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I believe the changes are intended to apply to new SCA contracts signed after January 1 next year. After that, if anyone signs a contract that includes such a free kick for their strata manager, then they only have themselves to blame.
Don’t take this as gospel from me, but in the meantime, a contract that allows any service provider to claim compensation for work that they didn’t do could, in theory, be challenged under Australian Consumer law which since July has applied to strata contracts in NSW.
SCA-NSW, the strata managers’ professional body, has already adjusted its standard contract to remove aspects that would have fallen foul of consumer protections.
The Australian Competition and Consumer protection website says that unfair contract terms are prohibited in standard form pre-formatted contracts where one party has significantly more bargaining power than the other, leaving the weaker party with little or no ability to negotiate the terms, and:
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Causes a significant imbalance in the parties’ rights and obligations under the contract.
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Is not necessary to protect the legitimate interests of the advantaged party.
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Would cause detriment (financial or otherwise) to a party if applied or relied upon.
If a court finds a term to be unfair, that term is void, meaning it is treated as if it never existed. However, the rest of the contract remains enforceable if it can operate without the unfair term.
Businesses that propose, apply, or rely on unfair contract terms may face penalties. Each unfair term can attract a separate penalty under the law.
- Seek advice from consumer protection agencies or legal professionals.
- Report the issue to relevant authorities, such as the Australian Competition and Consumer Commission (ACCC) or the Australian Securities and Investments Commission (ASIC).
These are just general observations and if you are thinking of going down that road, you really should first speak to a lawyer. I don’t know of any strata scheme that has challenged the terms of a contract under consumer law so it’s hard to predict how that might play out, but it could be an option for any scheme that feels it’s being ripped off by any service provider.
Just bear in mind that contracts are an agreement between two parties and if your owners corp has agreed to a contract that turns out to be disadvantageous, that doesn’t make it unfair.