When an owners corporation (or body corporate) appoints a strata managing agent, they're entering a contract that can last years and cost tens of thousands of dollars annually. These agreements govern everything from maintenance coordination and financial management to dispute handling and insurance procurement. The problem is that many owners corporations sign these contracts without properly scrutinising the fee structure, termination provisions, or the scope of services included versus charged as extras. A poor strata management contract can drain the sinking fund and leave common property deteriorating.
What is a Management Agreement?
A strata management agreement is a contract between an owners corporation (the collective body of unit owners in a strata scheme) and a licensed strata managing agent. The agent handles day-to-day administration: collecting levies, arranging maintenance, managing insurance, keeping financial records, and organising meetings. The agreement defines the agent's duties, fee structure, contract term, and termination rights. Each state has its own strata legislation governing these relationships.
Red flags to watch for
In NSW, the Strata Schemes Management Act 2015 caps the initial term at 12 months for new schemes and 3 years for existing ones. Other states have similar limits. Long lock-in periods with auto-renewal reduce the owners corporation's ability to switch to a better provider.
Some agents charge separately for photocopying, phone calls, postage, or meeting attendance. These extras can double the effective cost of management. The base fee looks competitive, but the total cost is not.
If your strata manager receives kickbacks from insurance brokers or preferred contractors, they have a financial incentive to recommend more expensive options. Disclosure is required under most state legislation but is often buried in fine print.
Some contracts require the owners corporation to prove a specific breach to terminate, rather than allowing termination by resolution. Penalty fees for early exit can be thousands of dollars.
If the contract doesn't clearly list what's included in the base fee, the agent can charge extra for routine tasks like issuing Section 184 certificates, attending AGMs, or processing levy arrears.
Without explicit handover provisions, a departing agent may delay returning records, financial accounts, and access credentials, disrupting the transition to a new manager.
Your legal rights
In NSW, the Strata Schemes Management Act 2015 (ss 50-56) regulates managing agent appointments, caps initial terms, and gives the owners corporation the right to terminate by special resolution. In Victoria, the Owners Corporations Act 2006 (soon replaced by the Owners Corporations and Other Acts Amendment Act 2021) sets similar requirements. Queensland's Body Corporate and Community Management Act 1997 requires managing agents to act in the body corporate's best interests. In all states, agents must hold appropriate licences (e.g., a strata managing agent licence in NSW, or a real estate licence in other states) and comply with disclosure obligations regarding commissions and conflicts of interest.
Questions to ask before you sign
- 1What is the total annual cost including all disbursements and additional fees?
- 2Do you receive commissions or referral fees from insurance brokers or contractors?
- 3What is the process for terminating this agreement, and are there early exit penalties?
- 4Which specific services are included in the base fee, and which incur extra charges?
- 5What are your handover obligations if the contract ends?
- 6How often will you provide detailed financial reporting to the owners corporation?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.