Merrimac Heights Lessons Learned

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A presentation by Michael Teys 25 November 2011

A presentation by Michael Teys 25 November 2011

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  • 1. Merrimac  Heights  Case:  Lessons  Learned  Friday  25  November  2011   ©  Copyright  2011  Teys  Lawyers          
  • 2. Well  May  We  Say……….  ©  Copyright  2011  Teys  Lawyers          
  • 3.   Gardening agreement valid to 2022 despite requiring work on lots  Caretaking agreement valid to 2022 despite manager’s obligation to supervise itself doing gardening  Damages awarded for the manager’s loss of ‘profit’ on gardening of $59,200 ©  Copyright  2011  Teys  Lawyers          
  • 4. Management  Rights  at  Merrimac   Heights   150  Lot  Owners   Caretaking   $135,949  pa   Gardening   New  Gardener   $42,996  pa   $11,700  pa   Common   Lots   Property  ©  Copyright  2011  Teys  Lawyers          
  • 5. The  Essence  of  the  Merrimac  Decision  !"#$%&()&!"#$%&()& !**+%&,-& !**+%&,-&!"#$%&"(%)*((+,-)%+".%!"#$%&"(%)*((+,-)%+".% !"#$%&"(%42$%)*((+$%+".% !"#$%&"(%42$%)*((+$%+".%"/0-)%*0#-%/,1-0%"/0-)%*0#-%/,1-0% "/0-)%)-5,&-)% "/0-)%)-5,&-)%23--4-0.%23--4-0.%67-0%42$%-4(+"$%23-0.)%."%67-0%42$%-4(+"$%23-0.)%."% !"#$%&"(%42$%&723-%+".% !"#$%&"(%42$%&723-%+".%(-8"4%+".%"/0-%(-8"4%+".%"/0-% "/0-)% "/0-)%23--4-0.)%23--4-0.)%9"%+".%"/0-)%23--4-0.%:%9"%+".%"/0-)%23--4-0.%:% !"#$%&"(%4*).%-&"5-% !"#$%&"(%4*).%-&"5-%0"%-;(-0#,.*-%"8%<"#$%0"%-;(-0#,.*-%"8%<"#$% &").)%."%3-2.-).%(2&=&2<+-% &").)%."%3-2.-).%(2&=&2<+-%&"(%8*0#)%&"(%8*0#)% -;.-0.% -;.-0.%©  Copyright  2011  Teys  Lawyers          
  • 6. So  Where  Does  This  Leave  Us?   •  The  body  corp  contracts  with  Sadie   to  clean  each  apartment  weekly   •  The  body  corp  takes  a  margin  to   cover  its  costs  of  supplying  Sadie’s   services   •  Some  owners  won’t  have  Sadie  but   she  gets  paid  anyway   •  Some  owners  don’t  pay  the  body   corp  but  the  body  corp  pays   anyway   •  The  developer  sells  Sadie’s  secure   income  stream  to  the  highest   bidder  ©  Copyright  2011  Teys  Lawyers          
  • 7. New  FronYers  for  Body  Corps  Maintenance   Communica-on   Domes-c  •  Cleaning   •  Telephone   •  Electricity  •  Repair   •  Intercom   •  Gas  •  PainYng   •  Broadband   •  Water  •  Pests   •  Television   •  Garbage    •  Mowing   •  Air  Con     •  HeaYng  ©  Copyright  2011  Teys  Lawyers          
  • 8. Is  This  New  FronYer  a  Good  Thing?   Good   Evil   Complexity   Mowing   Control   PainYng   Costs  ©  Copyright  2011  Teys  Lawyers          
  • 9. It’s  a  Queensland  Thing   2,350   20   10   200   25  Number  of  management  rights  around  Australia  Source:  Col  Myers,  Management  Rights,  The  Good,  The  Bad  and  The  Ugly,  ACCAL  10  March  2011   5   ©  Copyright  2011  Teys  Lawyers          
  • 10. Why  Management  Rights  Have  Not  Spread   •  LegislaYve  restricYons   on  developers   elsewhere   •  Common  law  fiduciary   duYes  not  displaced   elsewhere  (Arrow  case)   •  NSW  liYgiousness   ©  Copyright  2011  Teys  Lawyers          
  • 11. LegislaYon  Eroding  Queenslander’s   Common  Law  Rights   •  Fiduciary  duYes  by  a   developer  gone   •  Ultra  vires  (outside   powers)  gone,  Merrimac   Heights  case   •  Fiduciary  duYes  of  a   manager  watered  down   by  code  of  conduct,   Merrimac  Heights  case   So  where  is  the  upside?  ©  Copyright  2011  Teys  Lawyers          
  • 12. Tired  Old  Management  Rights  Chestnuts  •  Someone  with  ‘skin  in  the   game’  will  do  a  beder  job   than  a  mere  employee  •  A  resident  manager  will   pick  a  beder  tenant   because  they  live  there  •  Developers  will  not  build   without  management   rights  to  sell   ©  Copyright  2011  Teys  Lawyers          
  • 13. Lesson  1  -­‐  Long  Term  Contracts  Eliminate  CompeYYve  Pricing  Tension   •  The  award  of  damages   in  Merrimac  Heights   proves  this  point   •  Code  of  conduct  duYes   about  compeYYveness   do  not  trump  long  term   contracts   •  Absent  evidence  of   value,  they  ought  to  be   rejected  when  they  end  ©  Copyright  2011  Teys  Lawyers          
  • 14. Lesson  2  –  Resident  Managers  Will  Fight  for   Their  Livelihoods   •  Life  savings  invariably   invested   •  DepreciaYng  assets   heavily  financed   •  Market  driven   percepYon  of  ever-­‐ renewing  contract   terms   ©  Copyright  2011  Teys  Lawyers          
  • 15. Lesson  3  –  LiYgaYon  Will  Divide  the   Body  Corporate   •  Passive  v  aggressive   •  Investors  v  owner   occupiers   •  AcYve  commidee  v   disengaged  owners  ©  Copyright  2011  Teys  Lawyers          
  • 16. Contract  Term   Finance  ConstricYons   Expiry   Increasing   Receiverships   Social  Media  /   Blogging     Dark  Clouds  Over  Queensland   Management  Rights   ©  Copyright  2011  Teys  Lawyers          
  • 17. Unit  Owners  Must  Take  Responsibility   for  Their  Own  Affairs  ©  Copyright  2011  Teys  Lawyers          
  • 18. About  the  Presenter   Michael   Teys   is   the   Founder   and   Principal   Lawyer   of   TEYS   Lawyers.  He  has  a  Bachelor  of  Laws  and  pracYces  exclusively  in   the   area   of   strata   Ytle   law.   He   is   a   Fellow   of   the   Australian   College  of  Community  AssociaYon  Lawyers.  He  was  formerly  an   Adjunct   Lecturer   with   Charles   Sturt   University.   He   appears   weekly   on   SKY   News   Business   Channels   Property   Success   with   Margaret   Lomas   and   is   a   regular   panellist   for   the   property   ediYon  of  Your  Money,  Your  Call  for  the  same  channel.  You  can   find  out  more  about  Michael  at  TEYS   Lawyers   pracYce   naYonally   in   strata   Ytle   law   represenYng   owners  corporaYons,  bodies  corporate  and  apartment  owners.    The  firm’s  pracYce  groups  include   building   defects,   management   rights,   strata   community   disputes,   by-­‐laws  and  rules  and  levy  and  fee  collecYon.  Subscribe  for  their  free  e-­‐newsleder  StrataSpace  and  find  out  more  about  them  at  ©  Copyright  2011  Teys  Lawyers