Question: What is the appropriate or most respectful way and timing of informing the current body corporate manager that we do not intend to renew their contract at the AGM?
Our committee is investigating changing our body corporate manager at the AGM at the end of August. We have read the very comprehensive information very carefully that you have published over time and have found it very useful. Motions for the AGM have to be submitted 6-8 weeks before the AGM date so the current manager would certainly become aware at that time. However, we’d like to know the appropriate or most respectful way and timing to inform the current body corporate manager that we do not intend to renew their contract at the AGM. Also, what are the possible costs involved in the transfer of records? Both companies use Stratamax so electronic transfer of digital data seems straightforward. What are the problems and costs associated with paper records?
Answer: There is no requirement to advise the incumbent manager. If you want to be polite, you can provide a short letter thanking the company for their time.
The appointment of body corporate managers must take place at a general meeting – usually, this is the AGM but it could also be an EGM.
For an AGM, there is a set date – the end of the financial year – at which point any owner can submit motions for inclusion on the AGM agenda. This can include motions for the renewal of the manager’s contract. If an individual owner has submitted such a motion, the decision to part ways with the strata manager may not be the committee’s choice and the matter will have to go to a vote.
If there are no submitted motions by the cutoff date, the committee has the right to choose which motions will be included on the AGM agenda. The committee can effectively end the current manager’s contract by not including their renewal proposal and submitting alternative proposals. Owners could still vote down those proposals, but that is an unusual situation.
It sounds like that is what you are doing here and there is no requirement to advise the incumbent manager of what you are doing. If you want to be polite, it may be nice to provide a short letter thanking the company for their time managing your scheme, but their services are no longer required. Depending on the circumstances, you could state a reason so the company knows where it went wrong, but there is no obligation.
You may find that the incumbent manager will ask you for meetings to discuss or reconsider your position. It’s up to you if you want to engage in this process, but again there is no obligation. It depends on the company, but it is not uncommon for a management company to make you an offer to try and keep the business – typically by lowering their fees. Some people accept this and decide to stay with the management agency. Maybe it’s even a good strategy if you want to force your management company to lower their fees.
I always find it odd when body corporates decide to stay with the incumbent on this basis. After all, if they can offer you lower fees now, does that mean they were charging you too much before? Why did you have to threaten to quit to get a better deal? And if you had service complaints, how does lowering the fees change that? It doesn’t, and if anything, the service may get worse as your scheme has now become a less valuable customer.
In terms of the costs of a transfer, there is no definitive amount. Your incumbent will probably have an exit fee included as part of their contract, and you can expect this to be applied – you will need to review your contract to see what this is. The new company may also have a building start-up fee, although sometimes this is waived. I think start-up fees are reasonable. Behind the scenes, a great deal of work goes into transferring a new scheme. All in, you may be looking at somewhere between $500-1000 for the basic transfer costs.
In terms of problems with the transfer, it mostly depends on the incumbent manager. They hold your books and records and can make the transfer difficult by dragging out the handover process. Generally, most body corporate companies deal with each other cordially, but some get a bit salty when they lose a scheme and make the transfer process hard. Still, if that’s the view of your incumbent manager, it’s probably reflective of the business as a whole and may be why you are looking at making a change.
It would be good to see the SCA taking the lead on setting standards for transfers between members. The organisation talks a lot about raising the professional standards of body corporate managers, but actual action (in Queensland at least) is thin on the ground. Setting some standards and expectations around how transfers are managed between members would be a good point of progression.
Lastly, you mention that the transfer of your building will occur between companies using Stratamax. From a management perspective, it certainly is easier and more consistent when both companies have the same back end system. However, not everyone does, and while it is a bit more problematic, I don’t think those additional transfer issues should affect your decision making regarding which company you choose. Transfers aren’t straightforward, but they happen. Once complete, it’s better to look forward rather than back.
William Marquand
Tower Body Corporate
E: willmarquand@towerbodycorporate.com.au
P: 07 5609 4924
This post appears in Strata News #722.
