{"id":303,"date":"2016-08-15T07:58:22","date_gmt":"2016-08-15T07:58:22","guid":{"rendered":"http:\/\/www.theonsitemanager.com.au\/news\/?p=303"},"modified":"2016-08-16T07:56:08","modified_gmt":"2016-08-16T07:56:08","slug":"consent-to-transfer-of-management-rights-agreements-whats-reasonable","status":"publish","type":"post","link":"https:\/\/theonsitemanager.com.au\/news\/consent-to-transfer-of-management-rights-agreements-whats-reasonable\/","title":{"rendered":"Consent to transfer of Management Rights agreements. What`s Reasonable?"},"content":{"rendered":"

Some time ago I published an article on what I thought was reasonable for a Body Corporate to\u00a0request from a buyer of management rights, in considering whether or not a Body Corporate\u00a0committee should consent to the transfer of management rights agreements to the buyer (See the original article here<\/a>).<\/p>\n

This is an important issue, because under the Body Corporate and Community Management\u00a0legislation, a Body Corporate committee must not unreasonably withhold approval to a transfer.<\/p>\n

Under the legislation, one of the matters which a Body Corporate committee may have regard to is\u00a0the financial standing of the proposed transferee. My opinion as expressed in my previous article\u00a0was that it is doubtful that it is reasonable or necessary for a Body Corporate committee to require\u00a0detailed financial statements from a buyer who has approval from a bank for substantial financing to\u00a0complete the purchase of management rights.<\/p>\n

A bank has a better system of determining whether the financial standing of a buyer is sufficient to\u00a0take over management rights agreements, and in any case, it is not as if the Body Corporate will be\u00a0dependent on payments being made by the Caretaker to the Body Corporate.<\/p>\n

And so it came to pass that an adjudicator appointed by the Body Corporate and Community\u00a0Management Commissioner, was asked to consider whether it was reasonable for a Body Corporate\u00a0committee to require declarations in a particular form, in support of financial statements provided\u00a0by the buyer. After exhaustive analysis, the adjudicator decided it was not reasonable.<\/p>\n

As part of\u00a0that analysis, the adjudicator stated \u201cIt is usual in my view that sufficient evidence of financial\u00a0soundness would be acceptable by confirmation from a financier that the borrower had passed\u00a0stringent lending criteria\u201d. Evidence of financial approval for a substantial level of borrowing should\u00a0be sufficient evidence of this. The adjudicator also stated \u201cI find that while the Body Corporate is\u00a0entitled to understand the assignee\u2019s financial standing, they are not entitled to test the veracity of\u00a0their evidence of financial standing when the assignee\u2019s bank had tested their financial capacity.\u201d<\/p>\n

The end result was that the Body Corporate\u2019s legal and administrative costs relating to this\u00a0unreasonable requirement for a specific form of declaration of the buyer\u2019s financial position, could\u00a0not be passed on to the seller, leaving the Body Corporate, its solicitors, and the Body Corporate\u00a0Manager to fight it out over whether the costs that could not be reclaimed from the seller should be\u00a0paid by the Body Corporate.<\/p>\n

Since the Body Corporate\u2019s actions led to the buyer pulling out of the sale, it is likely that the seller\u00a0would have a claim against the Body Corporate for damages suffered as a result of the loss of the\u00a0sale. An adjudicator appointed by the Commissioner has no power to hear a dispute over a claim\u00a0for damages, but it is likely that a seller of management rights would be able to have such a claim\u00a0determined by a court or jurisdiction, having the right to determine contract disputes between a\u00a0Caretaker\/Letting Agent and a Body Corporate.<\/p>\n

As an aside, the adjudicator also found that the Body Corporate acted unreasonably in making it a\u00a0condition of consent that the buyer undertake a horticulture course.<\/p>\n

Another argument I put forward in my previous article, was that it is not reasonable for a buyer to\u00a0obtain and provide to the Body Corporate committee, criminal history checks, when such checks are\u00a0already carried out by the Office of Fair Trading under the process of granting or extending the real\u00a0estate agent\u2019s licence the buyer must obtain to continue to operate the management rights business\u00a0the buyer is purchasing. My investigations with the Office of Fair Trading have convinced me that\u00a0the information arising from police checks requested by bodies corporate, and those requested by\u00a0the Office of Fair Trading, both before issuing a new licence, and extending an existing one, provide\u00a0exactly the same information. It is a short step to the position that Body Corporate committees act\u00a0unreasonably in requesting that police checks be provided by the buyer when the Office of Fair\u00a0Trading already go through this process.<\/p>\n

I believe that body corporate committees and their legal advisors are putting their Body Corporate\u00a0at substantial risk of having to pay damages, because of their excessive demands in relation to\u00a0considering consent to transfer of management rights agreements.<\/p>\n","protected":false},"excerpt":{"rendered":"

Some time ago I published an article on what I thought was reasonable for a Body Corporate to\u00a0request from a buyer of management rights, in considering whether or not a Body Corporate\u00a0committee should consent to the transfer of management rights agreements to the buyer (See the original article here). This is an important issue, because under the Body Corporate and Community Management\u00a0legislation, a Body Corporate committee must not unreasonably withhold approval to a transfer. Under the legislation, one of the matters which a Body Corporate committee may have regard to is\u00a0the financial standing of the proposed transferee. My opinion as expressed in my previous article\u00a0wasRead More →<\/a><\/p>\n","protected":false},"author":1070,"featured_media":313,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_mbp_gutenberg_autopost":false,"footnotes":""},"categories":[3,2,4],"tags":[],"class_list":["entry","post","publish","author-martin-punchspglawyers-com-au","post-303","format-standard","has-post-thumbnail","category-accounting-and-finance","category-legal","category-the-management-rights-market"],"_links":{"self":[{"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/303","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/users\/1070"}],"replies":[{"embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/comments?post=303"}],"version-history":[{"count":8,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/303\/revisions"}],"predecessor-version":[{"id":327,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/303\/revisions\/327"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/media\/313"}],"wp:attachment":[{"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/media?parent=303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/categories?post=303"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/tags?post=303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}