as well.

Two other duties make the auditor more than a reviewer for the agency. Under section 37, an auditor who cannot report that an account has been satisfactorily kept, or who finds an irregularity that ought to be brought to notice, must immediately give written notice to the chief executive. And under section 34, an agent who did not operate a trust account during a period may give a statutory declaration to that effect in place of an audit.

When the regulator looks inside

The Act gives the State its own ways into the records, independent of the yearly audit.

Under section 24, the manager of a financial institution must allow an inspector, on a signed written demand, to inspect and copy documents relating to a trust account. Part 4 goes further. The chief executive may give directions about an agent's accounts, including a direction that prevents drawings without approval. A receiver may be appointed over trust property in the circumstances the Act lists. And a special investigator may be appointed where a trust account has not been kept as required; the investigator's powers include inspecting the accounts and preparing or constructing records.

That last phrase is a reminder of what the software requirements are for. If records have to be reconstructed by an investigator, the system has already failed at the one job the regulation gives it.

What an owner or seller actually sees

Clients see very little of the stack. A seller sees a signed form, an advertisement and, at the end, a statement. An owner of a rental property sees a periodic statement and, in many agencies, an online portal that shows rent received, bills paid and inspection reports.

The portal is a convenience the software offers. It does not appear in the Act or the regulation as read. What the law requires is narrower and firmer.

A written account. Under section 23 of the Act, an agent must account to a client who appoints the agent for all amounts received for a transaction. The account must be in writing and must state the amounts received and how they were paid out. It is due within 14 days after a written request, or, if the client has not asked, within 42 days after the transaction is finalised.

Disclosure of benefits. The same account must state the source and amount of any rebate, discount, commission or benefit the agent received in relation to expenses or referrals.

The balance. Under section 22, once a transaction is finalised the person entitled to the balance of the fund is paid within 14 days of asking in writing, or otherwise within 42 days, and the agent's own fee is drawn only after that balance.

A receipt. Under section 10 of the regulation, a trust account receipt is given promptly if requested.

Because section 19 requires a separate ledger account for each person, a statement produced from a compliant system is a view of that one person's ledger: every receipt with its number, every payment with its cheque number or unique transaction reference, and the balance after each entry, which are the particulars section 20 requires the ledger to hold.

What the text leaves open

The regulation's vocabulary is that of a computer in the office. It speaks of a system that is backed up to a disk or device and of a backup location that is not the place of business. It does not mention software hosted by a supplier, and it does not say how an agent demonstrates capacity, backups or an unalterable trail when a third party runs the servers. On the wording read, the answer is that the duty stays where the text puts it, with the principal agent.

The other categories of software sit largely outside the trust legislation. A customer database, a forms tool and an inspection app hold documents an agency is required to keep under other rules, and the Property Occupations Regulation 2014 has its own Part on keeping documents, including in electronic form. Those rules concern how long and how safely a document is kept. They do not prescribe what the software must do in the way section 4 does for a trust ledger.

That contrast is the clearest finding from reading the two instruments side by side. For most of what an agency runs, the law is interested in the document that comes out. For the system that holds other people's money, it is interested in the machine.

A trust accounting system is judged less by what it can produce than by what it refuses to let anyone erase.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

About Kooky and Shaka →