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Engaging Service Contractors

Whether you’re new to the world of strata or already have an active role within your scheme, understanding how to properly engage and manage a service contract is essential.

Bodies Corporate are often faced with considering engagement of service contractors to complete various essential services. The scope of services and the terms can vary greatly depending upon the complexity of the services. The most common agreements that bodies corporate enter into are with Caretakers (Building Managers), Lift Maintenance Service, Fire Equipment Service, Gardeners, Cleaners, Utilities Providers and Billing Agents. These agreements are usually the most important agreements that strata owners will ever be asked to enter into as they are essential to the ongoing management and maintenance of services to your property.

A service contractor for a community titles scheme is defined by the Act to be a person engaged by the body corporate (other than as an employee of the body corporate) for a term of at least 1 year to supply services (other than administrative services) to the body corporate for the benefit of the common property or lots included in the scheme.

The process for engagement of service contractors is regulated by the Act which states the engagement must be in writing and approved by ordinary resolution. For high value, complex agreements it is highly recommended that the body corporate should always consider seeking professional advice before considering approval of these types of agreements. Likewise engagement of a professional to provide tender services is recommended as a minimum of 2 service contract options must be presented to owners when the total agreement cost exceeds the major spending limit of the Body Corporate.

Below we have provided an overview of what is important to consider when entering in agreements:

    • Check to ensure your Body Corporate Contracts Register is up to date
    • Consider engagement of a specialist to seek tenders for high value, complex agreements
    • Approval by ordinary resolution is required for contracts in excess of 1 year
    • Maximum terms of agreements vary under different regulation modules from 10 to 25 years
    • Full details of the terms of the Engagement or Variation must be given to owners with their agenda including the commencement and end dates
    • Two contract options must be presented when the fee payable over the entire term exceed the Body Corporate Major Spending limit
    • Use of Proxies is not permitted when voting for an Engagement or Extension of terms for a Caretaker require which also require a “Secret ballot”
    • The conditions of these agreements are binding on all members of the body corporate
    • If you are considering purchasing a strata unit consider the details of any service agreements before making a decision

This article was contributed by Eddie Verevis. Eddie has been working in the Strata Management industry since 1998 and has extensive experience within the Cairns and Port Douglas regions. Eddie currently successfully manages a varied portfolio, which includes large mixed use buildings, residential buildings and commercial buildings.

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