WA: Can a Strata Company Terminate a Management Contract Early?

Question: Due to poor service, we’ve told our strata manager we will not renew the contract at the end of the year. Now we receive even worse service. Can we exit the contract early?

For over 12 months, our council of owners has had terrible service from our strata company. We’ve experienced a lack of communication, no follow-up on requests for work to be carried out, and a portal that constantly crashes, leaving the council with no way to track the progress of jobs. We’ve asked for feedback from residents, and they feel the same way.

Our contract expires at the end of November, and we have informed the strata management company that we will not renew their contract. The council have identified the company we want to engage.

However, now that they know we are not continuing the relationship, we receive even less communication and service. The contract doesn’t have an early exit clause. The council has yet to have advice from a lawyer. Should we approach the strata managers and request to end the contract early, or do we need to see it through to the end of the contract period?

Answer: The strata company could consider seeking the assistance of a lawyer who specialises in strata law to assist with the preparation of a show cause notice.

As a first point of action, I always recommend communicating your thoughts, concerns and feelings to your agent in writing. Also, consider picking up the phone and talking with the license or manager. I recommend you approach this calmly and non-aggressively, sticking to facts. You may be able to negotiate the early exit of your contract with the agent.

Should you feel the agent is not meeting the agreed service provision under the management authority, you may consider discussing this with the agent and suggest a reduction in fees based on the level of service provided. Relating these conversations back to the contract and the agreed services is important. Often, the strata company’s expectations regarding what services the strata manager is to perform are outside the contractual agreement.

Failing this, if you are contracted with the agent until November, the only way to exit earlier would be if there are grounds to do so under section 151 of the Strata Titles Act 1985:

151. Termination of strata management contract

1. There are proper grounds for termination of a strata management contract by a strata company if —
   
   1. the strata manager has contravened this Act; or
   2. the strata manager has contravened the contract; or
   3. the strata manager is, according to the Interpretation Act 1984 section 13D, a bankrupt or a person whose affairs are under insolvency laws; or
   4. the strata manager is a Chapter 5 body corporate within the meaning given in the Corporations Act 2001 (Commonwealth) section 9; or
   5. the strata manager, or a director or chief executive officer of the strata manager, is convicted in this State of an offence punishable by imprisonment for 12 months or longer and the strata company is satisfied that the offence affects the strata manager’s suitability to perform the strata manager’s functions; or
   6. the strata manager, or a director or chief executive officer of the strata manager, is convicted outside this State, in Australia or elsewhere, of an offence that, if it had been committed in this State, would be punishable by imprisonment for 12 months or longer and the strata company is satisfied that the offence affects the strata manager’s suitability to perform the strata manager’s functions.
2. If a strata company is satisfied that there are proper grounds for termination of a strata management contract, the strata company may terminate the contract by giving the strata manager written notice of termination —
   
   1. specifying the date (being not less than 28 days after the date of the notice) on which the termination will take effect; and
   2. informing the strata manager of the right to apply to the Tribunal for review of the decision to terminate the contract.
3. Before a strata company terminates a strata management contract under subsection (2), the strata company must give the strata manager a notice (a show cause notice).
4. A show cause notice must —
   
   1. be in writing; and
   2. state that the strata company proposes to terminate the strata management contract; and
   3. specify the grounds on which it is proposed to terminate the strata management contract; and
   4. set out particulars of the facts relied on as evidence of those grounds; and
   5. invite the strata manager to make written submissions to the strata company as to why the strata management contract should not be terminated; and
   6. specify the period (being at least 14 days after the date of the notice) within which the written submissions must be received by the strata company.
5. A strata company must give proper consideration to any written submissions made by the strata manager within the period specified in the show cause notice.
6. Nothing in this section affects the operation of section 115 in relation to a strata management contract or any other right that the strata company may have to terminate the contract.

The strata company should seek the assistance of a lawyer who specialises in strata law to assist with the preparation of a show cause notice. An appropriate lawyer would be able to ensure that the notice meets the requirements of the ACT.

This post appears in the September 2023 edition of The WA Strata Magazine.

Luke Downie
Realmark Strata
E: strataperth@gmail.com
P: 08 9328 0999