Tale of two classes: the loophole used by Henderson Advocacy director and others to fast track real estate licence

The 26-year-old entrepreneur worked in the construction industry for more than seven years before he made the leap about three years ago into the world of real estate.

Now, he "navigates the upper echelons of the industry with old-school work ethic", he says, after being awarded a class 1 agent licence, and with it the ability to become a licensee, without the two years' of skills and experience needed to earn it under current NSW Fair Trading requirements.

In NSW, licenses are split into two classes: those with a class 1 can own and operate their own business, sign contracts and agreements and manage a trust. Class 2 agents must spend two years on that licence before they can apply for a class 1.

Mr Henderson was issued a class 2 licence in NSW on September 11, 2020.

Just over a year later, on September 17, 2021 - he was a class 1 agent and a licensee - able to work independently as a sole trader and open and authorise trust account transactions for a business as a licensee in charge (LIC).

When Mr Henderson applied for his licence, a loophole allowed class 2 agents in NSW to apply for a licence in the ACT under a mutual recognition scheme.

At the time, the ACT system was not split into two classes.

From July 1, 2022, ACT Government reforms changed the system to follow the NSW model that requires agents to have at least two years' experience before being awarded a class 1 licence.

The reforms said consumers placed "significant trust" in the real estate industry to carry out work on their behalf and that it's "essential the industry is appropriately trained" to do that work to the highest standard.

Real Estate Buyers Agents Association of Australia (REBAA) NSW representative Michael Ossitt said the minimum requirements were in place for a reason, so agents had the experience to help people make one of the biggest decisions of their lives.

"A property is the biggest asset that somebody will buy and or sell, and so for someone to kind of jump into that role with no prior experience, and then to start advising clients and help them make decisions is obviously a huge issue if they've never worked in that role under the supervision of someone else," he said.

"It's like a doctor getting a quick certificate, rocking up to the hospital and operating on someone the next day without ever having practised or worked under the supervision of someone before."

According to Mr Henderson's online profile, he knows there's a difference between 'knowing it all, and being a know-it-all' - with a "new school way of walking and talking that truly sets him apart".

He said his own portfolio now sits at upwards of $23 million. He also gives investment, real estate and purchasing advice on his TikTok account where he's amassed more than 44,000 followers.

A NSW Fair Trading spokesman said all real estate licence holders in the state were subject to continuing professional development under their licence class.

"As per the public register, Jack Henderson was granted a class 2 real estate licence on September 11, 2020, and a class 1 real estate licence on September 1, 2021," he said.

"NSW Fair Trading is unable to provide further customer details due to privacy considerations."

Mr Henderson declined to comment on questions put to him by the Newcastle Herald, but said on Facebook he had not felt the need to comment on what was happening because he did not "value the opinions of the people who are sharing them".

The Herald is not suggesting Mr Henderson has placed any of his clients at risk due to a lack of the experience, training or prior supervision he would have had, had he obtained his class 1 licence under the NSW requirements, rather than through the mutual recognition scheme.

A Herald investigation revealed earlier this week the state's property services watchdog is making "active inquiries" into PRD Presence Newcastle and director Mark Kentwell's links to Future Property Co, which trades as Henderson Advocacy.

It is understood NSW Fair Trading is looking at a number of property sales where PRD Presence represented the sellers and Henderson Advocacy represented the buyers.

Henderson Advocacy has offices in Newcastle and Sydney. Mr Henderson and Mr Kentwell, who is the majority owner of sales agency PRD Presence Newcastle, regularly call themselves co-founders of Henderson Advocacy and Mr Kentwell is linked to a 50 per cent stake in the business.

Agents in NSW are not permitted to act for the buyer and seller of a property at the same time, or to profit from both sides of a sale.

Mr Kentwell has denied any wrongdoing, saying he does not work for Henderson Advocacy, has not profited from the half share of the business that is linked to him and PRD made "adequate disclosures" about the business relationship to clients.

Mr Henderson said on Facebook that people should do their "research around the real estate act".

"Understand what guidelines there are around shareholding," he said.

He went further to defend a controversial non-disparagement clause in his agency agreements that some clients have labelled a "gag clause".

"Understand that when you pay lawyers tens of thousands of dollars every year on legal advice and documentation their role is to protect you, like our lawyers have done with our non-disparagement clauses," he said.

"Understand corporate structuring and when you are legally obligated to disclose things and when you are not."

He urged readers not to pass judgement, unless they were "educated" on the topic.

"The majority of people in this group aspire to do great things. Build big businesses and serve a lot of clients," he said.

"And when you do that, like we are doing, you get a target on your back from people who are not where you are.

"This could be any one of you at some stage in your journey. Anyway, I'm getting back to building the biggest advocacy firm in Australia and building the biggest buildings in the world."

Talking generally about the industry, experts say legal loopholes and system shortcuts that allow agents to effectively run their own businesses with limited experience do pose a threat to the real estate profession and clients.

Registered Training Organisations (RTOs) are now actively encouraging students to apply for a real estate licence in states like Queensland to cut the queue and gain a class 1 licence through the mutual recognition scheme.

It means buyers agents with little experience can handle hundreds of thousands of dollars on behalf of unsuspecting buyers.

