Deposit Flicking: What It Is, Why It's Raising Alarms, and Two Recent Court Wins for Consumers

If you're buying or selling property in NSW, you've probably trusted that your deposit sits safely in your real estate agent's trust account until settlement. That's the law — but a controversial new practice known as "deposit flicking" is putting that assumption to the test, and Dott & Crossitt has been at the centre of the fight to stop it.

What is deposit flicking?

Deposit flicking describes a real estate agent — appointed as the "stakeholder" for a purchaser's deposit under the standard Contract for the Sale and Purchase of Land — transferring or directing that deposit to a third party to hold instead, pending settlement. It's typically marketed to agents as a way to cut down on trust account administration, cyber-fraud risk and compliance workload.

On the surface, that might sound like a convenience. In practice, it raises serious questions about who is actually accountable for your money, and whether the protections you're entitled to under the law still apply.

Why the industry is concerned

Several peak bodies — including the Real Estate Institute of NSW (REINSW) and the Australian Institute of Conveyancers NSW (AIC NSW) — have issued alerts to their members warning against the practice. The concerns generally fall into four areas:

1. It may breach an agent's trust account obligations — depending on how section 86 is interpreted. Section 86 of the Property and Stock Agents Act 2002 (NSW) requires a licensee to hold money received on behalf of any person in an approved trust account until it is properly disbursed. The Act's broad definition of "money received for or on behalf of any person" extends to money held for someone else, whether or not the agent originally received it directly. On one reading, this means an agent cannot sidestep the trust account duty simply by routing the deposit to a third party of their choosing. That interpretation is contested, however, and is yet to be tested and settled by a court — proponents of deposit-flicking models argue their arrangements can be structured to sit outside section 86 altogether. Until the proper interpretation is authoritatively determined, agents and their legal advisers should proceed with caution: if section 86 is found to apply, breaching it carries penalties of up to $55,000 for an individual or $110,000 for a corporation, as well as possible licence suspension or cancellation.

2. The contract already says who holds the deposit. The standard NSW contract defines the "depositholder" — usually the vendor's agent — and requires the purchaser to pay the deposit to that person as stakeholder. Swapping in a different stakeholder isn't something an agent can do unilaterally; it requires a specific special condition, agreed by both vendor and purchaser and drafted by their own legal representatives. An agent inserting or arranging such a clause off their own bat risks putting both parties in technical breach of the contract.

3. AML/CTF obligations still apply. Since 1 July 2026, real estate agents have been subject to "Tranche 2" Anti-Money Laundering and Counter-Terrorism Financing rules, including customer due diligence and reporting to AUSTRAC. Those obligations are triggered by an agent's role in brokering the transaction — not by whether the deposit passes through their trust account. As AUSTRAC deputy chief executive Katie Miller has put it, an agent can't contract out of their AML/CTF responsibilities, and those obligations apply regardless of who ends up holding the deposit.

4. Statutory compensation protections may not travel with the money. The Property and Stock Agents Act's Compensation Fund exists to protect consumers if trust money held by a licensed agent is misappropriated. That protection can't be assumed to extend to a deposit paid to a third-party operator — even one that describes its arrangement using the language of a "trust account" or "stakeholder."

The advice from REINSW to its members has been blunt: deposit-holders should not agree to release, transfer or direct a deposit to another party, and should not insert — or agree to insert — a special condition nominating an alternative stakeholder without independent legal advice.

Our principal solicitor's Supreme Court wins

Dott & Crossitt's principal solicitor, Jared Zak, has been one of the most vocal critics of deposit flicking — and that advocacy recently landed him in the NSW Supreme Court, twice, with two wins to show for it.

Agency Settlements, a Riverstone Partners business that offers a third-party deposit-holding service, first sought an urgent injunction to restrain Jared from commenting publicly on the lawfulness of its business model, after he raised concerns about the practice in an industry petition. It then went further, commencing substantive proceedings seeking a declaration that its business model was lawful, and alleging Jared had engaged in misleading or deceptive conduct in breach of the Australian Consumer Law.

The Court declined to grant the injunction. Justice James Hmelnitsky found there were "many voices in the debate" about the Agency Settlements model, and that little was to be gained by silencing just one of them. A costs order was made against Agency Settlements.

Then, last week, Agency Settlements discontinued the underlying Australian Consumer Law proceedings against Jared altogether — and agreed to pay him $60,000 in costs. Jared has been characteristically direct about the outcome, describing the claim as "a pretty wild and ambitious claim to start with" and one he believes Agency Settlements now regrets bringing. Agency Settlements, for its part, said its business had grown since the case was launched, making it "difficult now to substantiate specific losses," and maintained it takes confidence from the Court's earlier observations about its business.

Speaking after the injunction ruling, Jared described it as a win that matters well beyond his own case: "this is first and foremost about the consumer." He has said he hopes the outcome encourages NSW Fair Trading to give the industry clear guidance — and ultimately to address the practice through explicit regulation.

Taken together, the two results are a significant vindication for Jared and for the many industry voices who have raised concerns about deposit flicking. They confirm that conveyancers, solicitors and other practitioners are entitled to keep speaking up about a practice they believe puts consumers at risk, without being shut down by the threat of litigation.

Where things stand

The court proceedings between Jared and Agency Settlements have now concluded, but the broader question — whether deposit flicking is lawful under the Property and Stock Agents Act — remains open. NSW Fair Trading has been asked to investigate, AUSTRAC has reaffirmed that agents can't outsource their AML/CTF duties, and industry bodies continue to push for regulatory clarity and a definitive interpretation of section 86. Until that guidance arrives, our advice to clients — buyers, sellers and agents alike — is simple: know exactly who is holding your deposit, insist on the protections you're entitled to under the standard contract, and get independent legal advice before agreeing to any arrangement that changes how your deposit is held.

If you have questions about a deposit-holding arrangement you've been asked to agree to, or you'd simply like clarity on your rights before exchanging contracts, get in touch with the team at Dott & Crossitt.

This article is general information only and does not constitute legal advice. Please contact us to discuss your specific circumstances.