TWO EDGED SWORD

Contributed By: Short Punch & Greatorix on

When the original Body Corporate and Community Management Act 1997 was drafted, it contained a provision that made it illegal for a Body Corporate to seek, or accept the payment of an amount, or conferral of a benefit for itself for the engagement of a person as a Service Contractor (“Caretaker”) or authorisation of a person as a Letting Agent.  These ultimately became Sections 113 and 115 of the Body Corporate and Community Management Act 1997, in which they are also extended to cover replacement or renewals of any engagements or authorisations.

The provisions worked well to protect Caretakers and Letting Agents from being held to ransom by bodies corporate.  They have also worked well to focus body corporate committees and lot owners minds on good management, rather than short term gain for existing lot owners.  However, in some cases lot owners have indicated a dog in the manger attitude – if there is nothing in it for us why should we help out the Caretaker/Letting Agent.  The simple answer to that is that it promotes stable management, and decency in business.

Even where there are concerns about the current Caretaker/Letting Agent’s performance, the best approach is to bring the term of the Caretaking/Letting Agent Agreements up to a level where they become saleable, on the basis that the Manager agrees to sell to someone approved by the Body Corporate as part of the process.

Based on a recent decision by a QCAT member hearing an appeal from the decision of an adjudicator (BRK Resorts Pty Ltd v Popescu [2017] QCATA), it appears that a Caretaker/Letting Agent has found a way to offer incentives in exchange for agreement to add a further option to the Caretaking and Letting Agreements, without breaching the provisions of Sections 113 and 115.  In that case, incentives were offered to individual lot owners that were in the letting pool, and were not requested by or offered to the Body Corporate.  The incentive involved the promise by the Caretaker/Letting Agent to provide furniture packages to lots in the letting pool, if the majority of lot owners voted in favour of a motion, to add an additional option to the Caretaking and Letting Agreements.

At the general meeting to consider the motion, there was a tied vote, which in accordance with the legislation and the Australian way of doing things, was decided in favour of the Caretaker/Letting Agent by the toss of a coin.

One of the lot owners applied to the Commissioner for an order overruling the resolution, on the basis that it provided for an act which was illegal under Sections 113 and 115 of the Act.

The Commissioner’s adjudicator ordered that the resolution was invalid because it would result in a breach of Sections 113 and 115 of the Act.

The Caretaker/Letting Agent appealed to QCAT’s Appeals division and a member of the tribunal ruled that the resolution was valid.  It is clear, from the reasoning involved in the QCAT members making this decision, that for such resolutions to be clearly valid, it is best for there to be no involvement by the Body Corporate or its committee in seeking or receiving a benefit.

The decision was made by a member of the tribunal and not by an adjudicator in the Commissioner’s office.  Therefore it should carry weight as a precedent for future decisions

Of course this opens the way for individual lot owners to lobby the Caretaker/Letting Agent for an incentive for the lot owner to vote in favour of a motion to extend or add an option to a Caretaking or Letting Agreement, without breaching Sections 113 and 115 of the Act, although this was not determined in the BRK Resorts case.

It will therefore be necessary for Caretakers and Letting Agents to be prepared for arguments against such incentives, based on commercial considerations, when putting motions to a Body Corporate for extensions of, or options being added to Caretaking and Letting Agreements.

Leave a Reply

Your email address will not be published. Required fields are marked *