When the Trust Account Can No Longer Be Trusted: Recovering Trust Money from the Victorian Property Fund

Entrusting a deposit to a real estate agent — or receiving rent through an agency's account — rests on a simple expectation: that the money will reach its rightful destination. In the overwhelming majority of cases, it does. Yet a series of recent Victorian matters illustrates what can occur when that trust is betrayed, and, importantly, that affected parties have a clear avenue to recover their losses.

A troubling pattern

In one of the most striking recent examples, Debra Lawry, who operated Ray White Romsey, allegedly misused approximately $193,000 in client trust funds and is said to have left the country ahead of her 2024 disciplinary hearing. VCAT has since permanently cancelled her licence.

Hers is not an isolated case. Consumer Affairs Victoria charged Sunbury agent Syed Nasir Zafar over alleged trust account deficiencies exceeding $930,000. Ballarat agent Richard Hayden was sentenced to 12 months' imprisonment after causing close to $1.6 million in trust deficiencies and fraudulently transferring around $776,000 for personal use.

What is "trust money"?

By law, deposits, rent and other client funds must be held in a dedicated, independently audited trust account, kept entirely separate from the agency's own money. The agent acts only as custodian. Where an agent draws on that account for personal use, fails to pay a vendor following settlement, or does not remit rent to a landlord, this constitutes defalcation — precisely the conduct the law is designed to remedy.

The safety net: the Victorian Property Fund

The Victorian Property Fund, established under the Estate Agents Act 1980, exists to compensate those who suffer loss through the defalcation of an estate agent or conveyancer. It is funded in part by the interest earned on agents' trust accounts across the state. Where a claim succeeds, an eligible claimant may recover the full amount of their monetary loss, together with the reasonable costs of bringing the claim.

How we can help

Claims against the Fund are technical. A claimant must establish that the loss arose from defalcation by a licensed agent acting in the course of their business — not merely from poor service or unsound advice — and support that claim with appropriate evidence. Our firm has successfully assisted many clients in recovering compensation through the Fund. We can:

• assess whether your loss qualifies for compensation;
• prepare and lodge the correct claim form with all supporting documents;
• liaise with Consumer Affairs Victoria on your behalf; and
• where a claim is refused, seek a review at VCAT, which must be lodged within three months of the decision.

Time limits can apply, so early action is essential. If you suspect that your deposit or rent has been misappropriated, we invite you to contact our property law team for a confidential discussion.