VIC: Q&A Changing Owners Corporation Management Companies

Your owners corporation manager is appointed by the owners corporation to manage the common property of your owners corporation and provide services to you as per the contract of appointment (“COA”) under section 2.1. Your manager’s duties include:

accounting,

arranging insurance,

maintaining and keeping the documentation pertaining to your owners corporation,

convening your Annual General Meeting,

arranging minor repairs and maintenance of the common property,

providing guidance to the owners corporation to enable the owners corporation to perform its duties and functions and to generally implement the decisions and instructions in accordance with the contract.

Further duties known as additional services may be performed and are set out in schedule 2.2 of the COA.

The manager holds professional indemnity insurance as required by section 119(5) of the_ Owners Corporations Act 2006 (Vic). This is separate from the insurance for your building.

Your owners corporation has a separate insurance policy. It will outline the coverage specific to your owners corporation (excluding personal contents). A copy of your policy and the product disclosure statement is available (or can be made available) either on the owners portal or can be sent to you upon an email request.

Sim Firns The Knight Email P: 03 9509 3144

This post appears in Strata News #664.

Question: Can the committee make the decision to terminate our owners corporation manager or do we need an AGM?

We’d like to change our owners corporation manager. Can the committee make the decision to change as long as there isn’t a signed current delegation under section 11 of the Owners Corporation Act? If so, can the committee terminate the manager with 28 days’ notice at any time or do we have to hold an AGM? Does an ordinary resolution ballot need to take place?

Does an owners corporation manager have the right to object to the termination by the committee and proceed to ask each owner for their vote and provide their signature (pseudo ballot)?

Answer: A committee has the power to terminate an owners corporation manager.

Provided that the delegation of authority to the committee is not restricted to prevent the termination and appointment of a manager, a committee has the power to terminate a manager under section 119 of the Owners Corporations Act.

No annual general meeting or special general meeting is required. However, if there is a contract of appointment signed by the owners corporation, the owners corporation may be in breach of the contract of appointment if the contract was not terminated in accordance with its terms (i.e. midway through a term for convenience rather than a breach).

It is important that legal advice is obtained so the owners corporation can assess the risks of termination and the potential for a claim for breach of contract. Some owners corporations restrict the appointment and termination of a manager under section 82 of the Act, in which case a manager can only be terminated at an AGM or SGM.

A manager has no right to call a ballot unless authorised to do so under section 83 of the Act.

Phillip Leaman Tisher Liner FC Law E: ocenquiry@tlfc.com.au P: 03 8600 9370

This post appears in the June 2023 edition of The VIC Strata Magazine.

Question: Is it ethical to ask a “potential new OCM” to attend an AGM run by the current OCM before a motion is carried to formally appoint the “potential” OCM candidate?

Our committee is proposing the appointment of a new OCM and has this resolution listed in the AGM agenda to be considered and voted upon by all lot owners.

Is it ethical to ask a “potential new OCM” to attend an AGM run by the current OCM before a motion is carried to formally appoint the “potential” OCM candidate?

Answer: My experience is that nearly in all cases your new manager will not attend the final meeting with your old manager when you terminate their services.

Ethical possibly isn’t the right term I would consider for this decision, instead, I would consider whether it is simply appropriate or suitable?

All I can speak to here is my own experience, and my experience is that nearly in all cases your new manager will not attend the final meeting with your old manager when you terminate their services. Having said that, I have attended an AGM where the old manager’s services were terminated and I took the reigns halfway through that same meeting, however, this is rare and from a process view, not ideal. In the case I refer to above, there was an amicable relationship between all parties. Sometimes it is better to simply close things off with the old, and then start with a new meeting and a clean slate with your new manager.

When a new manager is appointed, the first task they have is to collect funds and the books from your prior (outgoing) manager. Once they have the records, they must complete all set up processes, such as creating new files, opening a bank account, notify all contractors/service providers, write to all lot owners, arrange a new plaque etc. Once this initial set-up process is complete, then is the best time for your new manager to call an AGM or an SGM to sit down with the Owners Corporation and get the ball rolling. By waiting until they have completed the initial set up, will allow them to best serve you at that meeting as they should have all systems and processes in place.

