Management Rights is under threat now!
The Management & Letting Rights industry shapes up for long-term fight
The management rights industry is facing its greatest challenge in years. If government legislates shorter terms for agreements it will leave thousands of “mum and dad” businesses in Queensland under threat.
If successful, the attack on management rights will have a negative impact on the whole industry, if you have a stake in the sector you need to read on…
Management Rights is an industry that started out as an improved service delivery model for holidaymakers on Queensland’s Gold Coast over forty years ago and it blossomed. Now the business model includes long-term residential tenancy accommodation in schemes right across Australia and in many other parts of the world.
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Management & Letting Rights (MLR) currently generates $55 billion for the Australian economy annually and that number is only rising as more Australians embrace high-density living options in both the long-stay residential and short-stay tourism accommodation sectors.
The industry body for management rights, Australian Resident Accommodation Managers Association (ARAMA) plays a critical role in promoting and protecting the concept of owner-operated MLR as the most effective method of serving the interests of unit owners, bodies corporate (or owners corporation), tourists and tenants, alongside optimising the industry’s growth and reform.
In response to the latest threat, ARAMA’s CEO Trevor Rawnsley is leading the defence against an attack on long-term agreements that threaten the core of the industry.
Queensland’s Unit Owners Association is calling on the term for management rights agreements to be reduced from 25 to three years.
Leading management rights lawyer John Mahoney predicts that if the government legislates shorter terms for agreements it will have an “immediate adverse impact” on their value.
And Alex Cook from ResortBrokers urged everyone involved in the business of management rights to get with the strength and become ARAMA members.
“If ever there was a time to become an ARAMA member it’s now,” Mr Cook said.
“This is a very serious issue and ARAMA is a vital advocacy group. It’s probably the only thing standing between the industry and those who would seek to benefit from its demise. If you’ve got money invested in management rights, ARAMA are the ones standing up to defend long-term agreements.”
Mr Cook said the issue had reached a head because “unfortunately a small percentage of managers are letting down the 95 percent who do a great job.”
“There are a couple of bodies whose solution to the problem is to basically destroy the industry,” Mr Cook said. “That would be ludicrous. Because you’re basically punishing the vast majority of managers who do a great job and all the lot owners who benefit from their exceptional service.”
Mr Mahoney said any decrease in the earnings multiples that are the basis of management rights values would dramatically reduce personal equity in each business.
He said a reduction from a multiple of six to five because of changes in legislation would mean most management rights businesses in Queensland would lose 50 percent of their equity in the business.
“If you buy management rights for $1.8 million, based on a multiple of six, and you have put in $600,000, that means you have borrowed $1.2 million,” Mr Mahoney explained.
“If that multiple reduces to five, the value of the management rights now becomes $1.5 million. You still owe the bank $1.2 but your $600,000 is now worth only $300,000. If the multiple reduces to four you’re $300,000 is now worth zero. You’ve lost all your equity. And you still owe the bank $1.2m.”
Mr Mahoney urged everyone involved in management rights to protest “loud and hard” and to contact their local members.
Read the full report in the September edition of Resort News subscribe HERE
Grantlee Kieza OAM has won three Queensland Media Awards, two Australian Sports Commission Awards and has been a finalist for the Walkley and News Awards and for the Harry Gordon Award for Australian sports journalist of the year. In 2019 he received the Medal of the Order of Australia for his writing. You can find more of his work in our AccomNews & Resort News print magazines.
He has written 22 acclaimed books, including bestsellers Hudson Fysh, The Kelly Hunters, Lawson, Banks, Macquarie, Banjo, Mrs Kelly, Monash, Sons of the Southern Cross and Bert Hinkler.
As a management rights owner working very long hours and doing a great job for our unit owners, guests and tenants I am appalled. We’ve invested over a million dollars of equity into our business, have until now, had a long term view of improving our business, pushed our BC committee to go green, become an ecoBiz star partner with our waste management systems as well as climate action certified with EcoTourism Australia. What is the point of pushing long term green and other solutions to better our businesses if our management terms are drastically reduced? Like government parties focused on short term election goals, there goes MR incentive to make long term plans to better our businesses. Very disappointing. 🙁
Sincerely
Will
MR Business Owner and Onsite Manager
I can understand this would be hard for existing contract in place as many have invested alot into these businesses.
However, from a person who works onsite and owns a unit. There are certain instances where it is overkill to have a live onsite manager and the need for owners to pay exhausberent Body coroprate levies to have a manager on site. Some complexes with no facilities, no set office hours and no rental pools – it is a waste.
Couldn’t agree more, definitely do not see a benefit to onsite managers – just a huge wastes of levy fees.
Why should owners have to pay profits that go to your bank? It’s so much cheaper for them to hire staff themselves – they are only using management rights companies because the developer made a tidy sum selling it at the start.
I must say I find it rather harmful for people to say that Onsite managers are just an expense for owners. This is OFTEN a complaint by onsite owners who often have bought into a building that has been a noted Holiday (Short Stay) RESORT since it was built. Maybe a solution would be to have buildings built for long-term stays and other buildings for just short stays. This also creates problems with the seller’s right to sell their apartment to anyone, not just an investor who is supporting the tourism industry.
If you don’t have an onsite manager you then deal with multiple real estate agencies who have no interest in your building other than as a cash cow. The onsite manager has a vested interest in keeping the investment up to standard.
Remember that the committee is made up of volunteers so then the Body corporate Manager (Strata company) will need to provide the work of the manager to organise quotes, tasks, etc.
Often the costs of doing this is more expensive than the onsite manager.
Sometimes committees take on the role with several members getting paid to do the tasks or becoming contractors. I have seen examples of disputes involving committee members using this to meet their own goals.
I agree the so called mum and dads have now become predatory consortiums buying up 2 or 3 resorts on the back of the 1st one and eventually move offsite and place a “night watchman” (who has a full time job during the day elsewhere) in the Caretakers unit so as not to be in breach of their management rights, while at the same time bleeding owners with exorbitant remuneration over $210K ….. total waste of money considering BC still pay for gardeners, pool, maintenance