What happens to your agency if the Licensee in Charge (LIC/OIEC) is suddenly unable to manage your agency?

O*NO! Like most principals and owners, you’ve been absorbed by the daily operations of your real estate agency, but have you ever considered what happens if your Licensee in Charge (LIC), or Officer in Effective Control (OIEC), can't manage the agency anymore? Truth is, life can be unpredictable, and emergencies won’t wait for you to put a plan in place. In this blog, we’ll explore the legal consequences and obligations when your LIC is incapacitated, and how you can plan for such scenarios to safeguard the future of your agency.

You're likely aware that having at least one Licensee in Charge (LIC) at your place of business is legally required. This becomes difficult if they become incapacitated, and to further complicate matters, the legal requirements for what happens can differ between states. So, whether it be sudden illness, death, or personal situations, the incapacitation of your LIC could lead your agency into a state of uncertainty, and worse, unable to legally run. So, lets break down exactly what happens in your state if your LIC is unable to manage the agency.

What happens in Queensland?

If your Principal Licensee is going to be absent from the registered office for more than 30 days then a substitute agent needs to be appointed to act on their behalf. To do this, you need to apply to the State, also known as the ‘Chief Executive’, using the appropriate form. The details you’ll need to get of the substitute licensee include their consent, and enough information so the Chief Executive can determine whether this person:

• is suitable to hold the licence

• qualified to perform the LIC’s requirements

• is covered by/holds the required insurance.

Once appointed, the substitute agent will be considered the principal licensee during their period of appointment. However, you cannot appoint a substitute licensee for more than 12 week in a 12 month period. Therefore, for periods of long incapacitation (eg. death or mental incapacity), you must have a plan for after this 3 month period expires. Because if not, then your registered place of business will be left without a principal licensee, and this means your agency cannot continue to legally operate.

For more: Property Occupations Act 2014 (QLD)

What happens in the Australian Capital Territory?

In the ACT, there are two situations or approaches that could arise if your LIC becomes incapacitated.

The first will allow you to appoint someone as a substitute LIC. You can apply to the Commissioner for Fair Trading to allow you to appoint an LIC who does not hold a Class 1 Licence. In deciding whether or not to grant this exemption, the Commissioner will consider:

• Why the exemption is needed

• How long the exemption will last

• The nominated person’s experience as a licenced RE agent

• Fiduciary safeguards and measures in place or planned in the office or systems, to ensure accountability to the Licenced Agent

• Staffing and office management arrangements in place or planned.

• Nominates person’s compliance history with the Act and any conditions of their licence during last 5 years

• Employer references (if any) related to the person's experience as a licensed property agent.

The second approach will mean the Commissioner appointing an ‘administrator’ for the business. This will generally happen if the LIC is unfit or unable to assume management of the agency, in situations such as if:

• Their licence is suspended or cancelled;

• They are disqualified from holding a licence;

• Their licence is expired;

• They are missing and cannot be located after making reasonable enquiries; or

• They die.

This administrator will be appointed to manage your agency, and any actions they take will be considered to have been performed by the LIC. Additionally, while this administrator is in force, the LIC cannot be involved in the direction, management or conduct of business, or withdraw money from the trust account. Therefore, if your LIC becomes incapacitated and you don’t have a back up plan, then you may end up losing control over the management of your business.

The renumeration of the administrator will be the responsibility of the Territory. But the Territory has the power to recover that amount as debt from the LIC.

For more: Agents Act 2003 and Agents Regulation 2003

What happens in New South Wales?

New South Wales makes it very clear that there must always be a licensee in charge. According to the Secretary’s Guidelines for Supervision, when a Principal Licensee/LIC is unable to carry out their duties, permanently or temporarily, due to illness or other reasons, they must promptly be replaced by an appropriate Class 1 Licence holder. A failure to follow these guidelines will be considered a failure to properly supervise your agency. This can result in a fine of up to $22,000 for corporations and up to $11,000 for others.

Well, what happens if you don’t have a back-up LIC or you become incapacitated?

You can apply to the State, or Secretary, to grant you an exemption to this, however there is little guidance on how this will work or what they are looking at when making their decision. If you have more than one registered place of business, then you can apply to allow the LIC from the other office to be in charge of more than 1 place of business. The matters the State will consider here are similar to those in the Australian Capital Territory (ACT).

