The Strata Schemes Management Act 2015 (“Act”) has made significant changes to the way strata managing agents are appointed by owners corporations.
Under section 50 of the Act, if a strata managing agent is appointed at the first AGM, the term of appointment must not be for more than 12 months. In any other case, the appointment is limited to 3 years, with a possibility for reappointment by the owners corporation by ordinary resolution at a general meeting.
Having said the above, the term of appointment of a strata managing agent may be extended by a strata committee for successive periods of up to 3 months, pending a decision by the owners corporation as to the reappointment of the strata managing agent. These extensions cannot proceed past the next annual general meeting.
But what happens if a strata management agency agreement was entered into under the old Strata Schemes Management Act 1996?
Under clause 14 in schedule 3 of the Act, if the agent was appointed or reappointed under the old law for a term of 3 years or more, then the agreement ends on the day that is 3 years after the term commenced, or that is 6 months after the commencement of the Act (i.e.30 May 2017), whichever is later.
If the agent was appointed or reappointed under the old law for a term that is less than 3 years, then it ends on the day that the term ends, or that is 6 months after the commencement of the Act (i.e. 30 May 2017), whichever is the later.
For instance, if an owners corporation appoints a strata manager for 6 months commencing 1 August 2016, under the normal circumstance the appointment would end on 1 February 2017. However, under the Act, this strata management agreement is automatically extended until 30 May 2017, since that is the later of the two expiry dates. The same applies to an agreement that is currently on ‘roll over’ – with no fixed end date. The agreement will automatically expire on 30 May 2017 – even if the Owners Corporation does not provide notice of termination to the strata manager.
The situation is different if the owners corporation decides to terminate the agency agreement for reasons such as a material breach of the agreement by the strata managing agent, in which case the automatic extension under clause 14 in schedule 3 of the Act is not applicable: the agreement has been terminated earlier in accordance with the terms of the contract.
We would also like to remind owners corporations that under section 72 of the Act, the NSW Civil and Administrative Tribunal has powers to make orders in relation to agency agreements, including the termination of an agency agreement. This option is available to owners corporations if there are any issues with harsh, oppressive, unconscionable or unreasonable agency agreements or poor performance by the strata managing agent.
In short, strata schemes should take the time to review their existing agency agreements to ensure that the agreements are compliant with section 50 of the Act or that they are aware of the expiration date or any automatic extensions under clause 14 in schedule 3 of the Act. This also presents an opportunity for strata schemes to re-negotiate the terms of their agreements and see what other strata managing agents have to offer.
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.