Management Rights Industry Newsletter January 2016 Specialists Servicing Queensland & New South Wales Industry Articles & Updates 2. Reflecting on 2015 Jake Clarke, MR Sales 3. Fair s Fair Martin Punch, SPG Lawyers 6. How to Make an Offer a Body Corporate Cannot Refuse Frank Higginson, Hynes Legal 7. Property Training Australia Gold Coast 2016 timetable for Resident Letting Agents Licensing Course Feature Properties 8. PROPERTY OF THE MONTH Moby Dick Waterfront Resort Click here to learn more about this rare riverfront management rights opportunity Management Rights Sales HEAD OFFICE: Suite 1 Equinox Sun Resort, 3458 Main Beach Parade, Surfers Paradise Qld 4217 P: 07 5555 8200 E: info@mrsales.com.au
Your Account of 2015 By Jake Clarke, MR Sales As I tentatively looked into the now famous Crystal Ball as I do at the beginning of each year, searching for predictions both negative and positive, my personal life came to the forefront of my vision. I started to wonder what I personally considered to be some of the defining moments of my year, more so than what I achieved professionally. Taking a moment to reflect and extract some wisdom from our experiences in 2015 can assist with setting us up for the year to come. So I ask, what do you consider to be some of the defining moments of the year in your personal life? Have you given more than you ve gotten? Have you swum against the tide or gone with the flow? Have you been taken for granted or felt appreciated and valued? Have you taken a risk and stepped outside your comfort zone? Did you commit to and reach a particular goal? What fell by the wayside despite best intentions? What have you learned about yourself this year? Has someone significant come into your life in the last 12 months? Of what are you the most proud? What do you regret the most? What are you most grateful for? What did you not do that you wish you had? What worked out better than you could have imagined? Which moment made your heart sing above all others? If you could change one thing that happened throughout the year, what would it be? What do you wish you had known at the start of the year that you know now? If you had to define your 2015 in one word, what would it be? With Christmas dinner eaten, the New Year revelers gone and majority of us back at work, what do you wish for 2016? What would you like to accomplish? What tricky situation would you like to overcome? What do you want to take forward into 2016? Who do you want by your side in 2016? Who do you want to BE in 2016? MR Sales wish you every success in 2016, both in your personal and professional lives, and want you to always remember, without us and we without you, we both can t move forward to bigger and better times ahead. Jake Clarke Mobile: 0418 663 661 Email: jake@mrsales.com.au
FAIR S FAIR There are two issues relating to Management Rights sales, which are at the moment causing concern to Buyers and Sellers of Management Rights, and Body Corporate committees, and their legal advisors. Recently there seems to be an upsurge in the number of bodies corporate not approving buyers of Management Rights to take over Caretaking and Letting Agreements. This seems to have coincided with an increase in the number of Asian buyers. Of course, as a result of Australian anti discrimination laws, race, marital status, age, and a number of other factors, cannot be taken into account in making such decisions. In acting for buyers of Management Rights, I have been staggered to read pre committee meeting Buyer s questionnaires running into 6 pages. These have included requests for the last 3 years tax returns for the entity buying the Management Rights, and if it is a company, the same thing for its directors. It may be an urban myth, but I have even heard of it being suggested to one Body Corporate committee, that it ask for a psychological profile of an incoming Manager. Requests for a criminal records report are not uncommon, even though such checks are carried out by the Office of Fair Trading as part of the application process for real estate licensing. One could be forgiven for thinking these questionnaires are designed to thwart any transfer of Caretaking and Letting Agreements. Under the Body Corporate and Community Management ( BCCM ) legislation, a Body Corporate committee is only entitled in deciding whether to approve a transfer ( assignment ) to consider: the character of the proposed transferee and related parties eg. the directors of the transferee company the financial standing of the proposed transferee the proposed terms of the transfer the qualifications and experience of the proposed transferee and any related persons of the proposed transferee, and the extent to which the transferee and any related persons have received, or are likely to receive training matters to which under the engagement or authorisation (Caretaking and Letting Agreements) the Body Corporate may have regard Also, a Body Corporate must not unreasonably withhold approval to a transfer. So what is it reasonable for a Body Corporate committee to require from a transferee, to consider whether or not to give such approval? Having acted for bodies corporate, and Sellers, and Buyers in assignments, in my opinion, the following is adequate: traditionally personal and business references are required attesting to the good character and business capabilities of the transferee, or where the transferee is a company, the directors of the company, and the person who will be conducting the business relevant criminal history will be checked by the Office of Fair Trading as part of the real estate licensing process
