QLD has an obsession for a “paper tenure” that can turn as toxic as GFC derivatives.  A body corporate investment can mutate into a living hell when disputes between managers and unit owners arise.

These property rights emerged in the 1970s as a fledgling cottage industry when entrepreneurial developers explored new ways of maximising profits.  Queensland, unlike other States, have been playing catch up with band-aid legislation ever since. It is now infinitely more difficult to rein in the horse that’s bolted.

“Management Rights” are contracts lasting up to 25 years typically fashioned by developers to maximise their selling profit for periods with little concern for the future consequences. . In NSW developers can only bind the Body Corp for one year, and then the lot owners make their own decisions.

Queensland dominates the management rights space in Australia with more than 2,500 properties operating under them compared with 200 in NSW and just 20 in Victoria, both of which are substantially bigger markets.

Originally, management rights were designed for generic ‘mum and dad’ teams who shared a common interest with other unit holders in maintaining a well-run and peaceful complex.

Large “corporate” managers have since moved in by wiggling between the gaps in the legislation to operate multiple property portfolios with primary concern for shareholder profits rather than residents or unit owners. With recent sales of rights up to $15 million, it can be BIG business. Reports of gross rental commissions in the vicinity of 25% and mark ups on costs of 100% serve to fuel the growing unrest.

Management rights are arrangements where a business holds contracts with the body corporate of a community titles scheme to provide a combination of caretaking and letting agent services, with the ´resident manager´ or employee licensed to act as a resident letting agent living onsite.

Under the Body Corporate and Community Management Act 1997 Management Rights comprise two separate agreements;

(1) a Caretaking Agreement covering the maintenance of the property and nominating a management fee to be paid from levies collected from owners, and

(2) an Exclusive Letting Agreement of units in the property.

The accommodation module covering properties with short term or resort rentals provides 25 year terms for management agreements, the standard module 10 year terms for residential properties.

The following news article extract about a recent court action (Henderson and Anor v The Body Corporate for Merrimac Heights [2011] QSC336 ) illustrates some of the issues:

It’s time to wipe the slate clean on management rights. The system, which has been foisted upon us for decades by government legislation, simply isn’t working — especially if the surge in disputes between apartment owners, body corporate committees and building managers is any indication. Neighbours tackle neighbours for the pettiest of reasons at the best of times, but there are no fights more acrimonious than those seething beneath the surface of many strata-titled properties on the Gold Coast.

The latest blow-up at the Merrimac Heights resort has left unit owners more than $400,000 out of pocket because of a court case that has gone against them. After ending the existing manager’s maintenance contract at the resort two years ago, the body corporate lost a legal action brought to the Supreme Court of Queensland two weeks ago by the building managers, Peter and Keiren Henderson. It was victory for contract law, and a rightful protection of the Hendersons’ rights.

But it hasn’t done anything to mend ill feelings that are still brooding at the complex.

Source : http://www.goldcoast.com.au/article/2011/11/23/368031_nick-nichols-opinion.html

The Department of Justice and Attorney-General is seeking submissions until Tuesday 8 May 2012 about the current system of management rights in Queensland. For further information : http://www.fairtrading.qld.gov.au/management-rights-in-community-title-schemes.htm

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