The goose, the golden egg and the assignment

29 June 2018

In an article I wrote some 5 years ago I expressed concern at a trend in management rights of inexperienced managers being sold management rights on promises of minimal work, high return on investment and low (or no) risk and the damage that was causing and would continue to cause the industry if it continued. I warned that the goose which had laid many golden eggs for the industry and its many participants was in grave danger. Unfortunately my prediction has proven to be close to the mark.

Regrettably the trend identified back then has not abated, or at least not to any great extent. A number of bodies corporate have found themselves with managers with little if any understanding of their duties or the reasonable expectation of owners. Disputes have become commonplace and body corporate managers are understandably encouraging their bodies corporate to be extremely cautious when considering requests for consent to assignment.

An unfortunate knock on effect of this has been the approach taken by some body corporate managers and lawyers to “outsource” the assessment of proposed new managers when asked to consent to an assignment. The reason they do this is so that the committee cannot be accused of consenting to an assignment of a poorly qualified new manager but can point to the assessment by an independent and (supposedly) qualified and competent third party.

It has also become common for bodies corporate to require potential new managers to have undergone, or to undergo, training of some description. Like other lawyers I have seen examples of where a body corporate has gone overboard in the extent and level of training required and the excessive cost of that.

Imposing such requirements has also made the whole assignment process more complicated meaning not only long delays but that the fees being demanded by some body corporate lawyers and body corporate managers are way above what might be reasonably expected.

The reality is though that bodies corporate have considerable rights when it comes to consenting to an assignment and are, due to many problems body corporate managers have experienced with poorly performing resident managers, exercising those rights in order to protect unit owners and themselves.

It is therefore too simplistic in my view to blame all of this on body corporate managers, body corporate lawyers, those engaged to do the assessment or those offering training. That is not to say that some of them are not taking advantage of the situation and gouging managers (as some clearly are) but you have to look at what has led to this and what can be done to reverse the trend. The industry has got itself into this situation and needs to find a way out.

In my view the answer lies in better and broader education of proposed new managers and existing managers. They all need to understand some basic principles including:

  • Management rights is not a risk free, passive investment. It can involve hard work to meet the owners’ reasonable expectations for the remuneration they are paying. For every $50,000 of annual remuneration the owners might reasonably expect 25 hours of work per week.
  • Proposed managers need to be totally familiar with the duties set out in the agreement, must understand the statutory requirements around infrastructure and services and must have a good understanding of the relevant legislation.
  • Bodies corporate are entitled to be satisfied that the proposed new manager has the qualifications and experience (and if necessary the training) to perform the duties. If training is needed, get it done before you seek the consent of the body corporate.
  • Rather than ask how can I do less work for more money ask how I can give my owners better service and improve my complex.

Proposed new managers with no or minimal experience should seek out education and training organisations. The first place to start is the ARAMA management rights induction course which is run over a full day and covers all of the essential basics. Depending on the person’s level of expertise further training of a practical nature through Danny Little of MRAS can be invaluable. If additional training in the theoretical aspects is required seek out one of ABMA approved trainers.

If we better educate and improve the quality of existing and proposed new managers, many of the assignment problems the industry is now experiencing will dissipate. However if we stick our head in the sand and blame others for the problems they will only get worse.