evidence of finance approval by a Bank. Is there really any necessity for committee members to be caught up with wading through financial records, when a Bank will have satisfied itself as to the financial viability of the transferee and the business, before agreeing to lend substantial funds for the purchase? It is not as if the Body Corporate will be dependent upon payments by the Caretaker to the Body Corporate. resumes of past experience, education, and training relevant to the performance of the caretaking duties, and details of what training before and after completion of the purchase by the Seller to the Buyer. This is usually a week before settlement for training, and a week after settlement for assistance with the operation of the business. a plan detailing how the transferee, and if the transferee is a company, its directors and employees, plan to operate the business eg. staffing an interview by the committee with the principals of the Buyer, and the person who will be supervising the caretaking The Body Corporate s role in relation to the business of letting units in the Scheme, under the BCCM legislation, is limited to authorising the Caretaker/Letting Agent to operate a letting agency on site should the Caretaker require this for licensing purposes. In fact, this is not required where the transferee holds a full real estate licence, rather than a residential letting agent s licence. A Body Corporate committee therefore has very few obligations in vetting the transferee in relation to the operation of the letting business. However, it would be reasonable to require some evidence that a licence will be obtained, bearing in mind that a residential letting agent s licence, will not be granted until such time as the evidence of Body Corporate consent to the transfer, has been obtained, and provided to the licensing authority. In my opinion, if a Body Corporate committee requests more than this, and rejects approval for transfer because it does not obtain more, it is danger of being found to have acted unreasonably. Damages a Seller could claim against a Body Corporate if there was such a finding would be substantial. For a number of years now there has been a concern by Sellers of Management Rights in relation to the approach taken by bodies corporate, and their Managers and solicitors, to consent to assignment costs charged by Body Corporate solicitors and Body Corporate Managers, and passed on to the Seller. Under the BCCM legislation, the Body Corporate is entitled to reimbursement for expenses reasonably incurred by the Body Corporate in relation to an application for its approval of an assignment of Caretaking and Letting Agreements. These are often referred to as legal and administrative fees. Note that the expenses for which the Body Corporate can seek reimbursement must be reasonable and must relate to the assignment application. If all these criteria are not met, the Body Corporate may find itself responsible for at least a portion of legal and administrative fees, depending on its instructions to its solicitors and Body Corporate Managers. Having had experience in acting for both bodies corporate and Sellers in the assignment process, in my opinion, some Body Corporate solicitors and Managers are doing more work than is necessary eg. reviewing and giving opinions on whole Agreements, rather than just the assignment process. It has not been uncommon to have legal and administrative expenses passed on to the Seller, which are up to double what I would have expected them to be.
The Sellers only redress in this situation is to have the reasonableness of the charges determined by the BCCM adjudication/tribunal system, or in the case of the legal fees, by a costs assessor appointed under the Legal Profession legislation. Unfortunately, these processes are time consuming and may involve the Seller having to pay for further legal advice, for which they may not receive full reimbursement, even if they are successful. However, everyone has their limit, and my firm has been successful in having legal fees claimed, which were probably about 4 times what they should have been, substantially reduced. Lawyers need to be careful about the reasonableness of their charges, both in respect of the amount of work they have done being reasonably required, and the amount charged being reasonable. The Legal Profession legislation allows for overcharging to be held to be unprofessional conduct, leading to quasi criminal punishment.
