The Mortgagees Right to your Owner's Rent

11 November 09

Have you ever been in this situation?
You manage a building and you let out a unit on behalf of an owner pursuant to a management agency agreement. You receive a call from a Bank saying that they are the mortgagee of the lot and the owner has defaulted in making payments under the mortgage and the Bank demands future rent cheques. You feel pressured into paying the rent to the Bank but you subsequently receive a call from the owner threatening to sue you for redirecting the rental payments to the Bank.


Schedule 1 of the Property, Stock and Business Agents Regulation 2003 (Regulations) contains the general rules of conduct applying to all licensees and registered persons and provides that an agent must:
• Act in the owner’s best interests at all times
• Act in accordance with the owner’s instructions
unless it would be contrary to law


In addition, your appointment to let with the owner specifies that the rent is to be paid to the owner. Clearly you don’t want to breach your fiduciary obligations to the owner or commit an offence under the Regulations, so it is important to establish that the Bank is lawfully entitled to be paid the rent before doing so.

Before acting on the Bank’s request, you should ask the Bank to provide the following information to you in writing:
1. Confirmation that the loan is one which is regulated by the Consumer Credit Code (the borrower must be a natural person and the loan is provided wholly or predominantly for personal, domestic or household purposes). If so, ask the Bank for evidence that it has a court order for possession of the property.
2. If it is not a Consumer Credit Code loan, have the Bank confirm that there has been a default under the mortgage in the payment of principal or interest.
3. If the Bank does not supply you with either 1 or 2, try to obtain a written authority from the owner to pay the rent to the Bank.
4. It is also handy (but not imperative) that you obtain from the Bank an indemnity for any rent paid by you to the Bank if it is later found by a court that the Bank incorrectly entered into possession of the property.


Unless you have the above written evidence, you are better off continuing to pay the rent to the owner and not to the Bank. If you don’t, you risk being sued by the owner for breach of the appointment to let and/or action being taken against you under the Regulations, which may result in monetary penalties and cancellation of your licence.
 

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 95

The Different Types of Caretaking Agreements

17 November 2014

(15954 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 ...

Unit Entitlement in NSW

11 February 2013

(9753 views)

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

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

16 July 2015

(8055 views)

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

Is it Time to Change the Management Rights Model?

13 May 2013

(7789 views)

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

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

17 January 2014

(7504 views)

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

Be Careful with your Proxies!

03 October 2013

(6160 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

(5922 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

(5452 views)

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

Caretaking and Letting Agreement Essentials Part 1

03 September 2014

(5194 views)

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

For Your Eyes Only!

15 April 2013

(5142 views)

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

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

12 August 2013

(5116 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

(4929 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

(4740 views)

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

Not Getting the Fundamentals Right

15 October 2013

(4456 views)

A recent decision of the NSW Consumer, Trader and Tenancy Tribunal (CTTT) has highlighted the importance of ensuring that the ...

Manged Investment Schemes

15 July 2008

(4426 views)

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