Management Rights Common Terms and Expressions

18/09/2018 by Rod Askew – RCA Business Brokers

For those new to the management rights industry, we thought perhaps it would be helpful to list some of the common terms and expressions that you may hear when looking for a business.

  • MLR – stands for management & letting rights.
  • Caretaking agreement – this agreement deals with the task of looking after the common property in a management rights complex, including gardens, foyers, lifts, pool, gym, BBQ, hallways, footpaths.
  • Letting Agreement – This is the other half of your management rights and gives you the exclusive right to let units / lots from an office onsite. This means that no one else can set up an office in the complex, it doesn’t mean that owners must use your services exclusively to rent out their units. A unit owner has the right to use another external real estate / letting agent if they choose to do so.
  • Letting services – This differs in the type of complex you buy. On the Gold Coast it may mean renting units for 1 night or 1 month. In a permanent rental complex that will usually mean 6 months to 12 months’ leases.
  • Letting commissions – When you engage in the services of letting units, whether that is for 1 night or 1 year, you are entitled to charge a rental commission for the service. In a short stay / holiday or corporate building that may be 12% + GST and in a long term residential rental business it will usually be between 6% and 8% depending on which state of Australia your businesses are located.
  • Caretaking Fee / Salary – Your caretaking agreement will stipulate the tasks you are to complete on behalf of the Body Corporate or Owners Corporation and for that service, you are paid a caretaking fee. That fee is usually paid in monthly instalments in arrears and will be between $800 + GST and $1500 + GST per lot per month. The difference in scale will depend on the size of your complex, the state you reside in and the amount of work involved. It is your option whether you employ staff to do that work or complete the work yourself.
  • Do Agreement – A do agreement refers to the caretaking agreement and simply means you are expected to carry out the caretaking duties at your expense.
  • Supervisory Agreement – A supervisory caretaking agreement means you are paid a lesser amount for a caretaking fee each month, however you are not expected to carry out the work yourself but rather oversee contractors or staff employed by the Body Corporate.
  • Body Corporate or Owners Corporation Manager – The BC or OC Manager is an external contractor who performs the administration services on behalf of your building scheme. Services such as ensuring levies are paid and collected, paying the caretaker their caretaking fee, ensuring the building insurances are paid, arranging maintenance contracts for your building are all services of the BC or OC Manager.
  • Letting Appointment – This document will vary depending on which state your building is in. In Queensland it is a Form 6 and in Victoria it is an ELMA (Exclusive Letting & Management Agreement). As the letting agent, you must have one of these required forms signed by the owner of each unit you manage. This form with state the owner’s details, your commission and charges, extra works or duties you will be undertaking in their units (ie: cleaning, linen supply, internet supply, etc). This refers to only the units held by you in your letting pool rental business.
  • AGM – This is the Annual General Meeting which is held every 12 months and is open to all unit / Lot owners within a building complex. At this meeting items such as the election of your building committee or representatives is held, setting of annual budgets, addressing building maintenance issues or anything that may be affecting the harmony of your building.
  • EGM – This is an Extraordinary General Meeting, which may be called by the committee whenever and issue or something arises which needs to be dealt with in between AGM’s.
  • Body Corporate or Owners Corporation Committee – Your building will have a committee made up of unit / lot owners who will be responsible for decisions affecting the running of your building. The committee is headed by a Chairperson and the onsite manager (You) will liaise with the chairperson on issues relating to the running of the building. Typically, a manager will meet with the chairperson between once a week to once a month depending on issues within your building or complex.
  • Deed of Variation – A deed of variation is produced by the solicitors acting for the manager or the body corporate whenever changes are needed to be made to a manager’s caretaking or letting agreements. The DOV may address changes to the agreement term by adding another 5 years to your agreement or change a specific duty or task.
  • Breach Notice – Should you neglect to carry out the duties and works detailed in your caretaking and letting agreements with the BC or OC, they have the right to issue a breach notice to you for failure to adhere to your assigned duties. Your agreements will usually state that you have 14 days to rectify the breach or your agreements may be terminated. It is extremely unwise to ignore any breach notices you may receive. Similarly, if an owner or tenant doesn’t adhere to the rules of your building, they can be issued with a breach notice.
  • Bylaws – The bylaws of your building were put in place by the developer when the disclosure document were established. These bylaws are used to govern the building and everyone, whether an owner of a lot or a tenant should have a copy for their reference. It will usually fall upon the building manager to monitor adherence to the bylaws by all concerned. Bylaws deal with use of common property, car parking, noise and disturbances within the building.
  • BCCM – Body Corporate and Community Management Act. This is the government legislation that governs the management rights industry.
  • Accommodation Module – Under the BCCM Managed schemes come under 4 modules, of which only 2 affect the management rights industry. The accommodation module which can have a maximum term of 25 years was designed for developments where there are a majority of investor / rental lot owners.
  • Standard Module – Again under the BCCM this module has a maximum term of 10 years and was intended for developments where the majority of lots are owner occupiers. The intended use of the lots in the development, whether for long term rentals or for short stay overnight rentals has no bearing on the module the building is under.

We hope this short list is helpful to you in your search for the perfect business.