Why you should use Management Rights experts?

The purchase of Management Rights can be a complex process which requires a significant investment of your time and money. It is therefore vital that you engage relevant industry experts to guide you through the stages and ensure a smooth purchase process.

Their experience will assist in identifying any real or potential issues. If you're contemplating using your current team (solicitor, accountant or lender), then it is advisable to ascertain that they possess and demonstrate the appropriate expertise in this area.

What your key advisors will do for you:-

Your solicitor

Your solicitor may provide advice on matters including:

  • your borrowing structure
  • the names in which to purchase assets
  • setting up company and trust structures

However, their main task is to undertake a 'Due Diligence' as part of the purchase process. This includes reviewing:

  • the contracts
  • the Management Rights agreements and any extensions, assignments and variations
  • the By-Laws and Community Management Statement
  • the Body Corporate records.

The Due Diligence report can be provided to both you and your lender. If any issues are identified during this process, your solicitor will discuss them with you and provide guidance on how to manage them.

The role of your solicitor doesn't end at settlement. Once you own a management rights business, you will probably need their assistance for things like:

  • exercising an option
  • seeking a variation in your agreements
  • seeking an extension in the term of the argument
  • dealing with complaints or issues

Your lender or finance broker

Not all banks have managers who specialise in purchasing management rights. So look for a finance broker or a bank who has built a reputation in this specialist area, and make sure they have a real understanding of the industry, current issues and values.

If you're new to Management Rights, you should look for a finance broker or lender who can put you in contact with other key industry advisors. They should also be able to give you an indication of how much you can borrow, provide you with a funding scenario for any options you're considering, and introduce you to other financial specialists you may need to help run your business.

You also need to think about whether the lender you use during the purchase process, will continue to work with you after settlement.

Your accountant

Your accountant's main role is to conduct a specialist verification of the financial records of the business you intend to purchase. They may also help you set up any company and trust structures.
The verification process includes:

  • a review of the income for the period detailed in the purchase contract
  • an analysis of the income achieved by the business for different services and a comparison against industry benchmarks
  • an analysis of occupancy trends
  • a review of the letting appointments which are in place for the complex
  • a review of the most recent Trust Account audit report.

Your accountant will then give the Verification Report to both you and your lender. Again, the relationship with your accountant doesn't end at settlement. The Trust Account which you operate as part of your business needs to be regularly audited, with a report submitted to the Office of Fair Trading, on a yearly basis.
Your accountant will also prepare annual financial statements which will break down your income and expenses, according to the different services your business provides.

Your sales agent

Sales agents are sometimes overlooked when we talk about industry specialists, but they often have years of valuable experience in this area. Many agents have even owned and operated a number of management rights businesses themselves.
The agent will be able to provide guidance in relation to the industry with knowledge of income, occupancy and value trends. They can also put you in contact with key service providers such as tradesmen, cleaners and linen suppliers.

Choose your team carefully

Remember, your key advisors all need to work together to support you, both during and after settlement takes place - so choose carefully.
An effective team can make all the difference to the success of your Management Rights business. Small Myers Hughes Lawyers are here to work with and support you and your team.
Should you have any more questions, or require further information on your options call:

Col Myers - Partner
SMH Lawyers +61 7 5552 6666

Contact Us Now

Phone:+ 61 7 5552 6666
Fax:+ 61 7 5528 0955
Email:info@smh.net.au
Address:Level 2, 17 Welch St Southport, Qld, 4215
Postal:PO Box 1876
Southport 4215

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