The recent clampdown by the Estate Agency Affairs Board on members who have not been acting ethically and have allegedly been defrauding trust funds highlights a long-standing problem with auctioneer's trust monies, says Auction Alliance CEO Rael Levitt.
According to Levitt, auctioneers who sell fixed property are governed by the Estate Agency Affairs Act, and therefore provide fidelity fund protection for their trust funds, but no legislation exists for movables trust money.
"If one includes motor vehicle sales, livestock, art and high-value machinery, billions of rand moves through auctioneers' accounts and they are completely unregulated in this regard."
The reality is that, despite a few rogue operators, the real-estate industry is well regulated, with a host of laws for the protection of consumers' deposits, Levitt says.
"Any funds held for property transactions, which are not in legitimately constituted trust accounts, are fraudulently misplaced and those who have stolen these funds should suffer the full wrath of the law.
"But one can purchase a multimillion-rand machine and the auctioneer can place these funds anywhere he wants, with no legislative guidelines."
Levitt adds that what is worse is that if an auctioneer steals these funds, there is no obligatory insurance or fidelity fund protection, which would provide a safety net for clients.
"If you consider that one art work, one airplane, one piece of machinery can sell for tens of millions of rand, and these funds are given to auctioneers in trust, but the auctioneer doesn't have to place them in a trust account."
Levitt points out that movables trust monies are often larger than property trust funds simply because normally the full purchase price is paid to the auctioneer, while in the case of property it is normally just the deposit, with the balance being collected by the conveyancers.
The threat for buyers and sellers is enormous because they are simply relying on the reputation of auctioneers. “This is an issue which has concerned me for years and should keep sellers of valuable movable assets up at night with worry," says Levitt.
While it is true that the Consumer Protection Act will safeguard consumers, there is no mention of movables trust funds and where they should be placed. And so, consumers are once again placed at the mercy of auctioneers. "Bearing in mind that government itself is one of the largest sellers of movable
items through its various bodies, one would think there would be tighter controls over movables trust funds, but alas the public is afforded no protection whatsoever. “I suppose when another article appears about the theft of funds entrusted to auctioneers, the authorities will start to deal with the issue," says Levitt. - I-Net Bridge
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