 Or, similar to the ACT, the Secretary may appoint a ‘manager’ for your business. This generally happens if the licensee:

• has requested the secretary do so

• has had their licence cancelled or suspended

• is found not fit to obtain payment or delivery of property they hold because they become:

  • Mentally or physically infirm;

  • Bankrupt;

  • An inmate;

  • Dead; or

  • Abandon their business.

Also, if a business is run by multiple licensees in a partnership, the term "licensee" in the above includes all the partners.

To become a manager of a licensee's business, a person must either be a licensee or meet specific qualifications or have relevant experience as determined by the Secretary. The manager, in essence, will have the power of the LIC as if they have ownership of the agency, subject to the terms of their appointment.

For more: Property and Stock Agents Act 2002 and Property and Stock Agents Regulation 2022

What happens in Victoria?

 In Victoria, if a licensed estate agent or branch manager plans to be away from their estate agency office for more than 30 days, you must inform the Business Licencing Authority of this absence in writing. You must also nominate a licensed estate agent or agent's representative to manage the office during that period of absence in your notice. If the Authority believes that the person nominated is qualified to run the estate agency office, they can grant approval for that person to manage the office for a time period determined by the Authority.

The form to request approval for a short-term branch manager can be found here.

In Victoria, there's limited direction on what to do if the officer in effective control or principal licensee experiences permanent incapacitation. Ideally, it's advisable to designate a backup licensee capable of assuming responsibility in unforeseen circumstances. If that's not feasible, seeking approval from the Authority to maintain agency operations until a new licensee is found may be necessary.

 For more: Estate Agents Act 1980

What happens in Western Australia?

Similar to the ACT and NSW, WA has two approaches to incapacitation – substitute licensee that you nominate or the appointment of a supervisor.

 In WA, if the licensee is incapacitated, or dies, then you can appoint someone else, with the written permission of the Fair Trading Commissioner, to operate the agency. This person can be  someone who doesn’t meet the typical requirements to hold a license. However, this person cannot:

• If the licensee is deceased, be the executor, administrator, trustee, or child;

• If the licensee is deceased, be the spouse or de facto partner of that deceased licensee before the licensees death; or

• If the licensee is incapacitated, be the spouse or partner of that incapacitated licensee.

This substitute licensee can only be appointed for a maximum period of 3 months. So, you can continue business for up to 3 months or until you makes other arrangements to comply with the Act; During this time, the business is considered to be operated without interruption by a licensed member with a current triennial certificate.

Alternatively, if the State Administrative Tribunal (SAT) finds reasonable grounds to believe that an agent is unable to properly conduct their business or is not complying with the Act, the Tribunal can suspend you from conducting the business, or appoint a ‘supervisor’ for the business.

If the sole agent in charge of an agency dies, then the tribunal may appoint a supervisor. The Tribunal can also prohibit the deceased agent's personal representative, as well as their past employees, agents, and bankers, and the employees and agents of those former bankers, from accessing any of the bank accounts of the deceased agent.

The supervisor’s job will be to operate the business only to finish or resolve any ongoing matters for the clients and handle related documents. In the case of a deceased agent's business, the supervisor will operate the business until it can otherwise be legally dealt with.

The supervisor's role is to address ongoing client matters and handle relevant documents, but their presence is temporary. Access restrictions to the deceased agent's bank accounts, and the possible inability to take on new matters, can pose financial challenges for the business.

The State will be responsible for the remuneration of the supervisor, but the State has the power to recover that amount as debt from the LIC, even if deceased (ie. from their estate).

For more: Real Estate and Business Agents Act 1978

What happens in South Australia?

In South Australia, a body corporate agency must be managed/supervised by a registered agent. Following this, it can be assumed that in the event of incapacitation of the registered Principal, there must be another registered agent who can take charge immediately.

You can apply to the Commissioner for Consumer Affairs for an exemption to this requirement, but there is little guidance on this process and what considerations are looked at. However, looking at the requirements in other states, it is advisable that this request include the reason you are asking for an exemption. Additionally, consider nominating a substitute individual and provide justification for their suitability to assume the responsibility.

Also, like most of the other jurisdictions, the Commissioner has the power to appoint a temporary manager for the business, and/or an administrator to deal with the trust account. This may happen if the LIC is not registered, deceased, cannot be found, suffering from mental or physical incapacity or other forms of incapacitation (eg. bankruptcy). This temporary manager will be responsible for transacting any urgent or uncompleted business of the agent.

For more: Land Agents Act 1994

What happens in the Northern Territory?

