Last week I had an interesting email about the discerning Dispute Tribunal decision on a case where the Property manager won the dispute after the owner breached a clause in the agreement.
What happened? A management contract contained a covenant that granted exclusive rights to the property management company for 12 months. No tenants were found so the landlord changed companies and claimed this clause to be unfair. (Sounds fair, if you ask me)
However, the Tribunal found that the exclusivity clause was ‘reasonable’ and the landlord was forced to pay the full annual management fee.
But what does this mean? This is an interesting move from the dispute tribunal to increase the threshold of ‘reasonable’ to this extent. It also highlights their tendency to protect contractual freedom, which can be tricky for first-time landlords or those unsure of what they are signing up for.
Our opinion. We always believed that there was no need to go with the locked-in management terms for our landlords. I mean why force you to commit to a fixed contract when we are sure we can deliver what we have promised?
But, this is a good reminder to keep an eye out for these pesky covenants in other contracts! Not only in property management but in any service-oriented businesses.
Next month I would like to give you an overview of the CBD rental market and how it has been gradually reviving back…
As always, feel free to give me a call should you wish to discuss the rental market or simply wish to have a friendly chat.
Ali Karambayev, on behalf of our team at OneCiti.