I seldom admit to idle moments, but in a recent idle moment that I must admit to, I happened on to the RAAS RIGHTS website (www.raasrights.com.au) and discovered the archived copies of the good old RAAS Report. I knew they were there, of course, but had not looked at them for a long time. These archived copies are the fore-runners of the document you now peruse and extend way back to the very first RAAS Report in August 2004!

As I wallowed in all this nostalgia, I was struck by an article I wrote in February 2005. This article concerned a series of recent "raids" by Office of Fair Trading inspectors on management rights operators in South East Queensland --- both holiday and permanent. It suddenly occurred to me that I had not heard of any similar broad crack-down since that time, and wondered if it were not high time to once again warn all our management rights friends about what happens when the OFT inspectors arrive at your door for a "compliance check"!

I am sure no one needs a lecture about things that amount to major transgressions of the Property Agents and Motor Dealers Act. If you don't know that you must bank trust monies promptly, issue trust account receipts and have your trust account reconciled and audited, then you shouldn't be in the business. During the 2005 compliance checks, some managers received heavy monetary penalties for these types of breaches --- and indeed were fortunate to escape with their licences intact! Fortunately, none of these were members of RAAS.

It was, however, in the area of more minor breaches that RAAS members sought our advice.

# What exact details of your licence do you have to display in a prominent position?

# How big does the sign have to be?

# Does your licence number have to appear on this sign?

# Do you have to display a full copy of the RUM's Code of Conduct or just a sign referring to its availability?

# Do you have to display your full Complaints Resolution procedure or just a sign saying you have one?

# Does the requirement to maintain and Employment Register apply to you?

Do YOU know the answers to these questions, because it is in these seemingly minor areas that many RUMs in 2005 came unstuck? At the end of this Report I will give you some instructions for obtaining a copy of a short RAAS-compiled summary that will point you in the right direction.

So what should you do when an OFT inspector coming knocking at your door? I should point out that in my 30 years of dealing with OFT, I have seen a vast improvement in the attitude of OFT inspectors. The inspectors of today are a more reasonable and helpful breed than the ones we knew 25 years ago! I have met and dealt with quite a few and in my experience they are willing to help and advise as much as condemn and penalize. This statement presumes you have not been doing funny things with your trust account. If you have, you will find OFT inspectors have teeth like tigers!

When the inspector arrives, co-operate in every way possible. Answer all questions honestly to the best of your knowledge. Under no circumstances adopt an aggressive and confrontational attitude because your visitor has the full force of the law behind him. If you have transgressed in a minor way, it is probably because you had forgotten what they taught you when you did your licence and were just ignorant of the law. My legal friends will tell you that ignorance of the law is a very dodgy defence indeed, but the OFT inspectors also know that the PAMDA laws are detailed and complicated. If you admit your error and co-operate fully they might let you off with a warning, rather than slap you in the hip pocket --- or worse!

If you have been silly enough to do something blatantly illegal like putting $5000 of trust account money on Number 7 at Eagle Farm in the Improvers Handicap, then no amount of advice from me is going to help, so ignore everything you have read so far and reach for the Yellow Pages. I think you may find what you are looking for under "Criminal Defence Lawyers"!

So how do you get the answers to the questions I posed earlier? We have asked RAAS director and former TAFE Lecturer in Real Estate Practice, Geoff Glanville, to prepare a short summary of the PAMDA requirements. To obtain a complimentary copy of this information please send an email with your request to mike@raas.com.au and we will have it on its way to you. Under no circumstances will your email address be passed on to a third party.

By Rob Balanda --- Partner --- MBA Lawyers Varsity Lakes Gold Coast
First published in Australian Property Investor magazine.
Email: robertbalanda@mba-lawyers.com.au

The number of advertisements for mortgagee sales and properties being sold by councils for arrears of rates and bodies corporate for unpaid levies has grown.

Developers are also prepared for the first time in years to grant you an option (giving you the right but not the obligation) to buy their property rather than a straight out sale. Some investors also find themselves in trouble and have their property taken from them and offered for sale by a receiver at a price just enough to pay out the loan.

Super funds too are now able to borrow to buy property and are now on the march buying real estate that was previously unavailable to them.

Distressed sales of properties by lenders as mortgagees or through a receiver seem to bring out the ugly side of investor buyers. With the smell of blood in the air, I'm regularly seeing buyers make such ridiculously low offers that if they were being made to anyone other than an institutional lender, they would indeed be offensive.

