Definitions

Accountant’s Verification

The process undertaken by a purchaser’s accountant to ensure the accuracy of the financial statements which have been used to calculate the net profit of the business for the nominated period.

Acquisition Expenses

Expenses associated with the Management Rights purchase.  Such things as accountant’s verification fees, finance application fees, legal fees, Licence application fees and stamp duty.  It is prudent to allow approximately 5% of the total purchase price to cover these costs.

AGM

An annual meeting for all owners within the Body Corporate.  An EGM is a special general meeting called for a specific purpose.  All lot owners are invited to attend.

Audits

Each year the Office of Fair Trading requires that the manager’s accountant conducts three audits on site.  One of these audits must be presented to the OFT annually.  It is a requirement of the Resident Letting Licence that a satisfactory audit report is received annually,

BCCM Act

The Body Corporate and Community Management Act 1997.  The Queensland Act of Parliament that governs the Body Corporate and Management Rights industry

Body Corporate

The legal term for the entity created to control and administer the common property.  All lot owners are members of the Body Corporate and they select a committee to make decisions on their behalf.

Body Corporate Committee

The Body Corporate Committee is elected at the AGM.  The lot owners nominate representatives to fill the positions of Chairman, Secretary, Treasurer and Ordinary committee members.  Legislation requires that there is a minimum of three and a maximum of seven on the committee and all nominees must be current financial members of the Body Corporate.  The Body Corporate will nominate a committee member to liaise with the Resident Manager who is automatically a non-voting member of the Committee.

Body Corporate Levies

Amounts payable by lot owners to the Body Corporate to cover the costs of running the complex.  The Body Corporate presents an annual budget for approval by the lot owners at the AGM. An administrative fund is established to cover the day-to-day running expenses and a sinking (saving) fund set aside for larger items which may occur in the future.  Special levies may be introduced from time to time should unexpected expenditure occur.

Body Corporate Manager

A business providing services to multiple Bodies Corporate. They will organise and attend AGMs, provide legal opinion to the Body Corporate and administer the collection of Body Corporate Levies

Body Corporate Salary

The income paid to the Resident Manager by the Body Corporate under the terms and conditions of the Caretaking Agreement.

By-Laws

The rules of the Body Corporate relating to the use of the lots and common property.  They define what the Body Corporate can and can’t do.  The By-Laws apply to all lot owners and their guests.

Caretaking (or Management) Agreement

An agreement between the Body Corporate and the Resident Manager whereby the Manager agrees to perform certain duties in return for an agreed remuneration.

Common Property

The property within a development that is shared by all owners e.g. swimming pools, hallways, gardens internal roadways, tennis courts, gymnasiums.

Community Title Scheme - CTS

The Community Titles Scheme of each specific Body Corporate is identified by a registration number.

Deed of Assignment

A document entered into between an outgoing manager, an incoming manager and the Body Corporate which provides for the assignment of the Caretaking and Letting Agreements.  The assignment must have the approval of the Body Corporate.

Deed of Authorisation

A document used to record any change to the Letting Agreement.

Deed of Engagement

A document used to record any changes to the Caretaking Agreement.

Deed of Variation

A document entered into between the Body Corporate and the Resident Manager which records any changes to the Caretaking and/or Letting Agreements.

Exclusive Use

An area of common property assigned specifically to one lot.

Lease Back

An arrangement between a Resident Manager and a lot owner whereby the Resident Manager leases a unit directly from the lot owner then on-lets the unit for a higher return.

Legal Due Diligence

The process undertaken by the purchaser’s solicitor to review the Caretaking and Letting Agreements, previous assignments and legal compliance.

Letting Agreement

An agreement between the Body Corporate and the Resident Manager allowing the Resident Manager to provide exclusive letting services to the owners within the complex.

Letting Pool

A term referring to the number of units managed by the Resident Manager.  There must be a current PAMD 20a in place for each individual unit.

Lot

The individual title of an owner; their unit or their townhouse.  Each lot has its own individual entitlement which is the basis for the calculation of Body Corporate Levies for the lot.

Manager’s Unit

The unit set aside as the Resident Manager’s residence.  This unit usually contains and office and the Management Rights business is conducted from here.

Modules

Under the BCCM Act different types of complexes are governed by different rules for a specific type of Body Corporate.  Types of modules include Standard, Accommodation and Corporate modules.  The main feature of an accommodation module is the agreement term limitation of twenty-five years where as a standard module has a term limitation of ten years including options.

Multiplier

The multiplier is a number used to determine the value of the business component of your Management Rights purchase.  To calculate the purchase price of the Management Rights business, you multiply the verified net profit of the business by the multiplier then add the value of the Manager’s unit.

Many market influences such as interest rates, location, size of the letting pool etc affect the multiplier, but the size of the multiplier frequently reflects the stability of the business.  A very secure business will command a higher multiplier.

Net Profit

Net profit is calculated by determining the total revenue of the business and then deducting operating expenses.  The calculation does not include depreciation, interest on loans, tax liability, Resident Managers’ drawings or wages to persons employed when an industry standard would determine that the Resident Managers could be reasonably expected to undertake those tasks.

Off The Plan

A term used when a Resident Manager purchase a Management Rights business prior to the construction and/or completion of the complex. 

On Title

A term used to differentiate between areas that could be on either common or exclusive areas.  Often used to define the use of the Manager’s office.

PAMD 20a

A written letting appointment authority between the Resident Manager and a lot owner.

REIQ

and REINSW

The Real Estate Institute of Queensland and the Real Estate Institute of New South Wales; the industry bodies for the Real Estate industry.

RTA

and Tenants NSW

The Residential Tenancy Authority Queensland and Residential Tenancies New South Wales. These bodies administer the Residential Tenancies and Rooming Accommodation Act 2008 and provide advice on the rights and responsibilities of tenants

Strata Scheme

A multi-titled development comprising individually owned lots, exclusive use areas and common property.

Trust Account

The account approved by the Office of Fair Trading where rental and letting income must be banked.  Owners are paid from this account at the end of the month once management fees and any repair and maintenance liabilities have been deducted.