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.