This article discusses when body corporate consent is required for building manager appointment approval under a caretaking agreement, particularly where nominees and assignments are involved.
Question: Our caretaker assigned their rights to a building manager, who appointed a co-building manager. Should the committee have approved this appointment?
Our building’s caretaker agreement is with a corporation and has a nominee. The nominee assigned their rights to another company, the building manager, who appointed a co-building manager.
Is the new co-building manager now an assignee, and should the committee have approved this appointment? The body corporate committee was established after the assignee was appointed but before the new building manager was appointed.
The caretaker agreement states that the appointment of the nominee or nominees or any replacement is subject to committee approval but does not state anything about the original assignee or the building manager.
As a summary, the tiers are:
- caretaker (corporation) nominee,
- assignee (company), also known as a building manager,
- another building manager.
Should the committee have had a say in the last appointment?
Answer: Depending on the terms of the caretaking agreement, there may be a requirement for the caretaking service contractor to obtain the approval of the body corporate for the nominee.
Ordinarily, a caretaking agreement will allow a caretaking service contractor (particularly a corporation) to appoint a nominee to carry out the duties on behalf of the caretaking service contractor.
Although the nominee may be carrying out the duties, the caretaking service contractor ultimately remains responsible for performing the duties under the caretaking agreement. The nominee cannot necessarily appoint another nominee – this power usually rests with the caretaking service contractor.
Depending on the terms of the caretaking agreement, there may be a requirement for the caretaking service contractor to obtain the approval of the body corporate for the nominee.
By contrast, an assignment occurs when the caretaking service contractor assigns its rights and obligations under the caretaking agreement to another entity. This always requires the approval of the body corporate. For example, Section 133(1) of the Body Corporate and Community Management (Accommodation Module) Regulation 2020 relevantly provides:
A person’s rights under an engagement as a body corporate manager or service contractor, or authorisation as a letting agent, may be transferred only if the body corporate under the engagement or authorisation approves the transfer.
An assignment of the management rights is ordinarily documented in a deed, which needs to be signed by the body corporate, caretaking service contractor and incoming buyer. The committee can authorise the assignment unless it has been made a restricted issue, which requires approval at a general meeting.
In short, if the caretaking service contractor has:
- Appointed a nominee – the approval of the body corporate may be required, but only if the caretaking agreement contemplates this.
- Transferred its rights and obligations under the caretaking agreement to another entity – the approval of the body corporate is required.
This post appears in Strata News #738.
Holly Oddo Mahoneys E: hoddo@mahoneys.com.au P: 07 3007 3753