HiRUM Software Solutions

Are Property Managers getting a ‘Raw Deal’?

Posted by HiRUM Software Solutions - 27/02/2012

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Are Property Managers getting a ‘Raw Deal’?

I noticed a recent article by a property manager in Far North Queensland as it raised the question about how to handle owners moving into their apartments for long term stays and who is responsible for dealing with this situation when it contravenes their purchase agreement. Apparently a clause exists preventing an owner from occupying their apartment for longer than three months at a time but many owners seem to be ignoring this. The question is then posed as to where the clause originated from and who should be ultimately responsible for ensuring it is upheld?

Managers pay large sums for the rights to manage apartments within a building but who is there to protect their investment when the apartment is sold to a purchaser who wishes to use it for their own purpose?  Units are not always lost from a letting pool because the owner is disgruntled with the manager, many are lost because they are sold to owner occupiers over which managers have little control.

So if a clause preventing owners from occupying the property for long periods does exist, then who should be responsible for enforcing it? It can’t be the police as I am sure it would be almost impossible to evict someone from a property they own. The banks are unlikely to do so as they want their mortgages paid and a court of law would be unlikely to agree that someone should sleep on a park bench if they owned a property which would provide them with a roof over their head.  If the council enforced it, there could be dire consequences for the local property markets.  Many apartments are selling to first home buyers who simply cannot afford to buy a home with house prices and interest rates at their current levels. If the apartments can’t be sold to first home buyers or those downsizing, then who will buy them? This would limit the pool of purchasers dramatically and apartments would fall under the Supply and Demand dilemma which is facing the real estate industry in many parts of the country at present. If supply is high and demand is low, then prices for apartments would surely fall, possibly impacting the managers own LVR with his bank. Does the Body Corporate have a part to play in all of this?

It seems this is a no win situation and the manager stands to lose most of all. Is there a solution to this problem, possibly not. Management Rights will always be subject to both ends of the spectrum. Some amazing opportunities to run a successful, profitable business, but forever exposed to the risks that go hand in hand it seems with anything that provides the potential to make a good profit.

It would be interesting to receive feedback as to whether anyone has any knowledge of this clause being tested in Australia and the relevant outcome.

See more details of our software products HiRUM Property Management Software and HiSITE Channel Management Software and keep an eye out for our regular blog posts on related articles.

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