By the time this article is published I expect that the ARAMA Roadshow being conducted throughout the State will be all but over. Starting in Brisbane and winding up in Cairns, I and other speakers at the Roadshow will focus on ways in which resident managers can utilise the provisions of the Property Occupations Act (POA) to their advantage.
As I predicted at the time POA commenced, entrepreneurial managers are starting to use POA’s deregulation of commission as a way to consolidate and improve their businesses. This deregulation has encouraged many managers to consider more seriously than before, even though it has always been a viable option (and one I have been advocating since as far back as 2004), the bundling of various fees charges into a single fixed rate that a manger charges for most if not all of the services that the manager undertakes or arranges. Under POA though, even the commission can be incorporated in the bundled charges.
Clients who have embraced this way of doing business have commented on the positive feedback they get from their owners. Instead of receiving a monthly statement with a dozen or so charges deducted from the rent, owners see only one or two deductions with a payment of a fixed percentage of the rent as the bottom line. Owners know that for every $ received from the letting of their unit they will receive a fixed percentage. The manager benefits in many ways including an automatic increase in charges when rents/tariffs increase.
Whilst careful consideration of the commercial issues when setting the percentage of an all-encompassing fee will be necessary, so too will the proper drafting of the provisions in your POA form 6 to provide for this type of charging.
This has been reinforced by a recent QCAT decision where the OFT prosecuted a manager for allegedly overcharging owners for various services and expenses. The OFT prosecution (in which we represented the manager) was unsuccessful and although the decision has been appealed, the comments of the QCAT member are very pertinent to the concept of the bundling of charges.
The decision confirms the importance of incorporating in the POA form 6 reference to fees and charges including a component of profit, or payment for labour, time and effort, for the manager. This is something we have been doing (and refining) in the letting appointment addendums we have been preparing for clients and ARAMA over many years.
The critical issue is the distinction between expenses on the one hand (where the manager cannot charge more than the actual expense the manager incurs) and fees and charges for services on the other.In this regard the Mahoneys / ARAMA addendum to the POA form 6 makes it absolutely clear that:
- Items like cleaning and linen, PABX fees and Foxtel charges are not an “expense” and are therefore not limited to any actual expense the manager might incur (such as the cleaning contractor, linen supplier, PAMX lease payment or Foxtel invoice);
- The fees are for a service and the owners are fully aware of the fees and that they include components of expenses, labour and profit;
- There is no secret or undisclosed profits which owners are not aware of or have not agreed to.
In summary, there are some real advantages offered by the POA and how charges to owners are dealt with. However caution requires that you draft your POA form 6, addendum and schedule of fees and charges very carefully.
If you have any questions or wish to discuss your matter, please contact John Mahoney.