How Do Management Rights Work?

Every Strata Titled complex is controlled by a Body Corporate which is simply all the owners of units in the complex. To assist the Body Corporate in the management of its secretarial and financial affairs, a Body Corporate Manager is appointed. The Body Corporate Manager is a separate company which specialises in servicing the affairs of Bodies Corporate.

When the complex is established, the Body Corporate, which at this time is usually the developer, introduces a set of rules known as the By-Laws. These rules are designed for the efficient running of the complex and the quiet enjoyment of all occupants.

When the developer determines that the complex will have onsite managers to caretake the property, maintain the common areas and control the letting of the units within the complex, a Management and Caretaking Agreement(s)is established. This agreement is between the Body Corporate and the person who buys the Management Rights, i.e. the Resident Letting Agent (Manager), and stipulates the Manager’s remuneration and the required duties in maintaining the Common Area. It also stipulates the classification or “module” the building will be operate under and the term of the Agreement.

There are two modules, a “Standard Module” and an “Accommodation Module”. Each module has specific features, the most important to the Resident Letting Agent is the maximum term allowed in each module. The Standard Module has a maximum term of 10 years while the Accommodation Module has a maximum term of 25 years. As the term of the Agreement reduces over time, the term can be topped up by a maximum of 5 years in any one year, with the approval of the Body Corporate, providing the total number does not exceed the maximum term allowed under the module.

In addition to the Management and Caretaking Agreement there is a second agreement called a Letting Agreement which is again between the Body Corporate and the building Manager granting authority to the manager to undertake the letting of units within the complex on behalf of the unit owners. These are the two documents that bind the Body Corporate and the Manager.

When buying management rights from an existing manager these two documents require the approval of the Body Corporate to be assigned to the proposed new manager. Once these agreements have been assigned, the new manager is responsible for the management of the building and the conduct of the letting business.

Finally, a Form 6 (Property occupations act 2014) Appointment Of Agent, referred to as a Letting Appointment, must be signed by the owner of each unit to be let, appointing the Manager to undertake the letting and setting out the terms of the appointment and the schedule of all fees and charges. In the event of the manager selling his management rights, the Letting Appointments are assignable/transferable to the new Manager

The Caretaking and Management Agreement(s), the Letting Agreement and all Letting Appointments will be checked by the purchaser’s solicitor to ensure there are no onerous conditions in the agreements and that the Letting Appointments are properly completed, prior to the contract being deemed unconditional.

With these documents securely in place, the new Manager can commence a new career as the proud owner of the Management Rights.