Queensland: Why are developers allowed to sell 25 year caretaking contracts?
By Frank Higginson, Hynes Legal
27 October 2015
Why are Queensland developers the only developers in any state in the
world allowed to sell 25 year caretaking/letting (property management)
contracts that must be paid for by new unit owners for the duration of
the contract? The Queensland Government refuse to provide a rational
explanation for this fraud on new unit owners.
Management Rights are big business
This is an issue that has been going around in Queensland strata
circles for decades. Interestingly, before we had the BCCM (Condo) Act
there was no term limitation. The BCCM Act actually introduced a cap on
term retrospectively from October 1994.
Queensland has the most sophisticated disclosure regime for
off-the-plan sales in Australia. Every single thing is disclosed up
front, including the term of management rights agreements. Most would
be lot (unit) buyers are sold on things other than that minor level of
detail and the closest most go to reading the disclosure statement is
to understand what the levies are forecast to be. Some don’t even go
No one can ever say they were not told what the body corporate (condo
corporation) arrangements were going to be on completion. There remains
a constant source of tension between balancing the obligation to
disclose arrangements (which can become voluminous) against the need
for consumer protection.
In addition, management rights are big business. Changing the
fundamental nature of any industry (with tenure being a key part) may
well have an adverse impact on values and while that would clearly
impact on resident managers enormously, it would also impact on the
major banks who also have a large stake in the industry through lending
to resident managers.
All in all? It is getting harder every day to unscramble the egg. Every
so often the government of the day issues a discussion paper on
management rights and tinkers with the fringes of the industry. Whether
any government could further limit tenure without significantly
affecting all of the industry stakeholders remains an interesting
After e-mailing the above answer to our LookUpStrata member, we received a reply to Frank’s views as follows:
The single biggest problem with 25 year caretaking contracts is that
they deprive the body corporate (condo corporation) of their authority
over the caretaker. The body corporate is responsible, under the BCCM
Act, for control and maintenance of the common property; however, if a
caretaker has a 25 year contract he can (and does) thumb his nose at
the Committee (board of directors) and the body corporate. The Act
provides termination provisions for non-performing caretakers but the
Commissioners Office and QCAT continue to cling to the belief that the
contract is too valuable to terminate.
The Rocks resort was a recent case where the QCAT member found the most
implausible excuse to reject the Committee default notice because the
Committee had not allowed the full 14 days for default rectification–by
00.01 of a minute. Albeit that the exact same wording was allowed by
District Court Judge McGill in Patterson v Body Corporate for Palm
If the Government was even half serious about 25 year contracts, it
could start introducing three year contracts (not retrospectively) and
then potential caretakers would not have to borrow from the banks to
fund the ridiculous good will that attaches to Management Rights (MR)
that cost unit owners millions of dollars over the 25 years. This would
allow many young professionally qualified couples to get into
Management Rights, thus saving unit owners millions of dollars and
raising the tone and level of the industry.
But you will never see this while developers are allowed to contribute to political parties.
chapter previous next