It is important for clubs to properly conduct their corporate governance and property strategy, in order to optimise benefits and avoid legal ‘complications’.
For a licensed club to put the correct framework in place to make good property decisions, and prevent the pitfalls of bad investment decisions made with members’ money, principals must understand how a good investment framework should look.
Paramount to successfully future proofing an asset and diversifying revenue is carefully considering the purpose of the asset, and how it fits the needs of the club, while keeping an eye on profit.
“Having a robust governance process is an important starting point and should inform your due diligence processes,” says Anna Porter, principal of property advisor Suburbanite.
“We see it all too often with Club boards, they have a large asset pool and little to no framework around property governance or due diligence.”
In terms of framework, and how to begin the process of mapping good governance on asset acquisition, disposal, and management, some common mistakes are:
- Using a friend of a board member to drive the property strategy
- Not seeking independent advice from a range of property and industry specialists from the outset of undertaking any major property projects
- Using people within the organisation for roles that fall outside of their skill set
- Not undertaking any due diligence on major projects and letting the strategy be led by the board, without any checks and balances
Porter notes there are often legal complications and compliance issues triggered by the improper management of property decisions, relaying how “too often” come examples of people employed into a lower role, such as a grounds keeper, and gradually escalated into maintenance issues, then facilities management.
“And before you know it they are managing major tenancy disputes, lease renewals, sales and acquisitions,” she says.
“This is generally well outside their skill set and the organisation is often unaware that they are not compliant with certain regulatory issues, breaking laws or just making poor property decisions because the correct governance framework has not been set up.”
The company offers that for the necessary property governance framework:
- Always get multiple quotes for any advice or works over a certain value
- If there is any potential for a conflict of interest with a consultant, always have the consultant sign a declaration that they have no relationship with the other party
- Develop a robust strategy for your property assets so that you have agreement on the purpose of each asset and manage it accordingly
- Have independent advice at each stage of property projects, acquisitions or disposals and don’t let the board drive this without suitable advice
- Do not use friends of board members for strategies on major assets
- Ensure everyone working on areas of your assets is suitably qualified and aware of all legal and regulatory framework
- Ensure your consultants have appropriate insurances and have them provide evidence and/or declarations to this effect. Professional Indemnity is a big one to check in this sector
- Have regular reviews of your assets and the management plan for them
- If embarking on a major project with a JV partner, ensure you have a robust and independent due diligence process and engage suitably qualified professionals
Porter says the most essential is governance and due diligence, which requires clubs to not simply note down their policies, or engage then ignore consultants, but to actually follow the framework and adopt it into the organisation’s culture.
This means undertaking the processes set up in all operations, and taking the advice of independent consultants.
Suburbanite shares its Governance Checklist that all organisations can easily implement when undertaking property strategies or masterplans. A Governance file should be easily shared, and contain:
- Each consultant or advisors’ details and quotes and/or service agreements
- Certificate of currency for all consultant’s Public Liability Insurance (PI)
- Evidence of all consultant’s industry standing/licensing
- Disclosure document from each consultant stating that they have no pecuniary interest and no conflict of interest pertaining to the engagement or project
- Multiple quotes obtained where applicable
“When decision making, it is critical to have a robust strategy or governance process around it,” furthers Porter.
“Mismanagement of property decisions can not only cause member uproar but national PR issues for the organisation to deal with.”
