PHOTO: FILE
An Auckland real estate firm has incurred a $15,000 fine and reprimand due to lapses in auditing processes described as “severely incompetent.” City Realty Ltd neglected to ensure compliance with auditing regulations aimed at safeguarding the public, as outlined by the Real Estate Agents Disciplinary Tribunal in a recent ruling.
The licensed entity, responsible for managing a trust account subject to scrutiny by a chartered accountant, failed to submit timely monthly reconciliations for 27 months spanning three financial years, with some reports delayed by over a year. Among the litany of infractions over this period were failure to properly record received deposits and erroneous disbursements from the trust account.
Notably, discrepancies occurred on eight occasions in the financial year ending March 2020 and nine occasions in the subsequent year. By March 31, 2020, the trust account was found to be overdrawn by $11,575, a shortfall rectified by City Realty in October of that year. Similarly, by March 2021, an erroneous surplus of the trust account resulted from a commission erroneously held within it, corrected a year later.
The company attributed these failings to human error and system deficiencies exacerbated by challenges during the Covid-19 pandemic. Despite this, City Realty faced charges in August of last year, including allegations of willful or reckless misconduct, or alternatively, misconduct categorized as “seriously negligent or seriously incompetent.”
In December, City Realty admitted to the latter charge. The tribunal, concurring with the complaints assessment committee, emphasized the severity and duration of non-compliance, characterizing the misconduct as substantial. It underscored the privileged position held by entities managing trust accounts and criticized City Realty for inadequately safeguarding clients’ funds.
Notably, the committee highlighted that the most egregious aspect of the misconduct involved the misappropriation of funds for unauthorized purposes. In response, City Realty contended that the breaches were inadvertent, with no evidence of fund misappropriation or customer loss.
City Realty’s director, Daniel Horrobin, declined to comment, but an affidavit submitted to the committee detailed staffing issues and operational changes within the trust account’s management between 2018 and 2022. The company’s legal representation argued that despite efforts to rectify the situation amid staff turnover and pandemic disruptions, City Realty struggled due to limited expertise and information availability.
The tribunal acknowledged the challenges faced by City Realty, including the Covid-19 impact, and considered factors such as the firm’s admission, cooperation, lack of prior disciplinary actions, and subsequent efforts to comply. In determining the penalty, the tribunal opted for a fine considering these mitigating circumstances, rather than a more severe punishment.
SOURCE: NZHERALD