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The “New Normal” of Assigning Management Rights

Depending on the size of your apartment complex, you may have a live-in building manager. If this is the case, your manager will have bought the “management rights” to your building, which they will run as a business on-site.

A building manager has myriad responsibilities, including managing the building’s general upkeep and security, coordinating tradespeople for common area maintenance and repair tasks; and they may even manage apartment rentals and tenancies.

Buying the management rights to a building or complex is not as straight forward as buying a franchise or other going concern. Whether the building manager is based on site or not, there are a much broader range of stakeholders who have to play a part in the business’s successful operation. As well as being a good business manager, the building manager has to work well with the body corporate committee, the owners, and any tenants, along with external real estate agents and property managers. It’s a complex web of relationships to balance, and any body corporate committee will want to make sure they have the right person for the job – for everyone concerned – if and when the business is put up for sale.

Tower Body Corporate works with Hynes Legal, who are specialists in the buying and selling of management rights businesses. In their recent article “It’s time to revisit the management rights assignment process”, they highlighted a shift from a more laissez-faire approach of assigning management rights, to a more rigorous approach. And rightly so.

The management rights industry is a tricky one, and not just because of the relationship intricacies involved.

If a committee assigns management rights to a manager who is inexperienced, incompetent, or indifferent, the impacts are far-reaching for lot owners and tenants, maintenance and costs, and can damage the overall sense of peace within the community.

Finding the ideal management rights talent

Hynes Legal asserts that the transaction of a management rights business should be about much more than money. Each party needs to work closely with their own legal expert, as well as with the body corporate committee, and with each other, as the business’s vendor and buyer. The expression “Caveat Emptor”, Let the Buyer Beware, resonates more strongly than ever in navigating the processes of buying, selling and assigning building management rights.

Assigning management rights
The benefits of getting the right manager on board pay dividends year after year.

The management rights seller

Whatever your current manager’s reason for moving on, and whatever relationship they had with your fellow residents and committee, it’s vital to be a part of the process to make sure they hand over operations fully to a competent successor everyone feels confident with. The last thing you and your new manager will want to deal with is legacy issues that weren’t dealt with properly.

There are specialist brokers and legal advisors who can help sellers identify a buyer who will be a good fit and who will help them manage the transition and assignment process for the committee. If your manager has indicated their intention to sell, ask who their professional advisors are, and offer them an opportunity to talk to the committee early on so everyone can work together.

You may also want to engage your own specialist advisors who will help you vet the potential buyers your current manager is negotiating with. What experience do they have managing a property of similar size and facilities? What are their references like? While the buyer will be taking over the business, in assigning management rights, the committee needs to be sure they’ll be a fit for your community, and will uphold the standards you expect – just as if they were applying for a job with them.

Most importantly, remember the value of your time and effort. Unless you and your fellow committee members are industry professionals, there will be aspects of this undertaking that you’ll definitely need help with. A professional advisor can help you navigate these intricacies more smoothly, and help make everything as clear as possible so everyone knows where they stand and what to expect.

The management rights buyer

The perks of having your building manager living on-site can be great. They’re on hand when you need them, they have an exclusive understanding of your building and its facilities, and they’re a member of your community, so it’s in their best interests to deliver their best for the residents.

But there can be a downside. If your fellow residents and committee don’t have a good relationship with your current manager, there may be challenges with whom they present to you as a potential replacement. You don’t want to experience the same difficulties and discomforts with a new manager. After all, you’re living in close quarter with them, and the previous person may have had a significant effect on the mood of your community.

As well as calling on the help of your professional advisor, you may need to exercise a little more patience than usual – along with some assertive communication – to smooth the transition and make sure you get your committee and residents’ needs met. The ideal buyer ‘candidate’ should have good communication skills, great references, and a proven track record of managing property and people effectively. Make sure they have the appropriate licenses and insurances, and that they understand what will be involved in managing your building or complex.

If the buyer hasn’t owned a management rights business before, you may want to ask them why they are embarking on this venture now, and what experience they have that makes them think they’ll make a good fit for the demands of the role, and the community they’ll be a part of.

The committee’s role in assigning management rights

While a body corporate committee can’t unreasonably withhold their assignment decision, you’re well within your rights to get a professional opinion to help you identify and deal with the finer aspects of the deal so you can make a more effective decision. After all, the person or couple you choose will play a significant role in your community, and have an impact on the lives of each and every resident.

Tower Body Corporate works with specialist legal firms like Hynes Legal to help committees understand their rights and responsibilities with respect to assigning management rights. If your building manager has expressed an intention to sell their management rights, it’s important you have the information and advice you need to ensure a smooth transition. Tower Body Corporate can help committees with the process.

By Kelly Borell

I have a Diploma in Business Management, Cert IV Property Services (Operations) and thoroughly enjoy working in the Strata Management industry. I particularly enjoy building a good rapport with people and providing reliable help.

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