Service contractors Guide
A body corporate can engage service contractors and caretaking service contractors. They can also authorise letting agents.
These people perform specific duties that help a body corporate meet its legal obligations.
This guide explains the kinds of services these people may perform and the codes of conduct they must follow.
It also explains how a body corporate can engage a service contractor (or letting agent), or amend, transfer or terminate an existing engagement.
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Role of a service contractor and letting agent
Service contractors
Service contractors supply services that benefit the common property or the lots included in the scheme.
A service contractor is someone engaged by a body corporate to supply services (other than administrative services) for at least a year. They are not an employee.
Examples of the services they provide are:
- cleaning the pool
- lawn mowing
- gardening.
Body corporate managers are not service contractors. They are contracted by the body corporate to supply administrative services.
Caretaking service contractors
A caretaking service contractor is a service contractor for a community titles scheme who is also authorised as a letting agent for the scheme (or an associate of a letting agent for a scheme).
The caretaking service contractor generally owns or leases a lot and runs the letting agent business from that lot. If they own their lot they can vote at general meetings.
They are automatically a non-voting member of the committee and ineligible to be a voting member.
Schemes registered under the Small Schemes or Specified Two-lot Schemes modules cannot engage a caretaking service contractor.
Disclosing commissions, payments or other benefits
If your caretaking service contractor receives a commission, payment or other benefit, they must disclose it to the body corporate.
Find out more about disclosures within a body corporate.
Authorised letting agent
A letting agent is authorised by the body corporate to let out lots and collect rent for investor-owners. They must be licensed under the Property Occupations Act 2014.
You can check licence requirements and check a property licence.
There is no need for a letting agent to give the body corporate details of letting arrangements. However, they may have to give the body corporate some information for the body corporate roll, such the name and address of the tenants for leases of 6 months or more.
Owners do not have to use the authorised letting agent to let their lots. They can choose to let their lots privately or use a real estate agent.
Schemes registered under the Small Schemes or Specified Two-lot Schemes modules cannot authorise a letting agent for their scheme.
Codes of conduct
A caretaking service contractor must comply with the code of conduct for body corporate managers and caretaking service contractors, as well as the code of conduct for letting agents.
The code of conduct is automatically included in the terms of their engagement. If there is a difference between the code of conduct and their engagement, then you should always refer to the code of conduct.
Under the code, a caretaking service contractor must:
- have a good knowledge and understanding of the Act and the code that applies to them
- act honestly, fairly and professionally in doing their job
- act in the best interests of the body corporate (if lawful to do so)
- not unfairly influence the outcome of a motion or election
- not be fraudulent or misleading.
Find the codes of conduct in the Body Corporate and Community Management Act 1997 for:
- body corporate managers and caretaking service contractors (schedule 2)
- letting agents (schedule 3)
The Act does not include a code of conduct for a service contractor.
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Engaging a service contractor
Service contractors and caretaking service contractors are engaged by the body corporate. They are not employees.
The original owner (developer) may initially engage a service contractor (or authorise a letting agent). The developer sets the initial salary, which should relate to the work done.
If the developer does not engage any service contractors, or the original term of engagement expires, the body corporate may decide on a new engagement by ordinary resolution at a general meeting.
The body corporate cannot sell the letting or caretaking rights.
The general meeting notice where a new engagement (for a service contractor) or authorisation (for a letting agent) is to be voted on must include the terms of the contract, as well as any options for extension or renewal.
The new engagement or authorisation must:
- be in writing
- state the term (length) of the engagement
- state the duties
- include the payment arrangements.
An engagement or authorisation cannot be in the form of a by-law.
Schemes registered under the Small Schemes or Specified Two-Lot Schemes modules can’t engage caretaking service contractors or authorise letting agents. They can only engage service contractors.
Terms of engagements
The minimum term of engagement of a service contractor is a year.
The maximum term of engagement of a service contractor and a caretaker service contractor depends on the regulation module that applies to the scheme.
The Standard Module allows for a maximum term of 10 years.
The Accommodation and Commercial modules allow for a maximum term of 25 years.
Schemes registered under the Small Schemes or Specified Two-Lot Scheme modules can only engage a service contractor for a maximum term of a year.
The term of engagement includes any rights or options to extend or renew the contract—whether provided in the first engagement or agreed to later.
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Amending an engagement
The body corporate can agree to amend the current engagement with a service contractor or caretaking service contractor by ordinary resolution at a general meeting.
Voting to amend an engagement
A motion to amend a service contractor engagement can be decided by open ballot.
However, an amendment to the caretaking service contract must be decided by secret ballot if the amendment includes an option for extension or renewal.
In either case, no votes can be cast by proxy.
Amending pay, contract length or authority as letting agent
A motion about a service contractor or letting agent can only be considered once in a financial year if it is about:
- increasing their pay
- extending their contract
- increasing their authorisation as letting agent.
Giving notice of the change
The general meeting notice must include an explanatory note (in the approved form) explaining the amendment.
The amendment must:
- be in writing
- state the term of the engagement
- state the duties
- include the payment arrangements.
Two-lot schemes
For schemes registered under the Two-lot Schemes Module, an amendment can be made by lot owner agreement. This is when the owner or a representative from each lot negotiates and reaches a written agreement on the matter.
