Extracting Blood from a Stone: the Lengths Some OC Managers Will Go To…

Background – Owners Corporation in Victoria

How does a strata management / owners corporation management contract from 2009 still torment owners 10 years later???

 

 

The owners in this owners corporation (located in Melbourne’s bayside) contacted us in mid-2019. The owners corporation had long held concerns about their owners corporation manager…

The incumbent owners corporation manager was:

  • Unresponsive, hard to get a hold of, all phone calls only ever went so far as the receptionist, and the manager never replied to phone calls or emails;
  • Rude and unprofessional when she (the manager) did speak to the owners or committee members;
  • Slow to action anything… and when things finally got actioned, the owners corporation would only ever receive one quote – which the owners found questionable;
  • The financial statements of the owners corporation was always poorly presented – the balance sheet effectively consisted of a cash balance in the corner of the income and expenditure statement; and
  • Whilst the owners corporation management company’s management fee was low/inexpensive on the surface of it… there was A LOT of additional fees and charges.

 

Low Owners Corporation Management Fee – Lots of Additional Fees & Charges

Committees and owners take note – when it comes to changing owners corporation management companies and getting a bunch of different strata management quotes – don’t be fooled by the seemingly low management fees alone. Read the fine print, obtain a copy of the proposed owners corporation management contract, and understand the implications of what services/items are additional.

 

Changing Owners Corporation Management Companies

We met with the owners, we reviewed their requirements and the priorities for the building. After a thorough tender and selection process and numerous discussions, the OC was ready to move ahead.

For Committees convening Special General Meetings, they should be mindful of the following:

  • That the SGM is convened pursuant to Section 74(c) of the Owners Corporations Act 2006;
  • That the agenda is stipulated in accordance with Section 75 of the Owners Corporations Act 2006;
  • That the notice meets the requirements of Section 76 of the Owners Corporations Act 2006; and
  • That the owners corporation achieves a quorum for the meeting in accordance with Section 77 of the Owners Corporations Act 2006.

 

Terminating Owners Corporation Management Contract

The last signed owners corporation management contract was from 1 January 2009, for a term of 3 years. The contract of appointment was signed by lot owners (under the direction of the owners corporation manager) at the 2009 AGM.

The owners corporation manager upon receiving their notice of termination claimed to have another ~1.5-2 years left to run on their contract!

How could that be possible (even in the landscape of owners corporation management)??

It turned out that the owners corporation manager’s view of the world (and their owners corporation management contract) was that…:

  • On 1 January 2012 (upon expiry of the 3 year term), the contract miraculously “rolled-over” for a further term of 3 years;
  • Then on 1 January 2015, the contract miraculously “rolled-over” for a further term of 3 years; and
  • Then on 1 January 2018), the contract miraculously “rolled-over” for a further term of 3 years.

So it was by this logic that in 2019 (a whole 10 years after the contract was signed) that the owners corporation management contract still had another almost 2 years left to run…

Really quite incredible and incredulous.

 

What Happened Next with the Owners Corporation

The owners corporation  sought to clarify these matters with the incumbent manager. It turned out that the incumbent owners corporation manager was all too willing to let the owners corporation change to another management company – provided they were duly compensated.

After further exchanges and references to the Owners Corporation Act 2006 – the incumbent manager backed away from their claim of having 1.5 to 2 years left to run on their management contract.

At this juncture, it is worth noting that the cash balances of the owners corporation was low. The incumbent owners corporation manager then proceeded to claim $2,500 as their fees for preparing the books and records for handover…

The incumbent owners corporation manager issued an invoice to the owners corporation to that effect – however there wasn’t enough funds in the OC’s accounts to cover that amount.

The unscrupulous manager decided to issue a special levy (on their own accord) to all lot owners – before the handover had taken place.

The owners corporation was once again left flabbergasted. They had already been put through a lot by this manager and management company. This was their homes, most of the owners were elderly retirees and they certainly didn’t sign up to endure all of these things.

The management of the owners corporation was eventually handed over to the new owners corporation management company (pursuant to Section 127 of the Owners Corporation Act 2006).

 

Just When the Owners Corporation Thought it was Over…

A few months after the new owners corporation management company had taken over – the owners were happy and getting on with things. Then the owners corporation received notice to appear in VCAT.

Turns out the previous manager really wanted that $2,500 in full.

The owners were worried – their owners corporation funds were already low and they really weren’t in a position to spend money on lawyers (especially when the amount in contention was $2,500).

One of the owners contacted us and we agreed to help represent them at VCAT (we’re certainly not lawyers or necessarily well versed running VCAT matters – but they asked for and needed our help).

The outcome at VCAT was that, before the member made a ruling on the matter, the parties were asked to try to reach a settlement. On one hand, the owners corporation management contract (yes that contract from 2009!) had provisions for exit fees. Whilst on the other hand, some of those provisions/clauses could be rightly be deemed ‘penalty costs’ to exit the contract.

Some middle ground was reached, it must be said that the outgoing owners corporation manager was somewhat willing to budge on that figure… All it took was a heck of a long process and for an elderly owners to train all the way into the city for a day at VCAT.

 

Not Sure How to Change Owners Corporation Management Companies?

Speak to Strata Management Consultants Melbourne on 1300 917 848 or email us at office@strataconsultants.com.au

 

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