This Q&A has been received from a NSW management rights owner and concerns the management rights agreement renewal process in NSW.
Table of Contents:
- QUESTION: Our caretaker is also an onsite letting agent. An agreement exists for caretaking, however, there isn’t an agreement for the letting agency. Is the OC required to have an agreement with the letting agent?
- QUESTION: Our management rights operators have asked for a 10 yr extension on their agreement. This will result in a 25 yr agreement. What is the average management agreement in NSW?
- QUESTION: I am the owner of management rights in a NSW strata scheme and our agreement is due to be topped up. During negotiations with the committee, the strata manager has circulated the draft agreement to non committee lot owners. Is this the usual process?
Question: Our caretaker is also an onsite letting agent. An agreement exists for caretaking, however, there isn’t an agreement for the letting agency. Is the OC required to have an agreement with the letting agent?
Our caretaker is also an onsite letting agent who operates onsite and uses common property. An agreement exists between the caretaker and owners corporation for caretaking, however, there isn’t an agreement for the letting agency. Does this leave the owners corporation financially and legally vulnerable? Is there a legal requirement for an agreement between the owners corporation and the letting agent?
Answer: Though not a requirement, an agreement protects the onsite letting agent and the owners corporation.
There is no common law that requires an onsite agreement between the owners corporation and the letting agent. However, it is highly advisable to have an agreement in place setting out the rights and responsibilities of the owners corporation, letting agent and the use of common property. This protects both the onsite letting agent and the owners corporation. There are likely further issues that need to be considered, such as insurance issues, particularly public liability insurance.
Similarly, if the letting agent is using parts of the common property for their caretaking duties, it is advisable to have an agreement in place. If they own a lot in the strata scheme, it would be by way of by-law. If they do not own a lot, it could form part of the caretaker agreement or be in the form of a lease or licence.
Matthew Jenkins
Bannermans Lawyers
E: [email protected]
P: 02 9929 0226
This post appears in the November 2023 edition of The NSW Strata Magazine.
Question: Our management rights operators have asked for a 10 yr extension on their agreement. This will result in a 25 yr agreement. What is the average management agreement in NSW?
We live in a holiday accommodation/motel-based strata complex. Our caretaker lives onsite.
The management rights were bought 6 yrs ago. They have asked for a 10 yr extension. This will result in a 25 yr agreement. This seems a very long time!
Is the manager setting up to sell halfway through their term and trying to make it a better deal for themselves? The caretakers will not last another 25 yrs, so new people will come in and we have no say!
What is the average caretaker management agreement in NSW? In this situation, what options do we have?
Answer: You should check what the contract says about assignments.
- Under the current laws (since November 2016), the maximum period a strata manager can be appointed is 1 year at the First AGM, and 3 years after that. A 3-year appointment is normal.
- The maximum period for a caretaker/building manager is now 10 years, unless they had already been appointed for a longer period before 30 November 2016. Some older agreements were grandfathered. For some coastal motel-style units, longer periods happen, also where building managers have “purchased” a contract. It sounds like this was an older agreement for > 10 years.
- For both strata and building managers, it can sometimes be appropriate to appoint them for a shorter “trial period” (eg 1 year), to see if they lift their game, or to allow the owners corporation to go to market and get tenders.
- Leasing rights are different, and might be tied to the lease of the common property area they use. That is simply up for negotiation with no statutory limits. It is common and economical for one person to do both.
- If you fear the current caretakers (whether the on-site workers are employees or owners of the caretaker company) are looking for a longer contract beyond the expected working life of the current operators, it could well be they are looking to increase the value of the contract and on-sell. That is the logical explanation. You should ask them why they want such a long contract in these circumstances. It sounds like you have a fair relationship with the current on-site managers but if the current contract still has a long time to run, I wouldn’t be recommending extending it this early on.
- You should check what the contract says about assignments to new purchasers. Usually it says the owners corporation cannot unreasonably refuse but in this case, you might either agree to the extension with full discretion to refuse assignments, or simply refuse the extension.
- One other point to raise could be this. Mention to the caretaker that under the new laws, the maximum period is 10 years. So as they already have a contract for that or more, it seems inconsistent with those laws to extend it further. Those new laws give you an excuse to refuse the extension (refer to section 68(1)(b) of the SSMA.
James Moir
Madison Marcus
E: [email protected]
P: 02 8022 1222
This post appears in the October 2022 edition of The QLD Strata Magazine.
Question: I am the owner of management rights in a NSW strata scheme and our agreement is due to be topped up. During negotiations with the committee, the strata manager has circulated the draft agreement to non committee lot owners. Is this the usual process?
I am the owner of management rights in a NSW strata scheme and our agreement is due to be topped up.
At our last AGM, it was “RESOLVED that the owners corporation delegate to the strata committee the negotiation of a new 10yr Building Management agreement with the owner.
I tabled slightly alerted agreements to the committee, and they voted to get legal advice from a strata specialist.
Two owners, not on the committee, requested and received copies of the draft agreement from the strata manager. These agreements have not been approved by the committee. These two owners are using the draft agreements to work against our request for a top-up.
Is it legal for the strata manager to give out draft agreements to general owners?
My understanding was that once the committee approved an agreement, the approved documents were presented to the owners to vote yes or no.
Answer: It is not “illegal” for the strata manager to provide the draft building management agreement to non-committee members, though it is not routine.
It is not “illegal” for the strata manager to provide the draft building management agreement to non-committee members, though it is not routine.
Generally, as you suggest, the strata committee will negotiate the terms of the building management agreement for consideration by the owners corporation at a general meeting. That draft is usually attached to the agenda for the general meeting. Further, at the general meeting, there is nothing to stop owners from raising objections or seeking amendments to your agreement.
Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440
This post appears in Strata News #572.
Have a question or something to add to the article? Leave a comment below.
Read next:
- NSW: Owners Corporation Unable to Convince Supreme Court of NSW for Building Manager to Hand Over Contact Details of Owners Recorded on Strata Roll
- NSW: How are parcels and boxes delivered to my apartment?
- NSW: Does your Owners Corporation have a Misbehaving Building Manager? NCAT Gives some Hope with First-Time Orders to Terminate Caretaker Agreement!
Visit Building Managers OR NSW Strata Legislation
After a free PDF of this article? Log into your existing LookUpStrata Account to download the printable file. Not a member? Simple – join for free on our Registration page.
Leave a Reply