Buying Management Rights in NSW - part II

Published: 18 August 2008.

Contributed by Col Myers of Small Myers Hughes

I know that this sounds basic but it is really important to understand what you are buying when you decide on purchasing management rights in New South Wales.

What sort of an agreement are you purchasing? One that is caught by the 10-year term limitation or one that is not?
Are your duties ‘do’, ‘supervisory’ or a combination of both?
Is the remuneration that you will be paid by the owners‘ corporation reasonable, inadequate or excessive?
What are the consequences if the remuneration is excessive?
Are there any terms in the agreement than can be regarded as harsh or unreasonable?
Will the agreements survive a later challenge by a rogue executive committee?
Are the by-laws adequate to empower the entering into of the agreements and is there sufficient protection against on-site competition for lettings?
Does the complex that you are buying into have a history of building problems or disputes with its manager?
What sort of licence will you need to operate the business and what is the best way about obtaining this licence?

A lot of negative thoughts but you have to look for the negatives rather than just extract the positives!

The term limitation applies to agreements entered into from the 10 February 2003. If your agreement was entered into before that date and you have the support of your owners’ corporation, you have an unrestricted opportunity to top up your caretaking agreement. However, do it the wrong way and you forfeit that right forever.

Make sure that your purchasing structure is right. Talk to your accountant or your lawyer to discuss the pros and cons of a company / trust structure. When you have come up with a structure that suits your particular circumstances,make sure it is allowed under the by-law and the agreements. Some agreements specifically do not allow a split structure such as individuals owning the management unit for capital gain tax purposes and a company or trust owning the management rights.

Only a specialist management rights law firm like Small Myers Hughes (SMH Lawyers) can give you the answers to the above.

Before you buy, have a talk to Col Myers and understand what you are looking at buying into!