Management Rights Newsflash
There has been a recent court case that has provided clarification on the transfer fee for Management Rights. This is a great win for the management rights industry.
Definition of the ‘contract date’ for imposing and calculating a transfer fee Section 83 of the
Accommodation Module and Section 85 of the Standard Module provide for the imposition of a transfer fee:
“if the date (approval date) on which the body corporate approves the transfer is not more than
three years after the date (the contract date) on which the engaged or authorisation was entered into,
or on which the term of the engaged or authorisation was extended”.
Establishing the contract date is vital to ascertain if any transfer fee is payable,
or whether 3%, 2% or 1% of the transfer price is payable to the body corporate.
Prior to February 2006, the contract date was generally understood within the industry
to mean the original date of the agreements, however in February 2006
(in the decision of Whitsunday’s Water Resort), the adjudicator determined that the
calculation of the relevant three year period should be determined from the
date of the last assignment of the management rights.
The decision was appealed to the District Court and on Friday 13 April 2007
the District Court delivered its decision . It held that the contract date is
“the original contract date for the relevant engagement or authorisation”,
NOT the date of the assignment to the outgoing caretaker.
The decision, in effect, returns the practice of the industry back to what was
occurring pre February 2006 and is great news for outgoing caretakers.
Definition of the ‘contract date’ for imposing and calculating a transfer fee Section 83 of the
Accommodation Module and Section 85 of the Standard Module provide for the imposition of a transfer fee:
“if the date (approval date) on which the body corporate approves the transfer is not more than
three years after the date (the contract date) on which the engaged or authorisation was entered into,
or on which the term of the engaged or authorisation was extended”.
Establishing the contract date is vital to ascertain if any transfer fee is payable,
or whether 3%, 2% or 1% of the transfer price is payable to the body corporate.
Prior to February 2006, the contract date was generally understood within the industry
to mean the original date of the agreements, however in February 2006
(in the decision of Whitsunday’s Water Resort), the adjudicator determined that the
calculation of the relevant three year period should be determined from the
date of the last assignment of the management rights.
The decision was appealed to the District Court and on Friday 13 April 2007
the District Court delivered its decision . It held that the contract date is
“the original contract date for the relevant engagement or authorisation”,
NOT the date of the assignment to the outgoing caretaker.
The decision, in effect, returns the practice of the industry back to what was
occurring pre February 2006 and is great news for outgoing caretakers.
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