You have completed your Right to Manage and now you have decided to have a managing agent to manage your building. You don’t want to take on the day to day running of the property. You’re concerned about the legislation and paperwork that you need involved.
What is the role of a managing agent?
The managing agent’s role is a complex one and it should also be professional. They need to carry out the role of what is required of the Right to Manage Company. They also need to know Landlord & Tenant Law. Building construction, Health & Safety regulations and basic accounting and more.
There are benefits of a professional management. Which should be balanced against any fees which they will be charging you as you will have to bear these.
Are there benefits of using an agent?
Managing agents are professionals. They should have an organized approach to the planning. Collection of service charges. Reserve funds. As well as time tables for redecoration, repairs, inspection and supervision of works.
They need to assess the building to understand what will be done and take into account private interests and preferences as well as keeping the property in a good state of repair. They are responsible for collecting funds. Taking reasonable steps to make sure that any unpaid charges are dealt with. All responsibilities for the Right to Manage Company are dealt with. The managing agents should be able to handle mundane and time consuming administration. As well as being efficient in organizing records and documentation for accounting purposes.
As part of employing a managing agent. The Right to Manage Company would be able to distance themselves from any disputes. Be an impartial arm’s length agent who will deal with it for them. The managing agent must hold some form of professional indemnity cover. Against acts of negligence or incompetence. If the right to Manage is going to use an agent. Then they can provide some of the responsibilities for complying with the leases and laws. Codes of practice but please note that Directors will still have a responsibility.
How would I go about appointing a Managing agent?
We give some ideas of what you could do:-
- Try Check a Trade and see whether there are any managing agents on their and their reputation.
- Look on Google for any managing agents and see what reviews that they have.
- See recommendations from other Right to manage or lessees.
- Check for Tribunal cases on a website to see if any managing agent’s names appear for lessees.
- Get any local advice from other lessees or your solicitors.
How would I then use a managing agent? And what is the best way to do it?
It will be your responsibility to make sure you get the right professional. You could have informal meetings with managing agents to find out what they are like. You could explain the problems that you are currently having. Ask them to give details of how they would deal with it. Each agent would tackle the problems.
Who will be your contact if they take over the management and what are their response times to emails and phone calls. What happens if that person is on holiday? Will you be able to choose the contractors you want to use or do they have set contractors that they wish to use. Do you keep final approval?
Ask them about disclosure of commissions for insurance. As this can be a particularly difficult question. It may be that you wish to do your own insurance because you know that they will get commission and you will not get the best possible price. You may wish to make this clear from the beginning of the agreement.
Check how they will deal with the financial records including accounts and demands and what their arrears procedure is.
There is an Association of Residential managing agents. Called ARMA who will be able to help you with local managing agents as they will have a code of conduct. Also RICS who we have mentioned before in another article. Which is the Royal Institute of Chartered surveyors who will have a management contract that you could read. You must take into account that management fees may go up on a yearly basis so you would need to check this.
How do I get the best from my managing agents once I have employed them?
It is important that you give clear instructions from the outset of the contract. That you are going to enter into and how you want to deal with instructions. You need to make sure that they know what responsibilities that they have as well as what authority. They need to make sure that they know how much to spend from the service charge without your authority and what time scale you need for any action. You need to make very clear what are the lines of reporting and communication and how you wish this to take place.
It is important that individual leaseholders and the agent know from day one who to take instructions from. An Agent cannot be expected to read instructions from all lessees. It needs to have one point of contact at the very least. A most effective arrangement would be for an agent to attend and report to meetings of the board. Between meetings one of the Directors would be the point of contact. It depends on you from the beginning how many meetings you would have with the board i.e. whether these are six monthly or yearly. Meetings can be organized. The board’s instruction to the agent then could be minuted enabling the lines of communications to be free and open.
Remember that your agent cannot take instructions from the board that would put him in breach of the lease with the landlord. He has a code of practice and statutory requirements. As well as health and safety legislation to take into account but he must inform you when this is the case.
It is all about communication when dealing with a managing agent and how you want to make sure that they respond to not only you but the lessees in general.
Do Managing agents need professional qualifications?
If you are looking for an agent you may go for experience rather than qualifications. Most managing agents include the membership of the Institute of residential property managementRICS. Or any other qualification you may have in property management. You should look for firms who have a membership of certain established trade bodies. Most agents are either members of ARMA or RICS which will be important to you.
