TIPS FOR SELLING MANAGEMENT RIGHTS
? g n i l Sel Be prepared well in advance… In the previous Tips for Selling Management Rights I authored for Resort News, I began with comments about how the quality of a prospective buyer had become an important factor in any management rights sale. Before you actually list the business for sale there is so much that can, and should be done, to make the sale as smooth as possible. The selection of the buyer is however absolutely critical, and it is one of the first questions I ask a seller when I learn of a potential sale contract.
Qualified buyer Some bodies corporate fail to properly investigate an incoming manager’s qualifications and experience, they accept anyone put forward and then find they have a poorly performing manager. As a consequence of this, bodies corporate today, quite understandably, are demanding that proposed new managers are properly qualified and experienced, or if not, that they have undergone
John Mahoney, Mahoneys appropriate training, both theoretical and practical. There used to be a misconception that a body corporate could not refuse to consent to an assignment unless the proposed new manager was a criminal or a bankrupt. That is, and always has been, far from the case. A body corporate is entitled to be satisfied that a proposed new manager has the qualifications, experience, and financial capacity to perform all of the duties under the management rights agreements. You should therefore properly vet any proposed buyer to make sure that the buyer will be acceptable to the committee. If the buyer is
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a new entrant to management rights, there are various training and educational opportunities available in the marketplace that you should insist the prospective buyer undertakes. The ARAMA induction course is, in my view, a must for such buyers. In addition, new entrants should, for their own benefit, source and undergo training in regulatory compliance and if necessary some hands-on practical training. If not, there is a very real possibility of experiencing problems with the assignment process, huge legal fees from the body corporate’s lawyer and every likelihood of the assignment being rejected. If the buyer has held management rights previously ask to see references from those bodies corporate or committee members. If such references cannot be provided, be prepared for your body corporate to refuse the assignment.
Letting appointments Any proposed seller should check the letting appointments. POA forms 6 are automatically assignable but not all PAMD forms 20a. Ideally, you have by now had
all forms 20a replaced with new forms 6 but if not, and you are relying on these, for these to be assignable (depending on the version used), they should have the assignment section ticked and initialled, or you will have to obtain the consent of all owners to an assignment to the buyer. Almost without exception, buyers are insisting that at settlement the purchase price be reduced for non-compliant appointments. We have seen purchase prices heavily discounted, and some contracts terminated because the sellers did not want to, or were not able to, produce compliant appointments.
Management rights agreements Next, check your body corporate agreements. Locate copies of all the relevant agreements with the body corporate, copies of the caretaking and letting agreements, deeds of assignment, deeds of variation and the like. If my firm has acted for you, you would have all these documents in the indexed binder or on a USB stick we provide to our clients after settlement of their purchase. RESORT NEWS - JANUARY 2023