Strata managers terminate strata management agreements for a range of reasons, some to do with the business and some to do with the scheme.
There are many reasons why a Strata Manager might decide to part ways with a client, including:
- The Committee members or lot owners are abusive, dismissive or otherwise disrespectful to the Strata Manager
- The Committee members are making decisions contrary to the legislation
- The Committee refuses to undertake necessary / compliance works
- The Committee is failing to make any decisions at all
- There is no Committee and consequently no leadership
- The Strata Manager’s business is moving in another direction (ie going all commercial, or all high-rise lots)
- The strata scheme is a lot of work for a small amount of money
- There are conflicts of interest between the Strata Manager and the Committee or lot owners
- There are conflicts of personality
- There have been staffing changes in the Strata Management firm and they can no longer service the client
- The Strata Manager is selling / retiring / going broke
These are just some ideas of the top of my head but in reality there could be endless scenarios that could cause the Strata Manager to decide they no longer choose to work with a particular strata scheme.
How Strata Managers Terminate Strata Management Agreements
There are three key ways that Strata Managers end their agreements with a strata scheme:
- The agreement expires and a new agreement is not submitted
- The agreement is assigned to another firm
- The agreement is terminated
The agreement expires and a new agreement is not submitted
The appointment of a strata manager must be made via an ordinary resolution at general meeting, must be in writing, and must be for a maximum of three years.
A Strata Manager seeking to end an arrangement with a strata scheme will simply refuse to submit another agreement. Its then left to committee to decide for themselves what they choose to do.
The current agreement expires and the records and funds of the strata scheme will be handed back to the Committee or the new Strata Manager if one has been appointed.
It’s a simple, neat and elegant way to end the relationship.
The Agreement Is Assigned To Another Firm
Strata Management firms are businesses and they grow, evolve and shrink like any other business. Sometimes that may lead to a change in the way the business is structured.
For instance, many new businesses will take on any and all clients. As they grow and form relationships however they become more strategic about the clients they work with including developing a speciality.
That can mean some schemes, and sadly it is usually the smaller schemes, no longer fit with their business model.
However, the Administration Agreements are still current, and there is no basis for termination. The agreements must be honoured so the Strata Manager will simply sell those agreements to another Strata Manager.
The agreements are assigned to the new manager for the balance of their term.
The body corporate must agree to this assignment with a general meeting motion and it is possible for them to block the sale. Blocked sales lead to tension until the term expires. Most schemes simply agree to the assignment.
After that it’s up to the new Strata Manager to perform to a standard that impresses the Committee enough they invite them to submit a new agreement when the current one expires.
The Agreement is terminated
All Administration Agreements will include terms and conditions for when either party may cancel the contract, usually based around the other party’s behaviour, or lack of it, as the case may be.
Termination of an agreement is a serious matter.
It’s also rare. Not because agreements don’t get terminated, but because if either party is seeking to terminate the agreement you can reasonably assume there’s a fair amount of bad blood, and people being people, if one party is seeking to leave the other party generally makes it as hard as possible to achieve.
For the most part the terms are short enough that it’s easier to just ride the problems out until the contract simply expires.
If an Administrative Agreement is terminated, and it’s not with mutual consent, it is a legal matter and should be discussed with the schemes Solicitor.
We’ve been fired: What do we do now?
If your Strata Manager has elected not to continue as your manager the first thing you need to do is take stock of why?
If your agreement has expired and the manager has no wish to renew it’s important to ask why. It may not have anything to do with the scheme but, if it does, without addressing the issues they’re likely to repeat.
If your agreement has been assigned there is little you can do except wait for the end of the agreement and then make your own choice of which manager to proceed with.
If your agreement has been terminated again consider why? Behaviours that led to the termination are likely to repeat. Also consider legal action if the split becomes acrimonious.
What Are The Next Steps?
If your strata manager fires you your next step is either take over the running yourself or find a new strata manager.
There are hundreds of Strata Managers all over Australia. Some are good, some are adequate, some are excellent and some you might be better off staying away from.
Finding the right fit can be challenging. There are two things you can do that will help enormously.
Firstly, get clear about what you want from your new strata manager including what services you want and what price you’re prepared to pay. The clarity of your intention as a group will play a big part in the outcomes you receive.
Secondly, read the documentation. Any quote from a strata manager should be accompanied by an Administration Agreement. Read the agreement, cover to cover. If you’re looking at multiple agreements try to compare terms. If there is anything you don’t understand ask. And if there’s anything you don’t like negotiate. It the manager won’t come to the party maybe they’re not right for you.
What if we want to fire our Strata Manager?
Strata schemes end their agreements by:
- Letting the term expire and appointing different management
- Terminating the agreement
Letting the term expire is the easiest way to exit the relationship and it will give the scheme time to find a new manager.
Termination is more complex. The agreement must be terminated by ordinary resolution at general meeting. It is a contract however and simply agreeing to terminate may not be sufficient grounds to do so and legal wrangling may result. Even if the termination is in accordance with terms some managers drag their feet with transferring documents and funds to cause problems for the scheme.
