WA Management Rights Agreement

We currently lease a commercial property in WA zoned hostel. It’s used to house miners on site via dongles, one owner, think of a res land 1500sqm with setup for miners

Years ago when lease started we put in a clause option to buy the property at $X

We pay rent/lease and all outgoings and receive the rental income

The owner of the property has offered us management rights at zero cost upfront, in lieu of the rise of the property value since we entered the option

The management rights would give us an asset rather than just a commercial lease and owning the property is neither here nor there as the important part is the cashflow

Under the MR we would still pay outgoings and a much smaller $ amount per month than current lease but receive 100% of income and a sellable asset

How do we secure the management rights and is there anything we should look out for?

We are not purchasing manager quarters or the like, just the MR agreement

How long can a MR Agreement last in WA?

We don’t have RE licence, do we require it?

The yearly income from the property is equal to the increase in the land value so makes sense to just enter a MR, but any help would be greatly appreciated

 

Check with fair Trading WA whether you require an RE licence as the requirements vary from state to state. Also different rules apply If you are an owner-occupier.

 

Great thanks for the tip will check it out

 

Lawyer.

 

Its possibly just me not having a lot of experience with these things, but why is it some sort of MR contract and not just a variation or addition to your current lease? I don't see how the MR would have any value in itself.

 

yep will do

 

Our understanding is the normal commercial lease holds value to us only while we operate under it, and it’s not sellable, as we don’t hold ownership. However with MR we could sell it down the track at multiples of the gross or net income to someone wishing to purchase the MR

 

What would they be managing though - you? Your lease?

 

They would purchase the business which includes the management rights to operate the hostel and collect all of the income. Similar in essence to buying a leasehold pub with proven income from the underlying security. Yes you pay all outgoings plus a nominal amount of the actual property owner but in return receive all of the boarding income.

 

Sorry I may have misinterpreted your managing the property which is filled with miners accomodation about 25 pax

 

How is that different from what you have now as a business with the lease? Just the amount that goes to the owner?

 

In essence yes the $ amount paid is halved which is quite a difference to the bottom line
We will seek some legal advice on the above