As the owner of a short-stay accommodation lot, have you ever been told by an agent managing your property that you won’t be paid for 90 days?
With the rise of non-traditional travel agents, overseas-based travel agents and other disrupters such as Airbnb, there are more and more cases of money being held or delayed for longer than what the management rights industry would describe as normal. It raises important questions around the handling and protection of consumer funds.
In order to own and operate management rights in Queensland, all resident property managers are required to obtain and maintain a real estate agents’ licence, either a Resident Letting Agent’s Licence (RLA) or a full licence (LREA). Similar licensing requirements are in place in New South Wales.
Other states are being encouraged to follow the Queensland lead. In these states you require a licence to collect rent from tenants on behalf of long-stay investor owners but ignore the protections that licensing provides for investors of short-stay apartments.
A licensed real estate agent is required to open and maintain a trust account with strict rules in place relating to the management of it, including random auditing, annual reports and monthly balancing. While trust accounts add cost and complexity for operators, they also ensure that monies paid to a management rights business is protected the instant it is received.
For investors, this means that if their unit falls within a management rights business they can be safe in the knowledge that their funds are being protected and that there is scrutiny of those funds and stringent rules about how they are managed. The investor’s income is protected and usually processed within 30 days of the guest’s departure or tenant`s rental cycle.
There is a growing trend however, for some travel agents and ‘car park cowboys’ to simply take money from consumers without putting it into a trust account. Often this is done to avoid incurring the costs associated with managing a trust account, and the desire to accrue interest on funds that simply do not belong to them. However, if these businesses suddenly become insolvent, all the funds are unprotected.
In addition to unit investors putting themselves at risk of losing their income if the agent or operator folds, guests hoping to enjoy the property can also be left in the lurch without being able to get a refund on their deposit or fees paid.
The recent news of the demise of yet another dodgy online travel agent sinking thousands of dollars of consumer funds was met with widespread concern by consumer groups and the management rights industry.
It is yet another demonstration of just how robust the management rights business model is in best serving the interests of unit owners and guests alike – but the importance of consumer protection is something we often don’t talk about.
For many years ARAMA has worked with state governments at a policy level to ensure a legislative environment supportive of the management rights industry as a whole.
We have also built close ties with the regulator, the Office of Fair Trading (OFT), so that we can provide insight into emerging trends or challenges facing operators that may then feed into the development of new policy.
With numerous online travel agents in the market – both large and small – and the increasing popularity of Airbnb, management rights will continue to offer the greatest outcome for consumers.
The protection of funds offered by a management rights operator is something that will continue to elevate our industry – in the eyes of regulators, investors, tenants and guests.
Help us share this news with our investor owners and our guests. It is what truly sets us apart from other operators.