OFF-THE-PLAN DEALS BOOMING

THE management rights industry emerged on the Gold Coast in the 1960s as an efficient way of maintaining holiday lettings.

It has since extended to developments designed for long-term residents, even including suburban townhouse schemes.

Prominent Management Rights brokers ResortBrokers, in a report released earlier this year, said “off the plan” opportunities sold by developers “over the past five years have developed into the most sought-after management rights type”.

Australian Apartment Advocacy CEO Samantha Reece said the changes showed the system was “antiquated” and needed to be changed.

“The whole idea was from when you predominantly had short-term leasing in the apartment complex, especially here on the Gold Coast,” Ms Reece said.

“The system is outdated, it’s antiquated and it certainly does not favour the owner or the consumer. And if developers actually have to rely on the sale of management rights to make any kind of profit, then they shouldn’t be in the business in the first instance.”

In New South Wales, developers can’t issue management rights for periods that extend beyond a body corporate’s first AGM, while any subsequent contracts are limited to ten years.

The effect is to greatly limit the industry in NSW, with one prominent broker admitting it “is nowhere near as prevalent as it is in Queensland”.

Strata Community Association QLD General Manager Laura Bos said the organisation would like to see similar provisions in Queensland law to stop management rights contracts being like “golden handcuffs” for bodies corporate.

“Management contracts in the right context and for the right terms are a wonderful thing,” Ms Bos said.

“... But it was designed for short-term letting.

“If a residential unit said we think having an on-site manager would be good for us, that’s all well and good, as long as it’s determined by the body corporate under a fair vote and under fair contract terms, so that if it doesn’t work out that as with any other service agreement they can walk away.”

ResortBrokers director Alex Cook said reducing terms is “not the answer” to rare issues with bad managers.

“ResortBrokers acknowledges in a small minority of cases a scheme can be lumbered with a bad manager and that it can sometimes be hard to get rid of them,” Mr Cook said.

“There are myriad legislative changes that can be made to resolve this issue but reducing term is not the answer and likely to worsen the quality and value of the caretaking service.”

Mr Cook said developers were required to disclose management rights agreements before any sale takes place, meaning it was wrong to suggest anything sneaky or underhand was happening.

“This means disclosing full caretaking and letting agreements including full schedule of duties, the caretaking salary and the term of the agreements,” Mr Cook said. “If any changes are made before settlement, this amounts to material change and purchasers can terminate.”

UDIA QLD CEO Kirsty Chessher-Brown also urged caution.

“Any significant change to current arrangements may have potential ramifications for (our) members and in turn the delivery of a consistent pipeline of product to market, further exacerbating the ongoing rental affordability crisis,” she said in a message to members.