Only a licenced agent (individual or firm) can carry out real estate business in the Northern Territory.

If that licenced agents becomes incapacitated through physical or mental illness, death, or if they are under inquiry for disciplinary action, the Board can request the Supreme Court to appoint a registered company auditor as a receiver of trust funds. This receiver is permitted to perform all the actions/functions that a licenced agent is.

The Board will be responsible for the remuneration of the receiver, but has the power to recover that amount as debt from the LIC (even if deceased.

For more: Agents Licencing Act 1979

What happens in Tasmania?

If you, or your employed LIC, are unable to manage your real estate business at its registered office/authorised place, for a valid reason, the Board may allow you to appoint another property representative you employ to manage the business for a specified time. This will also apply to a property management (PM) business. If a license holder dies, their personal representative is taken to be the license holder for 12 months from the date of the person's death.

The Board also has the power to appoint a receiver and/or manager. The Board can do this if it believes that you are unfit to receive trust money, generally because of mental or physical infirmity, death, disappearance, suspension or cancellation of licence to run a real estate business. This manager can do everything in relation the business that the LIC could lawfully do.

The Trust from Guarantee Fund will be responsible for the remuneration of the manager, but it has the power to recover that amount as debt from the LIC.

For more: Property Agents and Land Transactions Act 2016  

So, what should you and your agency do to protect your future?

Best step: planning – succession and contingency.

•  It's advisable to tackle issues concerning the ongoing operations of your business proactively, rather than reacting in a panic when challenges arise. This is especially crucial before regulatory boards intervene and potentially strip away your control.

• You should have a succession plan that outlines clear steps for transferring managerial responsibilities in case of incapacity. This will also be useful if you yourself need to take a step back, whether it be planned or sudden. Therefore, reducing the risk of uncertainty and instability by having a pre-determined roadmap for filling leadership roles in the event of unexpected departures or incapacitation. With a succession plan you can ensure a seamless transition of leadership whilst minimising disruptions to daily operations.

• Having a commercial succession plan in place will also be advantageous for your agency, not just you.  For one, it can boost employee morale and confidence in the organisation's stability, as employees feel reassured that there is a plan in place for leadership continuity. You will also be able to identify key areas of recruitment, which will streamline the recruitment process and give you time to prepare internal candidates (ie. working so a licenced agent can obtain their Class 1 licence). This will also demonstrate a commitment to employee growth and advancement, making the organisation more attractive to top talent who are ambitious and seek opportunities for career progression.

• It is recommended to have a backup licensed agent on staff. This ensures a swift replacement in the event that the primary licensee becomes incapacitated, even unexpectedly. Having the replacement already employed within the agency facilitates a smoother transition as they are already integrated into the system. This will enhance the organisation's adaptability to changes in the business environment by having leaders who are familiar with the company culture, values, and strategic objectives.

• We also understand that is may not be possible to have a backup LIC on staff at all times. Therefore, you should cross-train team members on key managerial tasks so that multiple individuals are familiar with critical functions. You should ensure that essential knowledge and skills are not concentrated in a single person. This will also be beneficial in specific states where you have the option to request an exemption, allowing this staff member to be appointed as the manager.

• You should also maintain thorough and up-to-date documentation of processes, procedures, and key responsibilities. Create a comprehensive handbook or manual that can guide a temporary replacement in the absence of the manager. You may also want to include the process for dealing with incapacitations in your culture handbook or employee policies.

• You should also have a company power of attorney (POA) in place. A company POA will nominate somebody else (person or company) to act on behalf of your company. This is important if you are the sole director of the company and become incapacitated. This appointed representative will be authorized to execute documents on behalf of the company, manage the trust account, and, crucially, fulfill any directives you have outlined for the company should you be incapacitated. This ensures a clear plan of action and designated individuals in the event of unforeseen circumstances.

In summary, establishing a succession plan beforehand prevents the need to operate in a state of panic when unexpected events occur. A thorough and well-crafted succession plan will directly affect the overall resilience, stability, and long-term success of a business.

Your Next Steps:

Get your succession/exit plan and POA’s in place before the unexpected happens - for peace of mind do it with our team of real estate agency lawyers. Book your free consult to get started.

Boring legal stuff: This article is general information only and cannot be regarded as legal, financial or accounting advice as it does not take into account your personal circumstances. For tailored advice, please contact us. PS - congratulations if you have read this far, you must love legal disclaimers or are a sucker for punishment.