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Regularly topping up your management rights agreement can improve the value and saleability. Some managers often overlook this until they are ready to sell their management rights.
In SIRE Management Rights we work closely with onsite managers and management rights owners to constantly improve the value of their business. We get questions everyday on this important topic. Today we are going to answer 6 of the most frequently asked questions for topping up management rights agreements.
1. How many years to top up? 5 years is the maximum option length for a top up with a deed of variation. You need to decide on the length of option you need because in the Standard Module the maximum term of unexpired options is 10 years – For instance if your Standard Module agreement has 8 years left you cannot extend the agreement for another 5 years because 8 + 5 is more than 10. The same applies for Accommodation Module agreements except the maximum term cannot exceed 25 years.
2. What does terms and options mean? Agreements are comprised of options which define the start and end date of the agreement. Agreements usually have multiple options and we often see a 5 years option + another 5 years option in the standard module which gives a 10 years term. Accommodation module agreements can have for instance a 20 years option + 5 years option which gives a 25 years term. In any case, the longer the term remaining the higher the management rights are valued.
3. How to approach the committee? Listen to what the committee and the owners have to say. Everyone should be working towards a high quality complex both in presentation and financial return. If the owners are happy with your services and the complex is in good shape this will benefit you, for more ideas on how to improve the presentation, financial return and relationships in your building, check out the “The Management rights formula” and download chapter 8 from the link below
4. What costs are associated with topping up the agreement? Usually there are legal costs and administrative costs. Most of the time you will need to pay the costs for your solicitor and the body corporate’s solicitor. Usually there are also administrative costs you need to pay such as the body corporate manager’s cost and returning officer’s cost. Sometimes the body corporate may not ask you to pay for their legal and administrative costs but don’t be surprised if they ask you to pay for their costs.
It’s a good idea to know the body corporate’s legal and administrative costs if you are paying. Always get fixed price quotes or capped price quotes before agreeing to proceed because you don’t want to be paying a massive bill that you were not expecting. As much as you want your agreements topped up – don’t get ripped off!
5. How to get the owners support for topping up your agreement? Basically the owners need to feel they are getting good value for money. Over the last 10 years, 99% of the managers we worked with often obtain overwhelming support from owners for topping up their agreement, we can share the details and strategic information with you or connect you with experts in the industry if needed please call the SIRE team on 0404 331 310.
6. Can proxies be used and what about a poll voting for topping up? The motion to top up the agreements are included in a general meeting for lot owners to vote on. It is an ordinary resolution motion which can allow voting via proxies, but it is not recommended to allow proxy because it is too risky and your top up motion can easily be defeated by one person that has multiple votes. Allowing poll voting is also risky. The key is to ensure the motion is Ordinary Resolution by Secret Ballot. Secret Ballot disables the use of proxies and also poll voting.
We have a 15 point checklist called Top Up Formula you can use that will make your top up process easier.