QUEENSLAND –V- THE WORLD – Australian Capital Territory
Author: Col Myers
Date: August,2010
This is the
4th
article in a series that looks at management rights around Australia and NZ and
underlines the strength of the industry in Queensland –v- the other states. It is
estimated that there are 2350 management rights in Queensland, 200 in NSW, and 25
in Victoria.
ACT is interesting
in that its legislation relating to management rights is quite extensive and certainly
the best outside of Queensland. This is probably because the highly respected former
lawyer
Restrictions Relating to Developer Control Periods
·
The Act imposes certain restrictions on the Owners Corporations during the developer
control period.
·
The development control period starts on the day that the units plan is registered
and ends on the day when at least one-third of the units in the registered units
plan are owned by persons other than the developer.
·
The relevant section provides that an Owners Corporation must not enter into any
form of management contract unless the contract is disclosed in
each contract of
sale of a unit in the registered units plan
and that either
the contract is for less than 2 years or is authorised by the ACT Civil and Administrative
Tribunal (ACAT).
The developer
or the Owners Corporation,
if established, can apply to ACAT for permission to enter into a contract.
·
ACAT can only authorise an Owners Corporation to enter into a contract if satisfied
that the terms of the contract are reasonable in all circumstances.
·
The Act provides that the Articles (by-laws) of the Owners Corporation cannot be
changed during the developer control period, nor can an Owners Corporation approve
the keeping of an animal by a unit owner in his or her unit, unless that right was
reserved in the contract to sell a unit.
Terms of Agreements
·
The Act provides that an Owners Corporation may, by ordinary resolution, enter into
a Service
Contract with a person.
·
An Owners Corporation however, cannot enter into a service contract for a period
of greater
than 3 years
during the developer control period unless ACAT is satisfied that the contract is reasonably
required for the purpose for which the unit’s plan is intended and authorises the
contract
before any unit is sold
and the contract is disclosed by the developer in any contract
of sale.
·
An Owners Corporation may enter into a service contract for a period longer than
3 years, after the end of the developer control period, if the contract is approved
by special
resolution of the Owners Corporation. A
special resolution is effectively a 2/3rd majority of those that vote.
·
The Act also provides that an Owners Corporation cannot enter into a service contract
with a service contractor for a period longer than
25 years.
If a contract is entered into for longer than 25 years then the contract is taken,
for all purposes, to be a contract for 25 years.
·
However, this term limitation does not apply to contracts entered into before the
commencement of the term limitation provisions (i.e. contracts entered into prior
to the 31st
March 2009).
·
The Act specifies that the functions of a service contractor are to assist an Owners
Corporation in the exercise of one or more of its functions in relation to common
property or part of the common property.
A service contractor can manage, supervise or maintain
and repair common property or part of the common property.
·
A service contractor may apply to an Owners Corporation to seek approval to the
transfer of a service contract.
An Owners Corporation may, by ordinary resolution,
agree to the transfer of the service contract. An Owners Corporation
must decide the application within 30 days of receipt of the application and cannot
unreasonably withhold approval or require a fee or other consideration for approving
the transfer.
However, an Owners Corporation may seek reimbursement of
reasonable legal and administrative expenses incurred in considering the approval.
·
The Act also provides the circumstance in which an Owners Corporation may end the
service contract.
An Owners Corporation may end a service contract for a
remedial breach, or misbehaviour, or the service contractor becoming bankrupt or
executing a personal insolvency agreement or otherwise agreeing to take the benefit
of any law for the relief of bankrupt or insolvent debtors, or if the service contractor
is convicted in the ACT of an offence punishable by imprisonment for at least 1
year.
However, before ending a service contractor’s appointment, because of a conviction,
the Owners Corporation must be satisfied that the conviction affects the service
contractor’s capacity to exercise the functions under the service contract.
·
Further, the Owners Corporation must end a service contract
if the service contractor is absent, other than on approved leave, for 14 consecutive
days or for 28 days in any 12 month period or for physical or mental incapacity
that substantially affects them from carrying out the functions of the service contract.
Ability to Top Up Agreements
·
Agreements entered into from the 31st March 2009 can be topped up to a term (including options)
of 25 years.
The top up can be affected by way of variation.
·
Caretaking Agreements entered into before the 31st March 2009 are not caught by any term limitation and provided
the agreement is varied only (and not re-engaged), can be topped up to any term.
Financiers Rights
·
The Act provides that an Owners Corporation must give the financier of a financed
service contract notice of any change made to the contract by the corporation and
the service contractor, or any agreement entered into by the corporation and the
service contractor that affects the contract.
·
The Act also provides the circumstances in which an Owners Corporation may terminate
a financed service contract.
To do this, the Owners Corporation must give the
financier written notice that the corporation has the right to end the contract,
and when the written notice is given to the financier, the corporation has the right
to end the contract, and the corporation must give notice to the financier, not
less than 21 days before the contract is ended. However, an Owners Corporation
may not give notice to end the financed service contract if the financier has given
notice of an agreement between the service contractor and the financier.
·
The Act specifies that a financer for a financed service contract can act under
the contract in place of the contractor (or appoint an agent for this purposes)
or appoint a receiver, or receiver and manager for the contract. The financier can only
take the action specified above if the financier has given written notice to the
Owners Corporation of the intent to act, and at the time that the notice is given
to the Owners Corporation, the corporation has not given the notice to the financier
(or has given and withdrawn that notice).
The Act requires the Owners Corporation to give
notice to the financier of the intent to end a financed service contract.
·
The Act also provides that if the financier authorises a person to act for the financier,
that person cannot be the service contractor or an associate of the service contractor
and must seek the approval of the person from the Owners Corporation.
The Owners Corporation may only consider the person’s character, competence, qualifications
and experience and must act reasonably in the circumstances and must decide as soon
as practical.
·
An Owners Corporation must not unreasonably withhold a person’s approval or require
a fee or other consideration for approving the person. However, an Owners Corporation
may seek reimbursement of reasonable legal and administrative expenses incurred
in considering the approval.
Legislation Relating to Use of Proxies by Developers and
Caretakers when Entering into or Extending Agreements
·
One section of the Act applies to a developer of a units plan who was appointed
as proxy under contract of sale of a unit in that units plan. The provision requires
a proxy disclosure statement that includes the name of the person appointed or the
position of the person appointed, the length of appointment and sufficient information
on the development matter to be included in each contract for sale of a unit in
the unit plan.
·
The section imposes restrictions on the developer’s use of proxy votes and states
that a developer must not exercise 3 or more proxy votes on a matter, which is consistent
with the proxy disclosure statement, at a general meeting of an Owners Corporation
for the units plan.
The developer must act consistently with the proxy disclosure
statement and cannot use the proxy for a matter other than a development matter.
The contravention of the provision by the developer voids the proxy.
·
The Act also states that a person entitled to vote at a general meeting of an Owners
Corporation must not:-
(a)
appoint a
proxy for more than 1 year after the day the appointment is made, or
(b) appoint a person as a proxy
if the person is:-
(i)
the manager;
or
(ii)
a service
contractor.
Consequently,
a Caretaker cannot hold proxies.