A presentation by Michael Teys 25 November 2011

1. Merrimac
Heights
Case:
Lessons
Learned
Friday
25
November
2011
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

2. Well
May
We
Say……….
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Copyright
2011
Teys
Lawyers
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3.  Gardening agreement valid to 2022 despite
requiring work on lots
 Caretaking agreement valid to 2022 despite
manager’s obligation to supervise itself doing
gardening
 Damages awarded for the manager’s loss of
‘profit’ on gardening of $59,200
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

4. Management
Rights
at
Merrimac
Heights
150
Lot
Owners
Caretaking
$135,949
pa
Gardening
New
Gardener
$42,996
pa
$11,700
pa
Common
Lots
Property
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

5. The
Essence
of
the
Merrimac
Decision
!"#$%&'()&
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!"#$%&"'(%)*((+,-)%+".% !"#$%&"'(%42$%)*((+$%+".%
!"#$%&"'(%42$%)*((+$%+".%
"/0-')%*0#-'%/',1-0%
"/0-')%*0#-'%/',1-0% "/0-')%)-'5,&-)%
"/0-')%)-'5,&-)%
23'--4-0.%
23'--4-0.%
67-0%42$%-4(+"$%23-0.)%."%
67-0%42$%-4(+"$%23-0.)%."% !"#$%&"'(%42$%&72'3-%+".%
!"#$%&"'(%42$%&72'3-%+".%
(-'8"'4%+".%"/0-'%
(-'8"'4%+".%"/0-'% "/0-')%
"/0-')%
23'--4-0.)%
23'--4-0.)%
9"%+".%"/0-')%23'--4-0.%:%
9"%+".%"/0-')%23'--4-0.%:% !"#$%&"'(%4*).%'-&"5-'%
!"#$%&"'(%4*).%'-&"5-'%
0"%-;(-0#,.*'-%"8%<"#$%
0"%-;(-0#,.*'-%"8%<"#$% &").)%."%3'-2.-).%('2&=&2<+-%
&").)%."%3'-2.-).%('2&=&2<+-%
&"'(%8*0#)%
&"'(%8*0#)% -;.-0.%
-;.-0.%
©
Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

6. So
Where
Does
This
Leave
Us?
• The
body
corp
contracts
with
Sadie
to
clean
each
apartment
weekly
• The
body
corp
takes
a
margin
to
cover
its
costs
of
supplying
Sadie’s
services
• Some
owners
won’t
have
Sadie
but
she
gets
paid
anyway
• Some
owners
don’t
pay
the
body
corp
but
the
body
corp
pays
anyway
• The
developer
sells
Sadie’s
secure
income
stream
to
the
highest
bidder
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

7. New
FronYers
for
Body
Corps
Maintenance
Communica-on
Domes-c
• Cleaning
• Telephone
• Electricity
• Repair
• Intercom
• Gas
• PainYng
• Broadband
• Water
• Pests
• Television
• Garbage
• Mowing
• Air
Con
• HeaYng
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

8. Is
This
New
FronYer
a
Good
Thing?
Good
Evil
Complexity
Mowing
Control
PainYng
Costs
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

9. It’s
a
Queensland
Thing
2,350
20
10
200
25
Number
of
management
rights
around
Australia
Source:
Col
Myers,
Management
Rights,
The
Good,
The
Bad
and
The
Ugly,
ACCAL
10
March
2011
5
©
Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

10. Why
Management
Rights
Have
Not
Spread
• LegislaYve
restricYons
on
developers
elsewhere
• Common
law
fiduciary
duYes
not
displaced
elsewhere
(Arrow
case)
• NSW
liYgiousness
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

11. LegislaYon
Eroding
Queenslander’s
Common
Law
Rights
• Fiduciary
duYes
by
a
developer
gone
• Ultra
vires
(outside
powers)
gone,
Merrimac
Heights
case
• Fiduciary
duYes
of
a
manager
watered
down
by
code
of
conduct,
Merrimac
Heights
case
So
where
is
the
upside?
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

12. Tired
Old
Management
Rights
Chestnuts
• Someone
with
‘skin
in
the
game’
will
do
a
beder
job
than
a
mere
employee
• A
resident
manager
will
pick
a
beder
tenant
because
they
live
there
• Developers
will
not
build
without
management
rights
to
sell
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

13. Lesson
1
-­‐
Long
Term
Contracts
Eliminate
CompeYYve
Pricing
Tension
• The
award
of
damages
in
Merrimac
Heights
proves
this
point
• Code
of
conduct
duYes
about
compeYYveness
do
not
trump
long
term
contracts
• Absent
evidence
of
value,
they
ought
to
be
rejected
when
they
end
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

14. Lesson
2
–
Resident
Managers
Will
Fight
for
Their
Livelihoods
• Life
savings
invariably
invested
• DepreciaYng
assets
heavily
financed
• Market
driven
percepYon
of
ever-­‐
renewing
contract
terms
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

15. Lesson
3
–
LiYgaYon
Will
Divide
the
Body
Corporate
• Passive
v
aggressive
• Investors
v
owner
occupiers
• AcYve
commidee
v
disengaged
owners
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

16. Contract
Term
Finance
ConstricYons
Expiry
Increasing
Receiverships
Social
Media
/
Blogging
Dark
Clouds
Over
Queensland
Management
Rights
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

17. Unit
Owners
Must
Take
Responsibility
for
Their
Own
Affairs
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

18. About
the
Presenter
Michael
Teys
is
the
Founder
and
Principal
Lawyer
of
TEYS
Lawyers.
He
has
a
Bachelor
of
Laws
and
pracYces
exclusively
in
the
area
of
strata
Ytle
law.
He
is
a
Fellow
of
the
Australian
College
of
Community
AssociaYon
Lawyers.
He
was
formerly
an
Adjunct
Lecturer
with
Charles
Sturt
University.
He
appears
weekly
on
SKY
News
Business
Channel's
Property
Success
with
Margaret
Lomas
and
is
a
regular
panellist
for
the
property
ediYon
of
Your
Money,
Your
Call
for
the
same
channel.
You
can
find
out
more
about
Michael
at
www.michaelteys.com
TEYS
Lawyers
pracYce
naYonally
in
strata
Ytle
law
represenYng
owners
corporaYons,
bodies
corporate
and
apartment
owners.
The
firm’s
pracYce
groups
include
building
defects,
management
rights,
strata
community
disputes,
by-­‐laws
and
rules
and
levy
and
fee
collecYon.
Subscribe
for
their
free
e-­‐newsleder
StrataSpace
and
find
out
more
about
them
at
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au