Merrimac Heights Lessons Learned

© Copyright 2011 Teys Lawyers www.teyslawyers.com.au

Merrimac Heights Case: Lessons Learned

Friday 25 November 2011


Well May We Say……….


  Gardening agreement valid to 2022 despite requiring work on lots

  Caretaking agreement valid to 2022 despite manager’s obligation to supervise itself doing gardening

  Damages awarded for the manager’s loss of ‘profit’ on gardening of $59,200


Management Rights at Merrimac Heights

150 Lot Owners

Caretaking $135,949 pa

Gardening $42,996 pa

Common Property

Lots

New Gardener $11,700 pa


The Essence of the Merrimac Decision

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So Where Does This Leave Us? •  The body corp contracts with Sadie

to clean each apartment weekly •  The body corp takes a margin to

cover its costs of supplying Sadie’s services

•  Some owners won’t have Sadie but she gets paid anyway

•  Some owners don’t pay the body corp but the body corp pays anyway

•  The developer sells Sadie’s secure income stream to the highest bidder


New FronYers for Body Corps

Maintenance •  Cleaning •  Repair •  PainYng •  Pests • Mowing

Communica-on •  Telephone •  Intercom •  Broadband •  Television

Domes-c •  Electricity •  Gas • Water •  Garbage •  Air Con •  HeaYng


Is This New FronYer a Good Thing?

Good Evil

Costs

Control

Complexity

PainYng

Mowing


It’s a Queensland Thing

2,350

5

20

Number of management rights around Australia Source: Col Myers, Management Rights, The Good, The Bad and The Ugly, ACCAL 10 March 2011

10

200

25


Why Management Rights Have Not Spread

•  LegislaYve restricYons on developers elsewhere

•  Common law fiduciary duYes not displaced elsewhere (Arrow case)

•  NSW liYgiousness


LegislaYon Eroding Queenslander’s Common Law Rights

•  Fiduciary duYes by a developer gone

•  Ultra vires (outside powers) gone, Merrimac Heights case

•  Fiduciary duYes of a manager watered down by code of conduct, Merrimac Heights case

So where is the upside?


Tired Old Management Rights Chestnuts

•  Someone with ‘skin in the game’ will do a beder job than a mere employee

•  A resident manager will pick a beder tenant because they live there

•  Developers will not build without management rights to sell


Lesson 1 -‐ Long Term Contracts Eliminate CompeYYve Pricing Tension

•  The award of damages in Merrimac Heights proves this point

•  Code of conduct duYes about compeYYveness do not trump long term contracts

•  Absent evidence of value, they ought to be rejected when they end


Lesson 2 – Resident Managers Will Fight for Their Livelihoods

•  Life savings invariably invested

•  DepreciaYng assets heavily financed

•  Market driven percepYon of ever-‐renewing contract terms


Lesson 3 – LiYgaYon Will Divide the Body Corporate

•  Passive v aggressive

•  Investors v owner occupiers

•  AcYve commidee v disengaged owners


Contract Term Expiry

Increasing Receiverships

Finance ConstricYons

Social Media / Blogging


Dark Clouds Over Queensland Management Rights


Unit Owners Must Take Responsibility for Their Own Affairs


About the Presenter Michael Teys is the Founder and Principal Lawyer of TEYS Lawyers. He has a Bachelor of Laws and pracYces exclusively in the area of strata Ytle law. He is a Fellow of the Australian College of Community AssociaYon Lawyers. He was formerly an Adjunct Lecturer with Charles Sturt University. He appears weekly on SKY News Business Channel's Property Success with Margaret Lomas and is a regular panellist for the property ediYon of Your Money, Your Call for the same channel. You can find out more about Michael at www.michaelteys.com

TEYS Lawyers pracYce naYonally in strata Ytle law represenYng owners corporaYons, bodies corporate and apartment owners. The firm’s pracYce groups include building defects, management rights, strata community disputes, by-‐laws and rules and levy and fee collecYon.

Subscribe for their free e-‐newsleder StrataSpace and find out more about them at www.teyslawyers.com.au


Merrimac Heights Lessons Learned

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