Paradise Grove II [2001] QBCCMCmr 599 (27 November 2001)

RA MeekREFERENCE: 0395-2001

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	5913
Name of Scheme:	Paradise Grove II
Address of Scheme:	7 West Burleigh Road BURLEIGH HEADS QLD 4220

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Contractor


RA MeekI hereby order that the application by Jesach Pty Ltd, the service contractor and letting agent, for an order that the proposed resolution of the committee imposing a transfer fee as a condition of its consent to the assignment of the Care taking and Letting Agreement is unlawful and the resolution consenting to the assignment should be unconditional, is dismissed.
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STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0395-2001

“Paradise Grove II” CTS 5913

The applicant Jesach Pty Ltd, the service contractor and letting agent, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

An order that the proposed resolution of the committee imposing a transfer fee as a condition of its consent to the assignment of the Care taking and Letting Agreement is unlawful and the resolution consenting to the assignment should be unconditional.

Section 223(1) provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

a) a claimed or anticipated contravention of the Act or the community management statement; or

b) the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or

c) a claimed or anticipated contravention of the terms, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

In the supporting grounds, the applicant states that –

• It is the caretaker and letting agent by lawful assignment;

• The original agreement contained an option for renewal for a term of five years commencing 16 June 1999, which option was exercised;

• At an EGM held on 29 June 1999, the parties sought to vary the agreement to add a further five year option;

• The applicant submits that this variation was unlawful pursuant to section 290 of the Act;

• The applicant concludes that the body corporate is not entitled to impose a transfer fee pursuant to section 85.

Section 85 provides as follows -

Payment of amount on transfer
85.(1) This section applies to an engagement of a person as a service contractor, or the authorisation of a person as a letting agent, if—
(a) section 107(3)15 of the Act applies to the engagement or authorisation; and
(b) the engagement or authorisation is not the result of the exercise of an option by the service contractor or letting agent under the terms of the engagement of the person as a service contractor, or the authorisation of the person as a letting agent, contained in a previous engagement or authorisation for the scheme; and
(c) the approval of the body corporate is sought to the transfer of a person’s rights under the engagement or authorisation.
(2) The body corporate may require, as a condition of approving the transfer, that the transferor under the transfer pay the body corporate an amount (the “relevant amount”).
(3) The body corporate may require the payment of the relevant amount only if the date (the “approval date”) on which the body corporate approves the transfer is not more than 3 years after the date (the “contract date”) on which the engagement or authorisation was entered into, or on
which the term of the engagement or authorisation was extended.
(4) The relevant amount is the relevant percentage of the amount representing fair market value for the transfer.
(5) The relevant percentage is—
(a) if the approval date is not more than 1 year after the contract date—3%; or
(b) if the approval date is more than 1 year, but not more than 2 years, after the contract date—2%; or
(c) if the approval date is more than 2 years, but not more than 3 years, after the contract date—1%.
(6) The body corporate may not require the payment of the relevant amount if—
(a) the transferor is a financier under section 109 16 of the Act who is acting under the provisions of the financier’s charge over the engagement or authorisation; or
(b) the transferor is seeking approval to the transfer on the basis of genuine hardship not reasonably foreseeable by the transferor at the contract date.
(7) The relevant amount must be paid into the body corporate’s sinking fund.

The section provides that there are two circumstances in which the body corporate may require the payment of a transfer fee. Namely, if the date on which the body corporate approves the transfer is not more than 3 years after the date on which the engagement or authorisation was entered into, or alternatively, on which the term of the engagement or authorisation was extended.

The applicant is alleging that the agreement was entered into in 1994, and further, that the purported extension of the term of the agreement in 1999 was of no effect, such that there is no right under the section for the body corporate to seek to impose the transfer fee.

In contrast, the body corporate alleges that the extension in 1999 was in fact valid, as the agreement was entered into in June 1994 and was therefore not governed by the provisions of the Act seeking to limit the term of any agreement. The body corporate submits that as the agreement was transferred within 3 years of a date on which the terms was extended, it was entitled to charge a transfer fee.

Section 290 of the Act provides that the “exempted provisions” for a body corporate contract do not apply to the contract if the contract was entered into before 24 October 1994. The definition of “exempted provisions” includes any provision seeking to limit the term of a body corporate contract (see section 288).

It is clear that the original agreement was dated 15 June 1994 and commenced on 16 June 1994. This is prior to the notification date of 24 October 1994. I conclude therefore that the original agreement was not subject to any term limitation, although I note that it did comply with the subsequent maximum of ten years.

In 1999, the body corporate and the then manager agreed to reappoint the manager for a term of 5 years, and to add a further option for renewal of the agreement for a further term of 5 years. I consider that this agreement was governed by the term limitations provided for in the standard module which is 10 years, including any rights or options of extension or renewal. In effect, the parties created a new agreement for a term of 10 years, which included the option of 5 years. This term was within the provisions of section 81 and 82 of the standard module, and I therefore consider the Deed of Variation of 29 June 1999 to be valid and effective.

I disagree with the point sought to be made in the applicant’s reply that to interpret the agreement as I have done allows the manager to obtain a rolling agreement. This is not correct. As I have concluded, the agreement entered into between the body corporate and the manager post the notification date was subject to the term limit imposed by the legislation. As it transpires however, the term provided for is within the maximum permissible term under the standard module, and therefore is valid.

The proposed transfer by the applicant to Atijill Pty Ltd, approved by the committee on 13 July 2001, was within the three year period of the date on which the term of the original agreement was extended, namely 29 June 2001. As such, the body corporate are entitled to require the payment of the transfer fee of 1% in consideration of its approval of the assignment pursuant to section 85(3). Accordingly I have dismissed the application.

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