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Owners’ Corporation Law - May 2014

08 May 2014

How to change management

One of the more common legal issues that I am asked to advise on by owners corporations is in regard to the removal and replacement of contractors and agents that assist an owners corporation, from building managers and caretakers to owners corporation managers and security companies.

Typically, an owners corporation may perceive, over a period of time, that a person or company engaged by the owners corporation is not fulfilling their duties under the contract, and will seek to terminate the relationship.

Breaches of duties under contract are notoriously difficult to prove, and often lie in the eyes of the beholder. If the committee of an owners corporation perceive that breaches are occurring, they ought to take scrupulous notes and create an electronic footprint of the breach, noting the exact dates and times and a summary of what occurred.  

Legal advice should be sought earlier rather than later, as most commercial agreements will require not only a breach notice to be served giving notice of the exact breach, but also specify that a minimum period of time (usually 21 days) be given for the contracting party to remedy the breach.

The easier method of terminating an agreement is to wait until the expiry of the term of appointment of that contractor or company. Again, care should be taken in ascertaining exactly what dates the term of appointment rolls over. Many commercial agreements are for 24 months, with successive 24-month terms rolling over, should the key dates pass by without notice of termination being given.

In addition, an owners corporation may be able to terminate an agreement in the event the contract was not executed in the approved form, or was not signed by the owners corporation.

Usually, the committee of the owners corporation has the legal authority to terminate or dismiss a contractor or company.

However, an owners corporation manager for instance, must be removed and appointed at a general meeting of the owners corporation via an ordinary resolution.

The termination of a company or contractor need not be a nasty or protracted affair; to avoid unnecessary litigation and costs, the owners corporation ought to take the time to inform the key personnel at an early point – and preferably face to face – exactly why the owners corporation no longer require their services.

Often, in return for a reference from the owners corporation, a contractor or company will forego any outstanding service fees they are owed.

While an owners corporation ought not to put up with a sub-standard service, an owners corporation committee should always be aware that they are held to a duty to act in the best interests of the owners corporation at all times.

Consequently, care should be taken in making these decisions, otherwise it can lead to needless litigation.

Tom Bacon is the principal lawyer of Strata Title Lawyers. (JavaScript must be enabled to view this email address)

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