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The Industry started in the 1970s on the Gold Coast in complexes where there were few or no resident owners. This resulted in the Body Corporate of the complex appointing someone to live on site to manage or caretake the complex... 


This practice extended to allow the on-site Manager to let units for owners who wished to rent them out. Since then this industry has expanded to become an integral part of Australia’s tourism development and has become a multi-billion dollar industry in Queensland alone.

When a developer builds units or town houses of a reasonable size, it makes sense for the developer to provide for the long term caretaking of the common property (like the gardens and the pool) and for there to be an on-site letting service for owners who might want to let their property. These arrangements are called Management Rights.

Living and working at home

People choose to invest in Management Rights businesses for numerous reasons, but you will often hear a Management Rights business described as “A home with an income”.  A business opportunity comprised of a home plus an investment return on the business component of the purchase price. Often these are significant businesses with significant net income, but in other instances, Management Rights have been chosen by people seeking a home with some part time work; a home that will enable a retiree to keep active or a home that will allow a single parent to be at home with the family.  Management Rights is often seen as buying a home which allows for a better lifestyle.

How does it operate?

Management Rights is a business that gives the right to the resident owner of a lot, contained within a community living complex, to fulfil the role of Caretaker and to operate a letting business (of units within the complex) on behalf of non-resident owners. To:

  • Live at the complex as a Resident

  • Take care of common property on behalf of the Body Corporate as the Caretaker

  • Let units in the complex on a rental basis as a Letting Agent.

Depending on the complex, the type of letting will predominately be either:

  • Permanent (Long Term) Letting

  • Holiday (Short Term) Letting

When you buy Management Rights you are buying the rights contained in contracts (agreements) with the Body Corporate (the collective body of owners within the complex). These contracts differ from building to building. Sometimes all the rights are in one contract; in other cases caretaking and letting are dealt with separately.

When you purchase, you take a transfer or an assignment of the Rights under those agreements. You will buy either from the developer (off the plan) or from an outgoing manager. Usually you will also buy:

  • The manager’s Unit

  • The right to occupy an office/reception area if there is not one contained within the freehold title of the manager’s unit

  • The plant and equipment necessary to run the letting office and do the caretaking work.

The person who owns the Management Rights is usually referred to as the Resident Manager. As the Manager is in regular communication with owners and/or tenants and is on-site most of the time, the Manager is the most influential person in the complex and is in a position to exercise real leadership.

There are four components:

1. The Manager’s Unit

The Manager’s unit is usually located in the most central position in the complex to allow the Manager to service the needs of residents and guests. Usually the Manager has the exclusive right to occupy another part of the common property to use as an office or reception or alternatively this area will be included as part of the Title to the Manager’s unit.

2. A Management Agreement

The Body Corporate will appoint the Manager as the Manager or Caretaker of the complex pursuant to a long term agreement for a minimum of seven years and often with options to extend the term past that period. The Agreement will provide that the manager carry out certain duties within the complex and for this the Manager will be paid remuneration. The remuneration is usually reviewed in accordance with increases in the CPI index.

3. A Letting Agreement

Under this Agreement the Body Corporate appoints the Manager as the exclusive on- site Letting Agent for those non-resident owners who wish to appoint someone to let their unit. Non-resident owners are still free to let their units through an outside real estate agent, however it is the exception that an owner would choose an off-site letting service rather than someone on the spot who has a vested interest in the same complex.

4. The By-Laws

The By-Laws are the rules that govern the operation of the complex and set guidelines for community living. The By-Laws usually contain some very important provisions that protect the Manager’s “exclusivity” within the complex as the only person who can operate a Management and Letting Business. They usually provide that no other unit can be used for Management and Letting except the one owned by the Manager.

Are You Personally Suited?

When considering purchasing a Management Rights business you need to honestly assess any possible negatives of the business to determine whether you are suitable to be a Resident Property Manager.

What are the “negatives”? Here They Are:

Many Bosses

The collective body of owners within the complex will elect a Body Corporate Committee to represent them and you will be answerable to this Committee. In addition you will be required to deal with tradespeople and the many other people who flow through the complex. You must therefore have reasonable people skills and enjoy dealing with people.

Servant of the Body Corporate

The bottom line is that you are there to serve the Body Corporate, just as a solicitor, accountant or bank manager is there to serve the needs of their clients. As Bob Dillan said, “We all have to serve somebody”. If you are not comfortable with this concept, don’t buy a Management Rights Business.

