Automatic contract renewals

**Richard S** · 28-Mar-17, 10:45 AM

I have been asked to sign a management agreement on behalf of a Body Corporate.

One of the clauses refers to the automatic renewal of the contract after after expiry of the initial period unless notice of termination is given by either party 3 months before the renewal date.

My understanding is that automatic renewals are no longer considered legal. Can anyone advise me on that score?

**Dave A** · 28-Mar-17, 12:36 PM

Originally Posted by Richard S

My understanding is that automatic renewals are no longer considered legal. Can anyone advise me on that score?

Your understanding likely arises from section 14 of the Consumer Protection Act. However, section 14 (1) limits applicability as follows:

This section does not apply to transactions between juristic persons regardless of their annual turnover or asset value.

Thus the Body Corporate is not protected in this regard.

Given the general limitations of applicability contained in Section 5, it's probably worth mentioning that most Body Corporates have no protection in terms of the Consumer Protection Act anyway.

**Justloadit** · 28-Mar-17, 01:30 PM

Simply cross out automatic renewal, and place that the contract will change to a monthly renewal with 30 days for cancellation.

If they do not accept, then find another supplier!

**Greig Whitton** · 28-Mar-17, 04:46 PM

Originally Posted by Dave A

Thus the Body Corporate is not protected in this regard.

Only if the body corporate's service provider is itself a juristic person (which is likely a reasonable assumption, but worth highlighting nonetheless).

Originally Posted by Dave A

Given the general limitations of applicability contained in Section 5, it's probably worth mentioning that most Body Corporates have no protection in terms of the Consumer Protection Act anyway.

How so? If you're referring to the asset value / annual turnover threshold for juristic persons, many smaller Body Corporates would still be protected by the CPA.

**Richard S** · 29-Mar-17, 12:54 AM

Thank you all for your input, it greatly appreciated. Yep, both juristic persons, although a small-ish complex of 15 units. That point escaped me at the time of posting.

After some discussion it was mutually agreed to simply remove the automatic renewal clause altogether.

**Dave A** · 29-Mar-17, 04:15 AM

Originally Posted by Greig Whitton

If you're referring to the asset value / annual turnover threshold for juristic persons, many smaller Body Corporates would still be protected by the CPA.

The stats on credit apps from Body Corporates I receive at my company suggest otherwise.

**Greig Whitton** · 29-Mar-17, 07:28 AM

Originally Posted by Dave A

The stats on credit apps from Body Corporates I receive at my company suggest otherwise.

Fair enough. My comment was based on the most recent annual financials of the Body Corporate where I live, which reflects an asset value and annual turnover well under the CPA threshold.

**Greig Whitton** · 29-Mar-17, 07:33 AM

Also worth mentioning that individual owners (and potentially their tenants as well, assuming they rent) would likely be protected by the CPA with respect to the Body Corporate's managing agent (and other service providers) even if the Body Corporate itself is not (given the CPA's extremely broad definition of "consumer").

**HR Solutions** · 29-Mar-17, 08:53 AM

Originally Posted by Greig Whitton

Also worth mentioning that individual owners (and potentially their tenants as well, assuming they rent) would likely be protected by the CPA with respect to the Body Corporate's managing agent (and other service providers) even if the Body Corporate itself is not (given the CPA's extremely broad definition of "consumer").

Isn't that what the newly formed "Ombudsman" role is ?