Published: 17 March 2007.

By Small Myers Hughes Lawyers

As I have pointed out an numerous occasions in prior articles, there are two types of Caretaker Agreement in New South Wales - those that were entered into prior to the 10 February 2003 and those that were entered into on and after the 10 February 2003.

One of the important amendments introduced on the 10 February 2003 was the ‘term limitation’ whereby all future agreements could not have a term (including options) exceeding ten years.

The critical thing to note about the term limitation is its actual wording.  The Act states that a Caretaker Agreement will expire…’when ten years have expired after it commenced to authorise the Caretaker to act under it..’.  Agreements entered to prior to the 10 February 2003 have been sheltered from this term limitation.

With new Agreements having a maximum term of ten years, there will be increasing pressure on Caretakers to make an application to the Owners Corporation to ‘top up’ their caretaking term.  If you are a Caretaker looking to sell or refinance, you will generally want to look at topping up your Agreement to the maximum ten year term so as to satisfy your financier or purchaser.  The critical issue is how you go about doing this.

One would think that all you need to do is to vary your existing Agreement by adding a further option, to bring the term back up to the ten years.  Whilst this will work for Agreements entered into prior to the 10 February 2003, it will not work for Agreements entered into after this date.

The reason I say this is that the legislation makes it quite clear that a Caretaking Agreement expires ‘when ten years have expired after it commenced to authorise the Caretaker to act under it’.  In other words, the critical date for calculating the period of the Agreement is the commencement date.  If, for example, an Agreement commenced on the 1 January 2004 it will expire on the 31 December 2013.  Any later variation of this Agreement to add additional options to bring the total term up to ten years will not overcome the fact that the Agreement (pursuant to the legislation) will expire ‘when ten years have expired after it commenced to authorised the Caretaker to act under it’.

Consequently, the only way to ‘top up’ Agreements entered into after the 10 February 2003 is by way of entering into new Agreements or effecting some form of ‘re-engagement’ of the old Agreement.

The morale of the story – get your ‘top up’ done by a specialist strata/management rights lawyer. 

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