Think Nicholsons

Mar 10

Body Corporate Tips – Options in Management Rights

“I’m not a second option. You either choose me or you lose me” 

Management rights agreements commonly contain an option to extend the term, exercisable by the building manager. 

To validly exercise the option, it must be done in the way, and at the time, required by the agreement. 

A failure to validly exercise the option likely means the agreement comes to an end at the expiry of its current term. 

Sometimes, either or both of, the building manager and the body corporate are unaware that the time to exercise an option has passed. 

If the building manager continues to perform the duties under the agreement and the body corporate continues to pay the building manager, there may be a dispute about whether the agreement has expired. 

To avoid what could be a costly and time-consuming dispute, we recommend that:

1. bodies corporate

(a) review their agreements, and identify and diarise the dates by which any option(s) must be exercised; and

(b) where an option is not exercised in the way, or at the time, required by the agreement, immediately seek legal advice;

2. building managers

(a) review their agreements and identify and diarise the dates by which any option(s) must be exercised; 

(b) ensure that an option is exercised in the way, and at the time, required by the agreement;

(c) keep evidence of the exercise of an option and obtain written confirmation of receipt from the body corporate;

(d) after the option has been exercised, request the body corporate enter into a deed with the building manager, acknowledging the option was properly exercised (a committee resolution is all that is required for approval); and

(e) where an option has not been exercised in the way, or at the time, required by the agreement, immediately seek legal advice. 

If you want to discuss the exercise of options, or any other strata law issue, please telephone Bronwyn Rule on (07) 3226 3938. 

Bronwyn Ablett

Senior Associate
Bronwyn’s extensive experience includes adjudication applications in the Commissioner’s Office; complaints about defective and incomplete building work to the QBCC and proceedings in the Queensland Civil and Administrative Tribunal, including appeals of Adjudicator’s orders and review of QBCC decisions.