A QUICK COMMITTEE LEGAL GUIDE

group of strata industry trainers shaking hands with caretaker

1. Committee members are often advised that “a body corporate cannot unreasonably withhold consent to the assignment of a management rights agreement” and that “a body corporate cannot impose any terms or conditions on the assignment”. Could you please clarify for our readers today what a Committee may reasonably request?

Conditions are commonly imposed on consent to an assignment, or can be drafted as covenants the other parties agree to in the deed of assignment. Types of conditions that may be imposed on the Seller/Outgoing Manager at their cost:

  • Body corporate legal costs to consider the assignment (e.g. buyer competency – qualifications, experience, financial standing, terms of deed of assignment).
  • Body corporate administrative costs to consider the assignment (e.g. body corporate manager additional “outside of contract” administration service charges, including associated printing and postage fees).
  • Costs associated with assessing competency (e.g. appointment of a suitably qualified and independent consultant, such as, Diverse FMX, Leary & Partners, Seymour Consulting, to conduct the assignment interview and onsite competency assessment on behalf of the body corporate).
  • Payment of a transfer fee, where applicable only (i.e. if the transfer occurs within 2 years of the agreement being entered into or the last assignment).

Types of conditions that may be imposed on the Buyer/Incoming Manager at their cost:

  • Training/up-skilling requirements (imposed on inexperienced buyers).
  • Future caretaker performance management audit/s, in unique circumstances (imposed on inexperienced buyers).

2. On what grounds has a body corporate reasonably and successfully argued/denied consent to an assignment of management rights?

  • Lack of industry related experience and unwillingness to up-skill/undertake body corporate recommended training programs, if relevant to the work to be performed and to mitigate competency concerns.
  • Character issues (criminal convictions, histories of disputes, argumentative, dismissive or un-cooperative attitude), see for example in Riverbend Gardens [2016] QBCCMCmr 507.
  • Physically incapable of performing the required schedule of gardening and cleaning duties and/or not provide a sufficient alternate plan.
  • Poor communication skills (written and/or verbal).

3. Can you please provide some examples of “unreasonable” body corporate requests to avoid?

  • Imposing onerous and unnecessary requirements.
  • Requiring the completion of training that is not reasonably required for the performance of the caretaking duties. For example, requiring the completion of a horticulturalist course where the work only involves “the most minor of gardening duties of mowing lawns and maintaining garden beds in exclusive use common areas” – Pulse [2016] QBCCMCmr 54 at [26] .
  • Unrelated requests for variations to the agreement (e.g. requests to adjust the caretaker spending limit when the request is not related specifically to the transfer consideration).

4. What are some common pitfalls committee members should be made of aware of during the assignment process?

  • Ensure that the body corporate is acting in the best interest of all lot owners and engaging an independent body corporate specialist law firm to execute the assignment on behalf of the body corporate, immediately upon receipt of assignment advice/request.
  • Ensure that the outgoing manager/seller agrees (in writing) to meet any/all assignment related costs, in the event that the transfer/assignment fails.
  • Ensure that the body corporate clearly identifies who will in fact be the building manager where a corporation or company is stipulated – find out which person is responsible for the day-to-day performance of the duties and be satisfied about how the business will be resourced and who will be controlling it – for example see Sirocco Resort [2006] QBCCMCmr 426.
  • Note that the 30 day legislated time frame, in which the body corporate must consider the proposed assignment in management rights, commences once the body corporate receives all information reasonably required to make a decision (not when the body corporate is first notified of the sale).
  • If the buyer requests a warranty that there are no existing breaches, then ensure that any/all existing caretaker non-compliances is not outstanding and the body corporate is satisfied with the general condition of the common property at hand-over.
  • Ensure that the buyer gives substantial and meaning answers to questions put to them by the committee when assessing their suitability.

5. Is it reasonable for incoming buyers to request that a voting committee member/s also enrol to the body corporate recommended training program, where members may not possess (entry level) knowledge and understanding of the BCCM Act and/or (entry level) understanding of building compliance and caretaking agreement “schedule of duties”?

The incoming manager can request, but not require, this – particularly if the committee is asking the same of the incoming manager.

The greatest precursor to successful management rights in a strata community is a healthy and productive working relationship between the manager and the committee.

An assignment presents a fresh start to the conduct of the management rights, and committees should be encouraged at the opportunity to improve their own understanding of management rights.