Deryck Walker SMTI deryck.walker@smti.com.au

This post appears in Strata News #520.

Question: Is our new Owners Corporation Manager required to place a sign at the front of our Victorian strata property stating their name and contact details?

We changed Owners Corporation Managers at our development in Melbourne earlier this year. After 5 months, the new OC Manager still hasn’t put their company sign and details ie, Name/Address/Phone No. at the front of the property. My questions are:

Are they required to do so by legislation?

Is there a timeframe this must be done by?

Answer: Yes, your newly appointed Manager is required to place a sign either at the main letterboxes or at the entrance to the property.

Great question, and in short, yes, your newly appointed Manager is required to place a sign either at the main letterboxes or at the entrance to the property. This requirement comes from the Owners Corporation Regulations 2008, Regulation 22 (4).

Letterbox or other indication of owners corporation

Unless an owners corporation has appointed a manager, the owners corporation must maintain a letterbox and a sign labelled with its postal address.

The owners corporation address on the sign required under subregulation (1) must correspond with the address held on the register kept by the Registrar of Titles.

It is sufficient compliance with subregulation (1) if the sign is placed on the letterbox of a lot owner who is responsible for the owners corporation’s mail.

If the owners corporation appoints a manager, the owners corporation must erect and maintain a sign giving the manager’s name and postal address in a place clearly visible from either—

the main group of letterboxes; or

the main entrance to the land.

One of the Manager’s key roles is to receive correspondence on behalf of your Owners Corporation. If this information is not up-to-date, important correspondence may not be received.

Whilst the Regulations state the sign only needs to include the “manager’s name and postal address” it is common the sign will also include other contact details, whether phone, email, maybe even a QR code as well.

As far as time frame, Regulation 22 doesn’t provide a specific deadline. I would suggest the sign needs to be installed as soon as possible. Wearing my “fair and reasonable” hat, you might allow some flexibility, maybe a month or so to get a new sign ordered, delivered, and then installed. However, 5 months is definitely getting very long in the tooth.

Having the current Manager’s contact details visible on-site is important, whether for a basic request from a neighbour to repair or replace a fence, or a more serious emergency like a fire. It is important that those outside of your Owners Corporation can easily identify and contact the appointed Manager.

It is also important to note that under the Subdivision Act 1988 your new Manager is required to update the Owners Corporations address for services on the title with Land Victoria, and of course, all suppliers should be notified of the updated mailing address. In general, the updating of signage and notification to relevant parties is one of the simplest tasks, and should be one of the very first things a newly appointed Manager undertakes to ensure all invoices and correspondence are diverted to your new manager.

Deryck Walker SMTI deryck.walker@smti.com.au

This post appears in Strata News #506.

Question: What are the most important factors when choosing an Owners Corporation management company?

Answer: Experience is vital, good understanding of the Owners Corporations Act is integral.

The role of an Owners Corporation Manager is very varied and there is a lack of education when it comes to what the role of the Owners Corporation Manager is. It is quite a diverse role.

It is really important that when you’re looking to appoint an Owners Corporation Management company, that they have the experience as well as the competence to deal with the financials and with compliance of the Owners Corporations Act. There are a lot of companies out there who purport to be Owners Corporation Managers, but really they’re not managing the property that well. They’re more Owners Corporation administrators, doing the basic administration tasks and providing documents to the committee to consider.

The role of an Owners Corporation Manager

The role of an Owners Corporation Manager should be providing direction and good advice when it comes to Owners Corporation Act, Owners Corporation rules, compliance obligations and also providing insight into other situations that an Owners Corporation may be dealing with. Whether that may be e.g. a waterproofing issue, they could rely on another situation that they have previously dealt with to apply their logic and inform the committee of any challenges they may have experienced in other situations.

Experience is vital, a good understanding of the Owners Corporations Act is integral.

