Recent Concerns and Experiences – Where to from here?

by John Punch - Short Punch & Greatorix Lawyers 4th of August, 2021

Recent Concerns and Experiences – Where to from here?
© ra2 studio / Adobe Stock

Not everyone’s experiences in management rights are the same and over the years I have had to deal, for clients, with most scenarios, both good and bad. By keeping a good relationship with a majority of owners, managers will always place themselves in a good position for their ongoing business.

I mention some of the occurrences that I hope will broaden the knowledge of managers and perhaps create discussion on improving the system of serving everyone’s needs, within the laws that exist.

The first situation that comes to mind is the attitude by some lot owners and their bodies corporate of: “We own the management rights, not the manager!” Or ‘Dads Army’ to the rescue!

Recently, a largish strata titled building of apartments, with both short and long-term lettings, plus live-in owners of the lots, found the opportunity to not renew the Caretaking and Letting Agreements. The manager, rather than staying the distance and operating the letting business, sold up the managers unit and left. The body corporate advertised for and engaged a capable couple with experience in management rights, who took a short-term contract and leased a unit to live in, in the building, conducting both the caretaking and letting for a reasonable reward and obtaining the ability to earn income from the commissions of the lettings. The body corporate and its lot owners felt that it was in a better position with a short-term arrangement. Then, the short term ran out.

Without a more secure longer-term contract, the managers were not happy. The body corporate committee decided that they could get a new operator, on a much-reduced salary for, the short term. They advertised and got someone willing to give it a try with a very low remuneration and where there was no opportunity of building up any good will, based on the enterprise of the manager. However, the party would not be living on the site and could not afford to, for the much-reduced payment!

What ensued was that the lot owners could see a much reduced “servicing” arrangement for both their letting and caretaking needs at the building, for the various categories of owners and possibly that this might lessen the value of their lots and lower the standard of the building. You might say “the penny dropped” that management rights, on an enterprise-based system of a live-in manager, catering to everyone’s needs, in a building, is far more superior to that of an employee type of arrangement, where the income of any letting business that the manager earned, was utilised to subsidise cheap management of the common property and it’s building.

So, the general meeting secret ballot approval of a new non-live-in manager resulted in a “no” vote, to the chagrin of the committee, thus producing a void in management and letting at the building!

No doubt this will bring the building to a position of having to rely on an ad hoc employed caretaker and both the live-in owners and letting owners are left having to rely on an offsite management, without an “on call” operator, the managers unit has been sold and for any employee to be renting in the building adds too big a cost to the caretaking!

It also becomes a bit like ‘Dads Army’, where the committee may have to be on hand for the building to operate via an employee. What happens when the employee has sick leave or holidays or decides to quit?

The situation also reminds me of a client body corporate, which engaged my firm to rewrite new Caretaking and Letting Agreements for an existing onsite manager, provided the manager then sold the business and the managers unit/ office within a short period of time (for various reasons). The committee wished to give the opportunity for the manager to sell up and the body corporate have an agreement designed to restrict or minimise the lettings lots of the building.

At a meeting I attended, for all the owners, discussion turned to the body corporate letting the current agreements run out and then having an employed person to simply perform the caretaking and maintenance work for a salary, no “enterprise based live in manager” would then exist for the building and no certainty of managing the lettings.

Quickly the meeting got into disarray with all of the competing groups of owners: the live-in owners, the short-term letting owners and the long-term letting owners all seeking to have their interests protected, particularly when it was realised that an employee might take sick leave and would need holidays as well as daily supervision. The involvement of the committee members for that role (again a ‘Dads Army’) certainly did not find favour!

Explaining that the tried-and-true system of management rights operated to produce a live-in responsible party, soon steered the owners back to the task of a caretaking and letting agreement, suiting both the manager and the owners!

Which brings me to the second observation or concern… What has happened in the sphere of body corporate management, where the party contracted to assist the body corporate to administer the building in its arrangements and to assist the owners, no longer seeks to guide the committee and the owners in respect to the need to have a worthwhile onsite management, by relying on a management rights operator?

More and more we are seeing that the body corporate manager is not working in parallel to the onsite manager, and helping the path of management rights, as they should be. They seem to be guiding body corporates to “anti-management rights” lawyers. This needs to be addressed by an industry education process with the body corporate managers, I would suggest.

To round off my observations, it is necessary to cover the situation where, more and more, the developers of buildings are not ensuring that the area of the office for the caretaking and letting arrangements, which the developer sells - is to be included in the ownership of the manager’s lot, to give security to the future of the management rights, beyond simply the Caretaking and Letting Agreements. It seems that this comes about from, firstly, the law stating that there can be a grant by a body corporate for an “occupation authority”, for common property areas built into the agreements, but only for the length of the term of the agreements (not an exclusive use by law anymore) and, secondly the developers legal advisers/surveyors are not ensuring that the developer takes the ownership of office path, for the future management rights owner.

This failure is encouraging the treatment of management rights as far more transient in nature and almost a “wasting asset” one where there is no security beyond the term of the agreements.

I am hopeful that these observations of mine lead to some firming up in the discussion and ideals of the management right’s industry, to ensure that the industry in Queensland will not be eroded through ignorance and lack of a coordinated approach, by those who have an ability to ensure a positive position is maintained. Such discussions and concern should involve the representatives of the industry, members of parliament and their advisers as well as those involved or engaged in the body corporate management/ development of buildings. Good will towards the management right’s industry appears to be missing, where our state government appears to be lacking.

Finally, getting back to the building now struggling with the owners having voted against a short term, employed caretaker and letting agent. That scenario only came about because the onsite, management rights owner /operator, at the time, failed to exercise an option! Every management rights operator must ensure the proper diarising of the timing for exercising management rights agreements options (if one is in the agreements), and always ensure that it is properly exercised to allow the term to be extended. This cannot be stressed more firmly!

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