A Paddocks Sectional Title Lifestyle Blog
By Anton Kelly
It’s surprising to hear that not all sectional title schemes have a written contract with their managing agent! I guess, if there is a long-standing good relationship between the trustees and the managing agent, neither party might see the necessity for a written contract.
Prescribed management rules (PMR) 46 and 47 deal with the appointment of a managing agent and the revocation of the contract. The first provision deals with the authority to employ a managing agent and specifies that the contract must be in writing.
An interesting point is that the rules bind the body corporate, owners and occupiers of the scheme; they don’t bind the managing agent. The rules regarding managing agents therefore regulate how the trustees must contract and deal with the managing agent. It is the trustees who are specifically responsible for ensuring that the contract with the managing agent complies with the requirements of PMR 46 and PMR 47. One of the reasons this is so important is that these rules include protections for the scheme and for the managing agent.
So what are the provisions the trustees must ensure are included in the contract, and what are the provisions that should or could be included?
Term of the contract
PMR 46 provides that the managing agent’s contract must run for one year and is automatically renewed unless the body corporate notifies the managing agent to the contrary. What the rule does not specify is the notice period, so the trustees need to make sure the period is included in the contract, otherwise when the time comes for a parting of ways there could be arguments as to what is reasonable notice under the circumstances.
The trustees must make sure that the contract includes the provision that they may cancel the contract without notice if the managing agent is in breach of the terms of the contract or behaves in a way that would justify the dismissal of an employee, and that the managing agent has no claim against the body corporate as a result of that cancellation.
The contract must also provide that the appointment is revoked under three sets of circumstances:
One, if the managing agent, as a juristic person is liquidated or placed under business rescue proceedings, or as a natural person is sequestrated or goes insolvent.
Two, the managing agent or any directors or members of a managing agency company are convicted of an offense involving fraud or dishonesty.
Three, if the body corporate takes a special resolution revoking the appointment. In this case, the managing agent would be able to claim compensation or damages for the loss of employment.
The trustees must decide on what they want the managing agent to do and they need to make certain that the tasks, duties, responsibilities and discretion of the managing agent are absolutely clear in the contract. Some of the areas the trustees need to consider and decide on include:
Each scheme is different and each board of trustees is different and will have different requirements from time to time, so the managing agent’s contract needs to be re-considered regularly.
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