It has been said that ‘industry practice’ in the body corporate world is for caretakers to request continual top-ups for their agreements. It is our position that the legislation only gives one top-up of up to 5 years beyond the maximum term. This means for the Standard Module, an agreement could have any number of rights of extension up to the maximum of 10 years, but only one possible 5-year extension beyond this. For the Accommodation Module, the maximum term would be 25 years, with only one possible extension of 5 years beyond this.
Industry practice?
At the outset, it should be said that this
is not ‘industry practice’: it is the practice of caretakers. It is at the full discretion of the body corporate to refuse variations to agreements, and it is questionable to refer to a person’s home as an ‘industry’. After all, caretakers must act in the b
est interests of the body corporate and must not mislead the body corporate.[1] There is a strong argument that a caretaker telling a body corporate that a top-up is ‘industry practice’ could be misleading, as that argument is purely for the caretaker’s benefit, and is not practice for a body corporate to agree to
it. It is difficult to see, particularly in the Accommodation Module, how it could be in the body corporate’s best interests to decide an issue that will not take effect until 20 years in the future, particularly where, in our experience, the terms of the engagement become woefully out of date well before then.
Currently, there is no case law that considers the issue of whether there is only one top-up available after the maximum term limit, or whether caretaking agreements can effectively be unlimited. It is common to point to industry practice, but practice is not law. Only parliament can make laws, and if a practice is contrary to law, it is not lawful. Commenting on what usual practice does is not evidence of its lawfulness. Such arguments are facetious at best, and fallacious at worst. For example, it is common
for politicians to be corrupt in practice. Is corruption therefore permitted? Obviously not.
Interpretation: single vs plural
So without case law, the only thing to do is to interpret the legislation around top-ups and refer to any academic comment on the issue. Currently the only academic comment is that published by members of our firm in The Queensland Lawyer.[2]
The crucial thing to note is the use of singular vs plural terms. Although it is usually the case that singular = plural and vice versa,[3] this is a presumption only. This presumption can be rebutted by the context.[4] So what is the context?
In the regulation modules, there are two types of right of extension: rights within the maximum term limit, and a right beyond the maximum term limit. Under the Accommodation Module, this means that there may be any number of rights of extension agreed to within the initial 25-year maximum term limit; however, there is only one subsequent right of extension of up to 5 years that may be agreed to beyond the 25-year maximum.
The point here is that rights of extension within the maximum term limit are referred to in the singular or the plural, depending on context – but the subsequent right of extension beyond the maximum term limit is always referred to in the singular. These definitions and the distinction between them are crucial. This is because the definition of ‘unexpired term’[5] makes the distinction explicitly. On one hand, there is a right of renewal ‘whether provided for in the engagement or authorisation or subsequently approved by the body corporate’,[6] and on the other, there is ‘a subsequent right or option, under s 130(2) or 131(2)’.[7]
The legislation itself makes a distinction between rights subsequently approved after the engagement, and a right subsequently approved after the maximum term limit. It is this distinction that made it possible in Lill v Ryan [2011] QCATA 124 to change an Accommodation Module engagement from a 10-year term with a 10-year option into a 15-year term with a 10-year option, as there is no restriction on how many rights of option there may be, or how long the initial term before an option must be exercised is, so long as it does not exceed the maximum term limit of 25 years.
The only place where no distinction is made between the two is when submitting a motion to add a right of extension to an agreement. A body corporate may not consider more than one motion in any financial year concerning the addition of a right of extension to an agreement.[8] It does not matter if the right of extension is within the 25-year limit or beyond it: such a motion may only be considered once per financial year. The legislation does not make the distinction here, because what if there was a 20-year agreement, and the caretaker wanted another 5-year right to take it to 25 years, but then wanted a subsequent 5-year right beyond that to take it to 30 years? If a distinction was made here, then the caretaker could submit two motions within the same financial year. It is the clear intention of the legislation, only in this very specific circumstance, to treat the two different kinds of options the same. Indeed, the very purpose of this regulation is to prevent the cost and harassment that results from caretakers continually requesting extensions.[9]
Term vs unexpired term
Also consider the use of the words ‘term’ and ‘unexpired term’ in s 130 of the Accommodation Module. At sub-s (1), the ‘term’ must not be longer than 25 years. At sub-s (4), at the end of the ‘term’, the engagement expires and the caretaker cannot act again without a new engagement. The use of the phrase ‘unexpired term’ only appears in sub-ss (2) and (3) and is used to calculate when the subsequent 5-year option might be added.
