The management rights business model is well entrenched in Queensland and New South Wales, and a growing market in Victoria.
But what is less known is that management rights are also found in Western Australia, although they may not look exactly like what you are used to seeing.
One of the reasons that Western Australia has been slower to adopt the east coast form of management rights is that the legislation that governs the operation of strata schemes has remained largely unchanged for decades. This has meant that the newer systems and processes surrounding the day-to-day management of a strata scheme that have become the norm in Queensland or New South Wales have not become the norm in Western Australia. How owners meet and control the operation of a strata scheme in Western Australia can be fundamentally different from what you may be familiar with.
A strata company
One key difference in Western Australia is that the owners group in a strata scheme are called a strata company, rather than an owners corporation or body corporate. This is significant because in Western Australia it is possible for the strata company to operate a business and generate profits like a normal company. Instead of the strata company having to engage someone else to manage and operate the letting pool, the strata company can do this itself.
This means that when you are engaged by the strata company as the building manager, your engagement may look more like a contract to provide specific hotel services for a hotel owner, rather than an authority to operate a letting business at your discretion. You may even be a direct employee of the strata company, simply there to manage the strata company’s business as you would if you were employed for that role by a hotel chain.
It appears that, as strata companies have enjoyed a significant level of control for a very long time, the idea of giving free reign to a letting agent to run their buildings without strict control by the strata company has been slow to catch on. Many owners, no doubt, like the idea of having greater control over how their buildings are managed, possibly not realising however that they may not be the best equipped to make the necessary decisions.
Governance and conduct bylaws
In most states, the strata bylaws deal with the day-to-day rules for use of the lots and the common property, whereas the rules governing how the owners meet and vote on matters are dealt with in the legislation. In Western Australia, the bylaws for the strata company are separated into two categories – governance bylaws and conduct bylaws.
The governance bylaws, unsurprisingly, deal with the governance of the strata company, including how meetings are held, committees formed and votes cast. They also deal with matters concerning exclusive use of the common property and the charging of levies to owners. Conduct bylaws deal with how owners and occupiers are to conduct themselves within the scheme and include any rules that don’t deal with the governance of the scheme. The fact that the bylaws determine how the strata company is operated and the bylaws can be changed, gives owners in Western Australia a broader scope of possibilities than those found in other States.
The ability of the strata company to operate the scheme as a business for profit will be set out within the bylaws for the strata scheme. Likewise, the ability of the strata company to grant exclusive letting rights to a management rights operator will also be found in the bylaws. Bylaws that enable the strata company to operate as a business will likely also enable the strata company to switch to a conventional management rights business model.
Making the Change
In recent years we have assisted strata companies to move towards the conventional management rights business model, giving lot owners a way of stepping back from a business they may not be managing well, and potentially making a profit in the changeover. As more and more owners in Western Australia get a greater awareness of the management rights business model, we expect to see a rise in both the number of strata schemes converting to the management rights model, along with a jump in developers creating strata schemes with management rights in mind from the outset.
So, as the sun sets in the east, it is still shining in the west.
Disclaimer: This article is provided for information purposes only and should not be regarded as legal advice.