This is a short note on transferring or terminating building management agreements under the Strata Schemes Management Act 2015.
Hi, this is Allison Benson from Thoughts from a Strata Lawyer and Kerin Benson Lawyers. Today I am following up on my previous post about building managers and I’m going to be talking about how to transfer a building management agreement and how to terminate one under the Strata Schemes Management Act 2015.
First, let’s deal with the less complicated matter of transferring a building management agreement. This is also often called an assignment of the agreement. Why does it happen? Well, let’s face it, building management contracts can be lucrative. As they can be for up to 10 years, we all know that life circumstances (and corporate circumstances for that matter) can change.
A building manager who intended to do the work themselves for the whole 10 years may no longer physically be able to do so, likewise a company may decide to change strategic direction and no longer want to operate in the building management space.
Rather than trapping the parties into an agreement that is no longer wanted section 69 of the Strata Schemes Management Act provides that a building manager may transfer their functions as a building manager to another person (note this can also be to another company) where the transfer is approved by a resolution of the owners corporation at a general meeting.
The term of the new building manager’s appointment is the same term as the outgoing building manager had. Effectively, the new building manager steps into the shoes of the outgoing building manager.
Most building management agreements will also have terms relating to transferring or assigning the agreement such as requiring the outgoing building manager to provide details of the proposed new building manager including enough information to assure the owners corporation that the proposed new building manager will be able to conduct the work.
Many agreements have a term saying that approval of the proposed new building manager cannot unreasonably be refused. Always, always look to the actual agreement as it will be key.
The building management agreement will also be key when an owners corporation is considering terminating a building manager.
Now, in my previous post, I discussed how to appoint a building manager and that it required a resolution of the owners corporation at general meeting due to section 68 of the Act. Section 68 requires a resolution to be passed by the owners corporation at general meeting to terminate a building management agreement in accordance with the terms if the agreement.
This means an owners corporation needs to consider whether there are grounds to terminate the agreement and if there is a process to do so set out in the agreement, to follow that process and to pass a resolution to terminate the agreement at a general meeting.
As noted previously, building management agreements can be lucrative and because of this any attempt to terminate an agreement is likely to be fought.
For this reason it is vital that the owners corporation gather its evidence of any breach, follow any process set out in the agreement itself to a tee and pass the resolution at a general meeting.
In fact, often there may be a preliminary resolution that the building manager has breached the agreement with an authorising to issue a notice, a further resolution that the breach has continued after the timeframe required by the notice and then a resolution passed to terminate the agreement.
Essentially, transferring or terminating a building management contract can get very complicated, very quickly. This has been general advice and I suggest obtaining specific legal advice if this is something your owners corporation intends to do.
This is general information only and is not intended to be legal advice. I strongly recommend that you seek legal advice tailored to your situation.
Kerin Benson Lawyers