Review your agency agreements NOW

With the Strata Schemes Management Act 2015 (NSW) set to commence on 30 November 2016, strata managers need to be paying attention to the terms of the agency agreements they (a) currently have with their buildings and (b) are issuing to new buildings they are tendering for.

I have seen a number of agreements in the past week alone, issued by strata management companies tendering for management that simply will not comply with the new law when it commences on 30 November.

Here’s what you need to be thinking about:

  1. Maximum 3 year terms – or 12 months for appointment at a First AGM
  2. No automatic roll-over. Agreements terminate on the expiry date, though the appointment can be extended by the committee for successive periods of 3 months, but never past the next AGM
  3. Agreements in place as at 30 November 2016:

    (a) automatically end 3 years after they commenced OR

    (b) 6 months after commencement of the new law (so that’s 29 May 2017, assuming the new law actually does commence on 30 November 2016)

    whichever is the later. 

What does point 3 mean in practice?

Here are some examples to help you get you head around it:

If you have a 5 year agreement, commencing 1 June 2014 and due to terminate 31 May 2019:

  • The agreement will be part way through year 3 when the new law commences on 30 November 2016
  • The agreement will automatically expire on 31 May 2017 (being 3 years from the commencement date)

You’ve just lost 2 years on your management.

If you have a 5 year agreement commencing 1 June 2013 and due to terminate 31 May 2018

  • The agreement will be part way through year 4 when the new law commences on 30 November 2016
  • The agreement will automatically expire on 29 May 2017, being 6 months from commencement of the new law.

That’s because 29 May 2017 is later than 3 years after commencement of the agreement.

If you have a 3 year agreement commencing 1 January 2014 and due to terminate 31 December 2016

  • The agreement will be part way through year 3 when the new law commences on 30 November 2016
  • The agreement will be extended to 29 May 2017, being 6 months from commencement of the new law.

That’s because 29 May 2017 is later than 3 years from commencement of the agreement.

Action steps

If you haven’t already, now is the time to:

  • update your standard agency agreement to ensure its compliance with the law once 30 November 2016 rolls around. There are a number of other items, outside the scope of this article, that agency agreements should be covering off under the new law. For example, managers charging a fixed fee for service are well advised to reconsider their fee structure, as the operation of some aspects of the new law mean an increase in a strata manager’s day to day duties
  • conduct the above exercise with respect to your existing agreements, and consider proposing new agreements now to secure your continuing engagement.  Remember the maximum 3 year term requirement.

The information contained in this article is not legal advice. This article is intended to provide general information in summary form only. You should not rely on the content of this article as legal advice. If you would like advice specific to you and your situation, please contact us.

Posted in LCOR