These offers are so low they can't possibly be accepted by a lender until after it has completed a full marketing program of the property, which may or may not uncover a better offer. Be aware that lenders have a legal obligation to use their best efforts to get market price for the property and if they fail to do so they expose themselves to a legal action by the owner.

So making low-ball offers below the amount of the loan, and well below recent sales in the area in the early stages of a sale of a property by a mortgagee/receiver will get you nowhere. If you really want to buy the property, do your own homework about market values in the area. Ask the agent what's owing on the property (surprisingly this information will be disclosed to you when requested or can often be ascertained by your solicitor when they search details of the mortgage registered on the title).

Then, if there's value in it for you, offer something above what's owing to the lender if you want to be in the race. Circling like a shark won't usually get you the property if you're serious about buying it.

Can a Mortgagee/Receiver Grant You an Option to Buy?

There are real legal difficulties with mortgagees of properties granting options. Their obligation is to achieve a sale of the property at the best price.

Long-term options would therefore be out of the question, however it may be possible for a mortgagee carrying out their power of sale to justify giving an investor an option for a short period of time only, particularly where efforts to sell the property up to that date have been unsuccessful.

Generally though, mortgagees can't grant a buyer an option to buy the property.

Mortgagees/Receivers Sell "As Is"

There are no tougher contracts in the market place, and that are so heavily weighted against the buyer, as contracts for the sale by a mortgagee or receiver. These contracts are specifically crafted by their lawyers so that the buyer acquires the property "as is" and almost certainly leave the buyer with no rights under that contract if there are any defects over the property, its title or the ability to use the property for any purpose.

The reason they're so tough is that the lenders will nearly always have no knowledge of the property and what has been done to it and so don't want to be responsible in any way for these issues. This is their perspective on it.

From the perspective of the buyer though, and to fully appreciate just how far these kinds of contracts go, investors should understand that the following are standard provisions in these types of contracts of sale:

• The buyer accepts the property in its present condition and subject to any legal and physical defects whether known or unknown by the seller.
• The buyer acknowledges that there are no guarantees or warranties given by the seller or its agent and in particular the buyer acknowledges that it has satisfied itself about:
• The quality, value and state of repair of the property:

• The purpose for which the property can be used (including and without limitation, any restrictions on its use or development):
• Access to the property:
• Any requirements of any council or other government or statutory authority relating to the property including, and without limitation, resumptions, road dedications and road widening:
• Any approvals required from any authority relating to the property including any failure to comply with any approvals:
• Existence of any hazardous substances within the meaning of the Contaminated Lands Act:
• The area of the property and its dimensions;
• The ability to construct any improvements on the property including and without limitation the quality and standard of the soil and any fill on the property:
• The fixtures, fittings, plant & equipment and chattels included in the sale and the buyer in particular acknowledges that they are sold with all faults and defects that exist at the date of this contract and no guarantee is given about their condition or suitability for any purpose.

What all this means for a buyer is that they must carry out all searches and enquiries about the property, including pest and building inspections, surveys, soil tests etc before they sign a contract or make their offer subject to a general due diligence so that they can protect themselves.

Remember too, that if you're borrowing money to buy the property on the security of the property itself, your lender usually won't agree to lend on an "as is" basis. You will therefore need to put up another property as security, if you have one.

All too often I'm presented with this style of contract by buyers who have signed up, blissfully unaware of what they've signed. It is too late then to protect them.

By Geoff Glanville --- RAAS Rights Director
Email: geoff@raas.com.au

Hi, I'm Geoff Glanville, one of the three directors of the RAAS Group. We very recently sent out the first of what will become a regular update on matters that specifically impact on the management rights industry in North Queensland. I hope you received it! If you have received this email from a colleague, and would like to be on the mailing list, please send your details to me at geoff@raas.com.au. Hopefully you will have also received our email just before Christmas 2009 introducing our new Cairns based RAAS sales team of Andrew and Liz Yiannoullou. I followed this up with a trip in Cairns in January and was grateful of the opportunity to speak at the ARAMA meeting at Yorkeys Knob.

This was something of a special visit for me as the first piece of property I ever purchased was a half interest in a block of land at Yorkeys Knob. This was back in 1973 when I was stationed in Cairns as a cadet valuer. My half share cost me $1450. Those were the days!

