Managing Agents

The management of flats is normally exercised through some form of RMC (Resident Management Company) which also includes RTM Companies (Right to Manage) and companies appointed by freeholders.

Leaseholders already commit to pay for the repairs and maintenance of the common areas of the property through the service charges and the buildings insurance but a particular bone of contention is why they also have to pay the fees of a managing agent!

Put simply, most blocks use the services of managing agents due to the logistics involved in self-managing anything larger than 6 flats. Essentially the fees for ther services paid for by the leaseholders through the service charges pays for everything associated with running an office (and I mean everything because without those fees, managing agents would not exist!).

There are no statutory guidelines when it comes to what managing agents can charge for their services, so the fees charged depend on not just the size and type of property but the range of services that the agent is required to provide.

The following information has been sourced from ARMA's downloadable LAN13 Management Fees.

Any management fee charged under a long residential lease is subject to s19 of the Landlord and Tenant Act 1985 (definition of service charges).  So, even though the fees billed are set out in the management agreement, leaseholders can challenge the 'reasonableness' and payability of them (under s27A of the same Act) at a Leasehold Valuation Tribunal. This also includes any supplementary fees that could be deemed unreasonable or excessive. Again there are no statutory guidelines on this.

The standard fee is normally stated as an annual fee for the whole development in total, not per unit and agents tend fix any increase in their annual fees against the RPI (Retail Price Index) which as of January 2012 is standing at 3.9%.

MAJOR WORKS AND LONG TERM AGREEMENTS

It is normal practice that along with the standard fees, managing agents will require the payment of additional fees to handle major works and long term agreements under s20 of the Landlord and Tenant Act 1985 which requires the sending of consultation documents. It is important to note that only the fees for this and those of the standard fee for the provison of services will fall within the definition of management fee used by Leasehold Valuation Tribunals.

OTHER FEES

There are also a considerable number of areas that can also be charged for which are neither service charges or ground rent. These are known as administration charges which should normally be agreed with the client as part of the management agreement.

THE SERVICE AGREEMENT

There is no hard and fast rule as to what form an agreement with a managing agent should take as it depends on the management structure and the requirements of the block. Ideally the agent should agree two lists of services/duties with the client: one list for the standard management fee and one for additional fees if carried out. It should also requires the agent to declare commissions.

The RICS Service Charge Residential Management Code states that:

• Managing agents and their clients should enter into written management contracts. The basis of fee charging and duties should be contained in the agreement;
• Charges should be appropriate to the task involved and be pre-agreed with the client whenever possible.
• Where there is a service charge, standard annual fees are usually quoted as a fixed fee rather than as a percentage of outgoings or income. This method is considered to be preferable so that tenants can budget for their annual expenditure. However, where the lease specifies a different form of charging, the method in the lease will be used by managing agents.

As a guideine the agreement should contain some or all of the following:

Financial Services

1. Preparation of a reserve fund plan relating to cyclical maintenance;
2. Annual service charge estimation;
3. Weekly/monthly payment of wages and other invoices;
4. Regular billing and collection of service charges, including management fees;
5. Provision of a periodic budget report of income and expenditure and cash flow
6. Annual preparation of draft accounts in anticipation of audit and subsequent liaison with the auditors;
7. Preparation and distribution of the notices for the AGM/EGMs;
8. Arrears collection management;
9. Provision of advice on block insurance and any other appropriate cover(s).

Relationship with Residents

1. Attend to routine enquiries from lessees and residents;
2. Respond to solicitors’ and lessees’ enquiries regarding assignments and licences;
3. Attendance at general meetings of residents;
4. Administrations of insurance claims.

Repair and Maintenance Management

1. Preparation of a cyclical maintenance and repair plan;
2. Deal with day-to day repairs and maintenance promptly and efficiently;
3. Preparation of maintenance plans and contracts for plant and machinery;
4. Advise on major contract work and the use of specialist professionals and contractors.

Lease Compliance

1. Ensure compliance with the terms of leases and policy agreed with the Board and where necessary, (subject to landlord authorisation);
2. Instruct solicitors in relation to breaches.

Legal Strategy and Control

1. Formulate a safe and effective strategy within current legislation and in accordance with current best practice;
2. Liaise with the company’s solicitors;
3. Represent the landlord at County Court level, arbitration and Leasehold Valuation Tribunals;
4. Maintain adequate record-keeping;
5. Risk management and Health and Safety compliance;
6. Company secretarial work (note that not all managing agents will be wiling to offer this service).

Staff Management

1. Prepare job description for employees and specifications for contractors and go to competitive tender;
2. Supervise any employees and regular contractors such as cleaners etc on behalf of the employer: cleaning, grounds maintenance etc; caretaker, scheme manager or porter services with particular care exercised in the employment of staff, who will have statutory employment rights.

Enforcement of Tenants Covenants

1. Regulation of the use of the flats;
2. Applications of covenants against sub-letting, business use etc;
3. Enforcement of lessees rights to quiet enjoyment (peaceable occupation) in the event of disturbance by other residents. It is however important to note that when the word 'tenant' is used, it refers to leaseholders, not renting tenants. Managing agents will look to the individual landlords to take responsibility for the behaviour of their tenants and they will do little more than send letters to the individual landlords.