This article discusses whether a body corporate can charge for management rights extension in Queensland, explaining why legislation prevents receiving payment for granting a management rights top-up.
Question: Our caretakers has requested a 5 year extension on the management rights agreement. Can we charge the market value of granting the extension.
I am an owner of a unit in a Qld Resort in Noosaville. Our body corporate agrees to extend the caretaking agreement and the letting agreement for another 5 years if the owners vote yes to the motion. Am I missing something here? The caretakers had a (free) 5 year extension a few years ago – to help sell the management rights, which never actually happened. The asset value of the caretaking (resort management) rights would increase when the 5 year option was granted.
In my financial world, you would sell such an option, not just give it away. Should not the committee seek external professional advice to ascertain the true market value of granting the extension? This cost would then be charged to the caretakers and paid to the body corporate for the benefit of all unit holders.
Answer: The body corporate cannot receive any payment for the granting of what is known as a ‘top up.’
The BCCM legislation actually prevents a body corporate from charging a fine, premium or consideration in relation to the granting of, or variation to, a management rights agreement. That means the body corporate cannot receive any payment for the granting of what is known as a ‘top up.’
You can find the section here: BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997 – SECT 113.
This post appears in Strata News #493.
Frank Higginson Redchip Strata Law E: FrankH@redchip.com.au P: 07 3193 0500