06 Nov 2013
Words Tim Admin

Management Rights - A Victorian Perspective

Properly structured, the management rights model of building management can be beneficial to all involved in the development and operation of an apartment block whether it be solely residential or mixed use. For the developer, the adoption of the model enhances return on the development and assists in the sale process, purchasers of apartments have the comfort that there is an onsite caretaker (who is also an apartment owner) taking care of their investments, and the owners corporation need only deal with one entity with regard to the management and caretaking of the development. Those apartment owners who are investors rather than owner-occupiers also have the benefit of an onsite manager looking after letting. The model which had its genesis in Queensland has become extremely popular in New South Wales and has gained some currency in Victoria since the relaxation of the estate agents' licensing requirements a few years ago. Whilst the model is regulated by specific legislation in Queensland and New South Wales (Body Corporate and Community Management Act 1997 Qld; Community Land Management Act 1989 NSW) there is no specific legislation in Victoria which regulates the relationship between the parties to a management rights scheme. Moreover, developers need to be aware that in most cases a Class Order published by the Australian Securities and Investments Commission exempting management rights schemes from the financial services licensing regime must be complied with otherwise the operator will require an Australian Financial Services Licence. Finally, the developer has an obligation at law and under the Owners Corporation Act 2006 to act honestly and reasonably and in the best interest of the Owners Corporation in entering into an agreement to establish a management rights scheme. Considering all of this it becomes very clear that, in Victoria especially, the constituent documents which establish the management rights must be very carefully drawn to ensure compliance with the ASIC requirements and to achieve an even balance between the interests of all participants in the management rights scheme including the manager, individual apartment owners and the Owners Corporation. One positive of there being no legislative regime in Victoria is that, unlike Queensland and New South Wales, there is no limit to the length of the term of management rights in Victoria. It is desirable that if management rights are to be implemented that the developer do so at an early stage so that apartments and other titles in the development be marketed from the outset on the basis that management rights will be implemented and full pre-contract disclosure is made to prospective purchasers.