Service contracts are one of the most common financial commitments a body corporate makes, yet they are also one of the least scrutinised. These contracts can lock a scheme into years of obligation with little flexibility. This article covers what to look for, what to question and where contracts commonly fall short.

Sourcing The Right Contractor

Before signing anything, committees need to know they are comparing genuine options. A single quote is not a comparison. As a general rule, it’s best to obtain at least three quotes for any contract over $5,000. This is basic governance and it is surprising how often it gets skipped.

Before signing with any contractor, verify that they hold current licences and appropriate insurance. In Queensland, the QBCC maintains a public register of licensed contractors. Ask for proof of public liability and workers’ compensation insurance and confirm coverage amounts are adequate for the scope of work. A contractor working on common property without proper insurance creates a direct liability risk for the body corporate.

Request references from other strata schemes your potential contractor currently services. Strata work has specific requirements around access coordination, resident communication and committee reporting that differ from standard commercial jobs. Direct feedback from other committees will give you a clearer picture of day-to-day performance than online reviews alone.

Comparing Scopes and Prices

Price comparisons are meaningless unless you are comparing like for like. The cheapest quote is rarely the cheapest option if it excludes half the services. Before requesting quotes, define a clear scope of works so every contractor is pricing against the same requirements.

Pay attention to what is included in the base fee versus what attracts additional charges. Many maintenance contracts cover routine scheduled services but exclude after-hours callouts, emergency attendance, replacement parts, materials and travel. These exclusions add up quickly, particularly in older buildings. If the base price looks competitive but the exclusions list is unreasonable, the true cost over 12 months may tell a different story.

Ask each contractor to clearly itemise inclusions and exclusions. A simple side-by-side comparison table makes it far easier to see where one quote is genuinely better value and where another is simply leaving things out.

Contract Terms Worth Reading Twice

Automatic rollover clauses deserve particular attention. These provisions allow a contract to renew itself for a further term unless the body corporate takes specific action to prevent it, usually by providing written notice within a narrow window.

Under the Australian Consumer Law, automatic renewal clauses in standard form contracts may be considered unfair if they cause a significant imbalance in the parties’ rights and obligations or are not reasonably necessary to protect the contractor’s legitimate interests.

Other terms to review closely include annual price escalation formulas, termination provisions (including exit fees), dispute resolution processes and any clauses allowing the contractor to subcontract or assign the agreement without approval.

As a practical starting point, look for initial contract terms of one to three years, with rollover periods no longer than 12 months. The notice window to opt out of a renewal should be at least 90 days, giving the committee time to review performance and obtain alternative quotes. Be cautious of any contract where the rollover term exceeds the initial term, or where the opt-out window is unreasonable. If a clause does not feel reasonable, negotiate before you sign.

What Often Gets Left Out

One of the biggest risks in service contracts is what they do not cover. Compliance obligations are frequently overlooked or excluded, and it is the body corporate that is ultimately legally responsible for meeting them. Fire safety is a clear example. In Queensland, the Building Fire Safety Regulation 2008 requires bodies corporate to maintain all prescribed fire safety installations annually and submit a yearly occupier’s statement to the Queensland Fire Department. Penalties for non-compliance can reach $8,250 per offence, with significantly higher penalties where non-compliance contributes to a fire causing injury or death.

Beyond fire safety, strata buildings may have compliance obligations relating to pool safety, electrical safety, asbestos registers, lift servicing and more. If your maintenance contracts do not address the compliance standards relevant to each service, the body corporate may be exposed without realising it. When negotiating a contract, ask directly: does this agreement ensure compliance with all relevant Australian Standards and legislative requirements? If you are unsure what compliance obligations apply to your building, it may be worth contacting a facilities management professional who can review your contracts and identify any gaps.

Get It Right Before You Sign

A service contract affects every owner. Treat it accordingly. Define the scope before you request quotes. Compare inclusions and exclusions, not just prices. Read every clause, particularly around duration, rollover, termination and price escalation. Confirm compliance obligations are addressed. If a contract has been rolling over untouched for years, put it back on the table. The time spent reviewing a contract before signing is always less than the cost of trying to exit a bad one.

Article Contributed by Fortis FM – Facilities Management Specialist – Meet the Fortis FM team at our upcoming Sunshine Coast and Brisbane seminar series.

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This article is intended as general guidance only and does not constitute legal or financial advice. Readers should seek independent professional advice where appropriate.

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