It would appear that the Queensland judiciary, or at least those members in QCAT, have decided that they will not terminate a Management Rights (MR) contract under the BCCM Act dispute resolution process. To avoid termination, the Presiding Member must invalidate all the body corporate’s Remedial Action Notices (RANs), and it would appear that the reasoning presented is often (but not always) contrived to favour the caretaker. The BCCM dispute resolution process in QCAT does not seek to resolve disputes in the performance of contracted duties such as cleaning common property, swimming pools and gardens.
The UOAQ recommends that members avoid seeking resolution of disputes with MR holders in QCAT. The attitude seems to be that strata owners should just pay up and shut up.
The Nature of the Disputes
The disputes arise about the simple tasks of management of a building i.e. maintaining the building, cleaning common property, maintaining gardens, cleaning the pool etc.
Many caretakers will improve their performance of their duties when shortcomings are highlighted, but what do owners do when the caretaker does not care, lacks competence or simply, cutting cleaning and maintenance costs as their letting or other businesses are failing? The lack of any market-based review of costs and performance of duties in a 25-year MR contract does not seem to attract any attention from government. The imposition of significant increases in costs on owners in the strata title industry has not been quantified by government. MRs are sold by developers for enormous sums, and long-term contracts are set without any input from any owners prior to the building lots being sold. In which other industry do you see a 25-year contract for the delivery of services to consumers? The situation is exploitative of Queensland strata owners.
In many situations, the caretaking contracts are set in exchange for the letting rights for the building. This concept has been outdated with the advent of the internet and letting services such as Airbnb. The recent removal of any letting fee regulations has meant poorer returns for owners, some of whom then look elsewhere for letting services. There is also no review of the legality of short-term accommodation in residential buildings, or the potential for some owners conducting short-term accommodation businesses to void the public liability insurance for the entire building.
A Poor History of Resolving Non-performance Disputes via RANs
The legislative requirement for dispute resolution has been made very narrow. It would seem that most aspects of contract law, that would normally give each party rights and obligations, is ignored or frustrated by the BCCM Act. The BCCM Act outlines a process for owners to develop RANs and request rectification of the disputed areas of performance. If the caretaker chooses to ignore these requests, or will not negotiate a suitable outcome, the only option for owners is to proceed to a general meeting vote to terminate the contract. There is no other option available for enforcement of MR contracts.
There seems to be a well-established playbook for frustrating owners’ intentions with RANs via an action in QCAT. Simply put, the aim of the caretaker’s QCAT action is to delay and frustrate owners with legal processes and legal costs for long enough for the body corporate (owners community) to elect another committee more compliant to the caretaker’s wishes and who will “work with” the caretaker. Often the caretaker /letting agent will favour compliant investor committee members with increased rentals. There are no restrictions or audits of the letting pool operation to prevent this practice.
These legal processes are an acknowledged divide and conquer strategy, and leads to toxic communities with one owner pitted against another.
Contrived Reasoning – Raises Questions of Industry Bias
The UOAQ completed a review of case records in the Supreme Court database, querying for cases involving a body corporate and termination. The clear conclusion is that owners are unlikely to succeed in any effort to terminate a caretaking contract or to have the Tribunal validate their RANs. Our analysis showed 15 cases over nearly 10 years, with only one body corporate succeeding in terminating a low value cleaning contract.
Ten of the disputes were abandoned in the initial phases via conciliation. The QCAT members routinely issue an injunction against owners proceeding with the legislated process, citing that the existing caretaker is best placed to continue to perform the building management tasks. There appears to be no consideration in the injunction of the lack of performance cited by owners by issuing RANs for failure to perform the duties.
The QCAT process then proceeds to a conciliation process. The UOAQ members have reported that the Conciliator informs owners that the RANs are unlikely to succeed (true) as they are “weak” (no specific reasoning is given) and that the caretaking contracts are “too valuable” to terminate. One UOAQ member reported the Conciliator saying to the owner representatives that a QCAT hearing “would ruin your lives”, not exactly a ringing endorsement of QCAT process. The emphasis of the conciliation seems to be to get the owners to back down. These injunction and conciliation outcomes hands tremendous leverage to the caretaker, as there are essentially no other legal avenues that are supposed to offer a honest and impartial review and judgement for owners to force compliance to the terms of their MR contracts.
A small number of cases proceeded to a hearing. Many of these cases resulted in contrived reasoning to find for the caretaker. The QCAT Members who preside in these cases are not judges, but barristers who are appointed based on their expertise. In one case the barrister appointed by QCAT was also suggested as a mediator by the caretaker’s legal team four years prior to the hearing. The body corporate made a formal application requesting that this barrister recuse himself, as allowed by the QCAT legislation. The application was first ignored, and then refused in the first day of the hearing. The outcome for this body corporate was dire.
One perhaps notorious case resulted in a four year delay, over a million dollars of costs for both parties and QCAT expenses, and resulted in the owners’ RANs being dismissed as the resolution time given in the RANs was “within 14 days” compared with the requirement in the legislation for “within at least 14 days”. Remember that we are dealing with issues such as failing to clean the pool and maintain the garden. The Presiding Member decided this difference was the only relevant factor, despite the delay of 4 years, and submissions from both parties that stated the difference was not relevant. From the nine days of the hearing, the judgement contained no reference to any element of the issues raised in the RANs. The QCAT legislation requires that the judgements should be made regarding the material facts of the case.