Problems Stay With You – Your Home is your Business

Most people, when they have a bad day, simply retreat to their home and after a couple of beers or wines, the problems are soon forgotten. In a Management Rights complex the problems are still all around you as your home is your business and, in the case of a high-rise complex, the problems are also above you. You have to be able to live with this fact.

What Skills Do You Need?

People skills

You have many bosses in a Management Rights business. Every unit owner is your boss, particularly if you let their unit on their behalves, and you will also liaise with the Body Corporate Committee who is responsible for the day to day running of the complex on behalf of the unit owners. There will also be a flow of people coming in and out of the complex including suppliers and tradespeople, so you need reasonable people skills to deal with the job.

Life skills

80-90% of people purchasing Management Rights have never done it before but are able to handle the job competently by drawing on their life experiences. Most have had families, bought and sold property and had alternative employment experience. A common sense approach coupled with diplomacy encourages the support of the other stakeholders in the complex: property owners, the Body Corporate Committee and the Body Corporate Manager and ensures that appropriate business relationships are established with tenants and suppliers.

Can You Work With Your Partner?

Many Management Rights owners operate as a “Mum and Dad” business or family team. You must be confident that you can work with your partner every day of the week.

Computer Skills

Whilst not essential, it is preferable to have some computer skills when entering Management Rights.  There are excellent software programmes available to assist you with the letting business and the Trust Account.  There are also on-line marketing systems available to assist you in finding tenants for permanent letting or guests for holiday letting.

Your Responsibilities

The duties of a Resident Manager include:

  • Caretaking as defined in a documented agreement between the Resident Manager and the Body Corporate

  • Letting

    • as defined in a documented agreement between the Resident Manager and the Body Corporate

    • as defined in a documented agreement between the owner of each individual lot for which the manager is undertaking a letting service

Some of the Caretaking duties may include:

  • Mowing lawns and gardening maintenance

  • Monitoring the Body Corporate By-Laws

  • Pool maintenance

  • Monitoring the general safety of the complex; and

  • Office services as required, often for specific hours but at least for whatever hours are necessary to carry out the Manager’s duties.

Where does the money come from?

The Income From The Businesses

Income from a Management Rights business ranges up to a 20% return on your purchase price of the business component of your investment. This income includes:

  • Remuneration from the Body Corporate for the caretaking role

  • Commission from the letting of units on behalf of non-resident owners

  • Miscellaneous maintenance activities on behalf of tenants, owners and the Body Corporate

Monies paid to you by the Body Corporate for Caretaking

The range of remuneration depends on the Manager’s duties. It also depends on whether the caretaking agreement entered into with the Body Corporate is a “do” Agreement or a “supervisory” Agreement. Under a “do” Agreement the Manager must undertake all tasks within the complex that a Caretaker/Manager would undertake, down to changing light bulbs and mopping the reception floor. With a “supervisory” Agreement the Manager will do very little and often nothing other than to supervise everyone else who carries out all the caretaking duties within the complex.

The range of remuneration for these services varies, but a realistic guideline would be between $800 per lot (dwelling) per annum up to a high of approximately $1,500 per lot per annum and will depend on many factors. The Caretaking Agreement may provide for the Manager’s remuneration to increase annually by a fixed %, the Consumer Price index or provide for whichever is higher.

Importantly, the remuneration from the Body Corporate is secure income; it is paid monthly, in arrears, on a nominated day of the month.

Income from the Letting of Units

On average, the commission on rentals in a permanent let complex is 7 to 8% while in a holiday let complex the average commission is 12%. In order to collect this income you must obtain a licence to act as a Letting Agent and have a signed agreement with the lot owner (Property Agents and Motor Dealers Act Form 20a) before letting the unit on behalf of the owner.  The PAMD Form 20a must state the commission and other relevant fees and charges.

Of course, owners do not have to let their units; they can live in them or lock them up. If an owner chooses to use the Manager’s letting services the owner pays commission from the rental collected by the Manager.  You “pay yourself” at the end of each month.

Extra Income

You also have an opportunity to earn extra income from tenants and owners by providing such services as cleaning, repairs and maintenance and gardening.

In the case of holiday letting complexes, other income is derived from linen hire, hire of equipment, the sale of tours and theme park tickets.

