VIC: Can our manager charge more than their contracted handover fee?

Question: An owners corporation manager wants to charge more than their contract allows for handing over records. Can they deduct a higher fee?

I own a unit in a block of four. Our contract with the owners corporation manager dates from 2020 and has been rolled over every year since, with the owners approving the rollover at each AGM. The manager has run all our AGMs, and we’ve never had a chairperson until this year. The owners areterminating the appointment contract in December.

Our signed contract sets the fee for “Preparation of records on transfer of management” at $400. However, the manager has told us they’ll deduct $600 from our account. Their reasons are:

1. The contract they currently use specifies $600. The owners have never signed this contract, and some haven’t even seen it.
2. Owners corporation insurance goes up every year, so the fee can be increased.
3. Another owners corporation manager charges $700, so they can charge $600.

Can the manager take $600 from our account when the contract we all signed says $400? We know that the extra $200 is a small cost split between the owners, but it doesn’t seem right.

Answer: A manager can’t unilaterally charge more than the fee set in the signed contract of appointment. None of the reasons given create a right to the higher fee.

Based on the facts provided, the owners corporation manager does not appear to have a contractual or statutory basis to simply deduct $600 where the contract of appointment provides for $400. The important distinction is between what the manager would like to charge and what the owners corporation has actually agreed to pay.

The signed contract is the starting point. If the current contract says:

“Preparation of records on transfer of management – $400”

then, subject to the precise wording of the renewal provisions, the manager is generally entitled to $400, not $600.

The fact that the manager now uses a different contract containing a $600 fee does not, by itself, amend the existing contract. A contractual variation normally requires agreement between the contracting parties. The manager cannot unilaterally replace an agreed price with a price appearing in a document that the owners corporation never agreed to.

This is particularly important because the Owners Corporations Act 2006 (OC Act) requires an instrument or contract of appointment to be in the approved form. Section 119 also provides that an owners corporation may revoke the appointment of its manager. Regarding the annual AGM rollover, I recommend checking one point carefully. Since the contract dates back to 2020 but has apparently been rolled over each year, the owners corporation needs to determine exactly what happened at each AGM.

If the owners resolved to continue/renew the existing management arrangement, without approving a new contract containing a $600 transfer fee, that strongly supports the position that the $400 contractual fee remained applicable. However, if the owners approved a new contract at an AGM that incorporated the $600 fee, that could change the owners corporation’s position.

The current OC Act places restrictions on managers’ appointment contracts, including restrictions concerning renewal and termination. Section 119A was introduced in 2021, and certain prohibited terms in contracts of appointment entered into or renewed after the commencement of those provisions are void. I would specifically establish what document was approved at the most recent AGM and what the AGM resolution actually said.

The owners corporation manager’s three reasons for charging $600 don’t establish a right to $600 and are particularly weak.

Reason 1: My current contract says $600

That is not sufficient. If the owners corporation’s contract says $400 and the owners never agreed to the $600 version, the manager cannot simply substitute his preferred contract.

Reason 2: OC insurance increases every year

That has no obvious connection with the contractual transfer-of-records fee. An increase in insurance premiums does not automatically increase an unrelated contractual fee. If the contract says $400 for preparing records on a transfer of management, it would need a contractual mechanism to increase that fee. The manager cannot argue that “my costs have increased, therefore the agreed $400 fee is now $600.”

Reason 3: Another manager charges $700, so I can charge $600

Again, that does not create a contractual entitlement. The fact that another manager charges $700 is irrelevant to what this manager is entitled to charge under this owners corporation’s contract. In fact, the statutory duties of an owners corporation manager reinforce the point. Section 122 requires a manager to act honestly and in good faith, exercise due care and diligence, and not make improper use of their position to gain an advantage. The current Act also requires a manager to take reasonable steps to ensure goods or services procured on behalf of an owners corporation are obtained at competitive prices and on competitive terms.

There is also a distinction worth making between the manager’s obligation to hand over the owners corporation’s records and the manager’s contractual entitlement to charge a particular amount for doing so. Section 127 of the OC Act provides that, within 28 days after termination, the manager must return to the secretary all records relating to the owners corporation and funds held or controlled by the manager. Failure to comply attracts a penalty.

In other words, the manager cannot simply treat the owners corporation’s records as its property and hold them hostage because there is a dispute about a fee. A manager cannot unilaterally rewrite the financial terms of its appointment and take money from an owners corporation’s account merely because it considers its revised fee reasonable.

On the facts provided, none of the three reasons given by the manager appears to provide a legal basis for converting a $400 contractual fee into a $600 fee.

The owners corporation can formally write to the manager before the December termination along these lines:

• The owners corporation does not agree to the proposed $600 charge. The current contract provides for a fee of $400 for preparation of records on transfer of management. No variation to that fee has been approved or agreed by the owners corporation.
• The manager’s reference to a different contract used by the manager, increases in insurance premiums, or fees charged by other owners corporation managers does not constitute a contractual variation and does not establish an entitlement to charge $600.
• Accordingly, the owners corporation requires confirmation that only the contractual amount of $400 will be charged and that no amount in excess of $400 will be deducted from the owners corporation’s funds.
• Any unauthorised deduction from the owners corporation’s funds will be disputed and the owners corporation reserves all rights in relation to recovery of those funds and any other relief available to it.

This post appears in Strata News #814.

Ben Quirk
TOCS
E: ben.quirk@tocs.co
P: 0448 663 616