Another factor is good communication. Making sure that there’s a good service level agreement when it comes to response times to owners and committees. Making sure that the Owners Corporation Manager who was appointed to the property has the time to liaise with the committee. Too often I get asked by prospective clients, ‘How many lots or how many properties are in the portfolio of the proposed manager?’. This intrigues me because what a prospective Owners Corporation Committee should be asking is, ‘What are the tasks the Owners Corporation Manager is responsible for doing?’. At The Knight, what we’ve done is decentralised the role of the Owners Corporation Manager. The manager is actually focusing on the high-level Owners Corporation matters and dealing with the committee of management and other owners. We’ve got other support staff who attend to the basic routine administration tasks such as preparing minutes for meetings or dealing with insurance claims, plus a whole host of other matters.

Ultimately, the Owners Corporation Manager is responsible for managing the property and making sure that their support team members are doing their job.

What else should people looking for a new manager look out for? The structure of support in the organisation. When that manager does go on leave, whether it’s annual leave or sick leave, there needs to be a really rigorous process in terms of somebody filling in the void when the manager goes away. Otherwise, their manager may come back in two weeks and nothing’s been done. At The Knight, we’ve got a system where the assistant managers step up, the team leaders step down, and other support staff chime in as well to make sure that any issues are dealt with during that period of time when the owners corporation goes away.

Also, look out for companies with good integrity. Fortunately, there are a lot of good players in this industry, but there are a few out there to watch out for. What should you look for here? Makes sure everything is being disclosed properly to the Owners Corporation and make sure they’re not getting commissions on the side. Strata insurance commissions are quite common, but not receiving commissions from things like service providers. We don’t agree with that. You need to really ask some of those questions to understand the ethics of those companies.

Who is the Decision Maker?

The Owners Corporation Manager’s role is to provide guidance and direction to the committee. When it comes to small decisions, it depends on the contract of appointment. We can make some of the basic decisions on behalf of the Owners Corporation if we are delegated that power.

When it comes to the higher-level decisions, these really rest with the Owners Corporation. If there is a committee, they are automatically delegated the power to pass those resolutions. They’re the ones calling the shots and Owners Corporation Manager’s are not the ones making the decisions. We don’t have a vote when it comes to Owners Corporation matters.

Gregor Evans The Knight Email P: 03 9509 3144

This post appears in the August 2021 edition of The VIC Strata Magazine.

Question: When changing Owners Corporation Managers, who pays bills during the 28 days changeover window?

Once an Owners Corporation Management Company has been given notice of termination, I understand they have 28 days to hand over paperwork to the new manager and that they are unable to act for the Owners Corporation, paying bills etc.

Is it possible for the old manager to transfer Owners Corporation funds to the new manager before the 28 days is up, in order to pay bills? If not, is it possible for the old manager to re-direct bills to one of the owners, so they can be paid?

Answer: The Act is silent on who is authorised to pay the bills during the 28-day period of the handover.

Section 127 of the Owners Corporations Act 2006 (Act) provides that a terminated manager, has 28 days within the termination date to return to the secretary of the owners corporation (OC), all their records and funds held or controlled by the terminated manager.

The Act is silent on who is authorised to pay the bills during the 28-day period of the handover. It should be noted that during the 28-day period, the terminated manager still has control of the funds and records and is only obliged to handover any funds and records after the 28-day period.

In that regard, it is in the best interest of the OC to request (but the OC cannot compel) the terminated manager to redirect the bills to the OC or their new manager, or instruct the terminated manager to pay the bills during the 28-day period. Such method would not leave the OC open to falling behind in bills’ payment.

Rochelle Castro RC & Co Lawyers E: law@rccolawyers.com P: 1300 072 626

This post appears in the August 2021 edition of The VIC Strata Magazine.

Question: Can an Owners Corporation Manager be a member of SCA? It doesn’t look like our manager is an SCA member.

Answer: Yes, definitely

Can an Owners Corporation Manager be an SCA member? Yes, definitely! I guess the majority of members are Owners Corporation Managers.

To give a bit of background on the Strata Community Association, it’s now a National Australasian body, because it now incorporates New Zealand, and then a lot of the states have their own bodies, and there’s a few chapters for Territories.

