Regulator to crack down on real estate agents pressuring tenants to use super

Australia's corporate regulator has warned real estate agents against advising tenants to access their superannuation to meet their rental payments.

Residential housing in Sydney's inner east.

Residential housing in Sydney's inner east. Source: AAP

Real estate agents have been warned not to pressure tenants to dip into their retirement savings to pay rent. 

The Australian Securities and Investments Commission (ASIC) issued the warning in response to reports several real estate agents had advised tenants to meet their rental obligations by accessing their superannuation fund.

In a letter sent to real estate institutes in each state and territory, ASIC said such conduct could lead to jail time and hefty fines. 

"Tenants facing financial difficulty need sound financial guidance and potentially debt counselling," the letter reads.

"Specifically pointing them to and recommending them to consider the specific possibility of accessing superannuation is, again, likely to amount to a breach of the [Corporations] Act."

Individual real estate agents face up to five years imprisonment and a fine of up to $126,000 for providing unlicensed financial advice, while firms face a fine of up to $1.26 million. 

The Federal Government's economic stimulus plan allows individuals who have lost their job to  this financial year, and up to another $10,000 next financial year. 

The ABC reported on Friday an incident where a tenant in Brisbane was told their ability to dip into their super would be noted on their rental history in an email sent about half an hour after government's six-month moratorium.

Meanwhile, property site Domain earlier this week wrote that some Victorian tenants seeking rental decreases have been asked to list how much they spend on food, bills and entertainment, whether they have accrued leave hours, and whether they had drawn down on their superannuation.

In some cases, property managers have contacted tenants before the subject was raised, Domain reported.

Real Estate Institute of Australia president Adrian Kelly said agents should not be providing financial advice to anyone.

"Agents can give guidance to a tenant as to where information regarding their financial affairs is available such as the ASIC Moneysmart website," Mr Kelly said.

"Thankfully today we will receive some government announcements around tenants and property owners which will lay the ground rules so we can start to clean up some of this mess."

ASIC said financial advice must only be provided by qualified and licensed financial advisers, or financial counsellors, not by real estate agents who neither hold the requisite licence, nor are an authorised representative of an Australian Financial Services Licensee.

The watchdog said it intends to monitor this situation closely and "will not hesitate to act swiftly to protect vulnerable consumers".

Unions welcome action

The Australian Council of Trade Unions welcomed the action by ASIC.

The council's president, Michele O’Neil, said she had written to the Real Estate Institute of Australia earlier this week to act on the "potentially dangerous financial advice to tenants".

“Right now tenants need support and relief from rental payments – not threatening messages and half-baked financial advice that could be ultimately against their best interests."

On Friday, Prime Minister Scott Morrison announced that a mandatory code of conduct was being finalised to compel commercial landlords to negotiate with tenants facing financial hardship due to coronavirus. 

The government has already announced a six-month moratorium on evictions. 

The prime minister said further work is needed to finalise a the code of conduct.

"What is required is that both parties negotiate in good faith, that there is a proportionality principle that needs to be in this code," Mr Morrison said. 

"And the proportionality principle is simply this: that the turnover reduction of the tenant needs to be reflected in rental waiver of the landlord.

"How that is done inside the lease is up to the landlord and the tenant. There are different ways to achieve this."

Additional reporting by AAP

4 min read
Published 3 April 2020 at 3:18pm
By Biwa Kwan
Source: SBS News