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  • #8299
    froggy23
    Flatchatter

      Need some advice around how to proceed with terminating our strata managing agent.

      The nitty gritty is that we have sent a letter of termination to the managing agent stating reasons that the agreement has been completed incorrectly and is therefore ambiguous. The ambiguity lies in Clause 5 in which neither of the three options have been deleted. From our research and advice given to date, to our understanding renders the agreement null and void and therefore the owners corporation is not liable for the remaining costs of the contract (clause 15).

       

      We have attempted to negotiate with the strata managing agent on a professional level however they will not release us from our contract sighting clause 15 of the Management Agency Agreement (Estate Agents Co-operative LTD proforma).

       

      So where to from here? We are looking into the mediation route however we would like to be close to 100% sure we are right before entering into, I am guessing not a pleasant situation with the strata managing agent. Any thoughts would be great.

    Viewing 12 replies - 1 through 12 (of 12 total)
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    • #16057
      Jimmy-T
      Keymaster

        Which state are you in and where can we access the contracts to which you refer?

        The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
        #16063
        froggy23
        Flatchatter
        Chat-starter

          I am in NSW.

          I have attached a link but I am not sure if it is going to work as it is a PDF sample of the document.

          https://www.reinsw.com.au/FM00500-08-03/default.aspx

          I googled ‘management agency agreement owners corporation form sample’ to get the result- it is on the real estate institute of NSW website.

          #16068
          scotlandx
          Strataguru

            It doesn’t matter what clause 15 of the REINSW proforma agreement says, what does clause 15 of your agreement say, and what does clause 5 say, i.e. what are the three options/what does the clause deal with?

            The only relevant agreement is the one you have, whether or not it is unenforceable.

            Does clause 5 deal with the term of the contract?

            #16099
            froggy23
            Flatchatter
            Chat-starter

              Sorry I thought it would be easier to send the sample as the wording is exactly the same rather than typing it all out

               

              Clause 5: This agreement commences on June 2011 and:

              • May be terminated by either party giving not less than 3 months written notice of termination.
              • Ends at the close of the next annual general meeting of the principal
              • Is for a term of 3 years. At the expiration of this term, the agreement may continue for a further term of 3 years. If this further term is more than 3 months, the Principal may terminate the agreement by giving 3 months notice within that subsequent fixed term. If the principal terminates the agreement, the principal shall not be subject to any penalty.

               

              I have underlined the sections that were completed by the strata agent. Next to each of these dot points is an asterisk that states ‘delete whichever is inapplicable’- none of these have been deleted on our contract.

               

              Clause 15: If this agreement is terminated by the principal for any reason prior to expiry of its term (if any), the management fees for the remainder of the term will then become due and payable.

               

              Hope this helps. Thanks so much for your help.

              #16103
              scotlandx
              Strataguru

                Right, ok.  Bearing in mind this is not legal advice.

                The failure to specify which section applies re termination doesn’t necessarily mean the agreement is null and void, if the strata manager has been acting as strata manager then he has been performing services under the agreement so to that extent the agreement is “live”.

                The real issue is which clause applies to termination, there are three options.  Ordinarily where there has been failure to specify (where there are options), an agreement is read down, so the most onerous clause/s won’t apply.  Here the last option effectively gives the manager a term of 6 years, or maybe 3 years and 3 months, it’s badly drafted.  Arguably that wouldn’t apply because it hasn’t been specifically agreed to by the parties.  This is presuming that there hasn’t been anything else said or written, e.g. an email from an EC member saying that clause would apply.

                The first and second options are not as onerous and therefore one of them would likely apply.  The first one lets you terminate at any time provided three months notice is given, the second provides that the agreement expires at the AGM at which time presumably you would have to refresh the agreement. 

                Clause 15 read with the first and second options is a bit confusing.  Under the first option you can’t say there is a term (note in clause 15 it states “prior to expiry of its term (if any)).  If the second option applies, then if you terminated prior to the AGM then on its face you would have to pay out the term up to the AGM.

