Don’t get it wrong or it will cost you!
I recently reviewed a ‘top up’ of a NSW caretaking agreement. It was sad really!
The original agreement was entered into in 2000 and was for a term of 10 x 10 x 5 years. The ‘top up’ was done in 2008 and it purported to extend the term back out to the original 25 years. Now in the normal course, you can do this, for the reasons I mention below. However, the solicitor who drafted the top up did so in a manner where the caretaking agreement was effectively ‘re-engaged’ (so a new agreement was created but subject to the 10 term limitation) and not varied to incorporate the extended term (so the original agreement continued to remain on foot).
The upshot was that the caretaker, who thought he had an agreement that ended in 2033, actually had an agreement that ended in 2018. The significant difference in term had financial consequences.
As I have pointed out on numerous occasions in prior articles, there are two types of caretaker agreement in New South Wales – those that were entered into prior to the 10 February 2003 and those that were entered into on and after the 10 February 2003.
One of the important amendments introduced on the 10 February 2003 was the ‘term limitation’ whereby all future agreements could not have a term (including options) exceeding 10 years. Agreements entered into before this date were sheltered from the term limitation. These agreements, if done right, can be ‘topped up’ for any term.
The critical thing to note about the term limitation is its actual wording. The act states that a caretaker agreement will expire… ‘when 10 years have expired after it commenced to authorise the caretaker to act under it…’.
One would think that all you need to do is to vary your existing agreement by adding a further option, to bring the term back up to the 10 years. Whilst this will work for agreements entered into prior to the 10 February 2003, it will not work for agreements entered into after this date.
The reason I say this is that the legislation makes it quite clear that a caretaking agreement expires ‘when 10 years have expired after it commenced to authorise the caretaker to act under it’. In other words, the critical date for calculating the period of the agreement is the commencement date. If, for example, an agreement commenced on the 1 January 2004 it will expire on the 31 December 2013. Any later variation of this agreement to add additional options to bring the total term up to 10 years will not overcome the fact that the agreement (pursuant to the legislation) will expire ‘when 10 years have expired after it commenced to authorised the caretaker to act under it’.
Consequently, the only way to ‘top up’ agreements entered into after the 10 February 2003 is by way of entering into new agreements or effecting some form of ‘re-engagement’ of the old agreement.
The moral of the story – get your ‘top up’ done by a specialist strata/management rights lawyer!
(Also, as a separate but related issue, make sure you diarise your option exercise dates!)
AccomNews is not affiliated with any government agency, body or political party. We are an independently owned, family-operated magazine.
