The official newsletter of Unit Owners Association QLD
The Cost of Good Apartment Living in Queensland 8 November 2010. It is fair to say that there are many upsides to living in a unit or apartment where an on-site manager is on hand to keep the building and grounds well maintained and clean. The convenience of putting your garbage down the chute from level ten, watching someone else emptying the lawn mower catcher on hot days and having the pool cleaned ready for that morning or afternoon swim is well worth a few extra dollars to many. But how much do apartment owners pay building managers and do they really get value for money? Written by UOAQ 2010 main account Building managers, known as caretakers in the Body Corporate and Community Management Act 1997, are part of what is known as the management rights industry. And it is an industry. Basically, it goes like this. Property developers build large apartment complexes that require onsite management due to their size and numerous facilities. Typically, one-bedroom The enforcement of new pool safety laws will apartments start at around $400K with be delayed for six months and Queensland’s penthouses over $1M. statutory land valuations will be postponed for three months in the aftermath of the The developer enters into a caretaking floods and Cyclone Yasi. and letting agreement with a management company for up to 25 years, provided for in “The State has been through a terrible time the Act.The on-site management company and now is not the time to stick rigidly to the (the prospective building manager) pays rules.” the developer often millions of dollars for the “right” to provide caretaking and letting “This is about giving people the breathing services within the complex. They are space they need to concentrate on putting required to live on-site and usually this price their lives back together.” includes an apartment.
The building manager also has the exclusive right to let apartments within the complex. While investor owners can often use an outside agent, no-one else can set up in competition to the building manager within the complex. The building manager’s salary for larger complexes starts at $200K - $300K. Along with the rental commissions, a building manager in a newer complex of say 200 apartments with 50 per cent rentals may expect to receive in excess of $500K per year in revenue, less costs. The main cost is the cost of funds to make the initial purchase of the management rights. This Brisbane Skyline may be a few hundred thousand dollars per year on the example provided, taking into account loan interest and the opportunity cost of funds provided by the management company. There are other costs too, such as staffing. Nevertheless, it can be a very profitable business indeed for shrewd building managers who are well supported by “the industry”. the new measures could cause delays as the demand for rental properties increases in the Included in the industry are specialist law aftermath of the current crisis. firms and the peak body ARAMA (Australian Resident Accommodation Managers’ The enforcement of new pool safety laws will Association) that coach building managers be delayed for six months and Queensland’s and conduct seminars as to how they can statutory land valuations will be postponed for better control and profit from “their” complex. three months in the aftermath of the floods and Cyclone Yasi. For example, unsuspecting apartment owners are sought out by the building “The State has been through a terrible time manager to put forward motions at annual and now is not the time to stick rigidly to general meetings to extend or “top up” the rules. This is about giving people the their contract every few years out to the breathing space they need to concentrate original term, up to 25 years. These motions on putting their lives back together.” are often passed by ill-informed bodies corporate. Building managers can then Under legislation introduced on 1 December on-sell their management rights for the 2010, all dwellings with a non shared pool maximum price to another prospective must have a valid pool safety certificate bebuilding manager who is able to lay his or fore a rental agreement can be entered into. her hands on the requisite $2M – $3M or It has also been confirmed by Pool Safety more. And the cycle starts again. Queensland that the delay also applies to Shared Pools provided there are units. So why is this bad news for apartment owners?
Premier announces common sense measures in aftermath of natural disasters
Under legislation introduced on 1 December The property developer pockets the millions 2010, all dwellings with a non shared pool and then sells the apartments to the public must have a valid pool safety certificate bewith the contract locked in. Once locked fore a rental agreement can be entered into. in, it is very difficult for bodies corporate to It has also been confirmed by Pool Safety terminate the contract unless the building Queensland that the delay also applies to manager is quite negligent. Shared Pools provided there are units within the complex that are rented out (whether Even then it can be a protracted and permanent or holiday let). There are fears expensive process if they decide to appeal. Included in this agreement or contract is a salary to be paid to the building manager a Unit Buying Buying Unit byBuying the body corporate (apartment owners). a Unit Well, only prospective buildingamanagers
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who can lay their hands on a lot of money can hope to manage the larger complexes in Queensland due to the price demanded by property developers and on-selling building managers.
Premier announces common sense measures in This effectively locks outof many potential aftermath good building managers who can’t stump up natural the cash to pay fordisasters these “rights”. Also, the incumbent manager has Written by UOAQbuilding 2010 main account the option of choosing when and to whom they their management Theon-sell enforcement of new poolrights. safetyThe building manager will sell to the highest laws will be delayed for six months and bidder, irrespective of theirland competency Queensland’s statutory valuationsor experience. The body under will be postponed forcorporate three months in the the Act is not allowed to unreasonably withhold aftermath of the floods and Cyclone Yasi. its consent for this transfer (sale).
“The State has been through a terrible And of and course, salaries to the time nowthese is not high the time to stick rigbuilding manager are paid by apartment idly to the rules.” owners in their body corporate levies. The largest component of levies typically is the “This is about giving people the breathing building manager’s salary. space they need to concentrate on putting their lives back together.” So, what is the answer?
Under legislation introduced on 1 DecemWell, a goodallstart has been made by the ber 2010, dwellings with a non shared Unit Owners Association of Queensland pool must have a valid pool safety cer(UOAQ) with their recent official policy tificate before a rental agreement can be and representations to government that by entered into. It has also been confirmed management rights shouldthat be the limited toalso Pool Safety Queensland delay 3 applies years. There are a number of benefits to Shared Pools provided there are that would flow suchthat a change to the units within thefrom complex are rented out legislation. (whether permanent or holiday let). First, management rights would become less expensive to buy for prospective building managers. This would allow other probably very good and well qualified people with experience in motel management and the like the opportunity to purchase these rights. Second, the initial salary set by the developer, usually at the higher end of what one might expect, could be renegotiated at the end of three years. Other aspects of the contract could also be renegotiated. Third, the body corporate would have the option of deciding to not renew the contract of a poor performing building manager at the end of the 3-year period without having to Brisbane Skyline Continued Page 6
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