What are management rights?
A traditional management rights business consists of three (3) main elements:
1. the ownership of a lot in a community titles scheme, often referred to as the “manager’s lot”. This is where the holder of the management rights or their approved representative usually lives. Sometimes, the office or reception area will be on the title of that lot although sometimes it will be on common property and the holder of the management rights will have an occupation authority over that area pursuant to the agreements at items 2 and 3 below;
2. an agreement between the complex manager and the Body Corporate in relation to the caretaking of common property (garden maintenance, swimming pools, paths, stairs etc) (Caretaking Agreement); and
3. an agreement between the complex manager and the Body Corporate which authorises the complex manager to let lots in the Scheme as letting agent for lot owners (Letting Agreement). There are usually a number of individual letting appointments between lot owners and the letting agent, as a result of this authorisation, however, lot owners do not have to put their lot in the letting pool. They are free to use any real estate agent or to use their lot for any other lawful purpose. However, usually, no other real estate agent or letting agent may run a letting business on Scheme Land except the holder of the Letting Agreement.
There are lots of variations on this theme – in some management rights, there will be no real estate (that is, no manager’s lot) and there will be no obligation for the complex manager to live on site. Some agreements are performance based (that is, requiring the complex manager to perform all of the duties in the Caretaking Agreement themselves or by their delegates or employees at their own cost) and some will be supervisory in nature, requiring the complex manager only to supervise the contractors engaged by the Body Corporate to perform the duties (at
the Body Corporate’s cost).
Who are the parties involved in a management rights sale?
1. The Seller (the current complex manager, also known as the Caretaker and Letting Agent) and the Seller’s solicitor;
2. The Buyer (the proposed new complex manager, also known as the proposed new Caretaker and Letting Agent) and the Buyer’s solicitor;
3. The Body Corporate and the Body Corporate’s solicitor.
What is the Body Corporate’s role in a management rights sale?
The Body Corporate and Community Management Act and the applicable regulation modules provide that a person’s rights under a caretaking agreement or a letting agreement may only be transferred if the Body Corporate approves the transfer. The caretaking and letting agreements also usually contain a clause mirroring that requirement.
As such the Management Rights Business Sale Contract and the Sale of Residential Lot in a Community Titles Scheme Contract are always conditional upon the consent of the Body Corporate to the transfer being obtained prior to settlement.
Who is responsible for getting the Body Corporate’s consent to the transfer?
The current complex manager (being the Seller) or the Seller’s solicitor is responsible for liaising with the Body Corporate (and after a solicitor is engaged by the Body Corporate, the Body Corporate’s solicitor) in relation to obtaining the Body Corporate’s consent to the transfer.
Is it important to use a lawyer and other consultants who are expert in the purchase or sale of management rights?
Yes. Given we have a large practice in this area, you were probably expecting us to say that! However, anyone in the management rights industry will tell you that transactions related to management rights are complex and using a lawyer, accountant or finance provider who is not expert in this area may expose you to a lot of un- necessary risk, frustration and financial expense. Devenish Law is a member of ARAMA and Strata Community
Australia and we have acted in a significant number of management rights sales and purchases. We love what we do and we are good at it. If you are new to the industry or looking to buy or sell management rights please feel free to call Shane Devenish on direct line 07 4081 7161 for a confidential and free discussion about your proposed or existing management rights business. We would love to help you.