There is a Victorian SCA and the majority of Strata Community Association members are Owners Corporation Managers. We’ve got a code of conduct that we require our members to subscribe to. We’re looking at how we can increase the professionalism of Owners Corporation Managers in the industry.

Other states have licensing, or minimum standards for education. We’re currently looking at what the best option is for Victoria, and really looking to advocate to government to introduce some of those requirements because the barrier to entry to become an Owners Corporation Manager at the moment is fairly low and we’re seeing some companies come into the industry who are questionable in terms of their operations.

That was a long winded answer to that question. So, in a nutshell, yes, your Owners Corporation Manager can become an SCA member.

Gregor Evans The Knight Email P: 03 9509 3144

This post appears in the June 2021 edition of The VIC Strata Magazine.

Question: Do all owners need to agree to change of management to a new Owners Corporation Management company, or just the OC committee members?

I’m in the OC committee for my property in VIC and we’re looking to change Strata Managers to a new Owners Corporation Management company. We’ve gone out to tender and identified our preferred one.

Do we need all owners to agree to the change of management or just the OC committee members?

Answer: When it comes to making a decision to appoint a new strata / owners corporation manager, the committee can make that determination in its own right

In answering this question, I think it might be valuable to look at it from two perspectives:

In terms of legislation, we might refer to section 113 of the Owners Corporations Act 2006, which states that “a resolution of the Committee of an owners corporation in respect of any matter has effect as resolution of the owners corporation.” That is to say that the Committee is elected to represent and make decisions on behalf of the Owners Corporation. (Committees, of course, cannot make decisions such as those decisions that are deemed to require a special or unanimous approval of owners.)

So in the above the Committee, when it comes to making a decision to appoint a new strata / owners corporation manager, can indeed make that determination in its own right.

Pragmatically Committees may, in certain situations, want to canvass the opinions of all the Owners in the Owners Corporation.

When might this be the case?

If the building / owners corporation is a smaller complex and all the owners know one another and regularly interact with one another – this might be a nice courtesy rather than for the owners to find out after the fact.

If there’s a lot of issues and points of contention – this might be a good idea so the Committee (and the new Owners Corporation Manager for that matter) isn’t met with a wave of hostility and resistance.

When might this not be the case?

If the building / owners corporation is a larger complex then Committees are often tasked with greater responsibilities to keep the building running and some decisions Committees just need to step up and push on with.

If there are a lot of investors and overseas owners and it’s difficult or unfeasible for the Committee to get in touch all owners.

David Lin Strata Management Consultants E: david@strataconsultants.com.au P: 1300 917 848

This post appears in the June 2021 edition of The VIC Strata Magazine.

Question: Our owners corporation is going through the process of appointing a new strata manager. We were wondering if there a list of specifications we should provide when seeking quotes? What do we need to consider?

Answer: We provide 5 overriding qualitative factors which should be at the forefront of your considerations.

Strata Management in Victoria

In Victoria there are:

Over 120,000 bodies corporate / owners corporations;

Over 1,100,000 strata titled lots; and

Over 1,000 registered owners corporation managers.

This register of owners corporations Victoria ranges from:

individuals sole traders;

real estate agencies;

the odd accounting firms trying to manage a few owners corporations for some side income;

a mowing business that ventured into body corporate management;

small-sized strata management companies;

medium-sized strata management companies; and right through to:

perhaps ~20 strata management companies that might be considered large.

Owners corporation management companies collect sizable levies from all the owners in your building, they manage and spend the funds, and they hold all your books and records.

When things go wrong or the strata management company (or individual strata manager) are unscrupulous… things can really become costly, stressful, and detrimental for Committees, owners, and investors alike.

What do the Best Strata Management Companies Have in Common: Our 5 Overriding Qualitative Factors

Strata Management Consultants Melbourne has formed the view that there are 5 categories that are essential when it comes to best practice:

Strata management experience and the right qualifications of key staff;

The people working in the strata management business and an emphasis on service (strata management is after all a services business);

Sound integrity and the right set of values behind the strata management company;

Proper systems and process – no point trying to do the accounting of strata buildings in excel or software intended for property management when there are hundreds of owners with different lot liabilities/entitlements; and

Knowledge learnt through professional working experience and a focus on training and up-skilling of staff.

