The Law Relating to Management Rights in Victoria

05 July 10

This article looks at Victoria where it is estimated that they are no more than 40 management rights complexes.
I will look at the constraints and obligations imposed on developers in Victoria whilst they control the Owners Corporation, particularly when it comes to entering into caretaking and letting agreements.
I will also look at the legislative requirements (or lack of them) in Victoria applying to the term of these agreements and the ability of caretakers and letting agents to “top up” the term.


DEVELOPERS’ OBLIGATIONS TO OWNERS
The Owners Corporations Act 2006 (Act) provides that an Owners Corporation has the following functions:
• to manage and administer the common property; and
• to repair and maintain:
 the common property;
 the chattels, fixtures, fittings and services relating to common property and its enjoyment …


The Act provides that an Owners Corporation may appoint or employ persons to assist the Owners Corporation in carrying out its functions. Hence, an Owners Corporation can appoint a caretaker to clean and maintain the common property. Also the Act provides that an Owners Corporation, by special resolution, may decide:
• to provide a service to lot owners or occupiers of lots or the public, or
• to enter into agreements for the provision of services to lot owners or occupiers of lots.


Hence, an Owners Corporation has authority to enter into a Letting Agreement.
The Act specifies that the developer must convene the first meeting of the Owners Corporation within 6 months of the registration of the plan. At this meeting, the developer must provide (amongst other things) a Maintenance Plan (which is compulsory only for prescribed Owners Corporations – being Owners Corporations with more than 100 lots or which collect more than $200,000 in annual fees per financial year), as well as any contracts, leases and licences binding or benefiting the Owners Corporation.


The key section of the Act that relates to management agreements states that a developer must act honestly and in good faith and with due care and diligence in the interests of the Owners Corporation in exercising any rights under the Act. This obligation also includes the developer taking reasonable steps to enforce any domestic building contract entered into by the developer in respect to the plan – but only while the developer is the owner of the majority of lots in the Owners Corporation and until the end of 5 years following registration of the plan.


Consequently, other than the obligations on a developer to act honestly, in good faith and with due care and diligence, there are no developer control period restrictions in Victoria.


TERMS OF AGREEMENTS
The Act has no limitation on the terms of agreements – including service contracts such as a Caretaking Agreement and a Letting Agreement.


THE ABILITY TO TOP UP AGREEMENTS
Again, because the Act has no restriction on the term of agreements, there is likewise no restriction on the ability to top up agreements by way of variation.


FINANCIERS RIGHTS

There is nothing in the Act that compels an Owners Corporation to enter into a financiers deed. Consequently, an Owners Corporation can reject outright any request by a financier of a Caretaker to enter into such a deed.


LEGISLATION RELATING TO USE OF PROXIES BY DEVELOPERS AND CARETAKERS WHEN ENTERING INTO OR EXTENDING AGREEMENTS
The Act provides that a person (including a developer) must not require or demand that a lot owner give the person or another person a power of attorney in favour of the person or other person or a proxy for the purpose of voting at a meeting or in a ballot of an Owners Corporation.
Consequently, developers are outlawed from using proxies to control meetings, particularly the first annual general meeting (when Caretaking and Letting agreements and generally entered into).
The Act also provides that proxies must be delivered to the secretary of the Owners Corporation and are effective from the beginning of the first meeting of the Owners Corporation held after it is delivered to the secretary and lapses 12 months after being given or, if there is an earlier date specified in the authorisation, on that date.
This section also provides that a person who is not a lot owner and who holds a proxy for a lot owner may not vote on matters affecting himself or herself relating to:
• the delegation of powers and functions under Section 11; or
• the appointment, payment or removal of a (strata) manager under Part 6.
As Caretakers or Letting Agents are not recognised under the legislation, there is no particular provision in relation to Caretaker’s or Letting agent’s use of proxies.
  

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