Strata management is one of the biggest decisions faced by any owner's corporation. New rules around strata management contracts may assist owners corporations to regularly keep an eye on their strata management contracts.
In Victoria, there are plans to restrict strata management contracts from the current situation of many contracts starting at 10 years and being quite open-ended. Stories of managers being effortlessly renewed are not uncommon.
In the 2016 strata Act NSW restricted strata management contracts to an initial 12 months to a maximum of three years. The rest of the country appears to be following suit, with Victoria considering a three year contract term for strata management.
However, the new law only applies to strata managers. This means that buildings or facilities managers are essentially exempt from the new laws set to start in December 2021.
Victoria’s Tier One schemes - that is buildings with more than 100 lots must appoint a strata manager unless they apply for special permission to be exempt from having a strata manager.
Contracts with developers who have set up a strata management scheme will expire at the first AGM of the new owners corporation and developers cannot be appointed managers. This is good news for owners who may want to regularly review the needs of their building and consider whether their current strata manager is fulfilling their requirements.
Any new contract entered at an owners corporation AGM is limited to a maximum term of three years, and there are rules to prevent unfair clauses being used in the contract.
For example, contracts cannot contain clauses like automatic renewal or resigning, and when sacking a manager there are maximum notice periods of one month for small blocks and three months for larger buildings. In this case “larger” refers to buildings with more than 50 lots.
New South Wales are currently in a consultation phase over strata management, although it is expected that soon facilities management contracts will similarly be restricted to a maximum of three years.
Clearer defining of the role of strata managers (and in future in Victoria facilities managers) benefits everyone. In a move towards transparency the new laws means that strata managers must that any relationship with suppliers is declared to the strata committee, as is any commissions received from securing contracts.
The move means owners corporations can rest assured they are receiving goods and services at genuinely competitive rates and that strata managers are acting in good faith for the committee. If not, there are now simpler and easier ways to regularly review the arrangement and if not the right fit, look elsewhere.
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