14 Aug 2013
Words
Tim Admin
Management Rights: What are they?
Management rights are increasingly under the spotlight – widely discussed and advertised, sometimes misunderstood. It is timely to clarify exactly what they are, how they operate, and where they are best suited. Everyone entering the industry needs to understand the fundamentals of this model for operating a property. Management rights operate in strata-titled holiday and residential properties where a significant number of owners are investors, providing an effective management model for investors who want to maintain an active role in the operation of their investment. Where complexes are mostly owner-occupied, a caretaker with a short-term contract may be more appropriate, while hotel-style properties where the owner wants a more passive investment are usually better suited to long-term lease-back to a hotel operator. Management rights are operated by a resident manager who:
- has a caretaking service contract with the body corporate and attends to caretaking, gardening, pool care and cleaning duties specified in his contract, as well as coordinat-ing the work of other service contractors;
- has a letting authorisation to conduct a letting business on the premises and is the only person who can conduct a letting business on site;
- owns a unit in the building (or leases a designated unit) and either lives on the site or has an employee living on site;• is a member of the body corporate (as he owns a unit);
- has a significant financial investment in the scheme and therefore has an incentive to ensure the scheme operates well;
- maintains an office on site, either on title or with exclusive use on common property, from which he conducts the letting business; and
- operates a letting business and acts as letting agent for those investor owners who choose to use the service. The business operates under the Property, Stock and Busi-ness Agents Act 2002 in NSW or the Property Agents and Motor Dealers Act 2000 in Queensland. The resident manager is licensed under the relevant Act.
Property developers usually decide if management rights will be part of the scheme, based on investment expectations, and create the management rights contract setting out the terms for its operation before any lots are sold.Purchasers know, before buying, that the expense and benefits of a resident manager will be part of the levies. They also know someone on site will attend to caretaking and securi-ty, having an interest in the process for selecting tenants, especially in a complex with long term residential tenants.
