Extending Management Rights Agreements – not as simple as it seems!

A recent decision by the Queensland Civil and Administrative Tribunal (“QCAT”) is a good reminder that extending a management rights agreement should always be treated carefully – and that sometimes a simple letter or email won't suffice!

The decision of Melville & Anor v Body Corporate for Santorini By The Sea CTS 16829 [2021] QCAT 285 (“Santorini”) has highlighted the importance of correctly serving notices exercising options in a Management Rights agreement, and the issues than can arise if these notices are not served.

The decision of Santorini involved the Melvilles, managers of an apartment complex in Miami, QLD, who posted notices exercising two options extending their deed of engagement to July 2027. The Melville’s and the body corporate fell into dispute around 2019, with the body corporate refusing to pay the Melvilles, stating that the deed of engagement had come to an end from a failure to exercise the options.

The Melville’s commenced QCAT proceedings seeking recovery of their unpaid remuneration, which the body corporate contested, arguing that the deed of engagement was at an end. QCAT were required to determine whether the deed of engagement had been extended, and if so, whether the Melvilles were entitled to recover of their unpaid remuneration.

Decision

QCAT found that the Melvilles had posted the notices to Whittles as body corporate manager on 25 December 2011, and after failing to receive a response from the body corporate or the manager, hand delivered these documents to Whittles on 12 April 2012.

The deed of engagement between the Melvilles and the body corporate required for service of any notice to be done in line with the requirements of section 347 of the Property Law Act 1974, which requires service:

  • by delivering the notice to the person personally; or
  • by leaving it for the person at the person’s usual or last known place of abode, or, if the person is in business as a principal, at the person’s usual or last known place of business; or
  • by posting it to the person by registered mail as a letter addressed to the person at the person’s usual or last known place of abode, or, if the person is in business as a principal, at the person’s usual or last known place of business; or
  • in the case of a corporation by leaving it or by posting it as a letter addressed in either case to the corporation at its registered office or principal place of business in the State.

By posting the notices by regular mail to Whittles, rather than to the body corporate, QCAT found that the notice of 25 December were not effective notices. The tribunal was also prepared to find that the notices hand delivered to Whittles were not served effectively, as they were not delivered to the body corporate, but rather to Whittles as body corporate manager. Fortunately for the Melvilles, receipt of these notices was given by Whittles on behalf of the body corporate, resolving the dispute.

Questions were also raised on whether the Melvilles could give notice extending both terms before one had commenced. QCAT was required to consider the terms of the agreement and determined that the agreement allowed for this circumstance.

As QCAT determined that notice had been given and the term of the agreement extended, they were prepared to consider the claim from the Melvilles for unpaid remuneration. However, the tribunal determined that the claim was excessive, and that the Melvilles were only entitled for unpaid remuneration of work that was actually performed.

As the body corporate had engaged external contractors for various services since the parties’ dispute, the Melvilles were only entitled to remuneration of work that they had actually completed and not the work engaged by contractors.

The decision in Santorini is a timely reminder that exercising an option in a Management Rights agreement should always be done in accordance with the terms of the agreement, and caution should always be taken to ensure that the notice is exercised properly. While it worked out for the Melvilles, had a few things gone differently they could have found themselves without an agreement with the body corporate and a loss of a major asset.

The terms of an agreement may also have hidden pitfalls for managers, and should always be reviewed by a management rights solicitor to ensure managers are aware of all of their rights, responsibilities and liabilities under an agreement.

The Managements Rights team at SPM Law have dealt with agreements from the Gold Coast to Darwin, as far as Fiji, and everywhere in between. The team are here to help so contact us today if you need management rights advice.

 

Areas of Law

Management Rights


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