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THE BENEFITS OF MANAGEMENT RIGHTS AGREEMENTS – TO ALL PARTIES

By October 17, 2020No Comments

Article prepared by John Punch Partner at SP&G Lawyers

Having handled multi-unit developments for Developers, Buyers of lots, Body Corporates and Management Rights Operators since the 1970s, it never ceases to amaze me to find how the basics that were  put in place in Queensland, for strata titling of multi-unit buildings and their management back then, are still serving all parties involved, so well – but are still being attacked by a certain few people for various reasons (mostly money related).

Once you move away from a separated one residence lot to multi-lot arrangements, a whole new series of items and needs have to be covered – hence the Community Titles laws and arrangement which have been made by statute, particularly in Queensland. Generally speaking, they are well thought out from those original days, and provide a “balanced” situation for everyone to work to, rely on, and benefit from.

It particularly bothers me to see some lawyers, advising Body Corporates, and Body Corporate Managers, as well as even some Body Corporate committee members and lot owners – stating that the Management Rights system of Body Corporate Contracts, has no benefits for lot owners and is only there to benefit the manager!

This particularly crops up because every so often the terms of the Agreements and the terms of the Engagement need to be extended or reviewed, resulting in the need for a Variation Deed to be entered into. When this is occurring, a party might decide to advise the owners that the Variations Deed is only there to benefit the Manager – and that is a falsehood!

Often, it is not realised that combining the three elements of Management Rights – the Caretaking Agreement with the Body Corporate, the onsite Letting Agency arrangements with owners and the ownership by the Manager of an area of reception desk, office and living quarters (Manager’s unit) by the Manager, gives owners a very secure and reasonably priced coverage for all of the owner’s needs.

A major benefit to all parties is the fact that the Manager can “double task” with a resulting economy of scale (the caretaking and letting activities combined into one operation) whereby the cost of caretaking of the common property, including the gardens, interior, and exterior of the building, is completed at far lesser cost than if a completely separate property management group had to be involved. This is particularly so for any medium or large size projects. Subsidisation of the cost of caretaking by the Manager often occurs, as a result – with savings to all owners not just the letting ones!

Then there is the aspect of having an “interested Onsite Manager” being constantly available or for all owners needs, with an owners vested interests and a residence in the building.

Also, there is the comfort to absentee owners of knowing that their tenanted lot is constantly cared for by their agent, living at the building complex and being aware of the tenant’s use of their lot, rather than being office bound away from their property.

So, when someone presents the “false statement” that the Management Rights and associated Agreements with the Body Corporate only benefit the Manager, there needs to be a resounding reply – “that is a falsity!”.

As a practitioner in legal matters, I was particularly reminded of this recently, when a Body Corporate Committee for a prominent high-rise building of apartments, consulted me for its needs as regards a Caretaking Agreement. Many years ago, a few protagonists in the building had destroyed some of the elements of the Management Rights, by hiving off the Caretaking Agreement from the Letting Agent, who still owns and runs the reception area and the letting of units for owners in the building.

It is now being realised that having an annually, renewable Contract with an external party is not so good!

The strains on the committee members, competing interests and desires of various owners and the constant supervising of an offsite contractor, has led some of the current committee to wonder why the caretaking was not left on a long term Contract commitment with the onsite letting Manager – the Manager being onsite, with office/reception and the conduct of letting the owners’ tenancies.

Then there are the legalities, with the limit on spending decisions in General Meetings of owners in the Body Corporate, which means that several “quotes” for the caretaking must be obtained (even if the current contractor is doing a good job) whenever the Contract is remade and producing the necessity of a Motion with “alternatives” for owners choice of contractors. This must happen before there can be an annual engagement rather than a extension of the Caretaking Contract.

Recently, the Body Corporate Commissioner ordered that a renewal of a Caretaker’s  Contract Motion, had not been validly passed. It would have been different if the Caretaker was running full Management Rights, under Agreements for both Caretaking and Letting. Now, an EGM must be held and the committee must find several alternatives to offer owners, for the caretaking services!

None of this is necessary when “standard” Management Rights on long-term commitment are in place via the Body Corporate and Agreements are made for both caretaking and letting.

So, I get back to my original point, we have an excellent, well thought out and balanced system, as to parties needs and rights in Queensland. This occurs with long-term contracts to Managers, who have a vested interest in the building as a lot owner and business operator. The system does benefit all parties – not just the Manager!

The correct message has to be constantly repeated, to owners, committees, Body Corporate Managers, and their legal advisors.

NB:     John Punch was appointed by the Real Estate Institution of Queensland to be its official advisor and representative with the Queensland Government in the 1990s to assist with the production of the Body Corporate and Community Management Act, in consultation with representatives of all other interested groups, which resulted in the Body Corporate and Community Management Act 1997 for Queensland.