Government reviews body corp Management Rights: Is it time for change?
Increasing concern about rising body corp fees has added fuel to a new discussion (and in some cases a verbal “punch-up”) about Management Rights. The government’s calling for submissions by May 8th for a detailed review, and change may be in the wind.
We’ve always liked to do things differently in Queensland. Across our 40,000 community title schemes (apartment buildings, townhouse complexes etc) we have more than 2500 Management Rights operators. Often called Caretakers or Onsite Managers they’ve usually bought their business with the contract for maintaining common property and the opportunity to run a rental business from the building.
Other states have very few Management Rights operators: NSW has approx 200 of them, Victoria 25 and the others states even less. This one-time cottage industry grew in the Sunshine State through offering individually-owned apartments for short-stay accommodation. Legislation set up to provide a structure for this is used across all types of residential buildings and may have inadvertently created a dangerous friction point, with apartment owners feeling they’ve lost control of their buildings, running costs higher than may be needed, and Managers pressured to find a return on their investment.
Lot owners have become second class citizens, according to The Unit Owners Association of Queensland. They argue the limited options for a body corp to sack their Manager, even when they’re not doing a good job, has taken control of buildings out of the hands of their rightful owners. They say the 25 year contracts are unfair and Managers have a natural conflict to prevent owner-residents moving into the building as it reduces their rental pool (and value of their business). The UOAQ have lobbied hard for change and government may be listening. While apartments have been largely investor-owned the pressure on Managers has been limited. But with increasing numbers of owner-residents the scrutiny and expectations on Managers is rising quickly.
As agents we meet and deal with a lot of body corp Managers and there are some fantastic operators. Some who treat their lot owners with heaps of respect, take real pride in their buildings and have a genuine interest in improving the lifestyle for all residents. And of course we’ve met some who seem to believe they own the entire building and their purchase of the business gave them a right to run rough-shod over owners’ interests.
But rather than focus on the personalities the current review will hopefully resolve whether the structure is wrong. Should a developer be able to sell the Management Rights at the outset, often for a price that’s 5 times annual earnings? Managers make a huge financial commitment and this can put them at odds with lot owners. In NSW developers can only bind the body corp for one year, then the lot owners make their own decisions. The UOAQ says contracts should be a maximum of 3 years. If developers sell the Rights for less (shorter terms = lower price) then all apartments will be a little more expensive. If a change is made how do current Management Rights operators (and their financiers) have some protection of the value of their business?
It’s a complex issue and there’s strong views on all sides. But it’s a discussion we have to have and we’d encourage you to give your opinion by emailing before May 8th: email@example.com