Most vendor financiers recognise they need Australian Credit Licence (ACL) coverage or Real Estate Agent Licence coverage if they are involved in the sale of a property they don’t have Title to.
The Licensing Implications
Knowing this, a large number of vendor financiers have become ACL holders, Credit Representatives and/or licensed Real Estate Agents.
Holding an ACL (with the correct authority) or becoming a Credit Rep has allowed them to ‘act as an intermediary’ for a credit provider (the vendor) in a vendor finance credit transaction. A situation I shorten to ‘standing in the middle’. For the vendor financiers with Real Estate Licences, these licences have allowed them to ‘stand in the middle’ and draw up a lease between the owner and a tenant/buyer.
So That’s It?
A lot of vendor financiers know they have to be licensed but they don’t know the money they collect for properties where they’re ‘standing in the middle’, needs to be deposited into a ‘statutory trust account’. Not an account operated by your Family Discretionary Trust but a Statutory Trust Account, as specified by the National Credit Code and all States’ RE Agent legislation.
The ‘Joys’ Of A Statutory Trust Account!
Ask any real estate agency or property management principal if running a statutory Trust Account is easy. Chances are they’ll tell you about the daily banking requirements, the end of month trial balances and reconciliations and the yearly external audit. In short they’re expensive to run because of the software you need to run them and they are a major time sink. Not great when you want to be out there setting up more vendor finance transactions.
But I Already Have A Great, Convenient System
A lot of vendor financiers have their own, very convenient, money collection systems. Our old system revolved around a separate account for every property and we loved it 😉
Problem is, whether you’re an ACL or RE Licence holder, without exaggeration, you probably will be subject to a spot audit in the not too distant future. No matter how good and convenient your accounts system is, not having a properly established Statutory Trust Account will expose you to serious penalties.
Get Licensed But Avoid The Nightmare!
Like rental landlords, quite a lot of vendor financiers have removed their administrative nightmare by using the services of Vendor Finance Management Pty Ltd (VFM), to undertake the administration of their on-going vendor finance transactions.
Even better than getting your administration done for you, is getting this administration at no cost to you.