Question: Our building management agreement started on 1 November 2016, just before the 2015 Act came into force. Does the 10-year term limit still apply?
Our building management agreement commenced on 1 November 2016, exactly 30 days before the 2015 Act came into force, under the agreement that section 40B applied. Section 40B has been repealed. Does the 10-year term limit still apply to our agreement?
Our building management company is refusing to provide us with a new contract and repeatedly says our position is untenable and that we need to consult a contracts lawyer. We are also aware of the case Australia City Properties Management Pty Ltd v The Owners – Strata Plan No 65111, in which the original judge held that the 10-year cap applied to the contract varied in 2015. Was this overturned on appeal?
Answer: A building management agreement entered into after the first annual general meeting is capped at 10 years, and the proposed 3-year cap will not apply to agreements entered before the Bill commences.
Where your query comes in is the potential effect of the Strata Schemes Legislation Amendment (Miscellaneous) Bill 2026, which has been passed by both houses of Parliament and is currently awaiting assent.
The date of appointment is key in this query, as may be the type of building management agreement, and that requires us to consider some history.
Before 30 November 2016, what we now call building managers were referred to as caretakers. Section 40B (2) of the Strata Schemes Management Act 1996 (NSW) (the 1996 Act) stated:
- Unless it expires or otherwise ceases to have effect earlier, a caretaker agreement (including any additional term under any option to renew it) expires:
- at the conclusion of the first annual general meeting of the owners corporation, if the agreement was executed by the original owner, or
- when 10 years have expired after it commenced to authorise the caretaker to act under it, in any other case.
This meant that the maximum term for a caretaker contract that had not been agreed to by the original owner (aka the developer) was 10 years. Assuming your caretaker agreement was not entered into by the developer, the maximum term it could have been for was from 1 November 2016 to 31 October 2026 under the 1996 Act.
On 30 November 2016, the 2015 Act came into effect. Under the 2015 Act, the term or length of a building manager’s appointment is dealt with in section 68(1) which states:
- A building manager agreement (including any additional term under any option to renew it) expires (if the term of the appointment does not end earlier or is not ended earlier for any other reason)—
- at the conclusion of the first annual general meeting of the owners corporation, if the agreement was executed before the meeting, or
- when 10 years have expired after it commenced to authorise the building manager to act under it, in any other case.
The transitional provision contained in Schedule 3, part 2, clause 15 of the 2015 Act meant that most caretaking agreements in force before 30 November 2016 became building management agreements. To be considered a building management agreement, the caretaker agreements had to be for the duties set out in section 66 of the 2015 Act, be for the prime purpose of appointing the caretaker, and the caretaker must not be entitled to exclusive possession of a lot or common property in the strata scheme.
Importantly for your scheme, where a caretaking agreement met these criteria, they were considered building management agreements with a maximum term of 10 years after they commenced, unless they were entered into by the original owner/developer.
This brings us to the Bill. Once in effect, the Bill will amend section 68 of the 2015 Act by introducing a new section 68(1)(b) to cap the term of building management agreements to 3 years rather than the current 10 years.
Will the 3-year cap in the Bill apply to all building management agreements?
The answer is no. There are potentially one or two categories of building management agreements that will not be affected.
The first is building management agreements entered into after the first annual general meeting and before the “commencement date”. This is because the Bill will also amend the transitional provisions in Schedule 3. But what is the “commencement date”? The commencement date is defined as the date the changes to section 68(1) of the 2015 Act come into effect. We don’t yet know when this will be. However, it means that for all building management agreements entered after the scheme’s first annual general meeting and before the amendments take effect, their maximum term will be 10 years.
The second category is not yet fleshed out. There is a proviso in section 68(4) that allows the regulations to carve out specific types of building management agreements and provide for a different term. We haven’t seen the regulations, but we expect the carve out to apply to building management agreements with letting rights attached.
So, to answer your question, your building management agreement, if it had been entered into by the original owner, would have ended at the end of your scheme’s first annual general meeting. The fact that it is ongoing means that it was not, and, for this reason, its maximum term will be unaffected by the proposed changes in the Bill, and it will expire, at the latest, on 31 October 2026.
Why did Parliament leave it open to the regulations to allow categories of building management agreements to have a different term when the changes take effect?
For this, we have to look at the intention behind the changes. The Bill’s Statement of Public Interest tabled in Parliament states that one of its objectives is “improving accountability of strata building managers by generally reducing building managers’ maximum term of appointment from 10 to 3 years”.
This reflects the second reading speech of Anoulack Chanthivong, the Minister for Better Regulation and Fair Trading, on 19 November 2025. On this issue, it can be summarised as key strata industry stakeholders generally supported building managers having a three-year term, but consumer protection had to be weighed against the needs of business. The business needs were specific to the unique situation where the building manager also had a letting rights business, recognising they often had substantial upfront costs to recoup that may not be viable over a shorter term. The Minister went on to say:
The Bill will impose maximum terms of appointment for building managers appointed by an owners’ corporation that reflect those for managing agents. Building manager appointments entered before the first annual general meeting will continue to end at that meeting. However, if the building manager is appointed at the first annual general meeting, the appointment will now end at the next annual general meeting. In any other case, the appointment will end after three years.
It is because of this that the regulations, which have not yet been published, may allow a carve out of the three-year term for specific types of building managers. Given the second reading speech, this should be limited to building management agreements with letting rights agreements attached. However, it would be open for other types of building management agreements to also be prescribed by the regulations.
To answer the second part of your question, in Australia City Management Pty Ltd v The Owners – Strata Plan No. 65111 [2021] NSWCA 162, the appeal, the NSW Court of Appeal addressed the application of the 10-year cap under section 68 of the 2015 Act and determined that the caretaker agreement in question did not fall within the scope of section 68 because the agreement was excluded by the transitional provisions in Schedule 3, clause 15 of the 2015 Act. Specifically, the court found that the caretaker was entitled to exclusive possession of the caretaker lots, which placed the agreement outside the purview of section 68.
This post appears in Strata News #794.
Allison Benson Benson Legal E: allison@bensonlegal.com.au
