media release

IR 04-30 ASIC provides relief for furniture funds in management rights schemes

Published

The Australian Securities and Investments Commission (ASIC) has amended Class Orders [CO 02/305] and [CO 02/304] Management rights schemes to allow operators of management rights schemes (also known as serviced strata schemes) to hold payments from investors on trust to repair, replace and refurbish the investors’ serviced apartments.

Persons who operate a management rights scheme are presently exempted from the managed investment, hawking and licensing provisions of the Corporations Act 2001 under [CO 02/305] or [CO 02/304].

The effect of the changes to the class orders made by ASIC is that a management rights operator may now establish a furniture fund (FF&E Fund) to receive, and hold on trust for each investor, money which 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 $5000 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 operator in letting out all the participating strata units. Policy Statement 140 Serviced strata schemes provides further information about ASIC’s regulatory approach to these schemes.

[CO 02/305] is amended by Class Order [CO 04/739] and [CO 02/304] is amended by Class Order [CO 04/738]. Copies of the class orders are available on ASIC’s website at www.asic.gov.au/co.

Corresponding amendments have also been made to Pro Forma 187 Management rights schemes where the strata unit cannot be used as a residence [PF 187]to permit the use of a FF&E Fund.

End of release

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