Third-Party Management (SAP Library - Real Estate Management)

Third-Party Management

Purpose

If you are the operator of third-party rental properties, you use a management contract to specify with the owner/owners which objects are to be managed to which conditions.

Using a flexible fee calculation and calculation form you specify the fee share to be invoiced to the payer.

The company-specific differentiation of fee types ensures that flat-rate, event-related and object-related activities of the management are taken into account. Periodic fees guarantee you a regular monthly or quarterly share. On the other hand, fees, even event-driven ones such as a tenant changeover to implemented or the sale of an object can be defined.

You use object-related fees to compensate for the increase of management time and expense incurred by objects that are hard to rent by assigning these objects increased fee amounts.

Manager and owner are stored in the system as two companies; each one having a distinct company code. This ensures proper accounting as well as transparency in business since the two company codes ensure that there is a distinction made in accounting between expense and revenues to be paid by the manager as well as the owner.

Process Flow

I Company code

Check that:

a company code of the manage and a company code of the objects to be managed have been set (Real Estate Customizing).
In Real Estate Customizing, the indicator for management contract has been set for these company codes.
In the case of a subsequent owner settlement, the indicator for the Owner management is set in the Customizing for the object to be managed.

II Editing partners for third-partner management

The following parameters are necessary to make the postings for the management debit position (periodic fees), for the management costs settlement (event-driven fees), and for the owner settlement (settlement costs/revenues to owners):

Fees Settlement

Owner settlement

Company code of the manager
Here you have to create a customer that represents all owners of the objects to be managed.

Company code of the objects to be managed
Here you have to create vendor that represents the manager of the objects.

You create the partners via Financial Accounting.

For the owner settlement, you have to assign the owners (role category 0800 Owner) with their property shares to each real estate object.
The total of the property shares has to amount to 100% for each object.

You have to assign the respective vendor account (of the owner) to all owners.

You create the owners via the real estate-specific partner management.

III Editing master data of the managed objects

All real estate objects managed

have to be maintained in the company code of the objects.

have to have the system status Released.

have the owners with their property shares assigned as business partners.

IV Editing management contract

Create a management contract and assign the vendors, customers, objects to be managed and fees. Activate the contract

IV Carrying out postings/settlements

In return for the management of real estate objects on behalf of the owners, the manager receives a corresponding fee.

Posting periodic fees

You post periodic fees using a debit position and the following posting procedures:

Revenue posting to the management contract with a posting of costs to the customer (representing the owners) in the manager’s company code.
Posting of costs to the real estate objects managed with revenue posting to the vendor (= manager) in the company code of the objects managed.
The costs are displayed proportionately on the managed or assigned real estate objects.

Posting event-driven fees

Contrary to periodic fees, event-driven fees are posted using their own settlement function.

In this case, you have to first create and then settle the events that lead to a fee receivable, as defined in the management contract.

The posting procedures are the same as those for the management contract debit position.

Owner settlement

By means of the owner settlement, periodic and event-driven fees are charged proportionately to the owners of the objects managed after the debit position or management cost settlement.

Result

You are stored as two distinct companies in the system - as manager and owner of the rental properties. This ensures proper accounting as well as transparency in business since there is a distinction made in accounting between expense and revenues:

Fee receivables arising from the management activities are entered as revenue appear on the management profit and loss statement. On the other hand, these receivables are considered as payments in the owners’ accounts for fee settlement and owner settlement payment.
Costs arising from management are listed in the loss and profit statement of the owner.

The following situation arises in the company code of the managed objects:

Revenues

Costs

From the rental of the managed objects that the manager has earned appear on the lease-out.
May also appear on the real estate objects (for instance resulting from sales of the managed objects).

In connection with fee receivables to be invoiced to the owners appear on the real estate objects concerned.
For the management and maintenance of the managed objects also appear on the objects in question.

A balance is created out of the revenues and costs, which the manager normally pays to the owners (Revenues > Costs).

Should the revenues be smaller than the costs, the manager claims the balance from the owners.

The following situation arises in the manager’s company code:

The revenues (fee receivables) from the management activities appear on the management contract and are entered in the manager’s balance sheet.

Revenues	Costs
From the rental of the managed objects that the manager has earned appear on the lease-out. May also appear on the real estate objects (for instance resulting from sales of the managed objects).	In connection with fee receivables to be invoiced to the owners appear on the real estate objects concerned. For the management and maintenance of the managed objects also appear on the objects in question.