Caretaking and letting agreement essentials – part 1
We regularly prepare caretaking and letting agreements for new developments. However, it has become increasingly common for us to be approached by on-site managers or owners corporations who are seeking to revise and update their existing agreements.
In many cases, the original agreements are over 10 years old and the caretaking duties are often no longer consistent with the needs of the scheme. Fixing outdated agreements is usually achieved by either varying the existing agreements or by re engaging the on-site manager under new agreements.
Unlike the old days (when managers actually wanted agreements that included vague and generalised duties!) experience has proven that the lawyer’s goal these days is to be very clear and very concise when drafting caretaking agreements to avoid future disputes. Notwithstanding, unless 50 – 80 page agreements are to become the norm, there will still be issues that will arise from time to time that are simply not black and white and will need a bit of common sense to resolve.
In my experience, there are several essential clauses and concepts that a caretaking or letting agreement should include to be able to provide the best possible guidance to the on-site manager and the owners Corporation. For example, clauses that address the following:
• The annual revision of the remuneration.
• The conditions for exercising an option.
• Dispute resolution and termination processes.
• Ownership of equipment and materials.
• Owners corporation spending limits and procedures.
• Requirements for the manager to live on-site.
• The owners corporation’s conditions for an assignment.
• A duties schedule that clearly indicates what, where, when and how.
• Duties that require specialists.
• The performance of extra work outside of the duties.
• Financier right of entry deeds.
• The monitoring of by-laws.
• Managing keys and other security.
• Exclusive letting rights.
• Work health and safety obligations.
• Managed investment scheme requirements.
Over the coming months, I will be providing articles that elaborate on some of these with a view that you gain a better understanding of the issues involved and some of the strategies we recommend for overcoming them.
The caretaker -v- specialist contractor
To get the ball rolling, let’s firstly look at the issue of determining whether a particular task should be properly performed by the on-site manager or by a specialist tradesperson at the owners corporation’s expense. Caretaking agreements usually provide very minimal guidance in determining which tasks should be performed by a tradesperson and this regularly leads to disputes when the on-site manager does not perform a task that the owners corporation believes it should.
Optimally, the caretaking agreement should provide one or more tests that can be applied to the circumstances at the time. For example:
• Gardening maintenance and window cleaning that requires a ladder, scaffold or crane to reach areas higher than 1.8m from ground level should be performed by a specialist tradesperson.
• Painting an entire wall, door or area greater than 10m² shall be performed by a specialist tradesperson.
• Tasks requiring the use of specialised equipment no more than twice a year on average should be performed by a specialist tradesperson.
If your agreement does not have a clear test you can apply to your circumstances, it will be a matter of interpreting the surrounding clauses in the agreement and seeing if there are any other guiding principles that could be stretched to apply to the circumstances. Compliance with the work health and safety obligations of the owners corporation should also be considered, especially if the on-site manager is ill equipped or unqualified to meet those obligations. If there are no guiding principles in the agreement then it may be a matter of determining if there is an industry standard that might apply. It is also worth noting that insurance policies held by the owners corporation may require that certain maintenance be performed by certified service providers.
Using the argument that “it has always been done this way” is only of benefit when there is no test or guiding principle in the caretaking agreement. Just because something has been done a certain way does not necessarily make it the correct way. If you are the on-site manager in a building, you should make sure that all the tasks that are performed by outside contractors are not actually tasks that you should be performing yourself, otherwise you might be receiving a nasty bill in the future from the owners corporation.
If your caretaking agreement is vague or unclear when it refers to work that should be performed by a specialist tradesperson, the on-site manager and the owners corporation should always come to an understanding first before the on-site manager appoints any outside contractor. By knowing in advance whether or not a specialist can be appointed, the on-site manager will be able to avoid many disputes with the owners corporation.
