Termination by mutual consent clauses let strata managers and councils part ways

The Strata Titles Act 1985 (WA) does not contain an express provision stating that a council of owners (COO) can suggest a mutual termination of a strata manager’s contract without an AGM or EGM.

In practice, however, most commercial strata management agreements include a termination by mutual consent clause. This means the contract can be ended if both parties agree and notice is given. Importantly, this cannot be enforced unilaterally by the COO – mutual consent is essential.

When considering this, the following points should be kept in mind:

• Contract terms: Check the specific termination clause in the management agreement, as mutual consent provisions are generally standard.
• By-laws and resolutions: Review the strata company’s by-laws and past resolutions to determine if the COO has been given general or specific authority to manage contracts on the strata company’s behalf, including termination.
• Legislative framework: 
   
  • Schedule 1, clause 4(1) – provides that the powers and duties of the strata company are exercised by the council, unless a general meeting has restricted that authority.
  • Section 139(1) – allows a person acting under the authority of the strata company (which includes the COO) to “make, vary, extend, discharge or terminate a contract” on its behalf.
  • Section 151 – sets out the process for unilateral termination of a strata management contract, requiring notice and providing a right of review. This applies only where the strata company seeks to terminate without the manager’s consent.

Summary:

The COO cannot terminate the strata manager’s appointment unilaterally unless the contract has reached its end. However, if the management agreement includes a mutual termination clause (as is standard), and both parties agree, then the contract may be brought to an end without the need for an AGM or EGM.