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The changing landscape of management rights disputes

By Frank Higginson01 Jul 2011

Back in 2009 we discussed what appeared to be a sharp rise in the number of breach notices issued by committees against resident managers. To read this article click here.

Our view at the time was that the increase was partly being fuelled by an increasing number of committees (and their advisors) seemingly taking the view that it was better to include as many allegations as possible in a breach notice, regardless of whether they are reasonable or substantiated. In addition it seemed that providing evidence and sufficient detail in support of each allegation was deemed an unnecessary luxury.

Since then we have seen some amazing breach notices being issued against resident managers for:

  • profiting from the sale of gas - in an electric BBQ;
  • failing to mow a massive nature strip in the middle of an arterial road - well outside common property; and
  • not taking the time on Christmas Day to place bottles left out by residents into a recycling bin.

These are only limited examples of where a committee failed to think twice (or rationally) before taking an aggressive approach with the resident manager, and being under the illusion that terminating a management / letting agreement is a simple feat.

What we frequently see is that this approach achieves very little, other than:

  • incurring significant legal fees for little, if any, result (unfortunately on both sides);
  • heightening (and at times causing) suspicion and distrust between the committee and resident manager, often causing irreparable damage to their working relationship; and
  • resulting in backlash from lot owners that are unhappy with the amount of discord in the scheme and annoyed at the increase in levies which comes from spending administrative fund monies on unbudgeted legal fees.

Fortunately, the message is starting to get through that this aggressive approach is not appropriate for, or sustainable in, community titles schemes.

There have been some relatively recent decisions handed down by adjudicators in the Commissioner’s Office and by judicial members of the Queensland Civil and Administrative Tribunal that have:

  • openly voiced concerns that a committee was not acting reasonably or objectively by seeking to terminate a management agreement at an EGM for failure to comply with a breach notice, before the resident manager even had the chance to respond to the notice; and
  • criticised a committee for relying on a notice that:
    • in the judicial member’s words, 'resembled a diatribe';
    • did not clearly identify the alleged contraventions;
    • failed to afford a reasonable time for remedial action to be taken;
    • sought to rely upon historical matters that had no ongoing effect;
    • made excessive demands for action that the body corporate had no right to insist on; and
    • was, for those reasons, held to be invalid.

When a notice is set aside, it simply sends everyone back to the starting block. Sadly, by then, the positions are entrenched, trust eroded and the prospect of ensuring that the process achieves a sensible, commercial outcome is greatly reduced.

Disputes in community titles schemes are unique - they often involve real people that live together, share the same elevator and swim (or invest!) in the same pool. It seems strange to us that some believe an extremely aggressive approach is warranted when a dispute arises in such an environment.

We like to take a different approach when working in these situations by:

  • working with the parties to identify what the real issue is;
  • seeking to identify if the dispute is fuelled by a misunderstanding of what can reasonably be expected of a resident manager or the scope of a resident manager’s duties;
  • working towards a resolution that will set clear expectations for both parties; and
  • hopefully building a platform to allow a committee and resident manager to improve their working relationship and internally resolve any future issues between them in a sensible and professional way.

Things are beginning to change in the landscape of disputes between committees and resident managers. All in the industry should be aware of it and embrace that because acting reasonably, and fairly, should lead to better outcomes for all concerned.