Interestingly, only a few months later in another case, this “within 14 days” reasoning regarding the resolution time for the RAN was dismissed by different Presiding Member, and after examination of the circumstances of each RAN, the cleaning contract was terminated. A huge expense just to get your common property properly cleaned.
In a further case, a RAN was dismissed regarding the failure to keep maintenance records as required in the contract. After a complex argument citing multiple precedents that proposed that because there was no evidence presented that the previous contract holder had complied with this contract clause, then the current contract holder was thus not required to comply with the contract clause. The RAN was dismissed.
In the same case, the presiding member accepted the advice from a lifetime member of the caretakers’ association that it was not possible to clean 70 light fittings within the required 21 days. If a small amount of common sense and simple maths were applied, a cleaner would be required to clean 5 light fittings a day, taking perhaps 15 minutes each (21 days minus weekends equals 15 working days). The caretaker has a contract for 10 years to clean common property and the owners have no ability via RANs to gain compliance to the performance of the contract.
No aspect of owners’ experience matches the QCAT Mission; “To actively resolve disputes in a way that is fair, just, accessible, quick and inexpensive”.
The UOAQ’s Complaint to the Crime and Corruption Commission
After review with government officials via various letters and meetings including various Presidents of QCAT, the Chief Justice, the Attorney General and staff, the UOAQ Committee decided to follow the advice of the Chief of Staff of the Attorney General to lodge a complaint with the Queensland Crime and Corruption Commission (CCC). A 206 page submission was completed. The UOAQ submission made it very clear that we did not expect the CCC to overturn the judgements.
After four months, a four paragraph response was received. The last two paragraphs were received by an unsigned letter from the CCC. The words were:
“Though we appreciate that this matter may be of concern to you, because the conduct you have described could not constitute ‘corrupt conduct’, as defined in the Act, the CCC is unable to assist you.
However, we consider that there are aspects of your concerns that ought to be brought to the attention of the a legal representative, who may be best placed to deal with the issues you have raised.”
The typographical mistake in the second paragraph was made by the CCC, which does not give you much confidence regarding the quality of any review.
The UOAQ Committee requested clarification of why the conduct described could not constitute ‘corrupt conduct’, and after several exchanges, the CCC responded with a three page letter which stated;
“To clarify, it is my view that the information provided does not raise a suspicion that the alleged conduct by any of those persons:
- Was engaged in for the purpose of providing a benefit to the person or another person or causing a detriment to another person (s15(1)(c) of the Act).”
The reader can make up their own mind about the “detriment to another person” caused by being dragged through QCAT for 4 years and the expenditure of over a million dollars of the various parties’ funds and receiving poorly reasoned contrived judgements.
There was no mention of any honest or impartial review of the facts of the case, other than to state that the judgements could only be reviewed in an appeals court. There was no mention of the breach of public trust in the QCAT institution.
The UOAQ observes that the presiding members in QCAT and perhaps with BCCM adjudicators are legal practitioners who have expertise in the areas of concern i.e. in this case, barristers and solicitors who have to earn their living in the area of the BCCM Act. If an owner has very deep pockets and is willing to appeal above these tribunals to a court with a judge or a magistrate, then it would appear a broader view is taken, and owners have more success in their disputes.
Alternatives – Short-term Management Rights Contracts
The most obvious way to fix this problem is to restrict the length of contracts for management rights to perhaps 3 years and allow the body corporate to go to an open tender for poorly performed contracts. An incumbent who is doing a good job, providing value for money will have nothing to fear from such market based review. This change would also require state government to talk to their voters rather than industry lobby groups. Short term contracts are the norm in other states.
The UOAQ has a couple of case studies of some Body Corporates who are free of Management Rights contracts, and have reached cost effective contractual agreements to manage their buildings. Letting contracts which are bound to building management contracts have more flexibility as individual Owners are not bound to the letting contract, and can find alternatives. This may explain the popularity of Airbnb. However these owners are still bound to the costs and performance of long term building maintenance contracts, and have no alternative to obtain better performance.
Beware of Resolving MR Disputes via QCAT
The UOAQ warns of the clear risks associated with RAN process and suggests that owners consider avoiding the QCAT roundabout. If the caretaker is failing to perform their duties to a satisfactory level, and does not respond to reasonable requests, then in the state of Queensland, owners have no alternative but to put up with poorly maintained buildings, or hire additional contractors to clean common property, the pool and maintain the gardens. It is cheaper and more predictable than using the legislated dispute resolution process.
In one recent case, a body corporate’s RANs were dismissed in QCAT, and the body corporate was made to pay close to $300,000 of the caretaker’s costs. The dispute regarding the maintenance of common property, pools and gardens remains unresolved.
Join the UOAQ in Highlighting This Issue
For decades, the UOAQ has represented the interest of owners and investors of units in Queensland. After more than two decades of current legislative framework, it is becoming ever clearer that the Managements rights as conceived by current legislation do not favour the interest of owners.
While we have espoused this message as an organisation for many years, we now call on owners as individuals to share their personal experiences of how the Management rights works for their scheme in practice with the Premier and Queensland government via link provided in this article.
The UOAQ has been giving owners a voice for over four decades in Queensland. Help us to continue to help you by becoming a member today.