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August 09 Edition Cover

Owners’ Corporation Law

28 Jul 2020

VCAT declares that committees have the power to terminate an OC manager

By Tom Bacon - Strata Title Lawyers

Many high-rise buildings will be aware of terms embedded within an owners’ corporation (OC) manager’s agency agreement.

These agreements permit a manager to be appointed for a period of five years (with subsequent options) and require that they may only be terminated by ordinary resolution or special resolution at a general meeting of all owners.

Often enough, it will be impossible to achieve an ordinary or special resolution because the OC manager holds the strata roll (and won’t release it) which makes it very difficult to run a ballot or gain sufficient support from the other owners.

However, Member Buchanan of the Victorian Civil and Administrative Tribunal (VCAT) has just delivered a very handy judgment that will assist other OCs to find a way through to terminate the OC manager agreement by way of a committee decision.

The case concerned the Upper West Side development in the CBD, which consists of thousands of apartments and many commercial lots.

In this particular instance, the cases concerns only one of the residential OCs (OC6).

In 2016, the developer appointed Australian Property Management (APM) to be the OC’s manager for a period of five years, with a further option at its election.

In due course, the developer relinquished control to the lot owners, and a committee was formed. The committee passed an email ballot (and later ratified at a committee meeting) to terminate APM as manager, and acted to appoint a replacement manager.

APM did not accept that it had been terminated and pointed to the wording of the resolution that the developer used to appoint it at its inaugural general meeting, which required any resolution to terminate it to be done by way of special resolution.

In publishing the decision, Member Buchanan stated, “I find that the answer to the preliminary question is yes. I find that the committee of the OC had the power to terminate the APM management contract.”

The proceedings are still ongoing at the date of this publication, and while there may be an appeal filed, at least as matters stand in Victoria, an OC need not find itself “stuck” in an uncommercial or untenable contractual arrangement set up by the developer.

The committee of the OC must act fairly, honestly, diligently, in good faith and exercise all decisions in the interests of all lot owners. So, as long as committee members take good legal advice from a specialist strata lawyer on the exact circumstances of their case and exercise due diligence, then there are opportunities for the committee to terminate an OC manager agreement before expiry •

 

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