This Q&A is about what to do when you are coming up to the end of your owners corporation management contract in Victoria.
Table of Contents:
- QUESTION: Our strata manager is engaged on a standard 3-year contract. Each AGM includes a resolution to renew the three-year term, which gets up every year. Is this legal?
- QUESTION: I have built a townhouse in Victoria. I understand our strata managers manage the common areas. Do they carry out any other duties? Does the OC manager’s insurance policy cover my building and other residential property in the scheme?
- QUESTION: Can the committee make the decision to terminate our owners corporation manager or do we need an AGM?
Question: Our strata manager is engaged on a standard 3-year contract. Each AGM includes a resolution to renew the three-year term, which gets up every year. Is this legal?
Answer: Deciphering whether the strata manager’s contract is extended or renewed depends on the specific language of the resolution and subsequent contractual actions.
The manager’s resolution to restart their three-year term every year at your AGM could either be considered as seeking to extend the current contract or simply renewing the contract each year.
Extending a contract means increasing the duration of an existing contract without altering its terms. This is not permitted by the Owners Corporations Act 2006, which limits the maximum term of a manager’s contract to 3 years under Section 119(1D). The approved form of the contract of appointment also provides that the start and end dates must be clearly specified.
Renewing a contract entails terminating the original agreement and entering into a new contract. Section 119A(1)(b) of the Act prohibits the automatic renewal of the contract at the manager’s discretion. Instead, both parties must agree to discharge the original contract and enter into a new one.
Under Section 122 of the Act, the manager is obligated to act honestly and in good faith, ensuring they do not misuse their position for personal gain or exert undue influence on members of the owners corporation. There is no suggestion of untoward behaviour in the original query.
Deciphering whether the strata manager’s contract is extended or renewed depends on the specific language of the resolution and subsequent contractual actions. Adherence to the Act and ensuring transparency and mutual agreement are critical in these circumstances.
Fabienne Loncar Moray & Agnew Lawyers E: floncar@moray.com.au P: +61 3 8687 7319
This post appears in Strata News #709.
Question: I have built a townhouse in Victoria. I understand our strata managers manage the common areas. Do they carry out any other duties? Does the OC manager’s insurance policy cover my building and other residential property in the scheme?
Answer: Your owners corporation manager is appointed by the owners corporation to manage the common property of your owners corporation and provide services to you as per the contract of appointment.
Your owners corporation manager is appointed by the owners corporation to manage the common property of your owners corporation and provide services to you as per the contract of appointment (“COA”) under section 2.1. Your manager’s duties include:
- accounting,
- arranging insurance,
- maintaining and keeping the documentation pertaining to your owners corporation,
- convening your Annual General Meeting,
- arranging minor repairs and maintenance of the common property,
- providing guidance to the owners corporation to enable the owners corporation to perform its duties and functions and to generally implement the decisions and instructions in accordance with the contract.
Further duties known as additional services may be performed and are set out in schedule 2.2 of the COA.
The manager holds professional indemnity insurance as required by section 119(5) of the_ Owners Corporations Act 2006 (Vic). This is separate from the insurance for your building.
Your owners corporation has a separate insurance policy. It will outline the coverage specific to your owners corporation (excluding personal contents). A copy of your policy and the product disclosure statement is available (or can be made available) either on the owners portal or can be sent to you upon an email request.
Sim Firns The Knight Email P: 03 9509 3144
This post appears in Strata News #664.
Question: Can the committee make the decision to terminate our owners corporation manager or do we need an AGM?
We’d like to change our owners corporation manager. Can the committee make the decision to change as long as there isn’t a signed current delegation under section 11 of the Owners Corporation Act? If so, can the committee terminate the manager with 28 days’ notice at any time or do we have to hold an AGM? Does an ordinary resolution ballot need to take place?
Does an owners corporation manager have the right to object to the termination by the committee and proceed to ask each owner for their vote and provide their signature (pseudo ballot)?
Answer: A committee has the power to terminate an owners corporation manager.
Provided that the delegation of authority to the committee is not restricted to prevent the termination and appointment of a manager, a committee has the power to terminate a manager under section 119 of the Owners Corporations Act.
No annual general meeting or special general meeting is required. However, if there is a contract of appointment signed by the owners corporation, the owners corporation may be in breach of the contract of appointment if the contract was not terminated in accordance with its terms (i.e. midway through a term for convenience rather than a breach).
It is important that legal advice is obtained so the owners corporation can assess the risks of termination and the potential for a claim for breach of contract. Some owners corporations restrict the appointment and termination of a manager under section 82 of the Act, in which case a manager can only be terminated at an AGM or SGM.
A manager has no right to call a ballot unless authorised to do so under section 83 of the Act.
Phillip Leaman Tisher Liner FC Law E: ocenquiry@tlfc.com.au P: 03 8600 9370
This post appears in the June 2023 edition of The VIC Strata Magazine.
Have a question about what to do when you are coming up to the end of your owners corporation management contract in Victoria or something to add to the article? Leave a comment below.
This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.
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