Assignments made difficult

1 August 2019

A few short years ago I wrote an article “Let’s not kill the goose” where I expressed concern that the number of new unqualified entrants to the management rights industry, and the increase in disputes that was creating, would damage and jeopardise the industry if nothing was done to rectify the problems.

Despite efforts from ARAMA, certain industry professionals and some of the brokers, unfortunately what we see happening in the market demonstrates that my predictions have proved correct.

On the positive side, those managers who are looking after their body corporate, their owners and their own business are going exceptionally well. These are the managers who ask “How can

I do a great job for my owners and the complex?” rather than “How can I do less but get paid more?”

Generally though, disputes between managers and bodies corporate have increased. Remedial action notices are common place. Assignments of management rights have become difficult, protracted and expensive. Bodies corporate are engaging independent experts to assess a new manager’s competence – if the report is negative it is virtually impossible to accuse the body corporate of unreasonably withholding consent to the assignment.

There have been more refusals to consent in the past year than I have seen in the previous 10 years. By the time consent is refused the buyer and seller have spent many thousands of dollars on legal and accounting fees. Top ups or other variations to agreements are harder to achieve for many managers.

So why do we have the problems and what can be done about it? There are many answers to that first question but the two principal ones are these. The first is the large numbers of inexperienced and unsuitable people buying management rights without understanding the nature of the role. The second is the long held misconception about a body corporate’s entitlement to properly investigate and reject a proposed new manager without appropriate qualifications and experience.

I am not so naïve to suggest that there are not problems with dictatorial chairpersons or difficult committees. Of course there are, but they are in the minority. Not even they can be blamed where a manager has no comprehension of gardening or cleaning responsibilities, fire equipment maintenance or regulatory compliance.

What then is the answer? In my view it starts with education and training. And not just so that the proposed new manager can tick a box to say that training has been done, but rather meaningful training which he or she realises is vitally important (if not critical) and where he or she fully engages and gains a true appreciation and understanding of the role and its responsibilities.

For any new entrants I believe the ARAMA Induction Training Program is a must. There are many components to it and gives an excellent broad overview of the various facets of the resident managers role.

Whether we like it or not the regulatory compliance which a resident manager needs to understand and undertake today is dramatically more than it was 10 years ago, so there needs to be specific training around that. For many new entrants there is generally also a need for some practical hands on training for gardening and lawn mowing.

At a recent industry breakfast hosted by Mahoneys we discussed these matters amongst the large number of industry participants. There was consensus on the need for such training and we are to develop a list of other acceptable training regimes for new entrants. There was also consensus on the concept of a proposed new manager meeting with the committee in the early contract stages to ascertain the likely position of the committee to the request for consent to the assignment.

Whilst sellers typically never want to tell the committee about a sale until the contract is unconditional, that approach may have to change. It is in the seller’s interest to know up front that the committee is likely or unlikely to consent – if it is the latter the seller (and buyer) may well save thousands of dollars of wasted legal and accounting fees.