So you want to change your Owners Corporation Manager?
For you to be reading this page one of a number of things have occurred;
- Your Owners Corporation Manager is not providing an acceptable level of service.
- Your Owners Corporation Manager is not providing any service at all (It happens).
- You or your OC Committee have an OC Management Contract/s expiring in the near term and wish to test the market by initiating a tender process. The OC and Committee is therefore exercising due care and diligence as required under the OC Act. Consequently, this Tender Process may result in the retention or change of Manager.
- Your Owners Corporation Manager is severing the relationship. (It happens also).
How you go about the change if any is dependent on a number of important observations, being;
- Are you currently in a management agreement with your current OC Manager? And if so, have you complied with the termination clause or notice period required under any agreement you currently have. The shock to many here is that most OC agreements have a notice clause and if you miss the notification period prior to any agreement ending you will find yourself with at least another years management by your current manager whether you like it or not. NOTE – Changes to legislation in December 2021 assist to address some of these past contract conditions, however you may still be under a pre December 2021 agreement.
- If you did get your 28 days or longer ‘notice of termination of agreement’ in prior to your contract renewal date you may feel confident that this is all that is required and you can select your new manager after giving notice. But, and this is a rather large ‘but’, did you also check the minutes of your last Annual General Meeting – AGM, as you may find your committee resolved that they couldn’t terminate the OC Manager except by a vote at an AGM. The the story goes like this – 1. So you resolved to terminate the current manager. 2. You gave the required notice. 3. You believe that you are complying with the agreement. 4. Yet a resolution at your last AGM shoots you down. Who reads those minutes properly now?
- Many managers will let you go if the relationship is ‘broken’ and even notify you of any required notification date re termination notice required. Whilst many will also attempt to hold on to a management contract in the normal course of running a commercial business, whether that is good for your OC or not. Large OC contracts are significant sums, enough said.
Over many years we have seen Owners Corporation Committees in Victoria become more experienced as more and more Victorians get a few miles under the belt from living in their OC environment and serving on their OC Committees. Expectations have risen for competent OC Management and also fair value, new legislation in the form of the OC Act and Regulations is in place and we believe most OC Managers have now got the memo that they must provide a Good quality of management.
We are not picking on the managers alone here, as we have former managers in the team at theOCguide. We have also experienced the very breaches of the OC Act by individual lot owners and committees, that the Act was set up to stamp out. So it is not always a one way street. We are aware that a committee may wish to change a manager, as the manager may not have given them the answer they wish to hear. In this regard self interest should have no place in the decision making process. In other words, burn through the managers until you get your way.
If the relationship you have with your OC Manager is broken beyond repair and you are still in an agreement which is yet to expire I can suggest;
- A frank talk where some negotiation could be entered into prior to accelerating matters. Mind you this is dependant on the state of the relationship.
- A chat with a competent person to map out a way forward, which may include Legal advice.
This article is not intended as Legal Advice.
And if using an OC Advocate / Strata Consultant for Assistance.
Owners Corporation Managers Register at Business Licensing Authority Victoria
Link – Is Your Manager Registered in Victoria and Carrying Insurance?
OC Manager Shopping? Our own experience in consulting to Owners Corporations and having actually prepared or assisted in tenders for Owners Corporation management has often given us some cause for concern due to the fact that the Owners Corporation Act for Victoria does spell out the need for there to be no conflict of interest.
Experience here indicates that often OC Committees or developers may shop around in an effort to find a ‘Compliant’ OC Manager, especially where say a developer is trying to dictate the opening years budget for OC Fees in an attempt to make sales of apartments/lots more attractive or the OC Committees are unwilling to address pressing maintenance/admin cost issues and increase budgets. The incoming OC Manager also has to make a decision based on complying with the OC Act and not about how much in fees they can make from your property. This raises the ‘integrity’ issue. A good manager will hold the line and insist on correct process. Unfortunately the Manager may insist on proper process and then be overlooked for management. We have been there, but mainly due to some parties wishing to sell the management rights of developments just like yours. A developer often will attempt to sell a management agreement to maximize their return on a project in the normal course of business. The developer may have sold a 6 years or more management agreement to an inexperienced manager which means you were in trouble after year 1 and you had 5 years to go. Luckily under OC Act changes in effect now, from 1 December 2021, any new agreements will be limited to 3 years (with a few exceptions).
If your OC Manager tells your committee or you how it is, you should not immediately try to rush them out the door. Sometimes the truth hurts and if you need an OC Fee increase or special levy for example, removing the manager doesn’t make the need to raise sometimes urgent funds go away. Ultimately lot owners should be attempting to add value or at least retain the value in their lots and this often entails expenditure on maintenance or repairs. For the larger Owners Corporations you can see why Long Term Maintenance Funds (LTMF) came to be legislated as OC’s must have planned, funded maintenance or things tend to get out of control very quickly.
The lesson here is all parties and this includes you and your committee of management have to deal with the reality of situations or you could burn a good manager.