Sealing The Terms On The New Contract of Appointment – Owners Corporation Manager

Strata Community Australia has released a revised (Version 4- April 2016) Contract of Appointment Owners Corporation Manager Agreement.

Here is a brief summary of the main changes:

  1. The initial term of appointment (at the Inaugural General Meeting) can not be for a period of more than 3 years;
  2. Subsequent terms of appointment can not be for a period of more than 5 years;
  3. The additional fees and disbursement fees are now charged in 6 minute intervals and the Contract of Appointment allocates the number of units applicable to each respective task;
  4. Payment of additional fees are now payable upon presentation of an invoice;
  5. Importantly, the Contract of Appointment maintains the old roll over clause of one year after the expiry date however, notwithstanding that the contract may have rolled over, the Agreement will terminate at the next Annual General Meeting unless the re-appointment of the Manager is resolved by the Owners Corporation;
  6. Importantly, the Contract of Appointment has dispensed with the requirement that the termination of the contract is resolved upon by the Owners Corporation at a Special General Meeting. Instead clause 8.3 states that “The Owners Corporation must comply with the Act and any Regulations made under the Act when deciding the terminate the Appointment.”
  7. Additional duties/obligations have been included, a manager must “not exert pressure on any member of the Owners Corporation to influence the outcome of a vote or election by the Owners Corporation” and “Take all reasonable steps to ensure that any goods and services procured by the Manager on behalf of the Owners Corporation are procured on competitive prices and on competitive terms in line with OC’s procurement policy and is fair and reasonable” and disclose any beneficial relationship with a supplier or entitlement to commission; and
  8. Importantly, the indemnity provided by the Contract has included the words “to the extent permitted by law the Owners Corporation hereby releases and indemnifies the Manager.”

Overall, the revised Contract of Appointment is a lot clearer and it addresses some of the uncertainties surrounding a Manager’s appointment. It was expected that these matters would be addressed in the revision to the Owners Corporation Act back in April last year, however these changes never eventuated.

The revised Contract of Appointment clears up the uncertainties around the maximum term of an appointment and the differentiation between the initial term of a manager appointed by the developer and a subsequent appointment is in the writer’s opinion a positive reform.

Whilst the wording on paper may have cleared up some of the uncertainties, on a practical day to day operational level, there may be some significant hurdles that managers will need to overcome. For example, take this scenario:

You as the manager are coming to the end of the term of your appointment. You receive no written notice of revocation from the Owners Corporation and your twelve month roll over period kicks into gear. You call an Annual General Meeting and you have not one lot owner turn up. What then? The Contract of Appointment requires that your appointment is resolved upon at the Annual General Meeting but you have no member to resolve to do so? Can you rely on the Minutes of the previous Annual General Meeting in which the Owners Corporation resolved to affirm your appointment? Do you pack your bags and walk away?

Another question that arises is – so what is the accepted procedure for the Owners Corporation to resolve to terminate the Appointment? Reliance is once again placed on the Act which simply states that an Owners Corporation may resolve to appoint or revoke a Contract of Appointment. We seem to be going around in circles here….

Overall, the revised Contract of Appointment is clearer in its wording however it will be interesting to see whether it creates more question than it answers in its application.
Owners Corporations law and how it applies to a fact situation is a complex and technical area. Contact Richelle should have a query about an Owners Corporation legal matter on T: (03) 9077 1177 or E: office@rbermanlawyers.com.au

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