Assignment of Management Rights in NSW

07 April 09

The assignment of Management Rights is not highly regulated in New South Wales. Accordingly, you have to revert to the Caretaking and Letting Agreements to look for specific terms to ensure that the assignment process is not frustrated.


Caretaking Agreement requirements
Caretaking Agreements contain assignment clauses that provide that the caretaker can only assign the Caretaking Agreement with the prior written consent of the owners corporation. Whilst the wording of these clauses vary from agreement to agreement, generally they are along the lines of the following:


“Owners corporation to act Reasonably
(a) The owners corporation shall not unreasonably, arbitrarily or capriciously refuse or delay giving its consent.
(b) The owners corporation shall give its consent or refusal within thirty (30) days of the Caretaker giving to the owners corporation all information reasonably necessary for the owners corporation to give its consent.


Consent Factors for Assignment
(a) If the Caretaker requests the owners corporation to consent to an assignment of its interest in this agreement, the owners corporation shall, prior to giving its consent, be entitled to require:
(i) satisfactory evidence that the proposed assignee and any associates, are financially sound and reputable, responsible, respectable, and capable of satisfactorily performing the caretaking duties;
(ii) two business references of the proposed assignee;
(iii) the proposed assignee to execute in favour of the owners corporation, a Deed of Covenant to comply with the terms of this agreement;
(iv) the Caretaker to pay all reasonable legal costs of the owners corporation incurred to obtain advice in relation to the assignment and the costs of calling and holding the owners corporation meeting to consider and approve the assignment.”


Statutory Requirements
The Strata Schemes Management Act 1996 (SSMA) only contains two sections relevant to the assignment of management rights:
Section 40B(3)
‘The functions of a caretaker under a caretaker agreement may be transferred to another person only with the approval of the owners corporation...’
Section 40B(4)
‘An owners corporation may …approve a transfer of the functions of a caretaker if authorised by a resolution at a general meeting of the owners corporation.’


Conflict
Clearly the statutory obligations in relation to the assignment of management rights are not as comprehensive as contractual obligations. In particular, under the SSMA, there is no obligation on the owner’s corporation to act reasonably in approving a transfer of the functions of a caretaker.


Accordingly, if 51% of owners voting at the general meeting act unreasonably in voting against consenting to the assignment of the management rights, the owners corporation (whilst complying with the SSMA) has acted unreasonably and breached the caretaking agreement. Most likely this will result in the Caretaker’s sale falling over and leave the Caretaker with an action against the owners corporation for loss suffered due to the owners corporation breach. The costs of such a default will be passed down to individual owners by way of special levies.


Qld position

The regulations under the Body corporate and Community Management Act 1997 comprehensively deal with assignment of management rights, including:
• What the Body corporate may have regard to in deciding whether to approve a proposed assignment
• 30 day timeframe for the body corporate to make its decision
• The requirement that the body corporate cannot unreasonably withhold approval of the assignment
• Allowing approval to be given on the condition that the assignee enters into a deed of covenant with the body corporate to comply with the terms of the agreements


Our view
Owners must act reasonably in considering an assignment of management rights and comply with the contractual obligations set out in the agreements or they may leave the owners corporation liable to legal action for breach of the Caretaking Agreement.


Also, it is important to remember that unlike Queensland, there is no transfer fee payable in NSW.
 

Share

Contact Us Now

Phone:+ 61 7 5552 6666
Fax:+ 61 7 5528 0955
Email:info@smh.net.au
Address:Level 2, 17 Welch St Southport, Qld, 4215
Postal:PO Box 1876
Southport 4215

Search

Search*
Search

Most Popular Articles

Management Rights News

Number of news items returned: 1 to 15 records of 68

Unit Entitlement in NSW

11 February 2013

(5876 views)

The issue of unit entitlement was recently looked at again as part of the Department of Fair Trading’s Discussion Paper ...

The Different Types of Caretaking Agreements

17 November 2014

(5294 views)

 Essentially, there are three types of caretaking agreements in the marketplace: “Do” agreements; “Supervisory” agreements; Hybrid “Do” and “Supervisory” agreements. “Do” Agreements A “Do” agreement ...

What Managers Need to know about the NSW Child Window Safety Devices Act 2013

17 January 2014

(5021 views)

Resident building managers have general obligations under their Caretaking Agreements to assist Owners Corporations with building and compliance issues. Managers ...

Is it Time to Change the Management Rights Model?

13 May 2013

(4699 views)

I think the time is right for the management rights industry to explore the creation of a new model. I ...

Be Careful with your Proxies!

03 October 2013

(3663 views)

In June this year, I wrote an article headed “Proxy Farming”, which set out the relevant restrictions on caretakers using ...

The Law Relating to Management Rights in Queensland

14 June 2010

(3620 views)

This article looks at the legislation in Queensland dealing with the constraints and obligations imposed on developers whilst they control ...

Duty Bound or Duty Free - Do you know what Your Duties Are?

23 September 2013

(3289 views)

The day-to-day care and maintenance of your resort facilities and communal areas is essential to its ongoing performance and success. ...

Owners Corporation Insurance - How do we Stop the Spiraling Costs?

12 August 2013

(3213 views)

In NSW, all strata schemes are required to be insured for the full replacement value, as well as public liability ...

Proxy Farming

10 June 2013

(3022 views)

It is often stated that Strata and Community Schemes represent the “fourth tier of Government” and, as such, voting (either ...

"Legal Action", All those in Favour say "Why"

15 July 2013

(2839 views)

I was recently involved in a New South Wales matter where an Executive Committee had received extensive legal advice from ...

Caretaking and Letting Agreement Essentials Part 1

03 September 2014

(2765 views)

We regularly prepare caretaking and letting agreements for new developments. However, it has become increasingly common for us to be ...

CARETAKING AND LETTING AGREEMENT ESSENTIALS PART 5: DISPUTE RESOLUTION AND TERMINATION

16 July 2015

(2709 views)

This month, we continue our examination of various clauses within caretaking and letting agreements and the important considerations to be ...

For Your Eyes Only!

15 April 2013

(2703 views)

Information is a commodity and for many, information is power. As you would most likely know from personal experience, the right ...

Being Aware of your Rights and Responsibilities

14 January 2013

(2683 views)

Every resident building manager in NSW should have a copy of the booklet issued by the Department of Fair Trading ...

Manged Investment Schemes

15 July 2008

(2665 views)

You may have heard the terms ‘MIA’ or ‘Managed Investments Scheme’ and wondered what it’s all about. If you operate ...