Question: Our Council has a signed management contract with a Strata Management Company. They have changed hands as a corporate entity from Strata Management Company A (SMCA) to Strata Management Company B (SMCB). Is this grounds for immediate termination?
Our Strata Manager has changed hands as a corporate entity from Strata Management Company A (SMCA) to Strata Management Company B (SMCB). The service level has been poor for the duration of the relationship. The signed management contract between Council and SMCA has not been updated to reflect the change of Strata Manager. Is this oversight by SMCB grounds for immediate termination of the current management agency agreement?
Answer: If SMCB is a different company from SMCA, it cannot act as your Strata Manager unless it has a written strata management contract with your Strata Company.
If SMCA only changed its name to SMCB, remaining the same corporate entity and retaining the same ACN, your Strata Company would not be entitled to terminate the strata management contract simply because of the name change.
If SMCB is a different company from SMCA, it cannot act as your Strata Manager unless it has a written strata management contract with your Strata Company that complies with the formalities in section 145 of the Strata Titles Act 1985 (WA) (“Act”). SMCB, its agents, employees and contractors must comply with the provisions of section 144(1)(b) of the Act and the educational qualifications in the Regulations.
In other words, if SMCA wanted to replace itself with SMCB as your Strata Manager, your Strata Company must release it from its current strata management contract, and SMCB must enter into a new written strata management contract with your Strata Company.
However, section 143(5) of the Act prohibits one Strata Manager from entering into or varying a contract with another Strata Manager. Section 143(5) may prevent a Strata Company from substituting itself with another Strata Company under a written agreement.
If SMCB has taken over from SMCA without a written strata management contract, it has breached section 144 of the Act and cannot act as your Strata Manager. If SMCA has stepped away and allowed SMCB to take over without complying with the Act, you can terminate any existing strata management contract with SMCA under section 151(a) of the Act.
In conclusion, unless SMCB has entered into a written strata management contract with your Strata Company, it cannot act as your Strata Manager. There is a possibility that SMCA, SMCB and your Strata Company can enter into a written agreement to substitute SMCB for SMCA, but that may contravene section 143(5) of the Act and invalidate the substitution.
However, this is not an easy question to answer, there may be other relevant facts that do not appear from the question and terminating strata management contracts can have serious consequences. For these reasons, I would advise you to seek legal advice before taking any further steps.
This post appears in Strata News #626.
Eduard Ferreira
Douglas Cheveralls Lawyers
E: eduard@dclawyers.com.au
P: 08 9380 9288
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