Leverage Group is one RTO that encourages its students to apply for a licence in Queensland. Others can use its internal agency Leverage Listings' Merlin Pathway to work under chief executive Bailey Compton, who grew up in Newcastle, as a licensee.

He provides access to data, mentorship, and education, as well as preparing agency contracts and agreements for an initial fee of $308, then a subscription of $310 per month.

According to documents seen by the Herald, Leverage Group spruiks it as a "great option for people looking to get their own licence who don't want to work under someone else".

NSW Fair Trading has confirmed it is investigating Leverage Group, but a spokesman said it was not in a position to release details.

The Herald is not suggesting Mr Compton engages in licence lending.

Despite offering the option to students, Mr Compton acknowledged that when he worked in policy he knew the mutual recognition scheme would "appeal to the lowest common denominator".

"Everyone is entitled to take an approach, this is in every industry, people will walk across state borders to see how they go," he said. "Is it a loophole? Yes it is.

"Is it bad for the industry? What I'm not seeing is a massive amount of consumer detriment."

Mr Compton spent 11 years working with the Office of Fair Trading, the last five of those were regulating real estate in NSW.

He said he trained about 1000 students each year and wished there was a common, consistent approach to licensing across Australia.

"It really is about enforcement by NSW Fair Trading and they've got their limitations in terms of resources unfortunately, it really is about us as an industry holding people to ransom when they don't perform, when there is a consumer complaint," he said.

"I'm not having buyers agents come to me saying someone is suing them or making a complaint and I'm not having consumers come to me and saying the agents got together and dudded me. I've never had that.

"If there's a whinge out there I usually hear it - and I'm not hearing it."

REBAA NSW's Mr Ossitt said if these loopholes were open, people were going to take advantage of them.

"So you've got people, new entrants into the industry, some with prior related experience that might have worked in property or finance, that may be slightly related, but they don't have any experience of doing the job under somebody else's supervision," he said.

"Or there's people coming from totally non-related industries, setting up a business and then helping people to buy property and helping them make millions of dollars worth of decisions without any experience, and obviously that is a big problem."

All they need to do is rent a desk in the state to use as a business address for the application.

Real Estate Institute chief executive Tim McKibbin said he wanted all real estate agents to be required to sit an exam before they were granted a licence.

"People not surprisingly gravitate towards RTOs that will push them through the course without too much friction," he said.

"The irony in all of this is that because people aren't properly educated, we have an 80 per cent churn in agents coming through the system, 80 per cent of the people that join the industry leave the industry in the first 12 months."

And, it's not just RTOs that teach students how to legally fast-track their licence.

The Buyers Agent Institute (BAI) is one of several non-accredited courses available online that promises to help give prospective agents the tools to make large sums of money using other people's cash.

Chief executive Ben Handler co-founded Australia's largest buyers agency Cohen Handler - before he left the business to start his own venture in education.

His $9800 course offers students online mentoring and training, and refers them to Leverage Group.

Once signed on with Leverage Group, students are taught how to take shortcuts to gain their real estate licence or own and operate their own business.

One student who did the BAI training said he paid about $6000 for the course, was recommended to Leverage Group and went to the ACT, where he qualified for a class 1 licence.

"Then you use mutual recognition to get your class 1 licence in NSW, it was a complete shortcut," he said.

"So, in hindsight I probably shouldn't have done that, but I've got it now so there's no going back."

He said the course helped him get his foot in the door during COVID but it "really didn't take much time to complete at all".

"It had a really good sales funnel. For someone who was wide-eyed and naive, it got me in," he said.

Mr Handler said he didn't see any risk to the consumer, and said he started BAI to fill a gap in the market for buyers agents desperate for specific training.

"I don't control licensing, it's a government related issue," he said.

"When I started my former business Cohen Handler, I did my licence and thought, 'how do I become better at negotiating and liaising with real agents to drive better outcomes?'

"There was no training to teach people on how to run a professional and customer-centric, focused buyers agent business. There was only qualification training."

NSW Fair Trading confirmed it is making "active inquiries" into BAI.

Another BAI student told the Herald that while she learned a lot in the course, it could have focused more on due diligence to the client and less on marketing and gaining clients.

She said Leverage Group wasn't the only training organisation BAI recommended to her, and that specific courses for buyers agents are few and far between.

Sydney-based buyers advocate and agent mentor Veronica Morgan said legislators and regulators didn't fully appreciate the risks to consumers of letting buyers agents get licensed in an "easy way".

She prides herself on providing property insights "without the bull----".

"If the course doesn't teach you the skills and the core competencies to do the job, and you're not required to work for somebody else who's got experience, then how the hell can a new buyers agent actually know what to do?" she said.

She said when a client engaged a buyers agent, they didn't know enough about property to "sort the wheat from the chaff".

As a result, she said buyers often won't know for another five or 10 years whether their purchase was a good investment.

"This is the real problem and some of these people won't even be in the industry then - they'll be flogging the next version of crypto," she said.

"They will not be around to be held accountable.

"That's one of the main issues, that without that depth of understanding, experience and the evidence to back up their approach, consumers are the ones left holding the can - not the buyers agent."

Read Mr Kentwell's full statement here, and a second statement here.

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