Caretaking and letting agreements are governed by the Body Corporate and Community Management Act 1997 and the regulation module that applies to the particular scheme.
The Act and regulation module govern the way agreements operate including when, and how, bodies corporate can terminate them.
Before a body corporate can terminate an Agreement they are required to issue a document called a remedial action notice (RAN), also referred to as a breach notice.
In an ideal world, caretakers would never need to worry about RANs – and most caretakers will never receive one. But because the consequences for not dealing with a RAN can be so severe, every caretaker should understand:
- what are RANS and why they are usually given;
- what happens if you simply ignore a RAN;
- how to avoid RANs;
- what to do in response to a RAN; and
- what steps they can take to protect themselves in the future.
What is a RAN?
A RAN is a document issued by a body corporate which contains a complaint (or several complaints) about the caretaker’s performance of an Agreement. They have legal requirements, including that they give at least 14 days to address the complaint(s).
A RAN can be issued for a simple failure to perform a duty (like mowing the lawn every week), or for more complex complaints that are harder to define (like failing to keep a scheme in “first class order and repair”).
Because a RAN relates to an agreement, the matters raised are governed by the terms of the agreement. Two identical RANs issued to two different caretakers may have very different responses based on the agreements those caretakers have entered into.
For that reason it is vital that caretakers act swiftly to get advice about a RAN as soon as they receive one.
What happens if you ignore a RAN?
Simply, if a caretaker does not respond, satisfactorily, to a valid RAN the body corporate may pass a resolution to terminate the Agreement.
If the resolution passes, the agreement will be terminated and the investment in the caretaking and letting agreements business will be lost.
Can you avoid a RAN?
It is important every caretaker understands one simple aspect of the management rights business – when you are engaged by a body corporate to perform caretaking services you are a business with only one client. If you don’t keep that customer happy it is more likely than not that you will, at some point, suffer the consequences.
It is inevitable in a long term caretaking arrangement that, from time to time:
- things will break;
- some duties won’t or can’t be performed; or
- things will not go according to plan.
Often, those issues arise without any wrongdoing.
In our experience, many committee members have an imperfect understanding of the work that a caretaker is required to perform, the demands of that work, and what a fair market value for performing that work is.
A happy body corporate and committee members are more likely to give a caretaker the benefit of the doubt when issues arise. They will understand, for example, when bad weather has meant that it has been impossible to perform certain duties, or when there is delay in engaging a contractor because the contractor did not provide a quote within a reasonable time.
The alternative is also true – if the committee starts believing that a caretaker is not performing their job adequately, they will tend to view everything through that lens. They will be convinced that any failure, no matter how minor, has happened because a lazy caretaker refused to do their job.
Responding to a RAN
The biggest mistake we see is caretakers ignoring RANs. We regularly have caretakers come to us after a RAN has expired, or after a termination resolution has been proposed.
While there is usually something we can do in that situation, the work will be more urgent, more time consuming and as a consequence, more expensive.
A matter that may have been able to be resolved by a single letter might instead require an urgent application to the Queensland Civil and Administrative Tribunal (QCAT) to restrain a body corporate from terminating.
The best approach is a measured one – if a RAN gives 14 days to respond, you should be using all that time to ensure that every item is addressed. That usually means working with your lawyer to:
- assess the validity of the RAN,;
- determine what areas can and should be addressed (and by when);
- gathering evidence about the performance of the duties; and
- provide a comprehensive response so there is a written record of the work that was undertaken during the RAN period (to ensure the best possible protection if the Body Corporate tries to go further).
Added protection
As we’ve mentioned, it is very rare in our experience for a caretaker who is on good terms with their committee to receive a RAN. The best “frontline” defence to receiving a RAN is to always be willing to work proactively and productively with the committee (and owners) to keep them happy.
In addition, caretakers can obtain insurance cover that will protect them against RANs that are issued to them. The Australian Resident Accommodation Managers Association (ARAMA) has partnered with EBM Insurance to offer A-Legal, an exclusive product for ARAMA members which provides cover for caretakers in responding to RANs. Feel free to contact ARAMA or EBM for details.
Written
Back to articles