Blue Chip Businesses – An Accountant’s Opinion

Clients regularly ask us at Crosbie Warren Sinclair “What are the best businesses to buy?” It is difficult to generalise, but Management Rights are in our opinion near or at the top of the list. It is our view that they are blue chip businesses for the following reasons:

1. No bad debts

You are paid your remuneration by the Body Corporate each month and you are entitled to deduct monies payable to you by the owners of units that you let out on their behalf at the end of each month from rentals collected by you. There are almost no bad debts in these businesses.

2. No working capital

Other than purchasing “off the plan” you only need enough money to survive until the end of each month when you receive payment from the Body Corporate and your investor owners.

3. Lifestyle

Many of these complexes, particularly the permanent let complexes, can offer a unique lifestyle. By lifestyle we mean the ability, if you are able to organise your time and your work schedule, to enjoy the facilities your own complex might offer or the general facilities within your area.

4. No stock

As Management Rights is a “people” business there is no stock sitting on the shelf eating its life away.

5. Home Business

As the concept of Management Rights businesses involves an on-site resident manager you are in the unique position of having a combined home and business. You live on site.

6. Security

These businesses offer a unique security that is not available to someone who purchases a leasehold business. At the expiration of a lease, if the landlord wishes to double or triple the rent or simply move you on so that they can demolish the premises and build a new building, you have no rights whatsoever to object to the landlord’s action.

Contrast this with Management Rights where, provided that you keep the support of 51% of owners who vote at meetings (which is usually substantially less than 50% of the unit owners in the complex), there is every reason to believe that you can have your agreement extended and remain as the Resident Unit Manager. This provides long term security. 

 

 

 

THE MBA PARTNERSHIP ACCOUNTANTS

Management Rights Accountant

PAUL GAFFNEY | MANAGEMENT RIGHTS

The MBA Partnership is one of the most experienced firms of management rights accountants in Australia. Many of their clients are new to the management rights industry, and with over 30 years experience in management rights they have the expertise to help you set up correctly from the beginning. From due diligence, accounting, taxation and auditing Paul and his team can guide you through the entire process.

Phone: +61 7 5557 8700

LEVEL 3 "PIVOTAL POINT"' 50 MARINE PARADE SOUTHPORT QLD  4215

pgaffney@mbapartnership.com.au | managementrightsaustralia.net 


 

Management Rights & Motel Finance P/L

Mark Ryall

 Mark Ryall | MANAGEMENT RIGHTS

Management Rights and Motel Finance Pty Ltd is an industry leader in providing specialist finance needs to companies and individuals embarking on the purchase of a Management Rights business. Mark and his team is dedicated to helping you with all your management rights and motel finance needs! We work around the clock to make sure you receive the best deals.

Suite 4, Level 2 / 247 Bayview St Hollywell QLD 4216

Phone: 07 55641100 | 0419 640 215
Fax:     07 30140108

mark@mrmfinance.com.au | www.mrmfinance.com.au

Australian Credit Licence No: 378366


 

Management Rights Articles

  • THE MANAGEMENT RIGHTS PURCHASING PROCESS

    Selecting a Management Rights business should not be a quick decision. It is important to research and discuss your circumstances with people who know and understand the industry.

SMALL MYERS HUGHES LAWYERS

COL MYERS | MANAGEMENT RIGHTS

SMH Lawyers handles all aspects of a Management Rights transaction from establishing, purchasing and selling Management Rights to advising bodies corporate on strata related issues and disputes. Col Myers and his team of experts is constantly exposed to all aspects of the management rights industry which means they can proactively advise when and how to best handle management rights to work effectively for individual scenarios.

Phone: +61 7 5552 6604 | Mobile: +61 417 620 516

Level 2, 17 Welch St Southport Qld, 4215

info@smh.net.au | www.smh.net.au  


 

Management Rights Brokers

 

 

 

 

 

Narelle Filmer | Linda & Wayne Stoll

Think Management Rights’ is a division of the nationally recognised First National Real Estate franchise. This team of specialist brokers operate throughout the state of Queensland. With over 15 years as owners, managers and sales agents in Management Rights industry, this team has a great deal of knowledge and experience to bring to the MRA seminars.

Wayne and Linda Stoll | Listings: Sunshine Coast / Gold Coast Region
Phone: 0452 181 505
wayne@thinkmanagementrights.com.au | linda@thinkmanagementrights.com.au 

Narelle Filmer | Listings: Gold Coast / Brisbane Region
Phone: 0459 229 744
Email: narelle@thinkmanagementrihgts.com.au  

www.thinkmanagementrights.com.au 


 

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