Even the name RAAS is obliquely related to my time in the North. As a keen diver I was always delighted to come across the giant WRASSE often found on the reefs off Port Douglas, and for a lot of years the wrasse formed part of the RAAS logo.

After finishing my ARAMA presentation I called for questions and in true North Qld style the first one was along the lines of "When is RAAS going to put on a golf day or race day like they run down south?" It bought home to me the tyranny of distance that still applies to living in the far North. Too often the focus is on South East Qld and this applies to where and how we conduct business and extends to social events like industry golf days as well. I spoke to Andrew and Liz about this and hence we have committed to a quarterly industry update as a first step to making NQ a more inclusive part of a great industry. I will have some news on the topic of a Cairns based industry social event a little later in this article, so please read on.

RAAS RIGHTS Progress in NQ: "Work" takes many forms.

RAAS RIGHTS North Queensland is obviously in good hands with Andrew and Liz Yiannoullou. The NQ team got to work just before Christmas 2009 to build

a presence for RAAS in the north. We have sold complexes up here in the past of course, but there is no substitute for having hard working people right on the ground. There is that word "work" again. I think "work" sums up why Andrew and Liz have achieved much from a standing start in December 2009. They have already placed 2 complexes under contract, have offers pending on 2 more and have a load of qualified buyers lined up waiting for the right opportunity. It is supposed to be quiet in the North so how have they achieved such an outstanding result..... well, I believe they have proved that work in all its forms is the basis of success. Andrew and Liz first laid the groundwork by employing old fashioned legwork. Every existing listing was visited, and then Andrew took off on an endeavour to call on every management rights owner from Cairns north. Before taking a listing or offering a property to a buyer they did their homework to ensure that the seller's business particulars were up to date and that every buyer was qualified to buy. On occasions that they came across an unknown or unusual circumstance they have both been in business long enough to know that they don't know it all. So on these occasions their actions were never based on guesswork. Instead they took advantage of the established RAAS network and were in a position to access the wealth of knowledge from industry specialist financiers, accountants and lawyers. Sometimes their success was based on enjoying the benefits of RAAS teamwork. There are 13 RAAS RIGHTS sales consultants across Queensland representing all the major regions with a strong management rights industry presence. Andrew and Liz have accessed this teamwork by referring buyers south and taking on unsatisfied buyers from the south and convincing them that their futures lay in North Queensland.Once they had the buyers and the listings it was just a matter of doing the hard spadework; organizing themselves like clockwork, keeping excellent paperwork and just plain hard work.

When you do all of this you appear to make light work of a new role in a tough market. In fact the main problem facing Andrew and Liz at present is that they are short of quality listings to offer to

their ever growing list of qualified and unsuited buyers. So if you are sick of work and want to sell your complex there is only one solution. Pick up the phone or hop on the keyboard and contact Andrew or Liz now. Ph 0419 794 692 or email yanlou@raas.com.au.

North Queensland Management Rights Golf Day.

As I have mentioned earlier, one of the first questions I was asked when I visited in January this year was when was RAAS going to run a management rights industry golf day in the North? We made some preliminary investigations with a few Golf Courses when we visited in January, and would you believe not one got back to us with further particulars. I also mentioned the terrible absence of North Queensland management rights events to Keith Page at Resort News. Keith has just relocated to Cairns on behalf of Resort News and so has taken the idea and decided that Resort News should run with it.

IMPORTANT Date-Claimer: Tuesday 27th July 2010 --- The first Resort News Management Rights Golf Day in NQ is on, with RAAS RIGHTS happily taking the position of Gold Sponsor. The Four Ball Ambrose event will be held at Paradise Palms Resort and Country Club with registration at 11.30am for a 12.30pm shotgun start. (For my non-golfer readers --- no, there are really NO shotguns!)

Don't worry about not being a great golfer! Ambrose events are designed to cater for all levels of accomplishment and are guaranteed to be a great fun day out for ladies and gents alike!

$90 per player includes lunch, shared buggy, green fees and BBQ prize presentation with heaps of prizes. Even the worst team on the course can win a prize. It will be the best value $90 you have ever spent! Contact Andrew or Liz Yiannoullou and they will happily email you a copy of the player registration form. This will be a ripper day so don't miss it!

Until next time!

If you would like to comment on anything you have read in The RAAS Report, please write to PO Box 1325, Sunnybank Hills, Qld 4109 or send an email to mike@raas.com.au.

www.raasrights.com.au • www.raas.com.au