It is estimated that roughly 50% of residential leasehold properties in the UK are run through a resident management company (RMC). What is harder to tell is how many of these are under self-management. Based on the numbers of self-managed resident management companies that have approached JFM for help, we think this could be more than many realise.
So what are the arguments for and against ‘Do It Yourself’ Block & Estate Management?
1. No Managing Agent Fees
After the buildings insurance, the highest cost a resident management company (RMC) can probably expect to fork out for is managing agent fees. Smaller blocks that cannot benefit from economies of scale will find this more difficult to pay for which is why they may opt for self-management.
2. Implementing Decisions can be Quicker
Rather than having to feed instructions through a managing agent, an RMC board of directors can sometimes formulate and implement big decisions more quickly if they are doing the work themselves. This does of course depend on all the owners staying friends and being willing to get on board and do the work.
3.“My next-door neighbour already does a smashing job as Property Manager”
In some circumstances, a fairly selfless individual will be willing to give up a lot more of their time to run the building than an agent would. We have known RMC Directors to treat the role as a full-time job. Such unsung heroes actually enjoy being at the beck-and- call of every other owner and do a great job in taking the time to resolve complex disputes. They do not expect pay, are sufficiently legally astute, and they love the work. If you are lucky enough to have this setup in your building then you may not need a managing agent.
1. Block Management can be a Pain!
So you’ve realised you can run the block. But did you ever stop to think whether you should? Without playing too much of a violin for us Property Managers, it really is a thankless task at times. The role of property manager is to ensure the lease is followed and tough decisions are made. More often than not, someone is unhappy with you even if you’ve made the right decision. It is the nature of the beast. Not everybody can face coming home to this after a full working day.
2. It’s a Big Liability
Were you really informed when you decided that you could run the building? Did you perhaps underestimate the plethora of legislation out there which must be considered with almost every decision? Reforms to leasehold law over the past thirty or so years mean that RMC directors can be held personally liable for fairly minor breaches of best practice. If you are not familiar with the law or if you are not a leasehold expert, you may not know what best practice looks like. You may decide that paying an agent to take this burden off your ha
nds makes sense.
3. “I don’t want to sue my next-door neighbour”
One of the most common problems we find with blocks that have been self-managing for some time is that service charge arrears cases tend to get out of control. It can be very difficult to make the decision to take your fellow flat-owner to court for unpaid charges. Many bend over backwards to avoid doing so. But this is not good either. The Directors of an RMC are legally responsible for holding bad-payers to account. Failure to take your neighbour to court could come back to bite you at a later date if the lady upstairs decides to take you to the tribunal for mismanagement.
4. The Pay Sucks!
We have seen examples of RMC Directors being paid for their work, but it is rare, and usually only a token amount. Directors of RMCs are likely to be prohibited from making profit from their roles, so it may be prudent to check the company constitution and lease if you have doubts on this key legal issue. We have had
a large number of RMC Directors approach us who have decided to call it a day. They have decided that DIY Block Management is not worth their time spent versus the income or satisfaction obtained from it.
Written by Joe Mallon BA (Hons) MIRPM AssocRICS
Partner of JFM Block & Estate Management LLP