Apart from the level of remuneration being paid to the resident manager by the body corporate, the performance of the duties by the resident manager would rate up there as one of the most contentious issues in the management rights industry. The interpretation of the required duties including the standard and frequency of the gardening, cleaning, maintenance, etc. is often the cause of a breakdown in the relationship between the two parties and, in the extreme, can result in a breach notice being issued. In most cases, excluding personality clashes or a plain and simple lack of performance, it usually comes down to a personal opinion as to what requirements are prescribed in the agreement. It’s not unusual for agreements to lack detail and they are not always specific to the building/complex in question. These generic types of agreement are open to individual interpretation as to what is really expected of the resident manager. From my experience in assessing resident manager duties and responsibilities at numerous buildings/complexes, I often see this as the major issue when evaluating a fair and reasonable body corporate remuneration.
Agreements
The management rights industry has evolved over the years to become a major and integral part of the accommodation and tourism sectors. So too has the legislation that regulates the industry, and with that, the contractual requirements. Management agreements have also seen changes brought about by landmark court decisions. Management rights solicitors do an excellent job in producing agreements to meet these ever-changing legislative and contractual requirements that provide security and protection for both the body corporate and the resident manager.
However, I do often see older-style contracts that have been in place for many years, and extended a number of times, in which the duties are not as detailed as they could be and are not necessarily specific to the particular building or complex. Experience has shown that this leaves the way open for misinterpretation of the requirements, and leads to disputes between the parties as to the standard of performance.
An example of this was in a complex where the only reference to gardening requirements was, “Ensure the landscaped grounds are maintained to a standard appropriate to a development of this type and quality.” Not only was there a dispute between the Body Corporate Committee and the resident manager over the presentation of the complex, but there were a number of owners who did not agree with each other on the requirements either.
Another example was an agreement that had been in place for a number of years within which there were a number of the duties that had been interpreted, and confirmed by a solicitor, as being supervisory only. The incumbent resident manager had undertaken to perform these supervisory duties in return for an agreed extra fee over and above the remuneration fee. With a change of resident manager and the election of a new committee within the complex, a review of expenses was carried out when establishing a budget for the ensuing year. An opinion was sought by the committee from another solicitor in relation to these extra duties. It was deemed that the agreement was a fully functional agreement and that the resident manager was not entitled to any extra payment in return for the provision of those services. The resident manager had bought this business based on an income that included the ex-gratia payments for those services and when this extra payment was declined, not only did it have a detrimental effect on the income, but also on the value of the business for resale.
There are many examples of situations where there has been a dispute over performance and this can usually be traced back to the duties not being either detailed enough or specific to the building or complex. When recently mediating a dispute between a resident manager and a body corporate over the extent of the manager’s duties, after establishing an agreed schedule of specific duties, the manager remarked “If I had known that I had to do this much work, I would never have bought the management rights”. Agreements with attached specific schedules go a long way towards minimising misinterpretation and ensuing disputes.
Schedules
An agreement with an attached schedule of specific duties takes away the doubt as to exactly what is expected of the resident manager. The schedules are more specific to the building/complex and to the duties and the frequency of performance of these duties, e.g. daily, weekly, monthly, etc. Unfortunately, in many instances, the remuneration fee does not always match the requirements of these schedules.
A number of resident managers have expressed a reluctance to work to a system of schedules as they feel that this gives the owners a checklist against which to monitor their performance. Their fear is that they will have an owner following them around each day ticking off the duties that should be performed or have not been performed on a particular day. Provided that the remuneration is “just and equitable” in relation to the requirements of the agreement and attached specific schedules, this should not be a concern so long as the resident manager is performing the duties that the body corporate is paying for.
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