ASIC warns agents not to give financial advice to struggling renters

Real estate agents have been warned they could face fines and even jail time for offering unlicensed financial advice to tenants struggling to pay their rent amid the coronavirus crisis.

The Australian Securities and Investments Commission has called on real estate institutes across the country to remind agents that they were unqualified to provide financial advice.

“ASIC is aware that some real estate agents are advising tenants who are unable to pay their rent, or who may find themselves in such a situation in future, to consider applying for early release of their superannuation,” wrote Tim Mullaly, executive director of financial service enforcement, in a letter to the real estate institutes in each state.

“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.”

It comes after shadow assistant treasurer Stephen Jones wrote to ASIC raising concerns about “unqualified financial advice” being given by real estate agents, The Sydney Morning Herald reported on Thursday.

Tenants have received what they described as intrusive and aggressive emails from property managers when asking for rent decreases due to COVID-19 hardship, or even before they broach the subject at all.

Some hardship application forms ask tenants to list their expenditure on groceries, entertainment and utilities, and whether the resident has drawn down on their superannuation and if they have any accrued leave at their place of work.

Mr Mullaly said ASIC was concerned that such conduct by real estate agents may constitute unlicensed financial advice and not be in the best interests of individuals – which would be in contravention of the Corporations Act.

He warned of significant penalties for giving unlicensed financial advice.  For individuals this can be a maximum of five years imprisonment, and/or a fine of up to $126,000 (600 penalty units), and for corporations a fine of up to $1.26 million (6000 penalty units).

“Tenants facing financial difficulty need sound financial guidance and potentially debt counselling. 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 Act,” he wrote.

Mr Mullaly said ASIC intended to monitor this situation closely, and would not hesitate to act swiftly if contraventions of the licensing requirements were found. He added if real estate agents felt they needed to give guidance to tenants, they should consider referring them to information available on the ASIC Moneysmart website.

Most real estate agents are doing the right thing, opposition leader Anthony Albanese said, but he was concerned by reports some suggested tenants look to their superannuation.

“It is not in individual superannuant’s interest to take their super out because it will lead to much lower retirement incomes and our concern is also there for the superannuation industry,” he said.

Mr Albanese had also received a concerning report of a sick Queensland tenant, in self-isolation while awaiting coronavirus test results, being asked to go for a walk by her real estate agent so that they could take a buyer through the home.

Asked if a freeze should be put on house inspections, which are currently allowed on a one on one basis, Mr Albanese said the situation just required a “bit of common sense … if there is a risk don’t take it”.

Mr Albanese also called for more clarity from the government as to how an eviction moratorium would work and what support will be given to residential tenants and landlords.

Real Estate Institute of Australia president Adrian Kelly said agents should not be giving financial advice because it was illegal, but said there was a fine line between doing so and forwarding on information around what assistance has been announced by the government, which includes the ability to draw from superannuation.

“I don’t see any issue in forwarding on what the government has already put out, but if property agents are making the firm suggestion that tenants should be dipping into their super … that is definitely not on,” Mr Kelly said.

He noted the industry was waiting with bated breath to see what further rental relief might be announced by the Prime Minister following a national cabinet meeting on Friday.

“Once we get that, we then know exactly what the legislation is and the guidelines that we can provide,” he said.

Real Estate Institute of New South Wales chief executive Tim McKibbin said more needed to be done to help tenants meet their rental obligations, which would in turn help support landlords and the real estate industry.

Mr McKibbin thought it was acceptable for agents to pass on information on assistance measures announced by the government, but noted agents should not be giving financial advice.

“You can arm that person with options they should have, but then it’s up to them to make the decision,” he said.

The Real Estate Institute of Victoria was also contacted for comment.