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Transferring an engagement
A person’s right under an engagement as a service contractor, or under an authorisation as a letting agent, may be transferred.
However, engagements cannot be transferred under the Small Schemes, Specified Two-lot Schemes or Commercial modules.
If they have body corporate approval, a service contractor can sell their business.
A transfer can be approved by resolution of the committee. Find out how the committee makes decisions at a committee meeting or by vote outside a committee meeting.
The committee can consider the following:
- the character of the transferee
- the financial standing of the transferee
- the terms of the transfer
- the competence, qualifications and experience of the transferee
- any training the transferee has completed or is likely to complete.
After being given the information necessary to decide on a transfer, the committee has 30 days to decide.
The committee:
- cannot unreasonably withhold approval
- can ask to be reimbursed for reasonable costs incurred during the approval process
- cannot receive or ask for any other fee or reward for considering the transfer.
Transfer fee
If the engagement is transferred within 2 years of the initial contract date, the person transferring their business may be asked to pay a fee.
The transfer fee will be either:
- 3% of the fair market value of the transfer if it is approved in the first year after the initial contract date
- 2% of the fair market value of the transfer if is approved after the first year but before the end of the second year after the initial contract.
The person transferring may ask the body corporate to waive the transfer fee if they are transferring because of genuine hardship. Information to support this claim should be given to the committee.
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Terminating an engagement
An engagement of a service contractor or caretaking service contractor, or an authorisation of a letting agent, can be terminated:
- by agreement
- under the terms of the contract or authorisation
- if the service contractor or letting agent is convicted of an indictable offence involving dishonesty, fraud or assault
- if the service contractor or letting agent does not comply with a remedial action notice.
Terminating by agreement
A body corporate can terminate their engagement with a service contractor, or authorisation of a letting agent, if:
- it is agreed with that person
- the terms of the contract allow for termination of the engagement or authorisation.
The body corporate must agree to the termination by ordinary resolution at a general meeting.
Terminating for conviction of offences
A body corporate can terminate their engagement with a service contractor, or authorisation of a letting agent, if the person (or director, if a company):
- is convicted of an indictable offence involving fraud or dishonesty (whether or not a conviction is recorded)
- runs a business (involving the supply of services to the body corporate, or to owners or occupiers of lots) that is against the law
- is convicted on indictment of an assault or an offence involving assault (whether or not a conviction is recorded)
- transfers an interest in the engagement or authorisation without the body corporate’s approval.
The body corporate must approve the termination by ordinary resolution by secret ballot.
Remedial action notice
A body corporate can terminate an engagement with a service contractor, or authorisation of a letting agent, for:
- engaging in misconduct
- being grossly negligent (i.e. extremely careless) in carrying out their functions under the engagement
- failing to perform duties as required under the engagement
- failing to comply with the code of conduct
- failing to comply with disclosure requirements.
Before they can terminate the agreement, the body corporate must issue a remedial action notice. The decision to issue the notice can be made by the committee.
The remedial action notice must state:
- that the person has not met their obligation in a way mentioned above
- specific details that identify the issue (e.g. the duties not carried out)
- a notice period (no less than 14 days) during which they must remedy the issue
- that if they do not comply with the notice within the notice period, the body corporate can terminate the engagement.
The termination must be by ordinary resolution at a general meeting.
If the engagement is terminated, the service contractor and/or letting agent cannot transfer their business with the body corporate to someone else.
Transferring the engagement
Instead of terminating an engagement or authorisation the body corporate may make the service contractor and/or letting agent transfer it (i.e. sell it to someone else with approval of the body corporate).
They may be able to leave the scheme with some financial return if the engagement is transferred.
Read more about transferring an engagement —the process leading up to the transfer or termination of an engagement is complex.
Note: The body corporate should consider getting private legal advice before it seeks to enter into, terminate, amend or transfer a legal contract.
Resolving disputes
The Office of the Commissioner for Body Corporate and Community Management has limited jurisdiction to resolve disputes involving service contractors and caretaking service contractors.
The legislation only recognises these disputes as between the body corporate and the contractor. A lot owner cannot lodge a dispute resolution application against a service contractor or a caretaking service contractor.
We can’t help you resolve complex disputes.
A dispute is defined as a complex dispute if it is about a contractual matter relating to
- an engagement
- the transfer of an engagement
- the terms of an engagement.
Complex disputes may be determined by the Queensland Civil and Administrative Tribunal or by a specialist adjudicator appointed by the Commissioner.
Specialist adjudication
An application for specialist adjudication must nominate someone to act as the specialist adjudicator.
A specialist adjudicator can only be appointed if all parties to the dispute agree in writing on:
- the person nominated
- how much the adjudicator will be paid
- how the amount will be paid and who by, or an agreement that how the amount will be paid will be decided by the specialist adjudicator
The Commissioner must be satisfied that the nominated person has appropriate qualifications, experience and standing to perform the role.
Refer to the Body Corporate and Community Management Act 1997 for more information about:
Service contractors, 15 Nov 2024, [https://oss-uat.clients.squiz.net/law/housing-and-neighbours/body-corporate/maintenance/service-contractors]
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