List of Specifications

I think a list of specifications is always going to differ – depending on the building, location, size, age, and the expectations/priorities of the owners and Committee.

If an OC is with a large company and not charging very much (for the cost of employing a management company) as it’s been more of a ‘cookie-cutter’ approach then maybe the emphasis is on paying a bit more and getting better service.

If the OC is new (built in the last 10 years) and there are building defects, maybe the emphasis is on getting an independent OC management company who has experience and resolve when it comes to finding a solution to fix the defects.

If the OC is a larger high-rise with multiple, significantly large sub-contracts (i.e. cleaning, building management, electricity, lift servicing) then the Committee should look to go through a proper and competitive tender process. Part of the criteria for prospective strata management companies can be to look to assist the Committee with tendering these sub-contracts in due course.

Regardless of the scenario, those 5 overriding qualitative factors should be at the forefront of your considerations.

David Lin Strata Management Consultants E: david@strataconsultants.com.au P: 1300 917 848

This post appears in the February 2021 edition of The VIC Strata Magazine.

Question: If we wish to end our current Owners Corporation Management contract and appoint a new strata manager, the current contract states 28 days notice is required. Our AGM is scheduled less than 28 days of the contract expiring. How does that work?

I have had a close read of the existing Owners Corporation Management contract for the agent to provide their service. I note that in our contract there is an automatic renewal clause if the service provider is not notified within 28 days to the contrary. I note that it seems to be the practice of the service provider to call the AGM less than 28 days of the contract expiring. My understanding is that 28 days is required to advise an existing service provider/manager that the Owners Corporation wants to sign with another Management Company.

This current practice of scheduling the AGM within the required 28 day does not afford the Corporation a reasonable amount of time deliberate the question of a new provider at the AGM and terminate the contract appropriately if the automatic renewal is in place. Does a decision at then AGM nullify the auto-renewal clause?

Is the fact that the holding of the AGM less than the required 28 days and the contract simply auto-renews legal or at least unethical? It seems sneaky. Is the contract in VIC legislated or can it the auto-renewal clause be struck-out or only given effect if certain criteria are met by the service provider.

I wrote a friendly note and put it on the notice board in the common area, however, this has achieved nothing. I’ve also informed the owners corporation via email but have not received any response.

We don’t smoke but we are forced to clean up other people’s cigarette butts. We also have dogs and this can pose health risks to them if they accidentally eat one of the butts.

I would welcome any suggestions on how to best deal with this issue or what legal methods I could use to solve this.

Answer: Generally, the Committee will meet before the AGM is scheduled to discuss the current OC Contract and determine whether there are any actions they may like to take.

This is quite common with a lot of the Owners Corporation (OC) Contracts in Victoria.

Generally, the Committee will meet before the AGM is scheduled to discuss the current OC Contract and determine whether there are any actions they may like to take. This might include going out to tender to see what the market is offering to be sure that they are happy with the services provided and the management fee structure.

A decision at an AGM does not nullify the auto-renewal clause unless it is stated in the contract. In the SCA standard OC contract it is noted that “if no notice of it’s intention to revoke this appointment is given by the Owners Corporation to the Manager at least 28 days prior to the expiry date, the Appointment will continue until the expiration of one year after the expiry date (which date will then become the expiry), but will not exceed the date of the next Annual General Meeting at which time re-appointment must be confirmed’.

Yes, it is legal to hold the AGM less than the required 28 days and for the contract to auto renew.

We can confirm that while the auto renew clause is standard practise in the industry, not all OC Companies have the clause in their contract and it certainly can be edited if all parties agree. It should be noted that if the Manager has breached the contract, the OC can terminate the Manager at any time given 28 days’ notice.

Jane Giacobbe Strata Reports Victoria & NSW E: info@srvic.com.au P: 0402 341 848

This post appears in Strata News #357.

Have a question about what to do when you are coming up to the end of your owners corporation management contract in Victoria or something to add to the article? Leave a comment below.

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This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.

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