ACT: Q&A Transparency & Conflicts around Maintenance Works Contracts

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These questions are concerning transparency around maintenance works contracts in ACT strata. Should strata managers and committee members declare conflicts of interest? Can the term ‘commercial in confidence’ stop lot owners from being able to view contracts?

Table of Contents:

• QUESTION: Are there any requirement in the Act for the Managing Agent to formally declare any interest/conflict of interest when it comes to the appointment of contractors for services to the Owners Corporation?
• QUESTION: Our Executive Committee has signed a Contract with a project manager to undertake major roof works on behalf of the Owners Corporation. We have been told the contract is “Commercial in Confidence” and that only the Executive Committee are able to see it. Why?

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Question: Are there any requirement in the Act for the Managing Agent to formally declare any interest/conflict of interest when it comes to the appointment of contractors for services to the Owners Corporation?

Are there any requirement in the Act for the Managing Agent to formally declare any interest/conflict of interest, when it comes to the appointment of contractors for services to the OC?

I’ve found that many Strata Management companies and Strata Managers have integrated their business model with the associated services providers (maintenance, gardening, cleaning, etc) or they have relatives/associates involved in these supporting businesses.

How can the Owners Corporation manage the risk and ensure independence of the Managing Agent?

Answer: If the manager discloses any affiliation to a contractor or service provider then this should discharge “conflict of interest” concerns.

In the ACT the Manager is bound by the Code of Conduct as noted in the legislation. If the manager is a member of the SCA then there is a Code of Conduct relating to membership of that body.

If the manager discloses any affiliation to a contractor or service provider then this should discharge “conflict of interest” concerns.

The majority of agents do act in the best interests of their schemes. If the owners have concerns then they can obtain quotes or request the manager to obtain additional.

We also note that owners and/or committee members should also declare “conflict of interests”>

Managers—code of conduct

1. Knowledge of Act and code

   A manager must have a good working knowledge and understanding of the Act, including this code, as relevant to the manager’s functions.

2. Honesty, fairness and professionalism
   
   1. A manager must act honestly, fairly and professionally in exercising the manager’s functions.
   2. A manager must not try to unfairly influence the outcome of an election for the owners corporation executive committee.
3. Skill, care and diligence

   A manager must exercise reasonable skill, care and diligence in exercising the manager’s functions.

4. Acting in owners corporation’s best interests

   A manager must act in the best interests of the owners corporation unless it is unlawful to do so.

5. Keeping owners corporation informed of developments

   A manager must keep the owners corporation informed of any significant development or issue about an activity carried out for the owners corporation.

6. Ensuring employees comply with Act and code

   A manager must take reasonable steps to ensure that the manager’s employees comply with the Act, including this code, when exercising the manager’s functions.

7. Fraudulent or misleading conduct

   A manager must not engage in fraudulent or misleading conduct in exercising the manager’s functions.

8. Unconscionable conduct

   A manager must not engage in unconscionable conduct in carrying out the manager’s functions.

Examples

1. taking unfair advantage of the manager’s superior knowledge relative to the owners corporation
2. requiring the owners corporation to comply with conditions that are unlawful or not reasonably necessary
3. improperly using the executive member’s position on the executive committee to gain, directly or indirectly, an advantage personally or for someone else
4. exerting undue influence on, or using unfair tactics against, the owners corporation or the owner of a unit in the units plan

9. Conflict of duty or interest

   A manager for an owners corporation (the first corporation) must not accept an engagement for another owners corporation if accepting the engagement may place the manager’s duty to, or the interests of, the first corporation in conflict with the manager’s duty to, or the interests of, the other owners corporation.

10. Goods and services to be supplied at competitive prices

    A manager must take reasonable steps to ensure the goods and services the manager gets for, or supplies to, the owners corporation are obtained or supplied at competitive prices.

Jan Browne
Bridge Strata
E: [email protected]
P: 02 6109 7700

This post appears in Strata News #450.

