Caretaking and Letting Agreements: Why Your Building Is Locked Into a Long-Term Contract

A committee in a mid-sized Queensland apartment building sat down to work out why their levies kept climbing. They went through the budget line by line. Insurance had gone up, as expected. Utilities had crept higher. But the single largest figure on the page was not insurance or repairs. It was the caretaking fee paid to the on-site manager - a fixed annual amount, indexed to rise every year, locked in under a contract that still had nineteen years to run. None of the current owners had voted for it. It had been signed by the developer before the building was finished, and every person who had bought an apartment since had inherited it without really noticing.

This is the world of management rights, and it is one of the least understood parts of apartment ownership in Australia. Caretaking and letting agreements quietly shape the budgets of thousands of buildings, particularly in Queensland and New South Wales. They are not inherently bad. A good resident manager can be worth every cent. But because they are long, complex, and usually set up by the developer before owners have any say, they deserve far more scrutiny than they normally get.

What Management Rights Actually Are

"Management rights" is an umbrella term for two separate things that are usually sold together as a package to an on-site manager:

The caretaking agreement. This is a contract between the body corporate and the caretaker to maintain the common property - cleaning, gardening, pool maintenance, minor repairs, managing contractors, and general day-to-day upkeep. The body corporate pays the caretaker a fee for this work, funded from your levies.
The letting authority. This is a right granted by the body corporate allowing the manager to run a letting business from within the building, renting out the apartments of owners who choose to use the service. This part is paid by individual owner-investors, not the body corporate, and it is where much of the manager's income often comes from.

The same person usually holds both. They typically also own or lease a "manager's unit" on site. The combined package - caretaking agreement, letting authority and manager's unit - is what gets bought and sold as management rights, often for a large multiple of the annual income it produces.

It is worth being clear that this is different from your strata manager or body corporate manager, who handles the administration, finances, meetings and compliance from an office, usually off site. A building can have both: an off-site strata manager and an on-site caretaker under a management rights agreement. If you are weighing up the administrative side, our guide on how to choose a body corporate manager covers that role specifically.

Why the Contracts Are So Long

The feature that surprises owners most is the length. Caretaking agreements can run for many years - in Queensland, depending on which regulation module applies to the scheme, terms can extend up to 25 years for some schemes and 10 years for others. New South Wales capped new caretaker agreements at 10 years following reforms in 2016. Other states vary.

The reason the terms are so long comes down to who sets them up and why. In most cases the developer creates the management rights before selling any apartments, signs the body corporate (which the developer still controls at that point) up to a long agreement, and then sells the management rights package to an operator. The long term is what makes the package valuable to buy and finance. The people who ultimately pay for it - the owners - are not in the room when it is signed, because they do not own their apartments yet.

This is closely related to another common complaint about new buildings: fees that look low in the first year and jump sharply afterwards, partly because the developer set up the arrangements. We cover that pattern in why body corporate fees jump after year one.

The "Top-Up" Trap

Here is the part that catches even experienced committees out. A caretaking agreement does not simply count down to zero. Many agreements are extended through what is known as a "top-up" - a motion put to owners to add years back onto the contract so it returns to, or near, its original full length.

Topping up is often presented as routine, sometimes bundled with a request the caretaker needs in order to refinance or sell their business. Approve it, and you have effectively reset a 10 or 25-year clock that had been ticking down. A building that thought it was five years from being free to renegotiate can find itself locked in for another decade or two.

A top-up is a decision, not a formality. Owners are entitled to ask what the body corporate gets in return, whether the caretaker's performance justifies it, and whether the remuneration should be renegotiated as a condition. Saying no, or saying "not yet", is a legitimate option.

What You Are Actually Paying For

Because the caretaking fee is one of the biggest line items in many budgets, it is worth understanding exactly what it buys. A well-drafted agreement sets out a clear schedule of duties: what is included in the base fee, how often it is done, and what falls outside the agreement and is charged separately.

Things worth checking in your own agreement:

The duties schedule. What is the caretaker actually contracted to do, and how often? Vague duties make underperformance hard to challenge.
How the fee escalates. Most agreements index the fee annually. CPI-linked increases track inflation; fixed percentage increases above CPI can compound into a much larger figure over a long term.
What is excluded. Tasks outside the schedule are often billed as extras. A long list of extras can quietly add up.
Bundled service contracts. Watch for arrangements where the caretaker also supplies or arranges other services. This is the same transparency issue we flag in is your strata manager taking secret commissions.
Performance and default provisions. What happens if the caretaker does not perform? A good agreement has a clear remedy process; a poor one leaves the body corporate stuck.

To see how the caretaking fee sits alongside everything else you pay, our breakdown of where your body corporate fees actually go puts it in context.

What Owners Can Do

You cannot usually tear up a long agreement on a whim, but owners are far from powerless. The practical levers are:

Read the agreement. Ask your strata manager for a copy of the caretaking agreement and letting authority. You are entitled to it. Most owners have never seen the document that drives their largest cost.
Hold performance reviews. Many agreements allow the body corporate to formally review performance and issue remedy notices for unsatisfactory work. Used properly, this is the main tool for keeping a caretaker accountable.
Treat top-ups as negotiations. When a top-up or extension is proposed, do not wave it through. Ask what the building gains, and consider making renegotiated terms or fees a condition of agreeing.
Get specialist advice before big decisions. Management rights law is a niche area. Before agreeing to a top-up, variation or buyout, a body corporate lawyer who specialises in this field is money well spent given the sums involved.
Factor it into manager dealings generally. If you are already reviewing your administrative arrangements, our guide on how to change your strata manager covers the separate question of the off-site management contract.

If your scheme is in Queensland, it is also worth knowing how the 2025 reforms touched this area. We cover the broader changes in Queensland's August 2025 body corporate reforms.

Key Takeaways

Management rights bundle two things: a caretaking agreement paid by the body corporate, and a letting authority paid by individual investor-owners. The same operator usually holds both plus an on-site manager's unit.
The terms are long - up to 25 years for some Queensland schemes, 10 years in New South Wales and for many others - because developers set them up before owners have any say.
The caretaking fee is often the largest single budget item and usually escalates every year. Check whether it rises by CPI or by a steeper fixed percentage.
"Top-ups" reset the clock. Treat any extension request as a negotiation, not a formality, and ask what the building gets in return.
Read the agreement, run performance reviews, and get specialist advice before agreeing to any variation, top-up or buyout.

Compare body corporate fees across Australia at BodyCorporateFees.com.

This article is for informational purposes only and should not be considered legal or financial advice. Management rights, caretaking and letting laws vary significantly by state and territory and change over time. Always obtain advice from a qualified body corporate lawyer before making decisions about a caretaking or letting agreement.