Built off the back of Blue Chip misrepresentations about financing, the 157 unit ‘Bianco off Queen’ in central Auckland is back in the news with allegations developer Tim Manning improperly loaded Bianco’s property management contract with excessive charges having unit owners subsidise the building’s use as a hotel. This management contract was left largely intact after a High Court challenge.
Bianco off Queen was born out of a speculative boom prior to 2008 with retail investors offered attractive deals on what they thought were loans over real estate. In fact, they had signed up to buy Bianco apartments off the plan and were forced to complete. Buried in the fine print, investors were told their apartment would be managed on their behalf if the developer could not find a replacement buyer.
Some fifteen years on, residents of Bianco’s two towers include owner occupiers, investors with their apartment held in a pool for hotel lets and Kainga Ora using apartments for social housing. Management of hotel operations lies with Shiraz Holiday Ltd, controlled by Masoud Bassamtabar.
The management contract now held by Shiraz was set up in 2008, when Tim Manning was in control. Shiraz bought out these mangement rights in 2014, paying $1.46 million. Unit owners allege Shiraz’ management fee is excessive, when compared with fees charged for comparable apartment complexes. This excess amounts to a subsidy towards running the hotel, a business activity not related to a property manager’s role of property maintenance, they complain. Expert evidence indicated fees currently charged each Bianco owner at about $2025 annually were some one thousand dollars higher than fees charged by the most expensive comparable apartment complexes.
The body corporate’s application to strike down Shiraz’ management contract failed. It is not for the High Court to question the level of fees charged in what is an application to strike down a management contract in its entirety, Justice Campbell said. Two provisions in the management contract were struck out: Shiraz Holiday’s exclusive rights to provide letting services in the building and exclusive rights to provide hotel management services. These are exclusive rights no body corporate has the power to grant, Justice Campbell ruled. Removing these rights from the management contract will have little practical effect on Shiraz Holiday’s monopoly of hotel lettings, Justice Campbell pointed out. The management contract gives Shiraz sole right of occupancy over that part of the building containing the hotel’s lobby and check-in facilities.
The High Court ordered that $64,400 be refunded to the body corporate for Shiraz Holiday outgoings wrongly charged.
Body Corporate 406198 v. Property Opportunities Ltd – High Court (10.03.22)
22.052