Before taking action read the clauses relating to termination. Its also a good idea to find a new strata manager. Hopefully they can help you through the transition period for a seamless transfer.
Conclusion
If your Strata Manager fires you then take the time to assess what the issues are. Changing Strata Managers is time consuming, expensive and challenging. If you fail to address the problem(s) that caused the change you might find yourself repeating future mistakes.
Unless stated otherwise all the information on this website relates to Queensland legislation.
When a BC Managers term is due for renewal and the BC Manager has submitted a proposal for renewing,in the event that the owners wish to discuss the renewal and possibly engaging a different BC Manager, prior to acceptinbg the renewal as submiotted, is it a requirement that the BC Manager is required to leave the meeting whilest the matter is discussed by the owners?
The scheme is a Comunity Titles Scheme in Qld.
Hi Don
Its not a requirement I’ve heard of no.
Surely if you asked them to leave they would, if they wanted to be reappointed.
HI Lisa
Our Strata Manager resigned and it’s our 3rd manager in 2 years, which will tell you something. Can a Strata Manager resign by sending to all owners a letter of resignation, then change their mind. Does there have to be an agreement to accept their resignation by a committee?
Hi Mary
You’re right, it does tell me quite a lot about your scheme…sounds unfortunate.
The terms of the termination will be set out in the agreement. You’d have to refer to the terms of the agreement for explicit details. Mostly its a written letter of termination usually giving 30 days. The committee doesn’t have the right to stop said termination and its legally binding as soon as issued.
Should the manager then change their mind I would expect the committee to then vote on whether to set aside the termination letter. Whether that’s legal would be something to ask a lawyer. Just in terms of operation I think it would be ideal for the committee to do so without interruption in service until the end of the agreement.
Any new agreement can only be entered into by lot owners at general meeting by way of ordinary resolution without proxies.
Hi There,
I own half a duplex which has a BC and BC management co. Can we allow the management to lapse and effectively hibernate the BC and just pay the insurance and any future bills ourselves? If so what do we need to do?
thanks for any advice
Hi Glen
Yes, if both owners agree that is OK.
Refer to the contract with the BC Management Co for terms of termination, or expiry. You won’t need to do anything. If the BCM puts forward a motion to reappoint them at the AGM vote NO. Then you should simply collect the body corporate records and a cheque with your body corporate funds.
You will need to open a bank account in the name of the body corporate to deposit funds. I would make it so both owners need to sign to operate. It will be up to the pair of you then if you choose to continue capital savings or simply use up the funds and close the account.
Thank you. Renewal is in July, so we can just let it lapse.
Excellent!
Yes that’s correct.
Though do vote NO if they put forward a motion to renew on the AGM agenda. They shouldn’t without your instruction, but might anyway. Vote NO. Even if only you vote its enough for the motion to be lost.
our strata manager is not going to renew their contract
How many votes at our AGM are required to appoint a new manager
Hi Ernie
Appointment of a strata manager is done by ordinary resolution at general meeting. That means the meeting must have a quorum, or be reconvened, then there need to be more yes votes than no on the motion. That means if only one person votes, and they vote yes, the motion will pass.
The strata manager must consent to the motion to appoint as well.
Hi Lisa,
The company shares of our Body Corporate Management were sold. As are result, the Body Corporate Manager ceased employment and a new Director/Manager was appointed. They still have three (3) years in the contract. Do you have any suggestions on what options the Committee have in terms of:
1. Acceptance of the new management or can this be challenged?
2. Can the contract changed to one year only instead of existing contract 3 years but renewable upon satisfactory performance?
Appreciate your thoughts.
Thanks, Gil
Hi Gil
The company has not itself changed, only the management of the company. Hence the contract endures. Refer to the terms of the administration agreement and specifically terms around cancellation and if there are any change of management.
If committee don’t like the new manager, and another cannot be appointed, then cancellation may be your only solution.
Our contract with our strata management expires next month, and due to abuse of one owner (owns 12/51 units in the complex), will not renew our contract, and COO not functioning… what do we do?
I am an owner and not part of the COO, and the one owner who has caused many issues with other owners and our strata company ends up with the majority vote at all meetings. Can we take this to SAT? And if so, what section can we take it to them under?
HI Pia
Unless the committee plan on taking over then you will need to find a new strata manager. Or rather at this stage most likely the committee will need to do this. A motion will need to be proposed at your next general meeting. If they find new management then they should be able to guide committee through the process of what to do.
As to the majority votes: how is this person ending up with majority? If its for a valid reason, such as they own multiple lots, then there is nothing you can do as they have a valid right to express their votes. If its more to do with proxies you’d need to check your states legislation about who can hold proxies and how many at a time. If there’s something there that isn’t correct you can seek further action via SAT. If not, then unfortunately they have the right to vote as they please.
Hi,
Our strata manager sent email to voluntarily terminate their contact. Now they wanted change their mind to stay after the Chairperson and Secretary already sent email confirmation that their voluntary email to terminate their contract is accepted.
Hi John
Sounds like its terminated to me. But that is contact law. You’d need to discuss with a lawyer.