Publications

QUEENSLAND -V- THE WORLD - South Australia
Author: Col Myers
Date: September,2010

This is the 6^th article in a series of articles that looks at the ability of developers to establish management rights in the various states of Australia , as well as New Zealand .

 

In previous articles, I have identified Queensland as the leading management rights state with over 2,350 management rights complexes.  When this figure is compared with NSW with no more than 200, Victoria  25 and ACT 5, you can see that Queensland completely dominates the industry in this country.

 

This article will look at restrictions on developers setting up management rights in South Australia , as well as on going issues such as the term of caretaking agreements, the ability to top up the term and the use of proxies in the process.

 

It is estimated that there are no more than 10 management rights complexes currently established in South Australia .

 

Restrictions relating to Developer Control Periods

 

·          Since 1 June 2009, it is no longer possible to register new or existing strata divisions (plans) under Strata Titles Act 1988 (Strata Act).  New plans are subject to the Community Titles Act 1996 (Community Act) and existing strata corporations are encouraged to agree, by ordinary resolution, to become a community strata scheme subject to the Community Act.

·          Under the Community Act there are no developer control period restrictions.

·          A developer must call the first general meeting of the Community Corporation within three months after the day on which two or more Community lots are first owned by different persons.

·          By-laws are registered at the same time as the plan is registered. By-laws cannot be inconsistent with the Scheme Description or the Development Contract, otherwise they will be invalid.

·          The Community Act allows the Community Corporation (Body Corporate) to grant a right to occupy part of the common property by unanimous resolution, provided the grant is not contrary to the Scheme Description or the by-laws.

·          The delegation of functions and powers by the Community Corporation is a matter to be addressed at the first general meeting of the Community Corporation.

 

Legislation Re Terms Of Agreements

·          There is no term limitation on Caretaking and/or Letting Agreements in the Strata Act or the Community Act.  Caretakers and on-site Letting Agents are not recognised under the Acts. 

·          Under the Community Act, the functions and powers of the Community Corporation, include:

(a)     administering, managing and controlling the common property for the benefit of the owners of the community lots; and

(b)     maintaining the common property and the property of the Corporation in good order and condition; and

(c)     where practicable, to establish and maintain lawns or gardens on those parts of the common property not required or used for any other purpose.

·          A Community Corporation may provide services for the benefit of owners and occupiers of lots of any kind that relates to the ownership or occupation of the lot, provided the services are only provided to and paid for by those who have agreed to accept the service;

·          A Community Corporation can delegate its functions and specifically, the function of ‘arranging for the maintenance and repair of the common property on behalf of the corporation;

·          However, a delegation of the Community Corporation’s functions or powers is revocable by the Corporation at any time, notwithstanding any agreement to the contrary by the corporation.  Consequently, regardless of the term of any Caretaking and Letting Agreement, the Community Corporation can terminate the agreement at any time if it resolves to revoke a delegation of its powers to the Caretaker or Letting Agent!

·          Letting Agreements require an empowering by-law authorising the entering into of a Letting Agreement.

·          There are no model by-laws in South Australia .  Consequently, a specific set of by-laws is required to be lodged with the community plan. By-laws are invalid to the extent to which they are inconsistent with the Act, scheme description or development contract.

·          A by-law cannot restrict the granting of a right of occupation of a lot, so the empowering by-law must not make it compulsory for all owners to use the on-site letting agent. A by-law may however, prohibit or restrict the owner of a lot from leasing or granting rights of occupation in respect of the lot for valuable consideration for a period of less than two months.

·          The Community Act also reduces the value of the votes of the developer at a general meeting such that the voting power of the developer can never be greater than the combined voting power of the other lot owners.

 

The Ability To Top Up

·          As there is no term limitation currently applying under either the Strata Act or the Community Act, a Caretaking or Letting Agreement can be topped up to any term by way of variation.

 

Financiers Rights

·          There is nothing in the Strata Act or the Community Act that compels a Community Corporation to enter into a Financiers Deed.  Consequently, a Community Corporation can reject outright any request by a financier of a Caretaker to enter into such a Deed.

·          However from a contractual point of view, some Caretaking Agreements do have provisions in them which require the Community Corporation to enter into agreements with Caretakers’ financiers. 

·          As with New South Wales , in an ideal situation, financier’s rights in relation to Caretaking or Letting Agreements should be incorporated in detail in both the Caretaking and Letting Agreements as well as the by-laws.

 

Legislation Relating to Use of Proxies by Developers and Caretakers when Entering into or Extending Agreements

·          The Community Act provides that a person nominated to attend and vote at meetings of a Community Corporation on behalf of another person (nominee) who has a direct or indirect pecuniary interest in any matter to be voted on at the meeting must disclose the nature of the interest of the nominee to the principal before voting where practicable to do so, or as soon as practicable after the vote is taken if it is not practical for the nominee to disclose it prior to the vote being taken.

·          Accordingly, a Caretaker or Letting Agent can obtain proxies and use the proxies to vote on any extension of the Caretaking of Letting Agreement provided the Caretaker discloses its interest in the vote to the owners.