Mahoneys secures an important victory for the management rights industry

15 February 2023

In a recent QCAT trial Mahoneys secured a victory for the resident manager in a claim brought by the body corporate which sought an order that the caretaking and letting agreements were void.

The case centred on a previous ruling by an adjudicator from the Office of the Commissioner for Body Corporate and Community Management that the scheme was, when established, incorrectly placed in the accommodation module and must transfer to the standard module.

The body corporate argued that as the scheme was unlawfully in the accommodation module it was in effect unable to make lawful decisions about the caretaking and letting agreements and therefore the 25 year agreements the body corporate entered into were void. Not just reduced to 10 years, but void absolutely.

QCAT accepted the position put forward by Mahoneys that this was not the case, that the scheme was (albeit incorrectly) in the accommodation module when the agreements were entered into, the subsequent change to the standard module did not change that as it was not retrospective and that in such instances the agreements retained their 25 year term.

The decision was a critical one for our client but also for the management rights industry. The original adjudicator’s decision established that where a scheme may be incorrectly placed in the accommodation module (because at the time a majority of lots were not intended to be rented out or available for rent), any owner can challenge that and obtain an order that the scheme transfer to the standard module (which of course limits the term of agreements to 10 years). However as QCAT has determined, that change does not render void or reduce the term of the 25 year agreements.

Whilst the consequence of the change of module is, based on certain QCAT decisions about the impact of an assignment on caretaking and letting agreements, likely to be that if these agreements are assigned in the future, the term will reduce to 10 years from the assignment, that consequence is moderate compared to the consequences had the body corporate’s argument that the agreements were void been successful.

I should add that the case had many complications, involved disputes about more than just the points covered above and is now under appeal by the body corporate. Mahoneys will issue an update after the appeal is determined.