by Graham Vercoe
14th July, 2017
Full Special Report - Management Rights 101
Management rights is an integral part of Queensland’s infrastructure, especially within the accommodation sector. It is doubtful that the state’s tourist infrastructure would have grown to the extent it has without management rights over the past five decades.
As well as providing the infrastructure, Queensland’s multi-billion-dollar management rights has delivered a lasting, profitable income for mum-and-dad investors, partnerships and small business through to substantial corporates.
As a regulated industry, management rights operates in a diversity of retail, commercial, permanent residential, student and holiday complexes in strata and community title properties. Management rights provides an effective way for a strata title property to operate when a number of units are owned by investors who want to maintain an active role in the operation of their investment.
Queensland did not originate strata title legislation worldwide, or even in Australia, but it did perfect it.
To look at the first “strata title” laws you need to go back to the 1804 Napoleonic Code but, in modern terms, the first condominium law passed was in Puerto Rico in 1958 followed by the Utah Condominium Act of 1960 in mainland US that made it possible for Graystone Manor to be built as the first strata titled condominium.
The initial Australian strata titles legislation was enacted in 1961 when the New South Wales parliament passed the Conveyancing (Strata Titles) Act 1961. The first Queensland legislation was the Building Units and Group Titles Act in 1965, and this has been refined over decades with the Body Corporate and Community Management Act that initiated major industry reforms in 1994 and 1997 that saw the creation of a range of accommodation modules. The process of legislative refinement continues and this year the BCCM Act is again under active review.
Queensland has more than 43,000 strata schemes with 405,000 units that are subject to the BCCM Act. The Gold Coast was the first region to embrace management rights and is, today, the epicentre of the industry but it flourishes in Brisbane, Sunshine Coast, Tropical North Queensland and most vacation areas of the state.
Essentially, a management rights business involves the owner of the business enjoying a contractual agreement with the body corporate of a multi-unit complex to supply certain services, in exchange for a salary and the right to earn further commission and services income from individual owners in the complex.
The manager also purchases the manager's unit within the complex giving them a vested and financial interest in the successful performance of the complex.
The practical nature of the work undertaken by resident managers and a range of service providers and industry operators are needed to attract not just visitors, but investors to ensure that the facilities and services that make a Queensland holiday are readily available on site.
The two main functions of the resident manager are caretaking (which includes managing the physical asset of the owners, security, bookings, guest services, trust fund management and body corporate/unit owner liaison) and the letting responsibilities (the resident manager is licensed to act as agent for investor owners who choose to appoint him as agent).
Management rights have always been a sound investment and has maintained steady growth in Queensland with around 450,000 unit owners and an estimated 1.1 million people living in strata title properties at this time. This is only going to grow with more and more people finding home ownership not within their grasp. Strata title renting or ownership can provide an economic means of stable accommodation with resort-style facilities not possible in stand-alone houses.
This has led to the the growth of MHEs – manufactured housing estates. This is envisaged to be the biggest growth market of the future. This new model is seeing large parcels of greenfield land on the outskirts of towns and cities being converted into this highly profitable new model.
As more empty-nesters seek to downsize in later life, apartments, over 50s communities, age care and gated retirement villages will be major growth areas for strata and community title.
As well, tourism is booming. Queensland alone hosted 2.6 million international visitors in the year ended March 2017, spending $5183 million during an average 21-night stay – the Gold Coast receiving more than 1 million of those. The number of international visitors to Tropical North Queensland grew 15.3 percent to a record 901,000, while 837,000 people (up 16.2 percent) travelled to the region specifically for holidays.
Those international visitors to Queensland spent $5.2 billion - equivalent of $100 million every week - around the state over the same period. Most of these stayed in strata title hotels, resorts and apartment complexes leading to above average occupancy rates.
Queensland’s tourism growth will continue to flourish with an added boost next year with the Commonwealth Games bringing in more than 6600 competitors plus their entourages and spectators.
The management rights industry continues to provide a very important commercial role in the diversity of managing the day-to-day growth and issues of density living and will continue to be an integral driving force in ensuring that the growth of community living is responsibly managed by a group of experienced people focussed on delivering outcomes for the benefit of all stakeholders.
Many people regard management rights as the ultimate home-based business, offering lifestyle, excellent return on investment and good re-sale potential. It provides a valuable income venture for family businesses, retirees, silent partners and other investors with a considerable lifestyle advantage, albeit 24/7/365. Properties can range from resorts with only a handful of units up to multi-million dollar high rises. The rights can be acquired off-the-plan, as newbuilds or already functioning businesses and banks are most friendly to financing management rights ventures.
Backing up investors is a solid force of solicitors, accountants, financiers and brokers that have unparalleled expertise in management rights to seamlessly, hassle-free guide and assist those that enter this incredible lifestyle venture.
Graham Vercoe - Resort Publishing