Operators of serviced strata schemes have been granted the ability to hold payments from investors on trust to repair, replace and refurbish the investor’s serviced apartments.
People who operate a serviced strata scheme, also known as a managed rights scheme, are currently exempted from the managed investment, hawking and licensing provisions of the Corporations Act 2001 due to two class orders.
The effect of the changes made to the class orders by the Australian Securities and Investments Commission is that a management rights operator can now establish a furniture fund to receive, and hold on trust for each investor, money that will be used for the replacement, repair or refurbishment of the investor’s furniture, fittings and equipment.
It is a requirement of the class order relief that:
- Payments into each investor’s fund do not exceed 3 per cent of gross scheme revenue attributable to the investor;
- The balance of each investor’s fund does not exceed $5,000 for each strata unit made available by the investor for use in the scheme; and
- Each investor’s fund is audited annually.
A management rights scheme is an arrangement under which the owners of strata units in a hotel, motel or serviced apartment complex make their units available to an operator who conducts a letting service.
Each strata unit owner is entitled to a share of the income earned by the operators in letting out all the participating units.