If it was the intention of the legislature to allow a caretaking agreement to have up to 25 years left to run, regardless of how long it has already been in place, then s 130(1) would say that the ‘unexpired term’ must not be longer than 25 years: but it does not. The term must not be longer than 25 years, and at the end it expires, unless it was modified by adding the subsequent right beyond that. If it was the intention of the legislature that there could be unlimited subsequent rights, the legislature would refer to it in the plural: but it does not. It is always referred to in the singular.
The legislature makes the clear distinction between plural rights of extension within the 25-year maximum term limit and a singular right of extension beyond that. The legislature clearly intended incredibly strict regulation around this issue – which must be so, as the term limits originally introduced in 1997 were designed to end the big money industry of management rights. Given the interpretation of the legislation above, it does not make sense that a slight relaxation was intended to reintroduce the very thing the BCCM Act first sought sought to prevent.
Explanatory material?
Further, reference to explanatory material is of little help. The example in s 130(2) of the Accommodation Module only shows one subsequent 5-year option. It does not say that multiple subsequent options beyond the term limit may be agreed to. This is also reflected in the 2003 explanatory notes to the regulation modules that introduced this subsequent 5-year option. At no point do the explanatory notes refer to multiple subsequent options beyond the term limit: the example is a 5-year extension only.
Indeed, the explanatory notes explicitly say that it is ‘not uncommon for the service contractor to purport that, under the [old] section, the agreement could provide for it to be continually topped up while still complying with the term limitation’. The current legislation was designed to ‘remove the possibility of that interpretation’.[10] It does not seem concordant with the intention of parliament to reintroduce a similar interpretation in a different form by allowing unlimited top-ups where an agreement could conceivably be renewed for hundreds of years. Even large commercial leases never approach this level of length.
The proper interpretation is that only one top-up of up to 5 years is allowed beyond the maximum term limit. Contracting out of the BCCM Act is prohibited,[11] so if an agreement purports to allow for multiple subsequent extensions after the term limit, such an agreement would be void and unenforceable.
What we have said here is only a basic overview of the matter. As it stands, there is no case law to assist in the interpretation. The only material to be referred to is academic comment on the matter. Currently, there is no other academic source of similar authority that disputes our view.[12]
[1] Body Corporate and Community Management Act 1997 (Qld) sch 2, items 4, 7 and 8. [2] Neil Samuel Hope, Dane Bryce Weber and Maija-Ilona Wilhelmiina Pekkanen, ‘Management Rights Agreements for Body Corporates in Queensland: Must They Expire, or May They Be “Topped Up” Indefinitely?’ (2020) 38 The Queensland Lawyer 175; Neil Samuel Hope and Dane Bryce Weber, ‘The Statutory Life of Caretaking Service Agreements in Body Corporates in Queensland: The Exception to the Freedom of Contract Principle’ (2021) 39 The Queensland Lawyer 39. [3] Acts Interpretation Act 1954 (Qld) s 32C. [4] Acts Interpretation Act 1954 (Qld) s 32A. [5] Body Corporate and Community Management (Accommodation Module) Regulation 2020 (Qld) s 126. [6] Body Corporate and Community Management (Accommodation Module) Regulation 2020 (Qld) s 126(a). [7] Body Corporate and Community Management (Accommodation Module) Regulation 2020 (Qld) s 126(b). [8] Body Corporate and Community Management (Accommodation Module) Regulation 2020 (Qld) s 76(7)(c). [9] Explanatory Notes, Body Corporate and Community Management Legislation Amendment Regulation (No 1) 2003 (Qld) 60. [10] Explanatory Notes, Body Corporate and Community Management Legislation Amendment Regulation (No 1) 2003 (Qld) 60. [11] Body Corporate and Community Management Act 1997 (Qld) s 318. [12] Neil Samuel Hope, Dane Bryce Weber and Maija-Ilona Wilhelmiina Pekkanen, ‘Management Rights Agreements for Body Corporates in Queensland: Must They Expire, or May They Be “Topped Up” Indefinitely?’ (2020) 38 The Queensland Lawyer 175; Neil Samuel Hope and Dane Bryce Weber, ‘The Statutory Life of Caretaking Service Agreements in Body Corporates in Queensland: The Exception to the Freedom of Contract Principle’ (2021) 39 The Queensland Lawyer 39.
This article is intended as general information only and should not be relied upon as legal advice. For specific legal advice please contact us here.
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