We had a situation where our body corporate manager’s contract expired on the 28th August 2023. Prior to this we received a notice that our AGM was to be held on the 15th September 2023. Following on from what I have read above I believe the person/company was no longer our BCM from 29 August 2023. A motion in the AGM was that the BCM be provided a 3 year contract commencing on 29 August 2023 which was passed by majority vote. Regrettably I was unable to vote as the meeting was held solely via zoom and I could not access the meeting due to my system freezing when I tried to install a Zoom update. I believe that the motion in that form was unlawful as it entailed backdating the start date of the contract. Could I please have some clarification?
Hi Ray
The following response has been provided by Chris Irons, Strata Solve:
It’s not possible to be definitive based on your comment. There are several variables at play and you may need to seek qualified legal advice.
As a general observation, if an owner at a general meeting believes that there was a defect with the way the meeting was conducted, then they may be able to challenge outcomes in the Commissioner’s Office. Adjudicators are generally reluctant to intervene in meeting outcomes, although can make orders about the motion, its outcome or the meeting more generally. An adjudicator has no jurisdiction in relation to contractual disputes (known as ‘complex’ disputes under legislation) between a body corporate and body corporate manager.
This is general information only and not legal advice.
Very useful. Any chance we can get these topics covered for an ACT audience?
Hi MJ
We will certainly take this request into consideration. In case you are interested, we have a ACT webinar coming up in Sept about the recent changes to the ACT Strata Legislation. You can fond out more and register for the event here: https://us02web.zoom.us/webinar/register/8016904414235/WN_qtrvGwIxTpKvCBYelA42vQ
After Engagement contract with the BC Manager expired, the BC manager provides further administrative work and bills the BC month to month without any decision, authorisation by the BC at a GM. No consideration has been made by the committee at its meeting as well.
The BC Manager called that AGM despite of no engaged by the BC and sent the agenda, that has been partly approved by the committee at is meeting before the AGM.
The AGM motion to engage the same the BC Manager was ruled out of order, the committee didn’t submit 2 quotes, as it is requested for the main BC spending in this case.
I am concern of validity of the AGM that was called by this unengaged BC Manager?
That to do, when the BC does not have engaged BC manger and I am not sure, whether there is any intention of the committee to call the EGM.
Any opinion is appreciated. Thank you.
Hi Helen
We answered a similar question here:
Question: Our body corporate manager’s contract expires a month earlier than the AGM. How do we deal with the gap between ending the 3 year engagement and our AGM date?
Simply let the management agreement lapse and consider contract work for maintenance of gardens and grounds, pool maintenance, security etc.
Considerable savings could be made ( and a reduction in BC fees) if contract work is considered.
We had 2 items on our last AGM to vote for a BCM, the quote included in the quote were for identical amounts of money. Then we looked at the budget and one BCM had 1000.00 more in the budget . WE found out that it does not matter what figure is in the motion , it is what is in the budget that is the correct figure. Very deceptive by a BCM listed on the Stock Exchange.
Re the BCM’s 3-year contract expiring 1 month prior to the AGM. It is true that the QLD BCCM legn provides strict ‘top and tail’ blocks on these contracts and at the end of the 3-year term it is ‘all over red rover.’
However, it is my approach – as a mug amateur – that there is no dispute until someone makes it a dispute. If I was on the Committee for this particular scheme, and before we spent on money on lawyers, I’d be thinking about the likelihood of anyone taking issue with an informal extension of the existing BCM until a new contract is resolved at the AGM arrangement…especially if the current BCM is popular and likely to be re-engaged. However, if there is even one owner who knows the law and definitely will make an issue of it…
Hi Helen
I have responded to your question in the above article.
Hi William,
Thank you for your response. I have not found this option for the committee in QLD. I have found that the contract must not be longer that 3 years. I suppose, it is not possible to extend it, so I think when the contract expires, the BC Manager can not act without a new engagement. I am concerned that the scheme stays without the BCM, however it is not compulsory to engage the BCM.
Hi Helen,
It’s not a requirement to have a body corporate manager so if a scheme no longer has one because the contract has run out they would have to self manage. If a scheme wants their manager to continue or appoint a new one an EGM should be called asap to vote on the appointment. Without that official appointment, any action taken by the manager without appointment could be challenged.
Our 3 years Engagement of the BC Manager is going to finish on 27 July. But the AGM should be held in the end of August. There will be approximately 1 month after ending 3 years Engagement, where the BC Manager should not.provide any work for the BC. How to deal with a situation like that?