Question: In our process to appoint a new strata manager, some companies have no lock in contracts. Are these legal and what are the advantages?
Were looking to appoint a new Strata Manager and have received quotes. Some companies have offered us a no lock-in contract. Is this type of contract legal?
Why would a Strata Management Company offer a no lock-in contract and what type of advantage would this provide the Owners Corporation?
Answer: A strata manager will usually offer these types of agreements as an enticement to being appointed.
Yes, a no lock-in contract is legal. However, they are not technically ‘no lock-in’ contracts. The agreement must have a term and it is likely that by referring to the agreement as ‘no lock-in’, they are referring to a provision which allows either party to terminate the agreement at any time with notice.
A strata manager will usually offer these types of agreements as an enticement to being appointed. It is advantageous if the owners corporation wishes to be able to terminate the agreement during the term as usually terminating the agreement during the term can only be done if there has been a breach of the agreement not rectified after 28 days of notice or if the strata manager is declared bankrupt, the agent company is wound up or the agent ceases to hold the necessary licence.
This post appears in Strata News #528.
David Bannerman
Bannermans Lawyers
E: enquiries@bannermans.com.au
P: 02 9929 0226
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