Question: Our Executive Committee has signed a Contract with a project manager to undertake major roof works on behalf of the Owners Corporation. We have been told the contract is “Commercial in Confidence” and that only the Executive Committee are able to see it. Why?

Our Executive Committee has signed a Contract with a project manager to undertake major roof works on behalf of the Owners Corporation.

Many owners would like to see the terms of the Contract which involves expenditure by owners of some $700,000.

We have been told that it is “Commercial in Confidence” and that only the Executive Committee are able to see it.

Such a condition was not agreed by Owners at the AGM at which the roof works were approved. Nor was it mentioned before the Contract was signed.

It is my understanding that as all owners legally constitute the signing party which is paying the costs, we are entitled to see the complete Contract.

The project manager has stated that a redacted version may be viewed under supervision, in his office and with no notes to be taken.

Work is about to start, so what can be the problem?

Answer: The commercial in confidence term cannot prevent the document from being inspected (in full) by eligible persons.

In reply to the question, I set out the relevant provisions of the Unit Titles (Management) Act 2011 below. These are fairly self-explanatory:

Section 119

119 Unit title certificate and access to owners corporation records

1. On request by an eligible person for a unit or the common property for a certificate (the unit title certificate), the owners corporation must, within 14 days after the day the request is received, give the person the certificate under the seal of the corporation giving the information about the unit or common property determined by the Minister.
2. A determination is a disallowable instrument.
3. On request by an eligible person for a unit or the common property to inspect the records of an owners corporation, the corporation must, within 14 days after the day the request is received, allow the person—

   1. to inspect:
      
      1. the information on the corporate register; and
      2. any other records held by the corporation; and(b) to take copies of any document inspected.
4. If a dispute exists, the owners corporation may withhold from inspection documents subject to legal professional privilege in relation to the dispute.
5. A request under this section must be in writing accompanied by a fee fixed by the owners corporation of not more than an amount determined by the Minister.
6. A determination is a disallowable instrument.

Section 121

121 Failure to provide information or certificate—offence

1. If an owners corporation for a units plan fails to comply with a request under this part for information or a unit title certificate, each executive member of the corporation at the time of the failure commits an offence.
   Maximum penalty: 50 penalty units.
2. It is a defence to a prosecution for an offence against subsection (1) if the defendant proves that:

   1. the person requesting the information, when asked by someone acting for the owners corporation, did not give the corporation reasonable grounds to believe that the person was an eligible person; or
   2. the defendant took reasonable steps to ensure that the request was complied with; or
   3. the failure to comply with the request happened without the defendant’s knowledge.

Dictionary

Finally, the Dictionary to the Unit Titles (Management) Act defines eligible person as:

eligible person, for a unit or common property in relation to which access to information is required, means:

1. the owner, or another person with an interest in the unit, or in an easement over the common property; or
2. for a unit that is owned, or part-owned, by a company—the representative of the company; or
3. anyone authorised in writing by a person mentioned in paragraph (a) or (b); or
4. if access to the information is necessary or desirable for the administration of this Act—the planning and land authority.

In short, the commercial in confidence term cannot prevent the document from being inspected (in full) by eligible persons.

Finally, it would be prudent for the owners corporation, given the sum involved, to have a lawyer review the terms of the contract for the work. I have reviewed dozens of these contracts and there are inevitably issues in relation to these contracts either in the manner in which the contract is documented or even in relation to basic issues like the calculation of the contract sum amount.

Christopher Kerin
Kerin Benson Lawyers
E: [email protected]
P: 02 8706 7060

This post appears in Strata News #177.

Read next:

• NSW & ACT: By-Laws & Rules – What are they? Who do they bind? Can they be enforced?
• ACT Case Note: How to Count the Numbers – Voting Requirements in Unit Plans

After more detailed information dealing with Strata Law in the ACT? Chris Kerin’s Guide to ACT Strata Law is now available.

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

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