Retention of Property Managers
It has always been difficult to retain property managers.
When you are involved in sales and purchases of businesses, it is very rare for long service leave with property managers to be an issue.
Over the past few years, the movement of property managers between estate agents has become more common. Property managers have always been presented with challenges in their role, however over the last couple of years with COVID-19 and the changes in Victoria with regards to the standard of residential properties, the role of a property manager has been made even more difficult.
It is to be expected that the stresses associated with being a property manager would result in some people leaving the industry. This in turn can create a negative impact on the perception of the role of a property manager as an occupation.
In terms of the commercial background to property management, if a property manager is competent, they are more likely to be approached by your competitors. This would obviously cause disruption to your business and may also result in rental providers following the property manager who has been dealing with their properties, resulting in loss of capital value of your business.
While it may seem unlikely that the continual increase in salaries paid to property managers will alone provide any stability in this sector, an option for business owners may be to consider making a property manager an equity participant in your business.
If over time a property manager became a 5% or 10% owner of your business (could be greater) it would be difficult for your competitors to get them to change employments. That said, the amount of equity offered and eventually owned would need to be significant, as lesser amounts of 1-2% offered equity would probably only contribute to increasing destabilisation. In the past, when these small amounts of equity have been offered, the owners have simply been prepared to walk away from the small investment without payment and this causes legal and commercial instability.
When considering offering equity, it is often the reality that the then employee doesn’t have the money needed to pay a fair price for the equity that is on offer. There are ways that this can been handled with the employee paying off their equity over time out of profits of the business. Obviously, if an employee had the means to purchase their interest, this would be preferable compared to any terms of contract.
If you were to decide to go down the path of offering equity to your existing employees, then as well as the sale documents you would need to have a shareholders agreement that covered off at least the following matters:
- Roles of different party
- Exit of parties by death or disablement or decision to leave
- Who decides the sale of the whole business
- What are salaries payable for employee roles
- Distribution of profits
For further information please contact the author, or any member of our Corporate & Commercial team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.