Selling your management rights business

The sale of a management rights business is not a simple process. Some people downplay the difficulty in a transaction of this nature. Occasionally a sale may transact seamlessly, but this is a rare thing, primarily because there are so many things that can go wrong.

Investing in the right advisors to support you through the management rights sale process is a form of insurance. You want experience around you just in case things don’t go the way they should.

Why a sale can become difficult

The main reason a sale can become dif cult is because there are so many parties that are involved. There are potentially 14 other parties involved in the process, as well as your committee, which can be up to another seven people. It sounds like a lot, and it is, but here is who they are and what they do:

Brokers – potentially your listing broker and the buyer’s broker (who might or might not be from the same agency). Accountants – yours to get the pro t and loss prepared and the buyer’s to review it.

Lawyers – yours, the buyer’s and more than likely, the body corporate’s. Sometimes you also get a buyers bank’s lawyer involved here as well.

Banks – the buyer will have one and you more than likely do too (and if not, well done!).

Valuers – perhaps you obtained a valuation on your unit when you listed it for sale. If your deal is a bigger one the buyer (or their bank) might need to value the unit, and/or, the business as part of the nance approval process. They will not be the same valuer.

Body corporate manager – just the one you know.

Committee members – any one of up to seven can have a say.

Buyer – you need a buyer to sell to!

The art of running a successful sale transaction from a legal perspective is being able to deal with all parties to a transaction. This guide deals with some of the issues that can occur on a sale, but it does not cover all of them.

The bene t of experience is knowing what are major issues and what are minor. Take the example of an issue arising in the veri cation of gures. The issue might be 10 missing letting appointments. The income might be there, but the ability to earn it might not quite be lawful. This can cause a chain reaction throughout the sale itself. This issue may well lead to a legal due diligence issue, and more importantly a nance issue because the valuer may lower the valuation, which then means the bank cannot lend what was applied for because its policy doesn’t let it. This means that the buyer needs to put in more cash, which they might not have.

The art of running a successful management rights sale is managing that issue with letting appointments when it occurs. It is knowing that it can lead to those complications, and then identifying a course of action that will solve it for all parties when it rst appears.

Ultimately, you have signed a contract because you want to sell and your advisors should be people who will help you achieve that with the least possible fuss. That comes from experience and there is no substitute for it.