Management Rights Explained
A Brief History of the Management Rights Industry
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 take care of 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 townhouses 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.
How they are set up
Management Rights businesses predominantly include three basic elements:
- The ownership of a lot or lots in a community titles scheme (which usually includes an office or the right to use an office)
- The caretaking of common property on behalf of a body corporate (i.e. gardens, swimming pools, pathways, etc.).
- The on site letting of units in the community titles scheme in which you reside.
People choose to invest in management rights for any number of reasons. These include investment return, lifestyle improvement and the alignment of home and business. The returns from management rights businesses are very identifiable, which gives many buyers new to the industry peace of mind that cannot be found in other business environments.
The operation of a management rights business can be applied to all styles of property developments from the traditional unit, townhouse, villa or resort style developments to more recent innovations such as corporate letting, student accommodation and retirement villages.
The purchase of a management rights business includes the right to obtain a resident letting agent's licence. The licence permits the collection of rent and the management of properties within the community titles scheme in which you reside and is relatively easy to obtain. The necessary education requirements can be completed through correspondence or attendance at a course run by an accredited training provider.
How Does the Manager Earn Income?
There are normally two parts to the 'On site' Manager's duties and two major parts to the Manager's income.
1. Body Corporate Salary:
In all multi-unit complexes, there are areas such as; pathways, gardens, pools, tennis courts, etc. which make up what is called Common Property.
The Body Corporate pays the Manager a salary, usually monthly in arrears, to maintain the Common Property, see that the By-laws are adhered to, and report on any matters pertaining to the complex. If you wish, you may think of it as a caretaker's salary.
The Body Corporate also pays for all the day-to-day expenses of looking after the common property. Such things as mower fuel and repairs, pool chemicals and fertiliser are expenses for the Body Corporate, not the Manager. Often all the necessary equipment is owned by the Body Corporate, and provided for the use of the Manager.
The Body Corporate salary is usually indexed to the CPI, to allow for automatic annual increases.
2. Letting Commission Income:
The Manager has the right to act as on site Letting Agent for investor owners wishing to rent their units to tenants. The manager is paid commission and management fees by the individual unit owners for securing good tenants, accounting for the rent, and ensuring that the rental property is kept in good condition.
Other sources of income for the Manager include repairs and maintenance for landlords, cleaning charges and monthly statement fees. In holiday complexes you can earn additional income from areas such as room cleans after each guest books out, linen hire, telephone and internet usage, sporting equipment hire and tour and hire car bookings.
Do you need any Special Qualifications?
To legally operate the Letting business, you will need to obtain a Restricted Letting Agent's Licence or a full Real Estate Agent's Licence. This involves the study of subjects through registered training organizations. These subjects are generally undertaken in a classroom environment; however some RTO's offer courses "on line" or by correspondence.