By Phillip Leaman

21 April 2021

Each week we will examine a key aspect of the changes. We delve into the changes in more detail so Owners Corporations Managers and Committees can be prepared and understand their rights and obligations. This week we are looking at Owners Corporations and their managers.

Our earlier blog gave a summary of the changes to the Owners Corporations Act 2006 which commence on 1 December 2021 as a result of the passing of The Owners Corporations and Other Acts Amendment Act 2021. It is available at http://tlfc.com.au/owners-corporations-act-changes-explained/

 

The Amendments include a range of measures to make managers more accountable including making it easier in some situations to terminate them.

 

This blog will go through the amendments concerning managers and their contracts of appointment. We will provide a separate blog about appointment of managers by developers.

 

The amendments which take effect from 1 December 2021 provide that contracts of appointments for managers must not include certain prescribed terms such as:

  • managers may not be appointed for a term of more than 3 years;
  • requiring the owners corporation to convene a general meeting or pass a special resolution to revoke the manager’s appointment;
  • allowing the manager to renew the contract of appointment at the manager’s option;
  • automatic renewal of contracts;
  • specifying the terms of notice before termination to exceed 3 months for tier one and tier two owners corporations or one month for all other tiers;
  • a term that restricts the ability for an owners corporation to refuse consent to an assignment of the manager’s management contract, other than a requirement that such consent shall not be unreasonably withheld. The amendments go further and say that it will be unreasonable withholding of consent if the owners corporation refuses consent to an assignee who is a full member of a professional body or association approved by the Director.

 

The amendments also add additional obligations for Managers to:

  • take reasonable steps to ensure that any goods or services procured by the manager on behalf of the owners corporation are procured at competitive prices and on competitive terms; and
  • not exert pressure on any member of the owners corporation in order to influence the outcome of a vote or election held by the owners corporation; and
  • before a contract is entered into for the supply of goods or services to an owners corporation under which a manager is entitled to receive a commission, payment or other benefit, must give written notice to the chairperson of the owners corporation disclosing the commission, payment or other benefit in accordance with section 122B.
  • holding money in separate bank accounts (unless otherwise agreed) and provide copies of financial statements of bank accounts on request by an owners corporation. Managers must as soon as practicable, with any reasonable request made by an owners corporation to provide copies of financial statements of bank accounts—
    • that contain money held by the manager on behalf of the owners corporation on trust; and
    • for any period within 3 years immediately preceding the request.
  • disclosing beneficial relationships or commissions, payments or other benefits with or from suppliers. For the purpose of the Act a manager has a beneficial relationship with a supplier of goods or services if the supplier is—

(a)     the manager; or

(b)     an associate of the manager; or

(c)     a body corporate of which the manager, or an associate of the manager, is a member; or

(d)     a corporation over which the manager (either individually or jointly with associates), or an associate of the manager, can exercise control; or

(e)     a corporation of which the manager, or an associate of the manager, is an executive officer; or

(f)      in the case of a manager that is a corporation—an executive officer of that corporation or an associate of an executive officer of that corporation; or

(g)     the trustee of a discretionary trust of which the manager, or an associate of the manager, is a beneficiary; or

(h)     a member of a firm of which the manager, or an associate of the manager, is also a member.

 

Payments to Managers to related party suppliers

The manager of an owners corporation must disclose any beneficial relationship with a supplier with whom a contract is proposed to be entered into for the supply of goods or services to the owners corporation.

Disclosure required under the Act must

(a)     be given by written notice to the chairperson of the owners corporation; and

(b)     subject to the emergency provisions be given—

(i)      immediately upon the manager becoming aware that the proposed contract is with a supplier with whom the manager has a beneficial relationship; and

(ii)      before the contract is entered into by the owners corporation.

 

If, because of an emergency situation, it is necessary for the manager to enter into a contract for the supply of goods or services and it is not reasonably practicable for the manager to disclose a beneficial relationship in accordance with the Act, the manager must disclose the beneficial relationship to the chairperson of the owners corporation as soon as practicable after the contract is entered into.

 

A manager who fails to disclose a beneficial relationship in accordance with this section is taken to breach the duty of a manager under section 122(1)(c).

 

However a breach does not apply if the manager—

(a)     was not, and could not have reasonably been expected to be, aware of the beneficial relationship with the supplier before the contract was entered into; and

(b)     disclosed the beneficial relationship to the chairperson of the owners corporation immediately after becoming aware of the beneficial relationship.

So what is an associate?

associate, of the manager, means—

(a)     a director of the manager; or

(b)     an employee or agent of the manager; or

(c)     a spouse, domestic partner, parent, brother, sister or child of the manager or the manager’s representative; or

(d)     a child of the spouse or domestic partner of the manager or the manager’s representative;

 

Payments to Managers from supply contracts (such as insurance)

Where there is a contract for the supply of goods or services to an owners corporation under which the manager of the owners corporation is entitled to receive (other than from the owners corporation) a commission, payment or other benefit. Before a contract is entered into, the manager must disclose, by written notice, to the chairperson of the owners corporation the commission, payment or other benefit to be received under the contract.

If the contract is an insurance contract and the commission that the manager is entitled to receive is a percentage of the premium payable under the contract, the manager must disclose, by written notice, to the chairperson of the owners corporation the percentage of the premium rather than the actual amount of the commission.

If the contract is renewed and the percentage of the premium that the manager is entitled to receive increases, the manager must make further disclosures of the percentage of the premium by written notice to the chairperson of the owners corporation.

A manager who fails to make a disclosure required under this section is taken to breach the duty of a manager under section 122(1)(f).

 

Summary

Most managers wont have any problems with complying with the new amendments as they probably already comply. What it does do is make things more transparent for Owners Corporations and adequately and fully disclose commercial relationships.

 

Need Advice?

Phillip Leaman, principal of the Owners Corporations practice group of Tisher Liner FC Law and his very experienced team can provide assistance to owners corporations, committees, lot owners and managers in a range of owners corporations legal matters. We have substantial experience advising Owners Corporations and managers on dealing with suppliers and Owners Corporations.

 

We believe Owners Corporations want to maintain peaceful, functional living environments for owners. Our mission is to provide a fresh perspective on resolving legal disputes and to inspire Owners Corporations to achieve outcomes that preserves the value of assets and restores harmony. We are expert Owners Corporations lawyers.

 

For advice or assistance, please contact Phillip Leaman on 03 8600 9314 or by email pleaman@tlfc.com.au.

 

To see earlier spotlights on the amendments check out our website. Our website also has more information on Owners Corporations as well as a range of helpful blogs and podcasts.

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