Common urban myths of management rights

period already granted under the agreement. An option is usually exercised by notice to the committee; a variation to add further term needs approval at general meeting. Failing to exercise an option is usually fatal to the agreement, but failing to obtain additional term at a general meeting just means the existing agreement continues.

By Frank Higginson, Partner, Hynes Legal

A committee cannot approve a new management rights agreement or the variation of an existing one - new management rights agreements and variations to existing ones need approval at general meeting by ordinary resolution. End of story.

Part of it must be driven by the constant changes in legislation and interpretation of that legislation, but there are some more ‘frequent fliers’ when it comes to misunderstandings in the management rights industry. I thought I would summarise what I see as most commonly misunderstood and hope that anyone reading this article gets at least one misconception corrected.

Maximum agreement term – the term that can be granted for a management rights agreement is capped only by the tenure authorised by the relevant Regulation Module (be that 25 years in the Accommodation Module or 10 in the Standard Module). It is not capped by the term originally granted under the agreements. If an agreement was originally granted for 15 years, it can be topped up to 25. I don’t know where this one came from, but it still pops up regularly.

Options and variations - that term can be a straight period or broken up into an initial period and options periods. Varying an agreement to add a further term is completely different to exercising the option for a

A committee can lobby owners - committees, like all owners (including you if you own a lot) can put forward opinions to owners and recommend they vote one way or another on any motion. There is no way to shut down opinion on matters that might generate discussion.

A resident letting agent’s licence is limited to just letting units in the building to which it relates - you cannot sell real estate for reward or manage other real estate outside your building without access to a full licence. You cannot let lots without a proper appointment – you need a Form 6 or a valid PAMDA20A to provide any services for reward related to real estate. If you don’t have that in place, the owner of the property can ask for the return of anything you have charged them. Never risk this! It will come unstuck at the time you go to sell too from a valuation perspective.

Lawyers can prepare sale contracts - this isn’t to put management rights brokers out of a job, but we can prepare contracts for any direct deals. But you had better be ready to have the difficult conversations and negotiations with the buyer if things come unstuck through the due diligence process. Most agents work harder after the deal is signed than before it!

Management rights agreements can only change when both parties agree - a management rights agreement is a contract. Like any other contract it can be changed but only when both parties agree to it. A manager achieves that by proposing a motion to general meeting which is then approved. A committee cannot unilaterally dictate a change of an agreement to a manager unless the manager agrees. If a committee puts a motion to general meeting to change a management rights agreement it doesn’t matter if the body corporate votes it through. The manager still needs to agree to it.

A body corporate can buy a management rights agreement out - a body corporate cannot operate a business at law. Therefore, it cannot ‘buy’ a management rights business, but it can pay consideration to a manager to get them to relinquish their rights under it. Call it a surrender fee if you like. Managers enforce by-laws - they don’t. Good managers will help the committee police them by drawing people’s attention to them, but the actual enforcement of by-laws through the Commissioner’s Office is a responsibility of the committee. There are body corporate police - unfortunately not. If a tree falls in the forest and no one hears it, does it make a noise? That same question can be applied to lots of bodies corporate. Many operate outside the scope of the legislation, but until someone decides to make an issue of that, they just carry on. In the strata arena, the body corporate police are the owners and occupiers of that particular scheme.

A body corporate can tow a car - this one is actually sort of right, but the caveat is that it can only be undertaken with an order from the Commissioner’s Office. This is something that the law might change on soon, so stay alert to this, but in the meantime, managers should not get involved in instructing towing companies and the like - see the by-law enforcement furphy above.

If you think I have forgotten any, let me know! There will surely be enough out there for a second article.