Dodgy deals could lead to jail

Here's some good news for those of you struggling to service a building management contract that was sold off without telling the original apartment buyers - according to one top lawyer, the developer involved could face criminal charges carrying sentences of up to seven years jail.

Apparently property developers who sold the rights to manage their residential apartment buildings without informing apartment purchasers almost certainly broke the law relating to their fiduciary duties.

And apartment owners who've been locked into onerous hidden building management agreements may be able to sue to have the profits from these deals paid back to them.

Leading Mallesons Stephen Jaques property lawyer Michael Allen (corr), told the Australian College of Community Association Lawyers annual conference in Surfers Paradise last month (August) that developers who receive undisclosed fees or favours from building management companies in return for procuring unit owners to enter into a contract with them, have breached criminal law.

Developers pre-selling building management rights was, until recently, commonplace with owners left to service expensive 20-year contracts into which they had no input and which often resulted in them having little effective control over the running of their own homes.

In NSW, Allen says the relevant principal provision is section 249B of the Crimes Act 1900, on 'corrupt commissions or rewards' which could lead to seven years' jail for offenders. "The non-unit components of management rights - the management and letting agreements - belong to the body corporate and not to the developer," he says, adding that if there isn't full disclosure, owners will be entitled to receive the profit or compensation.

So, if you're stuck with a crippling contract, check your Owners Corporation records to see if potential purchasers where told about this before the first apartments were sold.

Even if you can't send the developers concerned to jail you could sue them for the money they made out of selling your right to choose who managed your home and for how much.

Lawyer-up, lads and ladies - it seems where strata law has let us down, the criminal code may ride to the rescue.

Next week: The dirty tricks they're playing now - and the nasties they plan for the future.