Consumer Affairs takes steps to improve the governance of OC managers

Consumer Affairs takes steps to improve the governance of OC managers
Tom Bacon

One bad apple can spoil the bunch. The owners’ corporation (OC) management industry is filled with talented and passionate individuals, who love working in OC management and thrive on the fast-paced nature of the business.

Unfortunately, from time to time, an isolated incident by one bad manager can lead to an unfair public opinion that a higher number of managers might engage in such conduct. These falsehoods exist in all sorts of professions, including the law.

It is well known in the industry that directors of a couple of small OC management companies engaged in dishonest and unlawful activity by deducting funds held on trust for OCs and deposited them into separate business accounts, divested the funds, closed the accounts and businesses and ultimately spent the cash.

To date, Consumer Affairs Victoria has not taken action. One hopes for the sake of the reputation of the industry that investigators do throw the book at the managers for this business practice.

However, in taking baby steps in this regard, Consumer Affairs finally had its legislation to amend the OC Act passed in December last year. As part of the new legislation, the amendments make clear that an OC manager cannot be appointed for more than three years, or five years for a retirement village OC.

Further, an OC manager’s contract cannot include terms that:

  • require the OC, before it revokes the appointment of the manager, to:

- pass a special resolution;

- pass a unanimous resolution;

- pass any other resolution requiring more than  a simple majority of votes;

- convene a general meeting of the OC; or

- take any other prescribed step.

  • allow the manager to renew the contract of appointment at his or her discretion.
  • require a tier one or two OC to give three months or more notice of its intention to revoke the appointment.
  • require a tier three, four or five OC to give one month or more notice of its intention to revoke the appointment.
  • provide for the automatic renewal of the contract of appointment if the OC fails to give notice of its intention not to renew in accordance with its terms.
  • restrict the ability of the OC to refuse to appoint a person as manager, other than a requirement that consent to appoint a person as manager must not be unreasonably withheld by the OC.

If any of these terms are included in a contract entered into after December 1, 2021, they will be void.

If an OC fails to give notice of its intention to renew a contract of appointment, it will be taken to have been renewed. In this circumstance, the contract may be terminated by the OC or the manager with at least one month’s written notice (or a shorter period if provided for under the contract).

In addition, the duties of an OC manager have been expanded. They must:

  • ensure any goods and services they procure on behalf of the OC are competitively priced and/or procured under competitive terms.
  • not exert pressure on any member of the OC to try and influence the outcome of a vote or election.
  • give written notice to the OC chair disclosing any commission, payment or other benefit they are entitled to receive under a contract to supply goods or services to the OC.

Upon request from an OC, managers must provide copies of financial statements for bank accounts that contain money they hold on trust on behalf of the OC, as soon as practicable. This applies for any period within three years immediately preceding the request.

Also, a registered manager must now be covered by professional indemnity insurance and notify the Business Licensing Authority if they cease to be covered. Their registration will be automatically cancelled 30 days after coverage ceases.

These reforms are welcomed and will help to weed out the one or two bad managers that operate out there in Victoria.

The reforms also herald a move towards giving OCs greater choice and flexibility about who manages their affairs •

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