Thinking of selling?

Happy new year to you all! I hope 2015 will be a prosperous year for you.

I know many of you will also be considering selling within the next twelve months. I will now go through a basic staged plan to assist with the process. This list is by no means exhaustive but a general guide. Some of you may require a more detailed approach or if you’re lucky enough maybe even a simpler approach.

Pre contract
Step 1 –Plan the timing – Have a good review of your numbers and ideally plan the sale a minimum of 18 months out. Usually it is only a recent twelve-month period that is verified so timing is crucial to select a period of superior profitability. Personal factors may also have a bearing on this. What you want to avoid is the verification period including a recent period of poor profitability. In summary if changes can be made now to help increase profitability ensure they are in place more than twelve months before pulling the sale trigger.

Step 2 – Engage your industry accountant – Have your industry accountant prepare your sales numbers for a recent (within three months) twelve month period.

Step 3 – Ensure your bookkeeping system is accurately reconciled – Whether you use MYOB, QuickBooks, Xero or another program you need to ensure that your data is accurately reconciled up your sale date. Those that have their books kept externally by their accountant’s via Bank Link, Xero or other bookkeeping services should already be up to date.

Step 4 – Another crucial step is to ensure your general account coding matches your trust account income records.

Step 5 – Appoint an industry recognised sales agent – Once you have your sales numbers complete you should seek the advice of an industry recognised sale agent. A good sales agent will be able to advise you on the value of any property (manager’s unit) and the value of the business which is calculated as a multiple of annual profit.

Step 6 – Advise your solicitor and bank of your intentions – This may seem a little premature but best to give them both a heads up so they can plan internally.

Step 7 – Make sure all letting appointments are in place – With the old PAMDA 20a forms you need to ensure these are correctly executed by both parties and all are assignable. Under the new Property Occupations Act, the new form 6 (appointments to act) you don’t need to worry about assignability, you just need to make sure the forms are executed and on hand. The recent legislation change is in my opinion, a good opportunity to write to all owners and make the change to the new form 6 as this ensures automatic assignability.

Post Contract
Step 8 – Conduct Income Verification – The investigating accountant will forward you a checklist of the required information. Make sure all this available and collated prior to their arrival. Be sure to be available to answer whatever questions the accountant may have.

Step 9 – Follow your solicitor’s advice – Your solicitor will guide you through all the remaining hurdles including advising the body corporate.

Unconditional Contract
Step 10 – Reconcile your trust account – Make sure you have your trust account reconciled on a daily basis leading up to settlement. On settlement you will be required to hand over to the purchaser all funds held on trust. It may also be necessary to calculate a commission adjustment for any prepaid/unpaid rent or other income streams. Bonds held will also need to be quantified.

Step 11 – Understand any capital gains tax liability – Depending on what you bought and sold for you may have a capital gains tax liability arising in the financial year the sales contract was signed. It is important to note that capital gains tax is calculated based on contract date and not settlement date. You need to consult with your accountant to quantify any such future liability and discuss any implications.

Step 12 – Hand over process – You will need to negotiate the hand over process with the purchaser which will be commonly be one week prior to and one week after settlement.

In summary a well planned sale commences at least 18 months prior with the view to ironing out any underperforming areas of the business. Always stick to industry experienced accountants, solicitors and sales agents and the sales process should run as smoothly as possible.

Good luck to all those readers selling in the upcoming year!

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