Body Corporate How to make an offer a Body Corporate cannot refuse Yes, we took that from the Godfather, but why not? It is one of the greatest lines ever delivered in a movie (and credit where it is due to Mario Puzo for writing it in the first place). Anyway, enough pop culture. We don t need any distractions this early in the new year! We have written about bodies corporate and their obligations to act reasonably over the years and this newsletter is another example of the same principle. It started with 14 owners saying no to an application made by our client for the grant of an exclusive use space (which required a resolution without dissent). When our client applied to the Commissioner s Office, the adjudicator said each of those votes was cast unreasonably in the circumstances. Five years ago if you came to us with those numbers we would have said you were a long shot of winning in an application. Not anymore. Our client owned a lot and wanted to renovate it. Part of those renovation investigations revealed a rather large roof cavity above their lot. As their lot was in a building format plan (meaning the lot boundary was the ceiling of the lot), that cavity was common property. No one else could use the area. No other lot owner could access it or had accessed it in the prior life of the building. One of the problems we have as lawyers is sometimes people contact us expecting us to be able to unscramble an egg. As a simple example, if you come to us for assistance in appealing an adjudicator s decision we are already hamstrung in terms of what we can appeal on. We cannot include new evidence or submissions in an appeal. We merely look for flaws in what has already been submitted and decided on. So if you have not run all of the arguments you should have in the original application, we cannot run those in an appeal. Thankfully, what happened in this scenario was that our client contacted us very early on and we were then able to develop a strategy (which ended up working). The first port of call is always the committee. The committee indicated very early on that its support was going to be conditional upon our client assuming a greater contribution schedule lot entitlement (meaning increased body corporate levies). That was not palatable commercially to our client and hence we moved to Plan B. Plan B was to make the body corporate an offer it couldn t refuse at the AGM. In this matter that offer was: 1. Getting a valuation and offering to pay the valuation amount for the area. Expecting something for nothing is not realistic. 2. Providing absolute assurance around all of the works being done properly with all appropriate certificates etc. 3. Addressing the issue of any change in lot entitlements (which we submitted was not necessary for a number of reasons). There was no need to bend to any unreasonable demands for the sake of the body corporate having a bigger win. What was reasonable is what our clients proposed. Interestingly, the committee was not happy that our client simply by-passed them and put the proposal to the owners for approval. That objection was given sharp rebuttal in the decision. Whilst engaging with the committee is preferable, if the committee was looking to be unreasonable, there is no issue in going direct to the ultimate decision makers, being the owners in a general meeting. The 14 dissenting votes were held to have been cast unreasonably in the circumstances, and our client was therefore allowed the exclusive use of the cavity area, which they are now happily using. Of course, each offer will turn on its own individual circumstances. This is not a catch all for every application of this nature. If you are interested in the case, it is here. Would you like to receive the best Body Corporate information in the industry? Visit www.hyneslegal.com.au/subscribe
