NSW Strata Report

No letting appointment – no money!

Some resident building managers still don’t appreciate the importance of their letting appointments with owners. Essentially, the law states that if you don’t have a current letting appointment, you simply cannot charge an owner a letting commission or other fees.

In other words, no signed letting appointment = no entitlement to income.

Queensland
The Property Occupations Act 2014 commenced on 1 December 2014. Section 104 sets out the general contents that must be included in the letting appointment, which include:
(a) a prominent statement that the owner should seek independent legal advice before signing the appointment; and
(b) the service to be performed by the manager;
(c) the fees, charges and any commission payable for that service;
(d) when the fees, charges and commissions for that service become payable;
(e) the expenses, including advertising and marketing expenses, the manager is authorised to incur in connection with the performance of each service;
(f) the source and estimated amount of value of any rebate, discount, commission or benefit that the manager may receive for any expenses that the agent may incur in connection with the performance of this service.

You can see from the above that there is focus on two primary areas:
1. the services to be provided by the manager; and
2. the expenses that the manager may incur when performing the services for a client.

It goes without saying that any form of “kick back” or “benefit” that a manager receives when incurring expenses on behalf of owners must be disclosed in the letting appointment – otherwise you will be in big trouble!

ARAMA has provided its members with an addendum to the new form 6 required under the Property Occupations Act. The addendum is well drafted and covers services and expenses that are regularly incurred by managers but not adequately provided for in the prescribed form 6. If you are not an ARAMA member, being licensed to use this form is well worth the price of membership.

New South Wales
The Property Stock and Business Agents Act 2002 clearly states that managers are not entitled to any commission or expenses from an owner for services performed by the manager unless:
(a) the services were performed pursuant to an agreement in writing signed on behalf of the owner and the manager, and
(b) the agency agreement complies with the applicable requirements of the regulations; and
a copy of the agency agreement (signed by the manager) and served on the owner within 48 hours after the agreement was signed by or on behalf of the owner. This service can be by a facsimile.
The act further provides that the manager is not entitled to receive any expenses from an owner unless the agency agreement contains a statement:
(a) identifying the source of all rebates, discounts or commissions that the manager will or may recover in respect of those expenses; and
(b) specifies the estimated amount of those rebates, discounts or commissions.

The regulations also specifically state that if a manager refers an owner to a service provider (eg a tradesman), he must not falsely represent to the owner that the tradesman is independent of the manager unless:
(a) the manager receives no rebate, discount, commission or benefit for referring the owner to the tradesman; and
(b) the manager does not have a personal or commercial relationship with the tradesman.

Summary
• First and foremost, you must be licenced to conduct lettings or sales.
• You cannot charge an owner commission or expenses unless you have a written agency agreement that complies with your state legislation.
• In New South Wales, you must serve a copy of the written agreement on the owner within 48 hours after the agreement was signed by the owner.
• When you sell your management rights, your buyer will be paying for the good will of your letting business. Your good will starts and ends with having enforceable agency agreements with your owners.

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