If you own a flat there are a number of situations in which it may be necessary for you to appoint a managing agent.
- You own the freehold of the property
- You’ve purchased the freehold of the property
- Using the statutory Right to Manage (RTM)
- Using Appointment of Manager by First Tier Property Tribunal (under the Landlord and Tenant Act 1987)
- If the landlord decides to delegate the management responsibilities
- You are a director of a residents’ management company who has the obligations to manage the development in accordance with the terms of the lease
What is the Right to Manage? (RTM)
The Right to Manage (RTM) was introduced through the Commonhold and Leasehold Reform Act 2002, giving leaseholders the statutory right to take over the management of their property from the landlord. To action this you need the support of the majority of the other leaseholders.
Alternatively, you can apply for Appointment of Manager under the Landlord and Tenant Act 1987. This is a separate procedure to RTM and renders a First-tier Tribunal (Property Chamber) responsible for the appointment of a new property manager, replacing the landlord or their agent, with no majority of leaseholders needed.
In order for AOM to be successful, you will need to prove that the current managing company is at fault, making the process longer and more expensive than RTM. Tenants considering this option should be aware that the FTT-appointed manager is not appointed to act in favour of the tenants. For this reason, Appointment of a Manager is best used as a last resort if RTM has already been exercised unsuccessfully.
What does an RMC do?
A resident management company (RMC) is responsible for:
- The management of the building
- Any repairs to the building
- Ensuring compliance with the obligations of the lease
- Ensuring compliance with statutory requirements
What are the main duties of a resident management company?
A management agent must have sufficient knowledge of:
- Landlord and tenant law
- Health and safety regulations
- Building construction
- Basic accounting
Some of the typical duties of a managing agent include:
- Collection of service charges
- Lease compliance
- Management and supervision of contractors
- Risk management
- Insurance cover for the block
- Management of insurance claims
- Reports on cash flow and expenditure
- Payment of invoices
- Service charge arrears collection
- Health and safety compliance
- Producing the annual budget
- Attendance at general meetings
Why would you want to appoint a new managing agent?
If you have purchased the freehold to a previously leasehold development, it is likely that you will want to review the cost and performance of the current management company with the newly gained automatic power to choose your own company. If you have bought a freehold flat you will want to be part of the decisions from the start.
If your flat is leasehold your landlord may have appointed a management company you are unhappy with. You may feel that you are paying too much for your service charge, the service is unsatisfactory, or both.
What are the benefits of using a managing agent?
There are many benefits to using a property management agent, including:
- An organised approach to maintenance, repairs and financial management
- A purely business-like and professional management approach with no private interests
- The agent takes responsibility for compliance with the law
- The agent will collect service charges and organise reserve funds
- The agent takes responsibility for collecting unpaid charges and fees
- Any redecoration and repairs necessary will be overseen by the agent
- Agents supervise any work carried out to ensure it is of a high standard
- Employing a managing agent relieves residents of the burden of administration, which is time-consuming
- Managing agents have professional indemnity insurance to pay for any compensation or damages
- Any issues or disputes will be dealt with impartially
How to appoint a property managing agent
Before you appoint a managing agent you should:
- Decide the services you need to be covered by a managing agent
- Do some research – check out agent’s websites and look for reviews
- Organise some informal meetings with potential agents and make sure you can show them a copy of the annual statement and a copy of a lease
- Talk to other RMCs on other local blocks to ask for reviews and testimonials for their appointed management agents
- When you have chosen your management company, a solicitor can draw up a contract or you can adapt a model contract that has been developed by professional bodies.
Tenants appointing a property managing agent are advised to meet all agents informally prior to any formal arrangement.
Agree on what responsibilities the managing agent will have
Tenants are advised to agree the following responsibilities with their agent:
- The amount of service charge money the agent can spend without the tenants’ approval
- Reasonable response times and means of communication
- The line of communication. This generally means an appointed point of contact on both sides in addition to the agent reporting to a Board. Contact with all residents in such situations is not practical.
- Which meetings require the attendance of the agent
Codes of practice for managing agents
Management of residential property should be carried out in accordance with industry-approved codes of practice. There are two Government-approved codes of practice relating to residential property management:
- ARHM (Association of Retirement Housing Managers) – relating to retirement housing schemes
- RICS (Royal Institute of Chartered Surveyors)- relating to all residents who pay a service charge and don’t live in retirement housing
When appointing a managing agent, always ensure they comply with the relevant code of practice.
The contract with a managing agent
Once you have chosen a property management agent or company, you will need a contract.
You can instruct a solicitor to draw up the contract or alternatively you can use a template from a professional body:
- AMRA – provides a straightforward model template
- ARHM – provides a model management agreement
- RICS – provides a model template that can be purchased
What to do if you are unhappy with your existing property management company
If you are dissatisfied with your chosen property management company whilst you are in contract with them, you should follow the specified complaints procedure.
If you are still dissatisfied and ish to chance agents, consider:
- The notice period for termination of services
- The most appropriate termination date – to suit service charge and ground rent payments
- The current financial position of the development – are the accounts in credit or arrears?
- Are there any unpaid management fees?
- Which documents will be handed over to the new agent? The handover should be as smooth as possible so all the relevant documentation is essential