Strata Managers First Concern under the Strata Reform: Agent Appointment and Extension of Agreements

Posted 01 December 2015

Category: Strata, Archives

With new strata laws expected to commence on 30 November 2016, the first thing for strata managing agents to address is their appointment:

1. After the new laws commence, FAGM appointments will have a maximum 12 month term.

2. After the new laws commence, appointments made at other general meetings will have a maximum term  of 3 years.

3. There is a complicated and unhelpful transitional provision dealing with appointments made prior to commencement of the new laws. It may be necessary for the Court to consider this provision to obtain certainty as to what it means for prior appointments. The most likely construction will be that they will run their agreed term, as long as it does not exceed three years or extend more than six months after commencement of the new laws, whichever is later.

4. Automatic rollovers have been removed and replaced with a fairly complicated expiry/extension mechanism:

• • The agent must give the owners corporation at least three months’ notice of the expiry date of the agreement (or at least one month’s notice, if in an extension period).

• • The owners corporation can make successive extensions of up to 3 months, but not beyond the next AGM, pending a general meeting decision whether to reappoint the agent. If it does and then decides either not to reappoint the agent or not to make another extension, it must give the agent one month’s notice of that decision.

• • If the appointment was for a three-year term, the owners corporation decides not to reappoint the agent, does not extend the term and does not notify the agent of the decision not to reappoint at least three months prior to the end of the term, the agent has an option to extend for a further three months.

5. Developers or persons connected with developers are prohibited from being managing agents during the first 10 years from the date of registration of the strata plan.  If they were appointed before 1 July 2016, their appointment would expire as provided above and would be illegible for reappointment during that 10 year period.

What should you do about existing agreements?

You should consider entering in to fresh agreements with existing clients as many current agreements will expire on 31 December 2016.

What should you do about new agreements?

You should also consider making some changes to your agreement templates to deal with this part of the reform and other parts of the reform.

How should expiry and renewal be handled?

Adopt a policy aimed at reducing the risk of missing one of the steps required to prevent an agreement expiring without extension or reappointment.

***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.