Management Rights Myths and Legends

Before I was thrust into Management Rights 18 years ago, quite by chance, I owned an apartment that had an onsite manager. The extent of my knowledge was that there was a mysterious old man who somehow ended up living in the office behind the lifts, who seemed obsessed with vacuuming hallways and if you used the spa after closing time, he’d come by and tell you to go to bed. That was all I knew. How this man came to be living in this office behind the lifts, why he was being paid to vacuum things, or by whom, and what higher power had bestowed him the authority to send people to bed, I had no idea. It was a total mystery. The problem with mysteries is they often arouse suspicion and mistrust among the mystified. This is certainly the case, and highly problematic, with Management Rights where understanding and trust are keystones to a functional relationship between a manager, the committee, and lot owners.

I have recently read some rather terrible and misinformed articles and commentary from the mainstream media, and even some advocacy groups, that are highly critical of Management Rights in Queensland. Criticism is healthy, and important, but only when the points being criticized are factual. A lot of the issues being bandied about by these articles appear more concerned in rousing misguided outrage from the mystified than by offering any legitimate arguments about Management Rights whatsoever. I had planned to address some of these articles head-on, but cooler heads prevailed and I decided, instead, to deal with some of the myths and legends of Management Rights to drive back the darkness and replace mystery with enlightenment.

Myth 1: Onsite Managers are commonly receiving salaries of close to half a million dollars for doing very little.

Ok I know that sounds ridiculous to most managers reading it – but that’s a direct quote from an ‘apartment advocacy spokesperson’ printed in a major newspaper this week. Time to slay our first mythical dragon! Firstly, I have never in my life, heard of an onsite manager receiving $400,000 a year in remuneration. In fact we currently have over 600 Management Rights on the market, the absolute highest remuneration of all these listings is 1.6M but that’s a combined portfolio spanning many very large, sprawling townhouse complexes each with their own strata schemes being maintained by entire teams of caretaking managers, none of whom would be receiving anywhere near $400,000 a year. Of the singular scheme management rights listed on our site, I’ve counted 1,913 complexes that have disclosed the body corporate remuneration. The *AVERAGE* body corporate remuneration being $95,000 per year. No where near the $400,000 being touted here, $95k is what an entry level office grad makes these days (I can count on one tail the number of times he gets woken up at 3am by drunk idiots who’ve lost their unit keys and demand to be let in), it’s not exactly oligarch territory.

Secondly, caretaking remuneration isn’t a salary as such. These funds are availed by the body corporate in order to maintain the complex’s caretaking agreement. It’s not as though the manager simply cashes the remuneration into their bank each month for nothing. Ground keepers, gardeners, admin staff, assistants, cleaners facilities managers, pool cleaners, mower men, etc, all need to be funded from this remuneration package. The “journalist” seems to have skimmed over this inconvenient detail to imply that one single person is bilking close to half-a-million dollars a year out of a body corporate for changing the occasional light-bulb. It’s simply not the case – because believe me, every single remuneration package comes across my desk for every MR in the state, and if such an opportunity existed, I’d have taken it long before it hit our website ha ha ha. We recently ran a calculation for remuneration, and it worked out to around $1500 per lot, per year. So you’d need a complex of at least 260 lots to be pulling those numbers, and it would be physically impossible for a single onsite manager to be maintaining a complex of that size single-handedly. The workload sure as hell wouldn’t be ‘very little’ if they were!

Myth 2: 25 year contract terms make QLD Management Rights a corrupt rort that costs QLD bodies corporate tens of millions of dollars a year.

It is indeed true that 25 year caretaking contract terms in Queensland are significantly longer than the 4 year maximums of the southern states. However as counter to this, Queensland has very strict safeguards to protect bodies corporate that do not exist down south. For starters the onsite manager cannot legally sit on the committee, nor can they act as the body corporate manager. This separation of power ensures the manager is held accountable to the requirements of their contract by an unrelated third party, in NSW and VIC a single manager can also run the entire body corporate (and usually do) AND sit on the committee who are responsible for specifying the terms, renewing the agreement(!), and enforcing the manager’s contract (uh oh… that sounds more like a corrupt rort to me! how about that for a conflict of interest? Sure you only get 4 years, but you, yourself are the guy responsible for renewing it as often as you wish and setting your own remuneration!). Funnily enough, the body corporate rates in the southern states are not lower than Queenland’s, which begs the question if our bodies corporate are being ripped off “tens of millions of dollars” why aren’t our levies tens of millions of dollars higher? 25 year contract terms are actually a positive feature of our framework, it creates stability and gives managers a vested, long-term interest in ensuring the building is well run. Additionally, caretaking agreements spell out, specifically, what managers are required to do in their role for the body corporate, and if they fail to do so, regardless of how many years the agreement is for, they can absolutely be terminated from the position at any time if they breach their contract. Interestingly, in such situations where this has occurred (Carmel By The Sea being a well known example)  the caretaking fees *do not* go down, because now the body corporate are required to pay for a caretaker whose income isn’t supplemented with letting commission.

Myth 3: Onsite Managers can hold owners to ransom with the exclusive letting rights they have to the building.

Another crazy statement from the mainstream press this week. The source of confusion here may stem from the fact that many body corporate by-laws state no other business is to be ‘carried on’ at the complex. This doesn’t mean lots are exclusively let by the onsite manager. It simply means Johnny-the-resident isn’t allowed to convert his ground floor studio apartment into an all-night laundromat, or a pet salon, or a strip club, or (even worse) a real estate office. It doesn’t preclude a lot owner from appointing any licenced letting agent they wish (or self managing for that matter) to rent out their lot. They are free to do so, and many do: onsite managers, as we all know, have to work very hard to protect and defend the letting pool from outside agents. There’s certainly no exclusivity here. If a manager doesn’t pull their weight, they will end up losing their letting pool, and be in serious financial strife because, again as we all know, the caretaking remuneration alone is rarely sufficient for an onsite manager to survive on.

Those are three of the big myths and legends I’ve noted this week. If you’ve heard any others you’d like to set the record straight on, please comment them below. Finally, Archers are holding ‘Great debate’ right across Queensland this month at various locations. ARAMA President Trevor Rawnsley will be on the debating panel so it should be quite entertaining. I’d strongly encourage all managers to get along to the nearest event (see our events section for dates and details) and show your support.