Strata AI Tips and Tricks: Understanding Your Strata Management Agreement: A Plain English Guide for Committees

We asked our AI system to help us explain the key provisions of the SCA NSW's 2024 standard agency agreement in plain English. Our prompt was simple:

"I am a strata manager and I want to be able to explain, in non-legal language, the meaning of the important provisions of this agreement for strata management services. The idea is that we are giving this information to owners corporations, so they understand the provisions of the agreement in layman's terms".

Here's what we got:

When your owners corporation enters into a strata management agreement, it's important to understand what you're agreeing to. Here's a breakdown of the main sections.

Three Types of Fees You Pay (Clause 3)

1. Agreed Services Fee - Clause 3.1(a)

·       Fixed yearly amount for standard management tasks (Item 6).

·       Automatically reviewed annually with percentage increases (Clause 4).

2. Additional Services Fees - Clause 3.1(b)

·       Charged separately for work beyond standard management.

·       Hourly or per-activity rates listed in Schedule B.

3. Charges and Reimbursements - Clause 3.1(c)

·       Money the manager spends on your behalf (Schedule D).

·       You reimburse these costs in full.

Commission Arrangements (Clause 3.3)

Option 1 - Manager keeps 100% of commissions from suppliers (Clause 3.3(a)).

‍Option 2 - Manager keeps some commissions, passes others to owners corporation (Clause 3.3(b)).

Option 3 - All commissions passed to owners corporation within 30 days (Clause 3.3(c)).

How the Agreement Can End (Clause 5)

Natural Expiry (Clause 5.1) - Agreement automatically ends after specified term. Strata committee can extend for additional 12 months.

Early Termination by Owners Corporation (Clause 5.4(a)) - Manager breaches contract (28 days notice to remedy first) or manager loses license or goes bankrupt. Must be authorised by resolution at general meeting (Clause 5.3).

Early Termination by Manager (Clause 5.4(b)) - Non-payment of fees or breach of contract by owners corporation.

Document Management (Clause 5.6)

During Agreement - Manager maintains all records and provides access as required by law.

End of Agreement - Manager returns documents within 14 days, but can retain if fees unpaid (agent's lien).

Legal Protection (Clause 6)

Manager's Limited Liability

·       Liability capped by Professional Standards legislation (Clause 6.2).

·       Claims must be made within 3 years of incident (Clause 6.3(a)).

Protection for Manager (Clause 6.5)

·       Owners corporation covers manager from third-party claims.

·       Owners corporation reimburses expenses incurred at their request. Protection doesn't apply if manager acts dishonestly or negligently.

Instructions (Clause 2.5)

·       Manager can seek guidance from officers or committee.

·       The manager is protected if following lawful instructions and can refuse illegal or conflicting directions.

Manager's Requirements

Professional Standards - Must maintain license and professional indemnity insurance (Item 1, Clause 2.1(a)).

Legal Obligations - Comply with strata laws, maintain confidentiality, act in owners corporation's best interests (Clause 2.1).

Reporting - Provide regular financial statements and reports on delegated functions (Clause 3.5, Item 8).