| Abbreviation
or Term |
Explanation |
|
Transfer Fee |
Percentages
of the MR business sale price which may be charged
by the BC in the event of a sale within the first
2 years of ownership. 3% in year 1 and 2% in year
2. |
| Accommodation
Module |
The module
to which an increasing number of schemes are now
changing. For lenders the primary feature is the
agreement term limitation of 25 years inclusive
of options. |
| Accountant’s
Verification |
Process
undertaken by purchaser’s accountant to ensure
the accuracy of financial statements on which net
profit for sale purposes is calculated. |
| Audits |
Each year
the OFT requires 3 audits to be conducted by the
on site manager’s accountant. One of these
audits must be submitted to the OFT annually. Resident
Letting Agent licence renewals are predicated on
the OFT receiving a satisfactory audit in the period
8 to 12 months after the licence was granted and
annually within that time frame thereafter. |
| BCCMA |
Body Corporate
and Community Management Act 1997. Legislation administering
strata schemes including management and letting
agreements. |
| Body Corporate
(BC) |
The legal
term which refers to the consolidated entity which
is the lot owners within a scheme. Known as Owner’s
Corporation in some states. |
| Body Corporate
Committee |
Group of
elected lot owners which has the power to vote on
specific matters and decision matters concerned
with the day to day running of the scheme. Does
not have the power to vary agreements but can approve
assignments. Resident manager is included but has
no vote. |
| Body Corporate
Manager |
A business
set up to provide BC management services to multiple
individual bodies corporate. Will attend to such
matters as organising AGMs, providing legal opinion
to committee and administering the collection of
levies. |
| Body Corporate
Salary |
The sum
paid to the resident manager by the BC under the
terms and conditions of the Management Agreement.
Average salary benchmark is $1000 per unit in the
scheme (not the letting pool) with reviews generally
linked to CPI. |
| Clawback
/ Retention |
Refers
to the contractual mechanism by which an intending
purchaser of an “off the plan” MR can
ensure that the number of units projected to be
in the letting pool at settlement is achieved. |
| Committee |
Also known
as the Body Corporate (BC) committee. A group of
elected owners within a strata scheme who are empowered
to make certain decisions and recommendations to
allow for the smooth day to day running of the scheme
without the need for all decisions to go before
an AGM or EGM. Resident managers are to be included
in all committee discussions but do not have voting
rights. Does not have the power to vary management
and letting agreements. |
| Common
Property |
Property
within a strata scheme which vests with the BC rather
than with any particular lot owner. |
| Deed of
Assignment |
Document
entered into between an outgoing manager, an incoming
manager and the body corporate allowing for the
transfer of the management and letting agreements.
Requires approval by the BC committee. |
| Deed of
Authorisation |
Document
used to adopt and/or amend the Letting Agreements
in certain circumstances. |
| Deed of
Engagement |
Document
used to adopt and/or amend the Management Agreement
in certain circumstances. |
| Deed of
Variation |
Document
entered into between the BC & the resident manager
varying the terms and conditions of the management
and/or letting agreements. |
| Due Diligence |
Process
undertaken by purchaser’s solicitor to ensure
all documentation is in order in respect of agreements,
previous assignments and compliance with appropriate
legislation. |
| Exclusive
Use |
An area
of common property the use of which attaches exclusively
to one particular lot. Also known as an Occupation
Authority or Licence to Occupy. |
| Leaseback |
An arrangement
whereby a resident manager leases units in a scheme
direct from the owners on the basis that the units
are then on-let for a higher return than that paid
to the owner under the leaseback arrangement. |
| Letting
Agreement |
An agreement
between the BC and the On Site Manager whereby the
BC agrees to allow the manager to provide exclusive
letting services to lot owners within the scheme. |
| Letting
Appointment |
Written
agreement under PAMDA Form 20A by which the owner
of a property appoints a licensed party to act on
behalf of that owner and account for funds via a
trust account. |
| Letting
Pool |
The combined
units in a scheme which, on the basis of letting
appointments from individual lot owners, are managed
by the on site manager as letting agent. |
| Levies |
Amounts
payable by lot owners in a scheme to ensure the
coverage of costs associated with the day to day
running of the scheme. Standard levies cover sinking
fund contributions, body corporate management fees
& the resident managers salary while special
levies can be introduced from time to time to cover
such things as refurbishments & upgrades to
the site. |
| Lot Owner’s
Deed |
Document
entered into between the BC & the manager where
the owner of the manager’s lot is not the
same party as the owner of the MR business. |
| Management
Agreement |
An agreement
between the BC and the On Site Manager whereby the
manager agrees to perform certain duties for an
agreed remuneration. |
| Modules |
The regulations
incorporated in the BCCMA under which various types
of strata schemes are operated. |
| Occupation
Authority |
Document
entered into by the BC allowing use of common property
that is not classified as exclusive use. |
| Off the
Plan / Greenfield |
Refers
to a management rights business being purchased
prior to the construction and/or completion of the
subject development. |
| OFT (Qld) |
The Office
of Fair Trading (OFT) which administers compliance
with the PAMD Act including licensing and trust
accounting. |
| On Title |
Term used
to differentiate areas which could be either common
area, exclusive use or actually owned as freehold.
Typical example is the manager’s office space. |
| PAMDA (Qld) |
Property
Agents and Motor Dealers Act. Legislation administering
real estate licensing, property management licensing
and real estate trust accounting. |
| Rental
Guarantee |
An arrangement
whereby a developer undertakes to pay a set amount
to unit owners within a scheme. Usually applied
to make the purchase of units in a scheme more desirable
for investors. |
| Resident
Manager |
The manager
contracted by the BC to manage the site and provide
letting services to lot owners (unit owners) within
the scheme. Also referred to as Resident Unit Manager
(RUM) or On Site Manager. |
| Restricted
Letting Agent |
A licensed
agent under the PAMDA for the purposes of acting
as a letting agent for a specific building or group
of buildings. |
| Sinking
Fund |
The accumulated
funds collected from sinking fund levies go toward
the upkeep and maintenance of the site. BCs are
obligated to put in place maintenance plans &
costings on a regular basis. |
| Standard
Module |
The module
to which all schemes defaulted when the act came
into force in 1997. For lenders the primary feature
is the agreement term limitation of 10 years inclusive
of options. |
| Strata
Scheme |
Multi titled
residential development comprising individually
owned lots, exclusive use entitlements and common
property. |
| Trust Account |
The OFT
approved account into which the proceeds of all
letting must be banked by the on site manager. Owners
are paid from this account on a monthly basis net
of letting commission and any other deductions such
as cleaning costs, linen hire and charge backs to
owners. |
| Wholesaling |
Refers
to commercial arrangements via such organisations
as Sunlover Holidays whereby holidays are sold by
the wholesaler who in turn takes a percentage of
the tariff, generally 25%. |
Note : These terms apply predominantly
to Queensland although most state use the same or similar
descriptions.
