Right Management

What Makes a Contract Happen

As we all know 2014 has started with a bang with the Aussie dollar coming down against other currencies and particularly the New Zealand dollar which has seen the Kiwis back in the market for management rights in a strong way.

Increased occupancies and a very good holiday period combined with continuing low interest rates have seen increased sales of management rights across the board. The downside to this is the rate of contracts falling over is not decreasing with some buyers becoming disillusioned and looking at other industries.

Now that we are seeing this increased activity we need to be sure once a contract is in place we stay on our toes to make sure it happens. All too often contracts are falling over because vendors have not prepared properly for sale or some brokers sit round after the contracts are signed and don’t get involved in the ongoing process.

As brokers we keep saying check everything you can as a vendor including PAMD 20As to make sure they are on the right forms, that assignment clauses are ticked and initialed and the fees and charges attached are current. We had a recent case where some 75 per cent of the 20As in one building had to be sent back to owners to be ticked and initialed which could have seen the contract terminated by the buyer as nervousness came to the surface. We are always advising buyers to use industry experts and vendors need to do the same. Using the family solicitor or accountant with no management rights experience is asking for trouble, the same as producing your own profit and loss because an accountant charges too much is also potentially a problem when it comes to verification.

The role of the broker is most important in the process between signing contracts and settlement and it is imperative that solicitors copy the broker on all correspondence so problems can be sorted quickly and buyers kept confident in their purchase. If vendors think brokers, in some cases, sit around and do nothing but wait to be paid they are kidding themselves. The broker is generally the glue that holds the deal together if problems arise, as he/she liaises with all parties including the purchaser and vendor, two solicitors, the accountant, bank/finance broker and sometimes bodies corporate and valuers.

The process can be complicated today as solicitors are more critical than they have ever been as agreements are assessed with a fine toothcomb for any issues that may arise in the future. Your broker is not a legal expert and shouldn’t be considered as such but in a lot of cases they can help by talking with the buyer or vendor directly if there is some negotiation needed or chasing paperwork required by a solicitor and help keep the deal on track and on time.

There are many issues that arise and the people involved from the vendor to the buyer and all the industry experts will make a contract happen if everyone works as a team. The process begins with preparation of the business for sale purpose by assuring nothing is left to chance from 20As to up-to-date accountants figures, topping up of agreements and presentation of the property including residence and office. The broker should qualify potential buyers and only show people through that can afford to buy, are ready to buy within a specified period and generally have spoken with a finance broker or bank prior to inspections.

From there we would be confident that we will get to contract and the purchaser using industry experts, accountant, solicitor and financier working with the broker, buyer and vendor as a team will get the deal to happen. We should all strive to make it easy for a buyer to become a manager, not difficult by being ill prepared or putting up road blocks – after all we should have a willing buyer and a willing seller.

This is a unique industry to buy and sell in with no requirement for tax returns or BAS statements and a transparency of figures not seen in other industries so let’s get all contracts to settle this year.

Warren Oliver
MR Sales

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