03 Oct 2013
Words Tim Admin

Transfer Fee Decision Overturned

On 13 April 2007, the Qld District Court in the matter of Aqua Vista Management Pty Ltd vs. Whitsunday Waters Resort [2007] QDC 064, overturned a controversial decision of the Body Corporate Commissioner relating to the imposition of transfer fees by a body corporate when a management rights owner sells their business.The Commissioner’s decision had stated that a transfer fee could be imposed by the body corporate because the owner had sold their management rights within three years of purchase.This decision sought to extend the operation of section 83 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997, which states that a transfer fee may only be imposed within three years of a management rights owner entering into new caretaking and letting agreements or extending the term of their existing management rights agreements. Ironically, the Body Corporate Commissioner’s decision is probably a fairer method of dealing with the transfer fee issue. Arguably, the motivation behind the imposition of a transfer fee is to protect the body corporate from disruption caused by a manager buying the business only to sell soon thereafter.The way the current legislation reads, a manager of 10 years standing, who wants to top up his management rights agreements prior to selling, can have the full transfer fee imposed. We doubt this is the primary motivation behind the legislation.The apparent methodology behind the current operation of the section is that the body corporate becomes entitled to a share of the increased business profit associated with entering into, or extending management rights agreements. This cannot be the intended purpose of the section.Ultimately, the imposition of a transfer fee is a matter at the discretion of a body corporate. We have found, if a manager has done an excellent job, the body corporate tends not to impose the transfer fee. The opposite decision is often reached where a manager has done a poor job – so a form of natural justice applies.The decision of the District Court should highlight the need for the government to address the transfer fee issue in order to bring more certainty to this area of the law.