Management rights in focus

Management rights in focus

MANAGEMENT rights is the name given to the business of owning a unit/townhouse and the care-taking in the complex with the added bonus of running your own business by offering letting services in the complex.

When strata complexes of units and townhouses are built and marketed to individual owners, generally the management rights are sold to a manager who then provides the long-term caretaking of the common areas - pool, gardens, grounds etc.

A caretaking salary is provided and this salary will depend on what is required to be done at the particular complex by the nominated manager. All agreements can vary and the size of the grounds and number of lots in the complex will also vary so this will impact the salary payable. This salary will normally increase at around CPI each year, however each agreement is different.

The duties involved are generally documented in the caretaking agreement made between the manager and the body corporate (normally the developer in the first instance) but is then administered by a collective committee elected by unit owners.

The manager also enters into a letting agreement in which the body corporate grants the buyer/manager the sole rights to operate a letting business from within the complex. The manager can then negotiate with individual owners to let their units for which they will receive a letting commission (typically around 12% of gross rentals for holiday letting and 7.5% for permanent letting).

Holiday letting also enables other simultaneous income streams through:

• Unit cleaning: you run your own cleaning business on your own or with contractors/employees and make a profit whether hands-on or supervisory only;
• Linen hire: You own or hire the linen in and charge hire and laundering fees to the owner for each holiday stay;
• Tour booking commissions;
• Car hire commissions;
• Unit maintenance: from changing light bulbs to general repairs and maintenance;
• Hire: cots, high chairs, beach umbrellas etc.

The model is continually evolving as more properties today do not necessarily require the manager to actually live on site or in some cases not to necessarily own a unit in the complex, every complex is different.

This is management rights in a very simplistic view; however, it does operate under a legal and legislated framework.

Originally published as Management rights in focus