                Sorry if that is as clear as mud, but what I would be saying to the strata manager is could he/she advise you which clause in relation to the term does apply, i.e. what exactly is the term of the agreement.  They won’t be able to tell you.  If they can’t tell you, then on what basis are they seeking to enforce clause 15? 

                #16136
                froggy23
                Flatchatter
                Chat-starter

                  Thank you so much for your advice to date, it has been so helpful. There has been nothing written down by an EC member as far as I am aware in relation to agreeing to anything to do with clause 5 of our contract.

                   

                  I like your idea of asking the strata manager what are the terms of the agreement and what there evidence is for enforcing cause 15.

                   

                  I will keep you up to date on the progress just in case heaven forbid this happens to someone elseLaugh

                   

                  Thanks

                  #16139
                  scotlandx
                  Strataguru

                    Good luck!

                    He will probably try to stonewall you but just be insistent.  If he really mucks you around perhaps mention Fair Trading. 

                    If you are looking at changing strata managers do you have another one lined up, they are often very helpful in the transition stage.

                    #16188
                    froggy23
                    Flatchatter
                    Chat-starter

                      Update:

                       

                      We asked our current strata company which clause in relation to the term does apply i.e what exactly is the term of the agreement according to our agreement?

                       

                      The response was:

                      we advise that all 3 term options apply – however, if the OC elects to terminate and pursue either of options 1 or 2, Clause 15 entitles the strata company to be paid out for the remainder of the three (3) year term

                       

                      Do you think mediation is our next step given this response?

                       

                      Thanks

                      #16190
                      scotlandx
                      Strataguru

                        Ok – so according to them, the agreement has three terms:

                        1. at will, to be terminated with three months notice by either party

                        2. nominally one year, expiring at AGM

                        3. three years (with option for another three years etc.)

                        I don’t see how you can have an agreement that has three different terms, it doesn’t make any sense.  An agreement can only have one term, you can’t have a number of options, and they can’t be taken cumulatively which is what the manager is suggesting. 

                        In respect of the penalty, on my reading that is not correct because Clause 15 refers to “the term (if any)”.  And you can’t say that all three term options apply at the same time.  That is, for example if you terminated under option 2, then option 3 doesn’t apply.

                        I am not sure what you would be applying for mediation for, I suggest your next step is calling the Department of Fair Trading and telling them what the strata manager is saying and ask them what your options are.  Ideally you should consult a lawyer, it would probably not cost you that much to get a letter sent to the strata manager which is likely to make them pull their head in.  Bear in mind the strata manager is not a lawyer (so far as I know), and they don’t seem to know how agreements work.

                        #16193
                        froggy23
                        Flatchatter
                        Chat-starter

                          Thank you so much for your response. It is nice to get some reassurance.

                           

                          The purpose I thought we would go to mediation is to terminate our contract with them, but I don’t totally understand the process and possible outcomes of mediation so I could be a mile off. They will not let us terminate at this stage stating that we will need to pay them out the remainder of the contract.

                           

                          I have spoken to the Department of Fair Trading and they just say we need to seek legal advice. I am not sure how to go about this either. You say we can get a letter sent to the the strata manager, do we just request this piece of work from a strata lawyer? We are concerned about cost and getting lawyers involved as we have a very costly debt collection currently occuring.

                          #16194
                          Jimmy-T
                          Keymaster

                            At the risk of being criticised for spruiking for our sponsors, click on the sponsors page (menu at top) and then our sponsors Makinson & D’Apice’s ad and that will take you to a link where you can send them an email and they will tell you what they can do for you (and how much it will cost).  Or go to our Essential Links page where there are web addresses for other specialist strata lawyers (who will provide much the same service). No point in guessing when asking the question costs you nothing.

                            The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
                            #16196
                            scotlandx
                            Strataguru

                              I forgot to say, in terms of legal costs, you need to do a cost/benefit analysis.  We had a similar problem with a strata manager last year who didn’t want to terminate.  We worked out that paying out the manager was going to cost considerably more than the legal fees, i.e. the legal fees were about $1500 and to pay out the manager would have been more than $6000.

                              Yes – you need to go to a lawyer, show them the agreement and tell them what the manager has said.  The lawyer will tell you what your position is and what you can do.  The first consultation is usually free.

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