The term Management Rights refers to the business of operating strata titled complexes, ie. properties divided into a number of units or ‘lots’, each individually owned either by owner-occupiers or by investors who want to let them out.
Within strata titled properties, there will also be ‘common property’ not contained within the lots, eg. lobbies, driveways, gardens, pools, gyms and other shared spaces.
Essentially, Management Rights cover the business of onsite caretaking (of common property) and onsite letting (renting out units on behalf of investor owners) plus, in most cases, include associated real estate such as a manager’s residence, office or reception.
The manager enters into a contractual agreement with the body corporate. The Caretaking Agreement outlines duties they must perform in return for specified remuneration (Body Corporate Salary) paid monthly in arrears.
The Letting Agreement provides the manager with exclusive authority to conduct an onsite letting service for investor owners. Although owners are free to use outside agents, they rarely do as an onsite manager can provide much better service.
Management Rights may have a maximum term of 10 years (standard module), or 25 years (accommodation model). Agreements can be extended by application to the body corporate committee, a process known as ‘topping up’.
Broadly, there are two types of rights – permanent and short-term – although mixed-use developments offering both accommodation types are now common.
Permanent complexes cater to people who occupy units as their primary residence (owner-occupiers and tenants) for a minimum of six months. The operation involves securing good tenants, maintaining common areas, and developing good relationships with lot owners and the body corporate committee.
Short-term complexes, generally holiday letting in tourism destinations and corporate letting in business hubs, are operated much like hotels. The manager must market the property to attract guests and provide a high level of service.
The value of management rights is calculated by applying a ‘multiplier’ to annual net profit. Multipliers vary depending on market performance, location, term of agreements, and other factors. Any associated real estate, including a manager’s unit, is valued at current property market rates.
For the latest information on multipliers and lending ratios to expect in the current market, contact RESORTBROKERS on 1300 665 966 to speak with a specialist broker.