The Ultimate Guide to Deciphering the Owners Corporations Victoria – Contract of Appointment / Strata Management Contract

Owners Corporation Management Companies

Owners Corporation Victoria (Management Companies) aka ‘OC Managers’ aka ‘formerly Body Corporate Managers’ contract their professional services to their clients (owners corporations) through a contract.

In Victoria, owners corporation managers may or may not elect to be a member of professional industry body. The two most common and recognised professional industry bodies are:

– Strata Community Australia (Victoria chapter)
– The REIV (Owners Corporation chapter)

 

The first owners corporations Victoria professional body was established by Brian McGrath and a few others – the Institute of Strata Title Managers; which would the SCA (Vic). As the owners corporation management industry in Victoria matured (and a lot of the buildings started to show their age) – it became clear:

  1. Building maintenance and repairs was needed;
  2. It feel to the OC manager to co-ordinate a lot of the back-end work when it came to buildings maintenance and repairs i.e. discussing with owners / Committees, gaining OC resolutions to raise funds, sending out special levies, chasing up special levies, getting quotes and discussions with trades / contractors, overseeing the work.
  3. A lot of this work was:
    1. Time intensive and consuming for the OC manager; and
    2. Sat outside of the normal scope / year to year / day to day running of the building and OC management duties (See Schedule 2.1 in the below).
  4. The OC managers in Victoria then started to quickly realise that as they were dedicating a lot of their time to rectifying/updating/repairing/maintaining these buildings for their clients – they should in turn charge for this additional service (See Schedule 2.2 in the below).

 

‘Contracts of Appointment’ / ‘Management Agreements’ that Owners Corporations in Victoria are party to

From our 10+ years of working with and sitting down with Committees of owners corporations in Victoria, we estimate that 70-90% of owners corporation managers in Victoria either:

  1. Use the SCA (Vic) contract of appointment template; or
  2. Use a variation (and sometimes unauthorised variation) of the SCA (Vic) contract of appointment template.

This templated contract of appointment has undergone many revisions and updates over the years:

 

 

Should Committees and owners corporations in Victoria be daunted by this contract of appointment?

The typical owners corporation management contract in Victoria sits at 18 to 21 pages… which ever way you slice it – that’s a lot of pages for a volunteer OC Committee to digest, read, and understand.

Are all pages necessary? Perhaps.

Could the contract of appointment be shortened and simplified? Most definitely and many of our trusted Owners Corporations Management Companies in Victoria have indeed done just that.

Why aren’t more contracts of appointments / OC management agreements more simpler, straightforward, and less confusing? Well probably for a number of reasons:

– The default / path of least resistance is to take the above mentioned template and make it work for them (being the owners corporation manager).
– The ‘it always been that way’ mentality and looking around everyone does that and uses that so we will do that and use that.
– It costs time or money to draft a new OC management contract i.e. the OC manager needs to dictate the time and effort or they need to engage a lawyer to draft it.

 

Strata Expert Tip
Committees and OCs should watch out and be wary of ‘annually in advance’ and sometimes ‘quarterly in advance’ as this has the potential to really hammer your Owners Corporation’s cashflows.

 

 

Owners corporation Victoria management contracts – Schedule 2.1 professional body corporate services

What does the ‘professional owners corporation management’ services fee in Victoria include and encompass?

 

Owners corporation Victoria management contracts – Schedule 2.2 additional services

What doesn’t the ‘professional owners corporation management’ services fee in Victoria include and encompass?

 

Owners corporation Victoria management contracts – Schedule 2.3 disbursements

What are the types of out-of-pocket ‘on-costs’ that owners corporation management companies in Victoria on-charge to OCs?

 

Strata Expert Tip
Big differences over time or the span of a year can arise when negotiating and tendering OC management contracts. We always ensure that we get our clients (OC Committees) a fixed or all-inclusive disbursements set-up when helping to change owners corporation management companies.

 

Areas for Committees to pay extra attention to when reviewing and negotiating OC management contracts

 

Strata Expert Tip
If there’s a long list of related companies and subsidiaries that provide services into the strata and owners corporation space – be very wary and sceptical. Why? Because in our experience and from what we see first hand week in and week out is that over time the service providers in your building will gradually be shifted to these related companies and subsidiaries.

 

 

Strata Expert Tip
Read and review the Special Conditions section! Self explanatory or you are welcome to read the fine print in the below real life example.

 

 

Does your Committee / OC need helping to review a contract of appoint or re-negotiate your OC management contract?

Since January 2014, we’ve spent our working days and evenings sitting down with OC Committees to discuss their various issues, concerns, and consider viable solutions. We work for and with OC Committees – we understand that being a volunteer Committee whilst it enables the running of your building still is and remains a volunteer position.

In 2023, buildings are complex, OC politics aren’t always easy, and sometimes compounding matters is a less-than-helpful OC manager.

If your Committee needs help to reviewing the management (and contracts of appointments / OC management agreements) of your Tier 1, 2, & 3 building – speak to us. We can be contacted via email at office@strataconsultants.com.au or on 1300-917-848.

Meet the Strata Consultants Melbourne team – https://strataconsultants.com.au/our-team
 
 

The contents of this article or website are only intended to provide a general overview of the topics discussed. The author of this article makes no representations as to the accuracy or completeness of any information and the information is not intended to constitute investment, legal or professional advice. You should seek professional advice before acting or relying on any of the content. This article does not contain references to any specific company, organisation or individual, unless expressly specified.
Posted
July 25, 2023
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