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Management Rights For Sale A Selection of our Best Exclusive Listings NORTHERN NSW RARE RIVERFRONT OPPORTUNITY Iconic motel situated on the banks of the Clarence River in Yamba All apartments within the complex have been sold 10 year Caretaking Agreement and 25 year Letting Agreement Short term holiday letting, no permanent living permitted Established as a motel, this business will convert to a management rights in late February 2016 as a going concern business and should show 20% ROI Asking Price $930,000 W.I.W.O including stock on settlement Jake Clarke Mobile: 0418 663 661 Email: jake@mrsales.com.au GOLD COAST PRESTIGIOUS RESIDENTIAL ONLY HIGH-RISE Permanent complex of 181 units with 28 in the letting pool Supervisory only with Body Corporate employing gardeners and cleaners Generous Body Corporate salary of over $119,000 2 bedroom, 2 bathroom managers residence with large courtyard for outdoor living and parking for two cars Well run business that still offers potential to increase the net profit Net Profit $178,422 Asking Price $1,595,000 Deborah Tilley Mobile: 0424 428 489 Email: deborah@mrsales.com.au PORT DOUGLAS WELL PERFORMING HOLIDAY RESORT Boutique management rights with 16 lots in the holiday letting pool Great Accommodation module agreement 2 bedroom managers residence, attached office with no set office hours Approval has been given for the managers to live off-site Well run business that still offers potential to increase the net profit Vendors retiring after a decade of successful business Net Profit $183,000 Asking Price $1,180,000 Geoff Ellis Mobile: 0432 790 959 Email: geoff@mrsales.com.au BRISBANE CBD CORPORATE LETTING BUSINESS No office hours and no requirement to live on-site = flexibility Strong inner-city location with two hospitals within easy walking distance Straight forward caretaking duties no pool, spa or gymnasium Current manager operates the business with the help of cleaners Long agreements with 21+ years remaining 27 of 48 units in the letting pool; 21 corporate let and 6 permanent Net Profit $243,000 Asking Price $1,875,000 Greg Jorgensen Mobile: 0407 721 335 Email: greg@mrsales.com.au BEAUTIFUL BRIBIE ISLAND HOLIDAY MANAGEMENT RIGHTS 16 of 30 lots in the holiday letting pool 2 bedroom manager s unit with large air conditioned office overlooking the pool Across the road from the beach (Pumicestone Passage) Cleaning staff employed (costs included in the figures) Good repeat business Ideal location close to all amenities Net Profit $146,000 Asking Price $899,000 Chris Fuller Mobile: 0438 340 706 Email: chris@mrsales.com.au
Management Rights For Sale A Selection of our Best Exclusive Listings KINGS BEACH CALOUNDRA HOLIDAY RESORT Well positioned holiday management rights with long agreements in place Currently run by one person, ideally suited to first timers to the industry 19 lots with 10 in the letting pool Low maintenance grounds, no office hours Newly renovated 3 bedroom manager s residence Close to local shops, parks, cafes and restaurants Net Profit: $84,601 Asking Price: $750,000 Chris Fuller Mobile: 0438 340 706 Email: chris@mrsales.com.au FAR NORTH QUEENSLAND HOLIDAY COMPLEX 18 units with 14 in the letting pool Ideal management rights for newcomers to the industry Easily managed by a couple of single operator 3 bedroom, 2 bathroom managers residence on the ground floor Long agreements in place Easy care property Net Profit: $82,545 Asking Price: $675,000 Geoff Ellis Mobile: 0432 790 959 Email: geoff@mrsales.com.au GOLD COAST MIXED LETTING MANAGEMENT RIGHTS 3 storey walk up in great location just metres from the beach Easily run complex, can be run by single operator Located close to Tedder Avenue at Main Beach 20 of 47 lots in the letting pool; 10 holiday let and 10 permanent Large 2/3 bedroom managers residence with private outdoor entertaining area Attached office on title with no set office hours Net Profit: $153,000 Asking Price: $1,285,000 David Rotheram Mobile: 0414 706 600 Email: david@mrsales.com.au LABRADOR MANAGEMENT RIGHTS WITH SUPERB RESIDENCE 39 lot high-rise with 15 units in the letting pool Excellent and proactive Body Corporate committee Open plan 2 bedroom apartment with magnificent Broadwater