Here at Short Punch & Greatorix Lawyers we do keep a watch out for what we call “rogue activity” conducted by Body Corporate committees and their chairpersons where they might impact on the business of the on-site Managers.
When we see this happening, we particularly encourage our clients to act simultaneously in two directions. Firstly we encourage them to work with all of the owners on a process of informing the owners in the Scheme where the committee may be “off the rails” and may be acting unlawfully, not only to the detriment of the on- site Manager but in a manner that is likely to cause harm to the Scheme generally and its owners, particularly its letting unit owners.
Secondly, we conduct a search of Body Corporate records and offer assistance to our client to commence an action with the Commissioner, for dispute resolution under the BCCM Act.
Because of our interest and knowledge particularly relating to this field of activity, we will often give an initial interpretation of the Act or Module Regulation at a minimal fee, in order for the Manager to determine if they wish to go down the path of commencing the seeking of adjudication, through raising a dispute with the Commissioner.
Recently we have been encouraged by two decisions of the Commissioner’s office, very beneficial to building managers; one for which we assisted our client to obtain an order to have a transfer fee refunded; and the other in which we discovered on research a decision concerning commencement dates of Caretaking and Letting Agreements (Service Contracts and Letting Agent’s Authorisations). Commissioner’s Order for Refund of Transfer Fee
We acted for our client who purchased Management Rights only after a great deal of investigation and research into what might be necessary to perform the activities requested for the performance of the building manager’s duties.
He was an Australian of Chinese origin and he was keen to do a good job for both the Body Corporate and the letting owners. He and his family made certain that they carried out all of the duties of the Caretaking Agreement and more.
However, they seemed to face a hostile committee, with demands for activity beyond the duties specified and, in some regards, which would put the Manager at risk if undertaken. Our client was treated with a certain amount of distain and what could be deemed bullying from some people within the Body Corporate.
This continued to such an extent that our client started to suffer depression, and mental anguish which, after a period of time, caused his doctors to advise him to sell the Management Rights. The Manager had obviously improved matters at the Scheme, as the buyer was willing to pay a justified price, which was more than the price paid less than two years earlier.
There was a great deal of difficulty for our client in getting the Body Corporate to give its consent to an assignment, which consent was ultimately given but with two financial impediments. The transfer fee of 2% of the business sale price was required, even though our client had made the Body Corporate committee aware of the reasons he was selling due to hardship, and the expenses of the Body Corporate (legal and administration) which exceeded $8,000.00 were to be paid by the Manager as Seller.
Making certain that all of the i’s were dotted, and the t’s crossed in the process meant that our firm was able to encourage our client to seek a Commissioner’s Order that the transfer fee was incorrectly imposed, due to the Body Corporate refusing to accept the evidence of hardship. The Commissioner did make the Order that the transfer fee was incorrectly imposed, and must be refunded by the Body Corporate. This brought much joy to our client, and helped heal the wounds of some of the earlier activity, that had aided in producing his depression.
Commencement date of Caretaking and Letting Agreements
In the second matter of researching decisions of the Commissioner, we found that our firm’s earlier advice on the dating of Agreements, was confirmed by the Commissioner as correct. We do find that from time to time, we have used an interpretation and application of the BCCM Act and Module of Regulation that other solicitors might disagree with.
The background to the instance in which the Commissioner decided in favour of the building manager, is that the date of an Agreement for Caretaking and Letting or Body Corporate Management, must be within twelve months after the General Meeting Motion, resolving to enter into the Agreement (Section 119 of the Accommodation Module and Section 121 of the Standard Module).
There had been an argument from lawyers (particularly one lawyer representing a bank for its finance due diligence), where it was simply stated by the lawyers that Caretaking and Letting Agreements were void if the commencement date preceded the date of the Body Corporate’s General Meeting resolution to enter into the Agreements. The pedantic argument was that the term did not start within twelve months, after the passing of the resolution. The commencement of the term before the resolution was within the intent of the Section not to have agreements commence more than 12 months after the resolution.
There is no doubt that the section is badly worded as the intent of the 1997 Act and Modules was to simply ensure that there is not a “stacking” of Agreements so that one Agreement could be for a period of 25 years and another Agreement entered into at the same time could have a start date after that period of 25 years. I am pleased to advise that in the decision of Ephraim Island – Subsidiary (2014) QBCCMmr423, the Adjudicator order that an application to declare the Agreement invalid because the term commenced before the resolution to enter into the Agreement was passed, was dismissed.
In the reasons for the decision the Commissioner fully considered the wording of S119 and the intent of the Section, and made it very clear that the start date of the term of an Agreement could precede the date of the Agreement, as the purpose of the Section was to ensure that the date of commencement of the term was not later than twelve months after the date of the resolution. The Adjudicator specifically stated “In fact, it is not uncommon for Contracts to be back dated. Moreover, there is nothing in the legislation generally that prevents a Body Corporate from retrospectively approving something. That is not uncommon and accepted by Adjudicators.”
It is likely that this decision will be followed in any future adjudications on this point.
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