Question: Can the letting agent enter into an agreement with owners to sub-let their units? Is this a fair arrangement, or could there be a conflict of interest?
Our building is under the accommodation module. The caretaker is also the letting manager. Can the letting agent enter into an agreement with one or more owners to lease their units and then sub-let them?
Is the caretaker required to have a written agreement with the owner setting out this arrangement? We are concerned about preferential letting arrangements where the letting manager seeks to maximise their return from the sub-lets. Our letting agreement states explicitly that the letting agent will “act fairly and lawfully and not discriminate between owners”.
If a committee member has this letting arrangement with the letting manager, should they declare a conflict of interest?
Answer: This style of arrangement may lead to the management of bookings to benefit the manager.
A manager can sublet / provide guaranteed returns to owners and then sublet the unit for profit. Yes, there is a risk that this style of arrangement may lead to the management of bookings to benefit the manager. My experience has been that the Office of Fair Trading is usually pretty interested in letting pools where this sort of arrangement is in place because they are also aware of the potential for conflicts of interest to arise. Inevitably it will happen at times because that is human nature. This is the same reason that lawyers get struck off for trust account fraud. Some people just cannot help themselves, and then everyone gets tainted with the same poor behaviour.
Managers have to balance a fine line between sharing bookings equally and acting on guests’ instructions. This is a never ending battle coloured by views and the quality of the unit itself. One of the bigger issues in short stay management rights can be the disparity of the quality of the individual properties.
The other observations I would make are:
- This is not a body corporate issue – it is really an owner issue for those who have units in the letting pool;
- The manager has an obligation to disclose the existence of the arrangement to other owners in the letting pool managed by the manager;
- I don’t think a conflict arises at committee level purely by virtue of there being an arrangement in place for letting between the manager and the committee member. No matter the arrangement, if that were the case, we wouldn’t have a committee member who was an investor via the manager on a committee in Queensland!
Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500