Employment of managers
The Unit Titles (Management) Act (Act) provides that the primary functions of an Owners Corporation (OC) are the management of its common property and the enforcement of its Rules, together with a variety of functions designed to ensure as far as possible the peace and harmony enjoyed by owners and residents.
The corporation’s functions are divided into those that MUST be exercised, and those which the corporation MAY exercise, that is, where it has discretion as to when and how it will exercise them. In all cases the responsibility for the proper exercise of the functions vests in the Executive Committee (EC) elected at each AGM from among the voting members of the corporation.
The Act provides the EC with the structure and powers to exercise the functions of the corporation, but in many cases, corporations decide that their committees should be assisted by a manager.
Hiring a manager
An OC for a units plan may, by ordinary resolution, enter into a management contract with (S50 of the Act):
a person holding a conditional licence as a real estate agent under the Agents Act 2003 (Agents Act) who acts only as an OC manager
a member of the corporation; or
someone else who is not a manager of another OC, and whose income as manager of the corporation will not be the person’s primary source of income.
The management contract must state the remuneration of the manager and the functions of the OC that the manager is to exercise. It may include other conditions agreed between the OC and the manager.
Any arrangement for management services is a management contract and the contractors are then subject to all applicable provisions of the Act.
The contract, including any period for which the contract may be renewed or extended, can ONLY run for 3 years. If the contract is for longer than 3 years or includes a cancellation notification period at the end of 3 years, it can only operate for 3 years (S51 of the Act).
The manager is bound by a Code of Conduct and must hold the required public liability insurance (S56 and S57 of the Act). If the manager is a real estate agent, the Agents Act also applies to the activities of the manager.
The manager may only transfer the contract to another manager with the approval of the OC through an ordinary resolution. See owners approval of the transfer of management contract.
The Act provides at length how an OC can terminate the contract of a manager (S54 and S55).
Managers operate under the supervision of the EC. Their contracts need give them very little authority to act on behalf of the corporation other than as directed by the committee and managers do not need delegations to collect levies. But in some cases owners corporations may want to have a manager do the very large part of the work with minimum supervision by the committee. Others want committee and/or corporate control over all decisions.
The only way of giving a manager the power to act independently is for the OC and/or the EC to delegate in writing any of their functions to the manager (see S58 of the Act).
This may suit those owners corporations that do not want close involvement in management, but it should be borne in mind that the executive committee remains legally responsible for the proper exercise of the corporation’s functions. It is a very vexed area and should be handled with great care by OC's and EC's.
Delegation requires a definite statement that a function has been delegated. If there is no statement a function has been delegated. It cannot be implied that there is any delegation just because there is a management contract.
If a function has been expressly delegated, S240 of the ACT Legislation Act (Legislation Act) says the delegator can still perform the function or direct how the function is performed, should they think it necessary.
Most importantly the delegator remains responsible for the performance of the function (S238 of the Legislation Act.)
A contract can expressly state that there is no delegation of functions from the OC or the EC to the manager or that delegations are subject to conditions, limitations or directions. (S239 of the Legislation Act.)
Decide what you want the manager to do
The first step in hiring a manager is for OC's, usually EC's, to decide what tasks the OC wants to have performed for them and to prioritise those tasks into a ‘must have’ list and lesser priorities that they would like but could without or do for themselves if necessary.
For example, we understand one manager does not provide a monthly bank reconciliation, a report of expenditure and receipts against budget predictions and a levy status report as either part of their basic fee or as an extra service for an extra fee. If an owners corporation had those services as a ‘must have’ item, they would bypass that manager. Similarly some managers allow EC's log-in access to their accounts but others do not. Some require meetings to be in standard office hours but others accommodate meetings starting later.
So decide what you want rather than accept the first offer from a manager. The attached document can be used as a prompt list to help EC's clarify their thoughts:
Once the OC/EC has determined its priorities, it can circulate its requirements to managers and request a copy of their contract.
Any suggestion that contract terms are commercial-in-confidence and will not be discussed until late in negotiations should be treated with complete scepticism. The pool of managers in the ACT is limited. Many are members of Strata Communities Australia and use a largely common contract. Most managers are very happy to discuss the services they offer as part of the basic cost and as extra services and the contract they offer. If you find this discussion is blocked, look elsewhere.
Comparing apples with apples
If information is not easily comparable, ask for it to be presented so that it is. If the request is refused, the EC can decide whether it wishes to continue to negotiate with that manager. EC should compare the costs by making assumptions, based on experience, about how often it will use extra services.
Comparing how offices operate
Who would be your contact person in an office?
Does that feel like a comfortable fit?
Would that person do all your work?
For example, in some offices one person does account credits, another does debits and someone else does maintenance. So three small issues requires you talk to three different people. And more importantly, no one in the office has a complete picture of the performance of your owners corporation.
How many OC's would your person in the manager’s office manage?
So how much time could you reasonably expect to get over a month?
Would that work for your OC?
Ask for references from existing clients to be provided by the current clients direct, not through the manager or from a website. Ask around among your friends and acquaintances.
Consider the contract carefully
The contract does not need to be rocket science. It is a contract for the provision of defined services by the manager and in return the owners corporation will pay the agreed prices for those services.
What is the contract the manager has offered about?
Does it focus on the services to be provided and the payment for them?
Or does it focus on the conclusion of the contract and periods of notice?
Is it a mutual contract between equal parties or is it one-sided?
What is not in the contract?
There has been discussion among activist unit owners for some time about what a reasonable contract between OC's and managers would be like.
While OCN is not offering legal advice nor claiming professional expertise, it offers the attached contract ideas to owners corporation owners for their consideration:
a revised version of the contract developed by the Strata Managers Institute ACT and still in use with managers that are members of Strata Communities Australia. (SCA Management Contract)
a revised version of a contract used by one of the professional managers in the ACT. (An Alternative Management Contract)
Amending the contract
Think about what will work for your OC and request amendments of the contract you are offered, if you think that is what you need. If the manager refuses to consider that, reconsider appointing that manager. You are at liberty to amend the contract the manager offers you. Make the amendments you want and quietly insist on them.
Appointing the manager
The OC has to pass an ordinary motion at an AGM or special general meeting to validly appoint a manager. To enable the owners corporation to genuinely consider the proposal, the motion to be put to the OC needs to cover:
who is being appointed,
for how long,
to do which tasks,
whether any delegations are created, and
the payment terms.
Such a motion can then be used as proof of the OC’s intentions if it is ever needed. A wise committee would enable owners to see all the material provided by the managers approached either as part of the meeting papers or on request.
Managing the manager
Normally the relationship between the manager and the EC is cordial and business like. Sometimes relationships of respect and trust develop.
If basic good manners and reliable performance are not there, OC's must remember that they are hiring the manager, not the other way around. So the relationship must be put on a professional footing. Tell the manager that you are dissatisfied. Explain how you want the relationship to operate. Listen to the reply.
If the relationship does not improve, the EC needs to move the problems to the manager’s manager. If the quality of the service still does not improve, meet with the principals of the company and lay out the concerns.
Ending the appointment of the manager
If the EC is expressing concern about the OC’s relationship with the manager, it is likely that mutual agreement to conclude the contract will arise. If not, the EC should give notice within the terms of the contract and look for another manager. The manager cannot refuse to accept notice to terminate the contract.
If the OC is already expressing concern with the manager’s performance it is unlikely that it will be necessary to put the remedial breach provisions into action.