Management Rights

DEEP DIVE ON TOP-UPS

Kelsey Huebner, Partner (Non-Principal), Management Rights and Body Corporate Law

A top-up is where you add extra years to your management rights agreements.

You can do this by one of two ways:

Variation

This is where you submit a deed of variation, motion and statutory BCCM Form 20. A variation can only add a maximum of 5 years in each body corporate financial year.

New Agreements

Where you prepare a motion and fresh new management rights agreements – either a combined agreement or caretaking agreement and letting agreement. This can be to modernise them or to reduce say 16 agreements and deeds into 1 or 2 new simplified agreements that are a one stop shop of your duties and obligations as caretaker and letting agent.

You can add more than 5 years in this instance but cannot exceed the unexpired term for the module governing your scheme (e.g., 10 years for the Standard Module or 25 years for the Accommodation Module).

Process

If you own a lot in the Scheme you are seeking a top-up for, then you can submit an automatic lot owner motion before your body corporate’s end of financial year for automatic inclusion on the AGM agenda. This is not necessarily the 31^st of July and may be say 31^st of March or 30^th of November. This is the same date committee nominations are due, and your Strata manager notifies you of such date.

This does not mean your committee cannot negotiate with you on the terms of the variation or new agreements, but it ensures your lot owners will have to consider the top-up or new agreements at general meeting. If you do not own a lot in the Scheme, then you can ask a friendly lot owner to submit the automatic lot owner motion on your behalf before the financial year end of the Body Corporate.

If you do not submit the motion before the Body Corporate’s end of financial year end, or there is not an AGM coming up then you can ask the Committee to call an EGM or as a last resort petition for an EGM.

Your Body Corporate will then send out the AGM/EGM voting papers and secret ballot voting paper for your variation or new agreements motion (and which is conducted by an independent returning officer) to lot owners at least 21 days’ prior and if not an electronic copy of the agenda, then additional time allowing for post (no less than 2 days).

At the AGM/EGM, unless there is no quorum and it is reconvened a week later, the independent returning officer will tally up the votes and determine if your top-up is passed. If there are more yes votes than no votes your motion will be resolved and signing of the deed of variation or new agreements will occur.

Key factors:

• if your paperwork does not accurately add the option, how it comes into effect and completion of the statutory Form 20 (variation) and legislative requirements or the agenda fails to document what is being added or circulate the BCCM Form 20 or new agreements, it could be considered invalid, raised during due diligence by a potential buyer or be challenged by a lot owner in the Office of the Commissioner of Body Corporate;
• you can lobby for owners to vote in favour of your motion. Similarly, the committee can lobby against you. Having a good relationship with the committee whilst not always critical is strongly recommended and preferred;
• you cannot purchase or buy a top-up;
• you can look at other changes to the agreements as part of the top-up but importantly you still cannot breach section 113 of the Body Corporate and Community Management Act 1997;
• the independent returning officer cannot be associated with you or the Body Corporate. If the returning officer is not independent your top-up could be challenged or this could be raised when you sell the management rights down the track;
• top-ups are not just about sales – they may be a requirement of your financier and the structure of your loan; and
• If you’re an onsite manager, then this extends and ensures stability of an onsite manager into the future for the complex.

If you want to know more about the top-up process or need assistance with seeking a top-up please contact us here:

https://mba-lawyers.com.au/contact/

(07) 5539 9688

0400 045 498

[email protected]

Disclaimer: this article is provided for information purposes only and should not be regarded as legal advice.