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Variations of Agreements

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Here are Andrew's slides, covering Variation of Agreements as presented on the 17 February 2017 at an information session at Noosa Blue.

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Variations of Agreements

  1. 1. Variation of Agreements What is a variation? Common examples Approval Body Corporate obligations What can the body corporate ask for? When can the body corporate say no? Who pays what? Section 130 variation Don’t Forget
  2. 2. What is a variation? • A variation is a permanent change to the contractual relationship between the manager and the body corporate • Like any contractual change it requires the written consent of both parties (usually in a deed of variation)
  3. 3. Common Examples Top-ups under the Regulation Module • The body corporate may agree to amend an agreement to include a right or option of extension or renewal of no longer than 5 years • The unexpired term must not be longer than the maximum allowed under the regulation module • Approval must be by ordinary resolution by secret ballot • Meeting notice must include a BCCM Form 20 explanatory note • Can only be considered once in the body corporate’s financial year
  4. 4. Common Examples Top-ups otherwise Lill v Ryan [2011] QCATA 124: • You can get around the Module • Just amend the start and end dates of the Agreement • No secret ballot required • No BCCM Form 20 required • Minimal legal fees because simple deed • Why not more of it?
  5. 5. Common Examples Remuneration/Duties Review • New schedule of duties prepared by an expert • Market remuneration to match the new duties • A change in remuneration can only be considered once in each financial year
  6. 6. Common Examples Gallery Vie decision • Facts? • QCAT exposed a hole in the protection afforded to financiers under the Act • Financiers spooked and wont lend unless amendments made to termination provisions • Question about whether committee can “waive” the body corporate’s termination rights in a deed of assignment • Better approach is to amend your agreements at the next general meeting (rather than potentially holding up a sale down the track)
  7. 7. Approval • Must be at a general meeting • Must be an ordinary resolution • Must be no votes exercised by proxy • If the variation includes a right or option of extension or renewal: • Must be secret ballot; and • Must include BCCM Form 20
  8. 8. Body Corporate Obligations • No statutory requirements • Unlike assignments, there is no obligation to not withhold consent unreasonably • So, the body corporate is free to negotiate any proposed variations (subject to the overriding obligation to act reasonably)
  9. 9. What can the Body Corporate ask for? • The only restriction on the body corporate is that it cannot seek or accept the payment of an amount or the conferral of a benefit in exchange for approving new agreements or top-ups • Recent decisions have confirmed that commercial negotiations are acceptable • Ordinarily the body corporate will request its costs be paid so it is not out of pocket for considering the manager’s proposal
  10. 10. When can the Body Corporate say no? • There is no obligation for the Body Corporate to approve a variation • There is no obligation for a committee to call a EGM to consider a variation at your request (unless you have the support of 25% and have formally requested an EGM) • A decision of the Body Corporate to not approve a variation will be almost impossible to challenge.
  11. 11. Who pays what? • Unlike assignments there is no statutory obligation for the manager to pay the body corporate’s costs • If you own a lot in the scheme, you can submit a motion as a lot owner and the body corporate must include it in the agenda for the next meeting without alteration • However, a committee may submit its own motion and any motions dealing with the same issue need to be considered as a motion with alternatives
  12. 12. Section 130 Variation Party can instigate a review of terms (duties, powers and remuneration) if: • Agreements entered during OOCP • OOCP has ended • Original manager still there • Review period is the later of 3 years after the start of the term, or 1 year after the AGM held after the OOCP ended
  13. 13. Section 130 Variation Process: • Request review (ordinary resolution if instigated by body corporate) • Provide review advice (from an expert) to other party within 2 months of request • Have regard to review criteria (next slide) • Body Corporate’s final decision to be by ordinary resolution
  14. 14. Section 130 Variation Review Criteria: • Appropriateness of terms to achieve a fair balance between parties • Whether the terms impose conditions that are unreasonably difficult to comply with or are not necessary for protecting the legitimate interests of either party • The consequences of complying with or contravening the terms and whether they are unfairly harsh or beneficial to either party • Whether the terms are appropriate for the scheme • The term remaining on the agreements
  15. 15. Don’t Forget If you have a financier, you need to send it copies of any deed of variation you have entered into with the body corporate
  16. 16. Andrew Suttie Partner NICHOLSONS | Solicitors 20/224 David Low Way, Peregian Beach QLD 4573 P (07) 54712799; Direct (07) 3226 3955 F (07) 3221 3756 E ajs@nicholsons.com.au W www.nicholsons.com.au