Some years ago I wrote an article which explored some of the issues that we were beginning to see in terms of sellers obtaining body corporate consent to an assignment. Essentially, in that article I expressed my view that the process of obtaining body corporate consent to an assignment was becoming increasingly drawn out and, at times, difficult. The reasons for my view at the time were as follows:
- Lot owners and committees were more aware of their rights under the Body Corporate and Community Management Act and the caretaking and letting agreements and were exercising those rights;
- Body corporate solicitors were requesting significantly more information from buyers than ever before (often without justification); and
- Buyers and sellers were not organized and adequately prepared.
A few years on from that article and I can safely say that the consent process has become significantly more difficult and more drawn out than at any other time over the 20 odd years I’ve been involved in the management rights industry.
Why is this?
Certainly the 3 reasons I have mentioned above are as valid today as they were previously. In addition to those reasons I would add the following:
- Bodies corporate have been emboldened by the lack of any serious blowback or consequence from previous committee decisions to refuse consent to assignments;
- Some committees perceive there to be a manager skills gap, particularly in relation to communication and a lack of any experience applicable to running a management rights business. Unfortunately in a number of instances this view has been justified; and
- Bodies corporate have previously experienced poor managers and/or have been advised of poor managers by their body corporate manager or body corporate solicitor. Again, and unfortunately, this view has been justified.
With respect to points 2 and 3 it has meant that committees are more cautious when considering assignments, are asking for significantly more information and oftentimes when the applicant has little to no experience a requirement that the applicant undertake appropriate training.
As readers would know, under the Body Corporate and Community Management Modules, in considering an assignment, a committee can have regard to the following:
- The character of the proposed transferee;
- The financial standing of the proposed transferee;
- The proposed terms of the transfer;
- The competence, qualifications and experience of the proposed transferee and the extent to which those persons have received or are likely to receive training; and
- Any other matters that are specified in the caretaking and letting agreements.
The caretaking and letting agreements usually place the onus squarely on the shoulders of the seller to ensure that the committee has received all of the information required to consider an assignment. It is therefore a matter for the seller, and the seller’s lawyer, to make sure that they have this information from the buyer.
To ensure a smoother body corporate consent process my suggestion is that sellers, their lawyers and their agents make it clear to the buyer from the outset what items are required to be given to the body corporate. In addition to that, given the problems that we are experiencing as a result of the issues I have mentioned above, I would also suggest that when a seller is considering a prospective offer to purchase, that they take into account the skills and experience of the potential buyer in addition to their monetary offer. It just may be that a smoother body corporate consent process due to the buyer having sufficient skills will save on time, money and angst when compared to a failed or significantly drawn out body corporate consent process.