This article discusses how a management rights module change affects the term that can be offered when selling caretaking and letting agreements, and whether the original contract term continues to apply.
Question: The developer of our scheme sold the 25 year caretaking agreements. We changed from the Accommodation Module to the Standard Module. What term can the building manager offer when selling the management rights?
The developer of our scheme sold the 25 year caretaking and letting agreements to a building manager. We were originally under the Accommodation Module. After three years, the building manager sold the management and letting rights. We then changed to the Standard Module.
The new manager thinks he can sell a 10 year agreement. Can he only sell the remainder of the term under the original caretaking agreement? Is he able to offer a 10 year agreement? Notwithstanding the change of module, does the original agreement term remain in force together with any approved extensions?
Answer: The management rights agreements entered into, pursuant to the Accommodation Module, will continue to be regulated by the Accommodation Module (i.e. be able to be extended up to 25 years).
Section 128 of the Body Corporate and Community Management Act 1997 (Qld) provides that when a regulation module is changed:
The provisions of the existing regulation module applying to the engagement or authorisation continue to apply to the engagement or authorisation until the engagement or authorisation, including any renewal or extension of the engagement or authorisation, comes to an end.
Accordingly, the management rights agreements entered into, pursuant to the Accommodation Module, will continue to be regulated by the Accommodation Module (i.e. be able to be extended up to 25 years).
There is a view adopted by some lawyers that upon a novation of a management rights agreement (which is one way of structuring a sale), the management rights agreements will then be regulated by the module in place at the time of the novation.
When an agreement is “sold” the remaining term is sometimes discussed with reference to:
- The current term (being what is already available, including any options) – which is what the original poster is referring to; or
- The available term (this may be what the manager is referring to, taking into account the novation argument).
This post appears in the June 2023 edition of The QLD Strata Magazine.
Todd Garsden
Mahoneys
E: tgarsden@mahoneys.com.au
P: 07 3007 3753
Leave a Reply