Consider engaging a professional to review your agreements to ensure they are:
Your auditor should be reviewing a select number of these agreements at each visit; however, that may not be the case if you are not using an industry specialist auditor. It is the responsibility of the vendor to ensure the letting authorities reflect the correct charge to a letting owner.
When carrying out verifications for purchasers, we find a large number of vendors do not review their letting agreements, and they are then required to engage with their owners to have the agreements updated.
During the sales process, it can be very stressful getting agreements returned in time for settlement.
Where possible, you should have your body corporate agreement terms upgraded or extended so that your purchaser has sufficient years left on the agreements to enable their financier to fund the purchase.
With 10-year agreements, the term must be as close to 10 as possible and with 25-year agreements, as close to 25 years is desirable.
Consider approaching your lawyer to request that the body corporate upgrade your agreements to include a termination clause. This will allow your purchaser greater flexibility when approaching financiers.
Many financiers in the industry are more selective in relation to who they lend to and on what terms, so it’s important to present your business agreements in the most lender-friendly form as possible.
Before making the decision to sell, make a comprehensive list of all assets to be included in the sale of the business, so there is no misunderstanding in the settlement process.
Firstly, engage an industry professional to prepare sales figures to ensure that figures are realistic and verifiable.
Ask an industry specialist what records a verifier will require and ensure that your records are in a suitable state for a smooth verification. The verifying accountant will have a significant influence over your prospective purchaser in relation to whether they proceed or not, so these steps are vital in order that your business is presented in the best light.
Be sure that your industry professional is made aware of any letting pool movements during the period, and identify any one-off income that is earned.
Discuss with your industry specialist what appropriate level of wage assistance should be included in your sales figures.
Wage assistance is probably the most contentious expense in any verification, so it’s important to be realistic in what is acceptable. Remember, if your rights are short-term or holiday, then your labour should (at the very least) include assistance for weekends.
If the rights are permanent, then also be realistic about the staffing required to manage a large letting pool.
Valuers place a great deal of importance on this expense and if the figure is not realistic, then this will hinder your prospective purchaser’s ability to obtain finance for the purchase.
Discuss the sale with your specialist accountant
It’s important to discuss your sale details with your accountant to ensure there are no hidden issues with the sale contract that will cause you distress in relation to capital gains tax.
Capital gains tax is very complex and if the sale is not structured correctly, it may not be wise for you to proceed.
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