The advantage of having a membership of a registered professional organization. Are that they will have some form of professional indemnity insurance. If the agent acted negligently. They should have and hold infidelity insurance. In the case where a member of staffs found to have stolen monies. They will be checked the way that they hold monies. Collected on behalf of clients i.e. you. They will have to have a complaint handling procedure and access to an independent ombudsman service. This would only be in the event of a dispute.
What do managing agents need by way of insurance?
It is so important that you ensure that your agent has professional indemnity insurance. If an agent is a member of a professional or trade organization. Then professional indemnity insurance will be an automatic part of their conditions of their membership. They need to supply you with a copy so that you can check this.
But, please be aware that this would not cover you for an act or omission or negligence by a Director. But would only would deal with the managing agent. You need separate Directors and Officers insurance that we can provide you with.
Codes of Practice
There is a code of practice of the management of residential leasehold properties. The Government so far has approved two schemes being one of our ARHM which relates to housing and one by RICS which relates to management. If you appoint an agent you should always ask to confirm that they comply with the RICS code of practice and most ARMA agents would do so.
Should I enter a contract/management agreement?
This is extremely important and we would suggest that you get your solicitors advice on it. There are several models that can be used as well as RICS have a standard one which can be purchased. This is something that you do need to take advice on.
Can we remove our existing agent before appointing a new one?
It depends if you are unhappy with your current agent and you have tried to use their complaints procedure and ombudsman if available. If you are so unhappy you decide that you want to change agents then there are various things that you need to consider before you do so.
- You may find that they have a notice period that is required under the terms of their management agreement. If there is no management agreement or period in the agreement then you need to agree with them a time for them to leave.
- It would always be sensible to end on a date that fits in with the service charge payment periods or an end of year accounting period. This would make the accounting easier for you to deal with or your new managing agent.
- Check what the financial position of your scheme is. Is the service account in deficit and if so how will you deal with this when transferring it over?
- Are there any large outstanding arrears that would make it difficult for you to have your new agent provide a service?
- Are any of the management services or management fees in dispute?
- Draw up a list of what documents you want handed over from one agent to another
- What sort of accounting statement should be drawn up for the termination which you need to agree?
- Don’t just appoint another agent to sort out any problems. Try and get them resolved before you transfer it over.
- Try and understand with your new managing agent what they need and perhaps get a list up from them before you contact your managing agent
- You may find that a new agent is happy to deal with the changeover for you.
Is there a list of items that I should be asking the new managing agent or that I can check that he does?
- Will you prepare an annual budget for service charges?
- What regular billing and collection of service charges will you do including management fees?
- Is there a provision for you to do a budget report of income expenditure and cash flow?
- Will you arrange for the preparation of draft accounts in anticipation of an examination from an independent accountant?
- Do we need an independent accountant for accounts?
- Would you prepare a reserve fund plan relating to maintenance?
- How do you pay your invoices monthly or weekly?
- What is the arrears collection procedure for service charges?
- Attending to routine enquiries from lessees and residents?
- How do you respond to solicitors and lessees enquiries requiring assignments and leases?
- How often would you have a general meeting with lessees?
- Do you deal with insurance claims?
- Would you prepare a long time maintenance and repair plan
- Do you deal with the day to day repairs and maintenance promptly and efficiently and if so is there a time scale.
- How do you deal with the preparation of maintenance plans and contracts for plant machinery?
- Do you advise on major contract work and the use of specialist professional contractor?
- Do we have to use your contractor?
- How do you deal with the compliance of the lease terms. What the policy will be agreed with the board on authorisation to instruct solicitors in relation to breaches.
- Would you represent us at the County Court arbitration tribunal?
- How many contractors do you use when you put out to tender
- What is your cost for supervising works.
- Also, what is your training for the compliance with Health and safety regulations?
- What do you charge and is it fixed or increased every year
- How would you update the board on any procedures or requirements for new legislation?
- Would you tell the board of any suggested management policy?
- Telling the board on any financial maintenance and legal matters?
- Would you report any significant lessee issues?
- What is your document management procedures and issues?
- Do you do any periodic newsletters to lessees?
- Do you deal with any issues in relation to the company?
The more research you do in relation to managing agents. The reviews they have the easier it will become for you in the event that you wish to use a managing agent.
Please click here to read our previous article on appointing a managing agent part 1.