| 3,2,1 Rule.
The BCCM Act contains a provision that allows a Body Corporate to charge a fee to the selling management rights owner if that owner sells his business within a legislated time frame. Up until 30th August 2008 this was referred to as the 321 rule but these provisions have now been superceded by more certain and equitable transfer fee rules. For a more elaborate explanation on these new Transfer Fee rules refer to the FAQ section of this site.
Accommodation Module
Under the B.C.C.M. Act (see below) different types of community-titled property (unit complexes) are governed by different sets of rules or regulation modules. The Accommodation Module was designed with sets of rules that suit residential complexes that are predominantly owned by investor or non-resident owners.
Acquisition Expenses
Some of the expenses associated with buying a Management Rights business are:
- Stamp Duty
- Legal Fees
- Accountant's Fees for verification of Nett Income
- Finance Application Fees
- Restricted Real Estate Licence Application Fees
As a rule of thumb, allow 5% of the total purchase price to cover these expenses.
A.R.A.M.A.
Australian Resident Accommodation Managers' Association Inc. (Previously Queensland Resident Accommodation Managers Association) - the association for resident managers, providing advice and support for resident managers, preparing submissions on legislative issues, providing trading benefits for members, providing guidelines to members on operating issues.
B.C.C.M. Act
The Body Corporate and Community Management Act is the Queensland Act of Parliament that governs the Body Corporate and the Management Rights industry.
Body Corporate
The Body Corporate is the collective entity of all the individuals who own units in the building. An acceptable analogy is to consider the Body Corporate as similar to a company, where the individual unit owners are the shareholders.
Body Corporate Manager
Often confused with, but very different from the Resident Manager. A Body Corporate Manager provides legal, financial and secretarial services to the Body Corporate, to ensure that all statutory requirements are met. It is the Body Corporate Manager who sets and then oversees the spending of the administrative funds from fees collected from all owners.
Manager's Unit
The designated unit occupied by the On Site Resident Manager and from which the Resident Manager conducts the Management Rights business. It sometimes includes ownership of (or an authority to occupy) an office from where the business is conducted.
Multiplier
The multiplier is a number that represents the goodwill factor used to value the business component of the management rights investment. The size of the multiplier is dependant on the risk of the business. So a very secure investment with every positive attribute will command a higher multiplier. To obtain the value of the management rights business, you multiply the verified net profit of the business by the multiplier then add the value of the managers unit.
As a multiplier is an indicator of risk, this means you will pay more for the most secure investment and as a result your return on investment will be lower because of the lower risk. A multiplier of 4 times means a 25% return on the business component whereas a multiplier of 5 times nett profit sees the return at 20%.i.e you divide the multiplier into 100 to get the percentage return on the business side of the investment.
Nett Profit
Nett profit is normally calculated by deducting from the last full years gross income of the business (including Body Corporate salary), the actual expenses of operating the business for the period, excluding depreciation, borrowing expenses and interest on borrowings, and wages to the proprietors or payments to any persons for work which could be reasonably be undertaken by a two person resident management team. The contract usually used to buy a Management Rights Business will have a clause that makes the deal subject to the verification of these figures by a qualified Accountant.
Offer and Acceptance Document
It is common practice to negotiate the basic terms of a Management Rights sale and purchase on an Offer and Acceptance document. Once all parties sign this document, the agreed terms can be expressed into the formal contracts. At this stage, the more comprehensive formal contract documents are prepared and signed. The purchaser should pay the deposit or part deposit at the time of signing the Offer and Acceptance document.
PAMD Act (Property Agents and Motor Dealers Act)
This is the Queensland Statute that governs the conduct of the real estate industry and under which Restricted Letting Agents must be licensed.
Prescribed Commissions
Maximum rates of commission for the collection of rent are laid out in Legislation. Different rates apply depending on whether the residential premises are let for holiday or permanent purposes.
Holiday Purposes: 12% of rent collected for periods not exceeding three (3) months & 9% of rent collected for periods exceeding three (3) months
A management fee may be added if the manager believes it is warranted and that the market will bear it.
Permanent Purposes: One (1) weeks rent plus five 5% of rent collected for the first twelve (12) months or 7.5% of
the rent collected. In the case of permanent lettings it is common for owners to agree to pay a management fee of
between 1% and 3% in addition to the letting commissions.
R.E.I.Q.
The Real Estate Institute of Queensland; whether buying or selling Management Rights, it is advisable to deal with R.E.I.Q. member firms. A formal Code of Ethics binds such firms.
Resident Manager
One who owns and operates a Management Rights business. Other common substitutes for this title are Resident Unit Manager or R.U.M., Building Manager, and Caretaker/Manager.
Resident Letting Agents Licence (RLA License)
The Government-issued licence that enables the Resident Manager to act as Letting Agent for his building and legally charge commission for this service. Unlike a full Real Estate Agents Licence, the RLA licence is comparatively easy to obtain. (Until recently this license was referred to as the Restricted Letting Agents License.
Sales Registration
The PAMD Act now allows Restricted Letting Agents to obtain additional educational qualifications and apply to the Office of fair Trading to become a registered salesperson under the license of a full real estate agent. RAAS is the only management rights brokerage firm that offers this specific facility as a core part of our business; via our sister company RAAS Real Estate. Speak to us to learn more about this opportunity, that can put $ in your pocket by allowing you to make sales in the complex and help ensure, as best you can, that any new owners remain as
“Investor owners”. click here - How to join us section of RAAS Real Estate.
Secret Commissions
It is illegal to receive secret commissions or kickbacks from suppliers. Any manager who acts “unofficially” as a real estate salesperson, without the qualification above, and receives a spotters fee from outside agents is likely guilty of receiving a secret commission.
Standard Module
Under the B.C.C.M. Act (see above) different types of community-titled property are governed by different regulation modules. The Standard Module was primarily designed for residential complexes predominantly owned by owner-occupiers.
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