REVIEWING YOUR
LETTING APPOINTMENTS
Article by Frank Higginson - Hynes Lawyers
www.hyneslawyers.com.au  

It has been a while since we have sent a newsletter about letting appointments, so we thought it timely to give everyone a reminder about the current state of play.

The importance of having valid and assignable letting appointments to both prospective purchasers, their accountants and now their financiers is critical.

Some simple things that we regularly see that can be easily cured include:

• Using the right form. A new PAMD 20A form (version 5) came into existence on 1 July 2009. You can use version 4 up to 30 September 2009. However, we strongly recommend that you use version 5 from now on and destroy any old versions you have lying around or saved. Existing appointments that were signed on prior valid versions will still be valid, but new appointments should be on version 5. To obtain the latest version click here.
• Clause 4.2 sets out the end date of the appointment. Almost all management rights letting appointments will be of a continuing nature. Despite that, something should be inserted about the ending of the appointment which we recommend should be something along the lines of ‘Upon termination by either party in accordance with this agreement on 90 days notice.’
• Clause 4.4 of the form contains the assignment provision. There is a very strong argument that if this section is not initialled, the assignment clause is not valid. Make sure your appointments are ticked AND initialled in clause 4.4. If they are not, you should resend them and get them initialled, or have your owner agree to the assignment clause by letter.
• Many appointments might contain an addendum that sets out a mechanism for charging owners for additional services. Usually this will be by way of hourly rates, or a percentage of the service provided (ie 20 per cent of the cost of a replacement fridge). Make sure that your appointment sets out which method is to apply – usually it should not be both of them.
• Most appointments include a schedule of set service charges (ie linen, cleaning etc) but over time the costs of these increase. Those increases can be passed on to the owner. To increase charges to owners you must have their written authority or otherwise have a mechanism in the appointment which allows for a CPI increase or a similar percentage increase each year.
• We hope that most of you are aware that if you have an interest in a unit in your own letting pool (whether you own it or lease it back in your own right), you must disclose that to owners. This can be done in the appointment. The inclusion of the words ‘The client acknowledges that the agent may from time-to-time have an interest in the letting of a unit or units in the scheme’ should suffice.

These seem to be the biggest issues that are identified in due diligences at the moment. While it might be painful dealing with these issues now, we can only guarantee to you that it is far more painful when it is imposed upon you as a condition of a purchase proceeding.

Finally, there is now an online facility to check yours (and others) status as a licencee. It never hurts to know that you are up-to-date - click here.

For all queries, contact Frank Higginson on 07 5504 9994 or email him.