This article discusses how committees and owners must navigate caretaking agreement termination buyback decisions, including the limits of committee powers and when owner approval is required.
Question: Owners voted to pursue the termination of the caretaking agreement. The committee is considering the caretaker’s offer to buyback the management rights. What’s our position here?
Owners in our complex voted to pursue the termination of the caretaking agreement.
In the meantime, the caretaker has suggested a price she would sell to the body corporate. The committee is fine-tuning the offer. What actions can the committee take without prior approval by owners?
Termination would be ongoing legal fees, but a buyback would involve the owners finding funds immediately to finance the purchase. Most of the owners are elderly, and costs could be prohibitive.
Answer: It makes sense to consider all possibilities.
William Marquand, Tower Body Corporate:
If there has been a vote to terminate, the committee is obliged to follow up on that.
However, seeking termination is not an easy road to take. The legal process could take quite a bit of time and money and there is no guarantee of success.
We don’t know, but was the sale offer on the table before the termination motion was put to the owners? If it wasn’t, it probably makes sense for the committee to at least consider the proposal and possibly present it to owners to vote on.
If you think the committee’s role is to achieve the best possible outcomes for the body corporate, that has to encompass considering all available options. This isn’t to say that owners would have to agree to the sale option, but it may be worth considering.
Otherwise, if you are at the termination stage, your scheme probably has a legal representative involved. Maybe they could give you an idea of the pros and cons of each proposition.
In terms of the costs, you should probably be expecting a separation from your caretaker to be expensive either way, so I’m not sure these can be the overriding option. However, empirically, I’ve seen a number of schemes pay off their managers and after a few years, they have gained financially and been much happier schemes after exiting what is typically a toxic relationship. It may not be as satisfying as a termination, but it makes sense to consider the possibility.
Todd Garsden, Mahoneys:
The committee can explore negotiations in-principle with the caretaker to terminate the agreement, but this ultimately needs to be approved by owners at general meeting.
This is because the regulation module specifically provides that a management rights agreement can only be brought to an end by ordinary resolution – even if the caretaker agrees to this.
Such approval would also need to authorise:
- the spending of any funds;
- how the spending is to be funded if it wasn’t previously budgeted for (special levy, loan or adjustment to existing budgets); and
- entry into a deed confirming the termination.
This post appears in the June 2024 edition of The QLD Strata Magazine.
William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924
Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753