A buyer pays a $2,000 holding deposit in cash at the agency's front desk. Under reg 7 of the Real Estate Agents (Audit) Regulations 2009, what must the agency do?
Correct Answer
D) Issue the payer a numbered trust receipt and keep a copy.
Regulation 7(5) requires a trust receipt to be issued to the payer whenever trust money is paid to an agency in cash, or when the payer asks, with a copy kept. Regulation 8 requires trust receipts to be numbered sequentially and to show details such as the payer, amount, purpose and method of payment. The money must be recorded in the ledger account for that client.
Why This Is the Correct Answer
Cash trust money always requires a trust receipt under reg 7(5).
Why the Other Options Are Wrong
Option A: Issue a receipt only if the buyer asks for one, since the sum is small.
Regulation 7(5) requires a trust receipt whenever trust money is paid in cash, whatever the amount.
Option B: Bank the cash into the agency's business account and note it on the file.
Trust money must go into the trust account and be recorded in the client ledger, not the business account.
Option C: Hand the cash to the vendor and record the payment in the sale agreement.
The money must be held in the trust account; s 123 bars paying it out for 10 working days.
Background Knowledge for Compliance
Source: https://www.legislation.govt.nz/regulation/public/2009/0279/latest/whole.html
Exam Tip for Compliance
Cash in = trust receipt, every time.
Common Mistakes to Avoid on Compliance Questions
- •Issuing receipts only on request, even for cash payments.
More Compliance Questions
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Under the Fair Trading Act 1986, which statement about advertising a property for sale is correct?
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An agent holds $180,000 in trust across four transactions. One agreement is validly cancelled because the purchaser's finance condition was not met, and both parties' lawyers confirm the $60,000 deposit is to be refunded to the purchaser. What is the correct trust account procedure?
Under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, what is the minimum threshold for conducting customer due diligence when establishing a business relationship in real estate transactions?
- → An international client buying a $2.8 million commercial property provides a copy of their overseas passport but refuses any further identity checks or information, claiming diplomatic immunity. How should the agent proceed under AML/CFT requirements?
- → Which statement best describes the trust account requirements under the Real Estate Agents Act 2008?
- → An agency's trust account reconciliation reveals that interest earned on client deposits has been retained by the agency rather than distributed to clients. This practice is:
- → According to trust account regulations, how long must real estate agencies retain records of trust account transactions?
- → What is the primary purpose of the Consumer Guarantees Act 1993 in relation to real estate services?
- → Under the Consumer Guarantees Act 1993, if a real estate agent fails to exercise reasonable care and skill when marketing a property, what remedy might be available to the client?
- → A real estate agency's trust account shows a shortage of $5,000 during a routine audit. What is the most serious disciplinary order available under the Real Estate Agents Act 2008?
- → A real estate agent advertises a property as having a 'new roof' when they know it was repaired but not replaced. A buyer purchases based on this information and later discovers the truth. Which Acts could potentially apply to this situation?
- → Which statement best describes the primary purpose of trust accounts in real estate transactions?
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