views Large attached office overlooks spacious foyer and the Broadwater Family friendly complex with easy access to all the theme parks Well positioned to take advantage of the 2018 Commonwealth Games Net Profit: $168,000 Asking Price: $1,295,000 Phil Trimble Mobile: 0418 478 966 Email: phil@mrsales.com.au UNIQUE NORTHERN NSW MANAGEMENT RIGHTS BUISNESS Located in Yamba, Northern NSW, a progressive seaside town with idyllic beaches and waterways, just 2 hours from Coolangatta and 1 hour from Byron Built circa 2002 and has never been to the market for sale A perfect husband and wife operation with full housekeeping in place 3 bedroom, 2 bathroom managers accommodation with direct ocean views Walk to patrolled beach and cafes and restaurants No Stamp Duty payable on the business component Net Profit: $279,944 Asking Price: $1,680,000 neg. Jake Clarke Mobile: 0418 663 661 Email: jake@mrsales.com.au
Management Rights For Sale A Selection of our Best Exclusive Listings SURFERS PARADISE HOLIDAY MANAGEMENT RIGHTS Management friendly 3 storey walk-up apartment complex 30 of the 33 units are in the letting pool Located in a quiet street of Surfers Paradise, 100m from the beach 2 bedroom managers apartment ideal for night caretaker Contract cleaners in place Great first time building Net Profit: $179,810 Asking Price: $1,150,000 Warren Oliver Mobile: 0416 216 625 Email: warren@mrsales.com.au AIRLIE BEACH WHITSUNDAYS HOLIDAY COMPLEX Mediterranean style 3 storey walk-up with fantastic views 11 of 21 apartments in the letting pool, mostly 2 and 3 bedroom apartments 2 bedroom managers residence with patio and direct office access Office on exclusive use with flexible office hours Long agreements expiring 2032 $48,785 Body Corporate salary Net Profit: $167,000 Asking Price: $1,100,000 Geoff Ellis Mobile: 0432 790 959 Email: geoff@mrsales.com.au SUNSHINE COAST HOLIDAY WITH GROWTH POTENTIAL Holiday resort in highly visible location, close to Hastings Street Solid returns with opportunity to improve the bottom line 9 x 1 bedroom motel style apartments in the letting pool High occupancy rate with good repeat trade Spacious 1.5 bedroom managers residence with attached office Presently run by single Net Profit: $104,178 Asking Price: $718,000 Brad Jeffreys Mobile: 0488 737 720 Email: brad@mrsales.com.au 25% SHARE OF GOLD COAST MANAGEMENT RIGHTS BUSINESS 49% return on investment Located between Surfers and Broadbeach, metres from patrolled beach 3 storey walk-up complex, very popular with families, great repeat trade Large 3 bedroom, 2 bathroom managers residence, 3 balconies, 2 car parks Attached office on title, long agreements, EzyRez software Part-time receptionist in place Active Managers Return: $143,809 Asking Price: $784,250 (25% share) David Rotheram Mobile: 0414 706 600 Email: david@mrsales.com.au CAIRNS MANAGEMENT RIGHTS IN RIGHT LOCATION Popular complex with consistent profits, established and easy managed business Total of 20 lots with 19 in the holiday letting pool 3 bedroom managers apartment with spacious living, priced at $340,000 Body Corporate salary of $45,550 Long agreements, Accommodation module Attractive multiplier set by genuine, realistic Vendor Net Profit: $190,000 Asking Price: $1,075,000 Geoff Ellis Mobile: 0432 790 959 Email: geoff@mrsales.com.au
Management Rights For Sale A Selection of our Best Exclusive Listings UNDER CONTRACT WHITSUNDAYS HOLIDAY MANAGEMENT RIGHTS Great lifestyle business, ideal home and income for couple or individual Well established holiday business in beachside location just 100m to surf beach The managers real estate consists of a 3 bedroom unit, 2 x studio apartments (in the letting pool) and a housekeeping room and office, priced at $400,000 15 minutes drive from Mackay CBD Priced to sell at a two times multiplier! Net Profit: $102,000 Asking Price: $600,000 Geoff Ellis Mobile: 0432 790 959 Email: geoff@mrsales.com.au SURFERS PARADISE ABSOLUTE BEACHFRONT HOLIDAY GEM 10 level, 30 unit high-rise on the beach in Surfers Paradise 18 units in the letting pool, 4 owner