This is a short discussion on terminating strata management agreements (it can get quite complicated quite quickly!) and transferring them.

TRANSCRIPT:

Hi. It’s Allison Benson from Thoughts from a Strata Lawyer and Kerin Benson Lawyers and this blog/vlog is about terminating and transferring strata management agreements.

Let’s deal with transferring a strata management agreement first. It is slightly less complicated. Similarly to a building management agreement, the Strata Schemes Management Act 2015 provides for the ability to transfer a strata management agreement. The relevant section is section 51. A transfer must be authorised by the owners corporation passing a resolution at a general meeting. If a motion is passed to authorise the transfer the new strata management agreement is for the same term or length of time as the previous strata management agreement. Transfers can get tricky, generally, strata management agreements will have provisions to the effect that a request to transfer cannot be unreasonably refused so scheme’s should always request a copy of their current agreement and consider what its obligations are in relation to a transfer under the agreement. An owners corporation requesting information such as the name, licence number and details of the potential new manager’s experience, including, if they are a corporation, the details of the individual strata manager who will be looking after the scheme on a day to day basis, would be a reasonable request. After all, it is reasonable to want to know if the potential new manager has the ability and the qualifications required to manage the scheme before lot owners are required to vote on approving a transfer. Where lot owners need to be careful is that they do not refuse to approve a transfer unreasonably. For instance if the current strata manager is based locally and the proposed strata manager is based some 500 kms away this could be a good reason to refuse to authorise the appointment. Where however the proposed strata manager has a good knowledge of the local area, has good connections in the local areas and has agreed to regular in person meetings locally at no additional cost to the owners corporation then it would be less reasonable to refuse to agree to the transfer.

That was a quick summary of transfers, now let’s get onto terminating a strata management agreement which is far more common. Where a compulsory strata manager is appointed by the NSW Civil & Administrative Tribunal under section 237 of the Act, the appointment of the existing strata manager is automatically terminated. In other instances, a strata management agreement will terminate on its expiration. Both of these are generally non-contentious in that the termination date is clear.

In other instances, the owners corporation or the strata manager may want to terminate the agreement. What happens then? Where the owners corporation wants to terminate the strata management agreement it needs to consider section 50(3) of the Act which permits an owners corporation to do so if the termination is in accordance with the strata management agreement and if it is authorised by a resolution of the owners corporation at a general meeting. First things first, the owners corporation has to look at the agreement and see what the termination provisions are. Generally, there will be the ability to terminate the agreement with the consent of the strata managing agent or if there has been a breach of the agreement by the strata managing agent, the process of serving a notice of breach has been complied with and the breach has not been rectified within the required time frame. (Note, the strata managing agreement may give the strata manager the same ability to terminate the agreement if the owners corporation breaches terms of the agreement). Generally, this process will require at least two resolutions to resolve to issue a breach notice and to resolve to terminate the agreement if the breach has not been rectified. Whether or not the breach is sufficient to warrant starting the termination process also needs to be considered. When resolution to terminate an agreement is passed there is often conflict between the owners corporation, the new strata manager and the old strata manager. Sometimes, the old strata manager may refuse to hand over the books and records of the owners corporation or not co-operate with the new strata manager. In this case, it’s helpful to refer to the code of conduct for strata managing agents which is set out in schedule 4 of the Property and Stock Agents Regulation 2022 which sets out the requirement to co-operate on certain matters including providing access to the books and records and facilitating the transfer of the books and records of the scheme.

This is general information and is not legal advice. If your scheme is considering transferring or terminating its strata management agreement you should seek legal advice specific to your situation.