Where do you start?

Getting into Management Rights

If you’re considering purchasing management rights for the first time, a bit of early homework can save a lot of anguish later.

Compiled by experienced Suncorp Management Rights Specialists, the following information is based on their daily experience with the realities customers encounter when negotiating and acquiring management rights.

Get the facts

Have the business you are buying properly evaluated. Accounting records and building reports will indicate the state of the business and the physical structures. You are entitled to see these records and reports and, as a potential purchaser, have each independently reviewed by an expert of your choice.

Establish how long the current management rights agreement has to run, and whether there are options to renew.

If you are new to the location where you intend to buy – or new to the management rights industry – it would be wise to evaluate the potential of several schemes before deciding.

Although there are ‘standard’ formats for agreements between bodies corporate and management rights purchasers, there can be many variables.

Whilst many considerations are common to most agreements, do not assume that these will all automatically apply to your agreement or that they are exclusive. Ensure you have all terms and conditions in writing and have the documentation reviewed by an accountant, lawyer, and any other relevant professional with management rights expertise.

A specialist broker selling management rights should also be able to provide you with background on the current state of the local market and apparent trends.

What are you purchasing?

Management rights can be purchased for a growing diversity of metropolitan, urban, and holiday resort complexes – such as units, apartments, townhouses, student accommodation and retirement communities.

Typically, when you purchase management rights to a community title scheme, you are acquiring:

• The ownership of a lot – unit, townhouse, or apartment – in the complex. (The reception and office areas could be on the manager’s lot title, on a separate title to be purchased by the manager, or they could be set aside by the body corporate for exclusive use of the manager.)
• The caretaking responsibilities for the common property, such as the pool, gardens, and paths, for an agreed remuneration
• The letting agency for other lots in the scheme and receiving payment (commissions) from owners.

If you are buying management rights to an established scheme, you and your accountant need to determine how much longer the current agreement has to run and satisfy yourself that the remaining time will give you a viable income. The body corporate is under no obligation to renew the agreements, although they frequently do, unless there is general dissatisfaction with the performance of the manager.