occupiers Easy care grounds and gardens Supportive and proactive Body Corporate committee Magnificent 3 bedroom managers unit Health issues forces sale Net Profit: $187,000 Asking Price: $1,634,000 Phil Trimble Mobile: 0418 478 966 Email: phil@mrsales.com.au MAIN BEACH MANAGEMENT RIGHTS LIVE OFF-SITE Absolute beachfront mixed letting management rights on the Gold Coast For sale at a multiplier of 2@ No requirement to live on site No caretaking or letting agreements 1 bedroom, ground floor unit with ocean views, priced at $450,000 Potential to increase the net profit Net Profit: $58,000 Asking Price: $575,000 David Rotheram Mobile: 0414 706 600 Email: david@mrsales.com.au AWARD WINNING AIRLIE BEACH WHITSUNDAYS RESORT 4 star family resort style accommodation with brand name 24 apartments with 21 in the letting pool Managers real estate is a 2 bedroom, 2 bathroom, air conditioned apartment with single lock up garage and extra car space Attached office on title, Accommodation module agreements Excellent lifestyle location with the advantage of solid trading performance Net Profit: $263,000 Asking Price: $1,390,000 Geoff Ellis Mobile: 0432 790 959 Email: geoff@mrsales.com.au SOUTHPORT PERMANENT MANAGEMENT RIGHTS Sought after rental location close to Southport CBD Accommodation module agreements with over 19 years remaining 75 units with 56 in the letting pool Attached office on title with no set office hours Comfortable managers unit, 2 bedroom, 2 bathroom with storage and 2 car parks Room to increase the income with new initiatives put in place by the managers Net Profit: $209,000 Asking Price: $1,525,000 Deborah Tilley Mobile: 0424 428 489 Email: deborah@mrsales.com.au
SOLD & SETTLED Listings Wanted! Kings Row Centre, SURFERS PARADISE Madorri Villas, LABRADOR Degree Apts, FORTITUDE VALLEY Everton Heights, EVERTON HILLS Meridian on Alex, ALEXANDRA HEADLAND Paradise Glen, ASHMORE Samarinda on Beattie, COOMERA Admiralty Quays, BRISBANE Pelican Sands, TUGUN MORE LISTINGS WANTED! THINKING OF SELLING YOUR MANAGEMENT RIGHTS BUSINESS? We have qualified buyers wanting to purchase management rights businesses in all areas; Gold Coast Brisbane Sunshine Coast North Queensland Contact us to discuss how we can assist with the sale of your management rights business Head Office: Phone 07 5555 8200 or email info@mrsales.com.au Servicing Queensland and New South Wales Head Office: Suite 1 Ground Floor Equinox Sun Resort, 3458 Main Beach Parade, Surfers Paradise Qld 4217 Ph: 07 5555 8200 Fax: 07 5570 4693 Email: info@mrsales.com.au
BUYING OR SELLING? Contact Australia s Leading Management Rights Broker Phone: 07 5555 8200 Email: info@mrsales.com.au For information on management rights or resorts please feel free to contact any one of our experienced industry specialists: Jake Clarke Queensland & New South Wales 0418 663 661 jake@mrsales.com.au David Rotheram Queensland 0414 706 600 david@mrsales.com.au Warren Oliver Queensland & New South Wales 0416 216 625 warren@mrsales.com.au Graham Lillyman Queensland 0412 606 920 graham@mrsales.com.au Phil Trimble Queensland 0418 478 966 phil@mrsales.com.au Deborah Tilley Queensland 0424 428 489 deborah@mrsales.com.au Ian Forbes Gold Coast & Brisbane 0432 988 625 ian@mrsales.com.au Alan McCoy Brisbane & Queensland 0418 736 417 alan@mrsales.com.au Greg Jorgensen Brisbane & Queensland 0407 721 335 greg@mrsales.com.au Chris Fuller Sunshine Coast & Queensland 0438 340 706 chris@mrsales.com.au Brad Jeffreys Sunshine Coast & Queensland 0488 737 720 brad@mrsales.com.au Geoff Ellis North Queensland 0432 790 959 geoff@mrsales.com.au The success of the MR Sales team is reliant upon an experienced administration team: Lyn Clarke Principal 0417 641 202 lyn@mrsales.com.au Amy O Meara Sales Administrator 07 5555 8200 info@mrsales.com.au Katrina O Sullivan Office Administrator 07 5555 8200 admin@mrsales.com.au ARE YOU SUBSCRIBED TO OUR NEWSLETTER? Click here FOLLOW US HEAD OFFICE: Suite 1 Equinox Sun Resort, 3458 Main Beach Parade, Surfers Paradise Qld 4217 P: 07 5555 8200 E: info@mrsales.com.au