Navigating the Management Rights Assignment Process

Contributed by Darren Brent, PROPERTY BRIDGE – 15 March 2019

Navigating the Management Rights Assignment Process

Firstly, a little context…All the hard work done, the angst of pushing through with the Management Rights sales contract process (likely incorporating both a Business and a residential lot), lawyers and accountants professional fees mounting, finance finally approved, your hotel bills coming to an end once your new and exciting business purchase settles. But wait…. There is more!

Whilst not mandatory, in this era, most Body Corporates, from the smallest through to the largest Community Management Schemes are insisting on the involvement of an independent lawyer to represent them in the assignment process.
Consequently, both the buyers and sellers then enter the final and sometimes the most frustrating stage of the sales contract process; navigating the Body Corporate assignment process via a third-party legal representative. Once the plethora of assignment documentation (References, Resume’s, Business Plans, Real Estate Licences, etc) has been provided to the ultimate satisfaction of the Body Corporate, under advice, by its legal representative, the Body Corporate committee will likely seek a formal interview with the proposed purchaser. Bear in mind that during this process, the Body Corporate legal costs will be worn by the Seller.
Assignment interviews may often be the most stressful process of the entire purchase transaction, especially for new entrants to the industry. The intending purchaser’s efforts and significant financial investment, via professional fees, time and loss of income will come to naught should the Body Corporate decline to assign the Management Rights business.
Whilst many lawyers involved with the assignment processes on the Body Corporate side are reasonable, some may argue that there is an element of fee gouging by a handful of professionals during this whole exercise whereby the “reasonableness” of requests made to the intending purchaser are called into question. End result is often that the assignment process maybe protracted and therefore costly. First impressions count! Therefore it is paramount that the initial package of documentation provided to the Body Corporate is complete and professional.
Prepare….Maximising the chances of a successful Management Rights Sale is at the heart of our approach to the entire sales transaction, even prior to entering into a sales contract. Without a suitably qualified buyer, a sales contract will simply be a vehicle whereby the only financial beneficiaries are the lawyers, should the contract fail to proceed.
Once Sales Contracts are in place, we work with the buyers to get their “ducks in a row” well before hand. In fact, once an intending purchaser has committed to entering the Management Rights industry, we encourage our prospective buyers to undertake as much initial preparation as possible prior to committing to any purchase given the significant investment and lifestyle choice they will be undertaking. Key pre-purchase initiatives we see as practical for a new entrant to the industry are as follows:
• ARAMA membership
• ARAMA’s Management Rights Industry Training Program
• Attending ARAMA industry educational events
• Real Estate Licence certification (Resident Letting Agent as a minimum qualification)
• Real Estate Institute membership
• Complete online Body Corporate Committee training (as “Caretaker” the purchaser will be on the committee)
• Subscribe to Residential Tenancies Authority (RTA) electronic newsletters
• Subscribe to Body Corporate and Community Management (BCCM) “Common Ground” electronic newsletters
• Subscribe to “Resort News” publication
Prior to a prospective Buyer going to contract it is essential that they have read and understood both the Caretaking & Letting Agreements and duties therein, in conjunction with the Community Title Schemes By-laws. This is vitally important on two fronts. Firstly, the buyer must be comfortable with the duties they are to be undertaking and secondly, they need to be across these duties at the Body Corporate interview stage as often the focus of the interview is on these duties and the Caretaking role in particular.
We often recommend that the Buyer undertakes relevant hand on training with the outgoing manager prior to the assignment interview to gain an understanding of the building and the practical application of the key caretaking duties. We find most Body Corporates are appreciative of this initiative, particularly at the assignment interview stage. The majority of disputes between Managers and Body Corporates are related to the Manager’s “Caretaking” duties.
At Property Bridge, we offer our intensive proprietary Body Corporate interview preparation program to Buyers once the Sales Contracts have become unconditional and therefore subject to the formal assignment process. Our program offers helpful and intuitive guidance to Buyers which is tailored exclusively to the individual Buyers unique purchase proposition. From our experience each sales transaction is unique and that applies very much so to the assignment interview process.
Some More Hints….Interview questions can vary considerably and indeed some may be quite intrusive or extensive, within the context of what one would expect for a reasonable assignment decision to be made.
Likewise, the length of an interview can be similar to a length of string. Be prepared. Have copies of all your documentation with you in order that you may refer to them during the interview if required. Keep your answers concise. Be professional and avoid personality conflicts with committee members. There may be some committee members who see their role as more “substantial” than reality. Remember to focus on the bigger picture. Aside from the technical aspects of the Management Rights and Letting Business you are contracted to purchase, this business is largely a “relationship” business. You may have excellent technical knowledge and skills, however these need to be enshrined into your “people” business matra, given you manage multiple stakeholders, including Body Corporate Manager, Resident Owners, Investor Owners, Tenants, Guests and Contractors.
A Final Word Preparation, Professionalism and People skills will see qualified Buyers successfully navigate the Body Corporate’s assignment process. As a Buyer and Management Rights operator one of the fundamental pillars of your business ethos should be achieving outcomes that are optimal for your building and therefore the Body Corporate.

You can trust the experienced and passionate team at Property Bridge to assist in ensuring your Sales Contract will go the full distance when you also partner with the industries recognised professionals in the finance, accounting and legal arenas.