When a Strata community undergoes changes in building management, it can be a complex process. The assignment of management rights is a significant event that requires careful handling to ensure both legal compliance and the long-term success of the community. The following are the key considerations for Strata communities when transferring management rights. 

Understanding the Basics 

Most strata schemes operate under long-term management contracts, often lasting between 10-25 years. These contracts, set up under the Standard and Accommodation Modules, are typically sold by developers as part of the establishment of a scheme. Over time, the value of these contracts diminishes as the term runs down, prompting managers to request a “top-up” to restore the contract to the original 25-year length. This process ensures that management rights retain their value, particularly when a manager is considering selling their business. 

If your Committee receives a letter regarding the transfer of management rights, it signals the start of an important process. The Committee is asked to approve the assignment of these rights to the new building manager. This can involve reviewing various documents, including references, resumes, and the deed of assignment. 

The Role of Legal Advice 

One of the key steps in this process is obtaining legal advice. While it may not be legally mandated, a prudent Committee will seek legal counsel to ensure the process is handled correctly. Most often, the outgoing manager will cover these legal costs, but it is essential for the Committee to ensure that all legal obligations are met. Legal advice helps to ensure that the incoming manager can fulfill their contractual obligations without placing the Body Corporate at risk. 

Engaging a legal professional, such as a solicitor, ensures that all legal boxes are ticked. The solicitor reviews the motion for consent, the deed of assignment, and any material provided by the buyer, including resumes, references, and financial soundness. 

Building Relationships with the New Manager 

Once the legal checks are complete, it’s time for the Committee to meet the prospective new manager. This meeting is a vital step, as it provides the Committee with an opportunity to understand whether the incoming manager can perform their duties effectively. In some cases, a third-party expert may be brought in to assess the new manager’s capabilities, offering added assurance. 

It’s important to note that while the Committee may have concerns about the incoming  manager’s experience, a lack of extensive experience alone is not usually sufficient grounds to withhold consent. In such cases, training options can be negotiated to ensure the incoming manager is well-prepared for their role. This approach has been successfully adopted by many Committees, where new managers agree to undergo added training to build the skills needed to effectively manage the property. 

The Importance of Communication 

The transition process is also an opportunity to set the tone for the relationship between the Committee and the new manager. A well-coordinated interview allows the Committee to articulate their expectations and vision for the role. This proactive approach helps to avoid potential conflicts down the line and ensures that both parties are aligned from the outset. 

Additionally, it is important to recognise that the new manager may not hit the ground running immediately. Every building has its unique requirements, and it is unrealistic to expect the new manager to be fully up to speed from day one. A grace period of a few months for both the manager and the Committee to build rapport and adjust to the new working relationship is often necessary. 

The assignment of management rights is a complex but manageable process when approached with diligence and the right expertise. By obtaining legal advice, conducting thorough interviews, and fostering early communication, the Committee can ensure a smooth transition and set the foundation for a productive relationship with the new building manager. 

For Committee members, this process is about more than just ticking legal boxes—it’s about ensuring the long-term success and harmony of your community. Embrace this as an opportunity to establish a positive working relationship with your new manager and set the stage for a successful partnership. 

If your Committee is facing an upcoming transition, consider consulting with your Strata manager and a legal expert to ensure you are well-prepared for the process. Together, these professionals will help navigate the intricacies of management rights assignments, providing peace of mind that your community’s interests are safeguarded.