Motel Mingle Forums Motel Leasehold Motel v Management Rights

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  • #7623



      We sold our leasehold motel, to a guest before putting it on the market, back in January 2017. After selling we took a break then looked to buying back in. We opted for a Management Rights after being talked into it by a broker. HUGE mistake! The freedom of running your own business is totally removed if you get into MR, you have many unit owners to be answerable to, the body corp committee to answer to, rooms that don’t match as some owners will opt for renovations while others don’t. On the plus side, what is shown as a net profit is in fact the net profit, no addbacks, the net is the net. That fact about the net is what hooked us. Notwithstanding this, we ensured there was a clause included that we knew the body corp would baulk at and would give us sufficient time to work out if the body corp was workable or not, turns out they were not so thanks for our clause we included (have more than one approved representative) gave us an out when the sunset clause arrived.

      I would strongly urge anyone against a MR business, if you can’t afford a freehold motel, a leasehold is TEN fold better option.

      Further, do not be backward when purchasing a leasehold. Brokers will tell you that a meeting with the landlord is to take place after contract is unconditional. This is NOT a lawful requirement and is merely a tool for the brokers, as by the time the contract is unconditional you have expended a substantial sum and they anticipate that you will proceed rather than risk losing your deposit.

      You are well within your rights to ask to approach a landlord prior to a contract being unconditional and by doing this, you have the opportunity to identify if you feel there will be any difficulties in dealing with the landlord and avoid an uncomfortable period at your new venture.

      For us, well we are now looking out again for another motel, we have a freehold we lease out so fortunately aren’t in a position that we have to move fast. We will be getting a leasehold for the higher return and putting some good managers in.

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