“Unfair Contract Terms and Owners Corporations” is a common topic of discussion for us – both in conversations that we have with Committees and internally within the office. Over the years we’ve seen our fair share of difference owners corporation management contracts from across Victoria.
- Lengthy Contract Terms for Owners Corporation Management.
- Automatically “Roll-over” or Management Contract Extension Clauses.
- Additional Fees & Charges for Various Owners Corporation Services.
- Onerous and Unfair ‘Special Conditions’.
- Termination Provisions that Contravene Strata Management Legislation.
So, let’s take at a few example owners corporation management contracts and take a closer look at Unfair Contract Terms and Owners Corporations.
1. Lengthy Contract Terms for Owners Corporation Management.
There’s probably 2 main ways that owners corporation managers get themselves wonderfully lengthy management contracts:
- Get in front of the developer before the eventual owners have even settled on their townhouses or apartments;
- Pull aside 2 owners at the AGM and ask them to sign the signatures page of the contract…(yes, actually quite common and we’ve seen a few of these matters end up at VCAT with both parties submitting affidavits).
All new strata property developments need an owners corporation manager however a fair and reasonable initial contract might be 3 years and not 5 or 10 years.
Jimmy Thomson, a respected columnist and long-standing strata writer has
- “Management Contracts that are 25-Year Shackles”
2. Automatically “Roll-over” or Management Contract Extension Clauses.
Due to changes in strata legislation and Australian Consumer Laws, these clauses are now a lot less common. It used to be that the standard clause on most management contracts was that the auto-renewed for 12 months no notice was given:
We even had an owners corporation whereby the owners corporation manager was trying to claim that her contract from 10 years ago had ‘rolled-over’ for another 3 years…
3. Give Additional Fees & Charges for Various Owners Corporation Services.
The modus operandi for strata management companies seem to be to quote a low management fee and win the client that way… It’s a fairly common approach.
And as always, the devil is in the detail. Read the proposed strata management contract in-depth and scrutinise before signing. What are additional fees and charges? When and how often do they apply?
So how does a $21k base management fee turn into over $40k in actual fees and charges collected by the owners corporation management company? Very easily it turns out – watch out for those pages of additional charges…
4. Onerous and Unfair ‘Special Conditions’.
If you have your owners corporation management agreement in front of you, turn to page 16. More often than not clause 11.3 in the commonly used owners corporation management template is where the ‘Special Conditions’ are listed.
And when it comes to strata management and owners corporation management special conditions, there are certainly some doozies out there…
5. Termination Provisions that Contravene Strata Management Legislation.
Strata management contracts were drafted by lawyers engaged by strata management companies and as my old boss used to say to me – “whoever pays the piper, picks the tune”. So, it shouldn’t be surprising to owners corporations and Committees that they find that the management contract doesn’t favour them when it comes to changing owners corporation management companies.
Emilia Panayiotou a partner at CLP Lawyers has written this detailed discussion regarding how owners corporation can terminate their strata management contracts:
When Changing Owners Corporation Management Companies, Choosing the Right One Will Save a Lot Headaches Down the Track.
Due diligence and choosing carefully is important – have a read of this article for one example of where things didn’t go right – Don’t Trust a One-man Band with Your Money (or Owners Corporation Management).
Lastly, Strata Management Consultants ™ specialises in not only advising and guiding Committees on how to change body corporate management companies but have also carefully vetted every management company we work with. Find out more about the value of having a Strata Consultant working for you here, or feel free to get in touch on 1300 917 848 or via email at office@strataconsultants.com.au.
Unfair Contract Terms and Owners Corporations in Victoria? – Content Copyrighted 2020 by Strata Management Consultants ™
