Hi Ken,
I think we seek legal advice. I have a friend who has recently purchased Management Rights in Currumbin they are going for an extension on the Manager’s Agreement. The Chairman and his wife who are both on the Committee are Lawyers and are fighting this.
In Qld Managers can submit a Motion every five years ( this would have to be checked) but if that is correct and the original contract was the 1st February 2006
then the following would be:
2011- 5 years
2016 – 5 years
2021 – 5 years
2026 – 5 years
If this is correct then a motion for an extension can’t be put forward by R2 Management until February 2026.
If Qld bring in the same law as Vic or NSW have implemented then they only can get a 10 year contract.
This is why I think we need a lawyer.
A lot of thought and time has gone into your email.
Everything you wrote I agree with, thank you.
Robyne
Sent from my iPhone
Robyne Cotterill
Mob 0417 622 605
On 14 Jan 2023, at 9:51 pm, Ken_Culpitt@bigpond.com wrote:
Committee Members will recall that, late on the afternoon of 20 December, R2 Management advised the Body Corporate Members that they ‘will be seeking to extend our agreement by 5 years at the next general meeting’
The advice includes a business rational of industry-recognised agreements of 20 years that preserve the capital value and a related finance component.
R2 Management lists 4 Benefits and anticipates success of the motion will be based on ‘the majority of owners being happy with our services’.
StrataCare subsequently advised Body Corporate Members of the R2 Management Motion detail including the Motion, Deed of Variation and the relevant Body Corporate and Community Management Act 1997 form – Form 20.
Initial observations by Body Corporate Members were that the motion simply favoured R2 Management and that the business case about preservation of capital value did not make sense.
Summary
R2 Mgt are seeking to extend the CMS by 5 years from 31 Jan 2036 to 2041
R2 Management did not discuss the contract extension with the Body Corporate Committee on the basis that the majority of owners are happy with their services
There was no negotiation on the proposed extension only an R2 Management offer which favours R2 Mgt and makes no offer to owners.
The contract extension is worth almost certainly over $4m.
R2 Management by passing the Body Corporate leaves each owner to undertake Due diligence of the offer, clearly won’t happen.
StrataCare advises that the Body Corporate should seek legal opinion about the proposed extension which is supported by Body Corporate members who have commented
Benefits described by R2 Management
• Preserves the value of the agreement and therefore the quality of people managing the complex
Preservation of the agreement value favours R2 Management. It is difficult to see the ‘therefore’ quality of management, a long agreement is more likely to generate complacency
• Having quality managers preserves the value of individual properties due to:
Well maintained buildings and common areas, Attractive gardens and grounds, Maximum rental return for investment properties
This is a cornerstone principal and there is no suggestion implied or otherwise that R2 Management are the only providers of this owner benefit. At the last R2 Management contract extension in 2020 R2 Management agreed to provide Caretaker Duties and Responsibilities Reports by 28th of each month. These Reports are inconsistently provided and of dubious quality. Caretaker reports are provided for each Body Corporate Meeting and recently monthly.
• Retains knowledge of the building (service locations, operation of equipment, abilities to address issues etc)
The retention of building knowledge is of particular advantage to owners. For ROTS, the long serving on-site managers are a critical component of this benefit while they continue to manage. Any new building managers, R2 Management or other would be reliant of the documentation trail left by the current managers. If there is an opportunity to discuss benefits for owners, The Body Corporate should seek assurance that critical and working building knowledge is retained when the current caretakers depart as likely / certain in the next 15 – 20 years of the agreement.
• Provides the Community with the stability of long-term managers
This is another cornerstone principal but needs to be underpinned with information / practice / procedure recording and not dependant on individuals. The Body Corporate is trying to progress these matters with both R2 Mgt and StrataCare.
Body Corporate Members need to decide what we should do
1 DO NOTHING – leave it to owners
2 Seek legal opinion about the proposed extension as suggested by StrataCare
3 Seek legal opinion about the process of changing building caretakers
4 Advise owners of the proactive approach being taken by the Body Corporate Committee, if approach 1 is not taken.
I do not favour the DO NOTHING option but will support the Body Corporate majority view.
Look forward to Committee Member thoughts.
Ken
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