Attwood Marshall Lawyers Property and Commercial Law Senior Associate Tobie Mitchell discusses the emerging practice known as “deposit flicking,” the reasons for its rise, and why outsourcing the handling of property deposits may cause more risk than intended.
What is deposit flicking?
Every real estate professional understands the importance of the deposit in a property transaction.
The deposit secures the purchaser’s obligations under the contract and depending on the area, it is usually held by the real estate agency in a trust account until settlement.
“Deposit flicking” is where a real estate agency transfers or arranges for a purchaser’s deposit to be held by a third-party, rather than retaining it in the agency’s own trust account.
Why is it appealing?
Managing a trust account requires considerable time and care. Agencies must maintain accurate records, complete regular reconciliations, comply with audit requirements, supervise staff, verify transactions and more recently, act to protect funds against fraud and cybercrime.
A third-party service may therefore appear to offer a practical solution. By outsourcing the receipt, holding and distribution of deposits, an agency may hope to reduce administrative work, streamline settlement and limit the operational burden associated with maintaining its own trust account.
One provider has reportedly claimed that its service can reduce settlement administration by 90 per cent.
However, the conveyancing industry has raised concerns about the legal basis for transferring deposits to third parties, the protections applying to those funds and whether purchasers have properly authorised or understood the arrangement.
A legal grey area
Industry concerns include what protections would apply if a third-party deposit holder became insolvent, suffered a cyberattack, lost funds through fraud or became involved in a dispute over the release of a deposit.
The growing attention on it comes after the new “Tranche 2” anti-money laundering and counter-terrorism financing laws came into force in July, extending obligations that have applied to banks and financial institutions for years to a broader range of professional service providers, including lawyers, accountants, and real estate professionals.
The practice of deposit-flicking has become the subject of proceedings in the NSW Supreme Court following the publication of a petition by a conveyancer criticising one third-party deposit service. No conclusions can be made about the legality of Agency Settlements’ business model, or the conduct of any party, unless and until the relevant issues are determined.
NSW Fair Trading is also investigating the practice.
The regulator has stepped up its focus on ensuring agents are properly managing funds held on behalf of clients. It says it has invested $8.4 million in its Strata and Property Taskforce to crack down on misconduct and lift industry standards for the use of trust accounts and safeguarding consumer money.
On the 13 August 2026, NSW Fair Trading announced for example that it had issued more than $200,000 in fines against real estate agencies across the state for not meeting their legal and professional obligations when managing client funds.
The probe audited compliance with the Property and Stock Agents Act, targeting higher-risk businesses and license holders.
Why has this practice emerged?
Deposit flicking has not emerged in a vacuum. More work is required behind the scenes to deliver the same service, while clients continue to expect transactions to proceed quickly and fees to remain competitive.
Property transactions are particularly unforgiving in this respect.
Contracts are often prepared and signed quickly. Deposit deadlines must be met. Finance, building and pest, due diligence and settlement dates continue to run. Clients expect agents, lawyers, conveyancers and lenders to respond almost immediately.
Outsourcing deposit administration may seem appealing as it promises to reduce internal processing, remove repetitive work and allow agents to focus on listings, negotiations and client relationships.
However, the arrangement involves risks and there is an important distinction to be made between outsourcing a task and outsourcing responsibility for it.
Does outsourcing the task outsource responsibility?
Even where a third party receives and holds the money, questions may remain about the agency’s obligations to the vendor, purchaser and regulators.
The agency may still need to explain where the deposit will be held, obtain the necessary authority, ensure the arrangement is consistent with the contract and satisfy itself that the third party is properly authorised and adequately protected against insolvency, fraud and cybercrime.
The involvement of an additional party may also create new risks.
There may be additional bank details to verify, additional payment directions to communicate and additional opportunities for an instruction to be misunderstood, intercepted or fraudulently altered.
If a dispute arises, the agent may still be the first person the vendor or purchaser contacts, even though the agency no longer controls the funds.
Compliance becoming a big cost of doing business
The broader lesson from the deposit flicking debate is that professional services are becoming more regulated, but client expectations have not necessarily changed with them.
Vendors still expect their property to be listed and sold quickly. Purchasers expect immediate answers. Contracts continue to contain strict deadlines. Clients also expect professional fees and agency costs to remain competitive.
Behind the scenes, however, there are more checks, approvals, records, reconciliations and risk assessments than ever before.
For agencies, this may require reviewing staffing levels, professional fees, technology, service arrangements and expected transaction timeframes. It may also require more open communication with clients about why information is required and why certain processes can no longer be completed immediately.
One cannot ignore increasing compliance obligations. Nor is it necessary to duplicate every check across the agent, lawyer, conveyancer and other professionals involved in the transaction.
Better coordination may be the better approach, reducing unnecessary duplication without compromising legal responsibility or consumer protection.
Attwood Marshall Lawyers – your property law partners
At Attwood Marshall Lawyers, we understand the pace of property transactions and the practical pressures facing real estate agencies throughout Southeast Queensland, Northern New South Wales and across Australia.
Our Property and Commercial Law team can assist with reviewing deposit-handling arrangements, third-party service agreements, trust account procedures, contractual authorities and associated risk.
For an appointment with our lawyers, please contact our Property and Commercial Law Department Manager Fleur Wallis on 07 5506 8233 or fwallis@attwoodmarshall.com.au, or free call the firm on 1800 621 071.
