Part 1 – Changing Managing Agents – Top 10 Things to Consider – Costs
The Standard Management Fee
It is not acceptable nowadays for a firm to bill their management fee in any way other than a set fee per unit. If the agent you have or are considering moving to charges a percentage of the service charge expenditure for the year, move on to the next option. There is an obvious conflict of interests with this method as the more of service charge payers’ money is spent, the more money the agent will receive.
A set fee per unit on the other hand is agreed at the outset and will not vary. The agent, therefore, should give more importance to providing value for money in the matters in which they spend their clients’ money. The RICS Code of Practice and ARMA stipulate that any RMC should only look at agents charging in line with the set fee per unit.
Are Standard Services being Billed as Extras?
It’s all very well if a managing agent quotes a very competitive management fee, but if nearly everything they do bar answering the phone is then charged as extras, the perceived competitive fee will very quickly spiral to sums significantly higher. Many agents will charge additionally for attending meetings, recovering stationery costs, providing out-of-hours assistance, or even billing separately for the normal day-to-day accounting functions. These really should form part of the standard service.
What are the Costs of the Additional Services?
There are a wide variety of functions which managing agents perform which cannot be covered in the standard service agreement, because the volume of the work involved cannot be realistically envisaged. Essentially one side would be better off than they thought, whilst the other would be worse off. So the fairest way to restore the balance is to charge on an ad-hoc basis for the supplementary and less frequently carried out processes. Commonly the ones to expect are:
- Issuing Section 20 Notices and overseeing the subsequent project
- Attending tribunal on behalf of the management company
- Remedying breaches of covenant by leaseholders
- Changes to the Company’s constitution and/or leases
- Formulating new service charge schedules / apportionments and notifying relevant parties
Additional Costs Chargeable to Individuals as Opposed to the RMC
Lastly on the subject of cost, prudent resident management company directors will acquire a pricelist from their shortlist of agents which show all the costs payable for services which are exclusive to company shareholders/members. These include:
- Leasehold sales enquiries packs
- Notices of Transfer
- Deeds of Covenant
- Share/Member Certificates
- Provision of keys, fobs and permits
- Arrears recovery charges
Although individuals in the block/estate pay these charges, an RMC director may wish to prevent their company members from having to pay upwards of £400 when they want to sell their flat just to acquire a leasehold sales pack, a cost this is surprisingly prevalent in the current market-place.
If you have any questions or observations relating to any of these points, please contact us at JFM and we will be happy to help, or if we’re unable to ourselves, we’ll signpost you to others that can.
Written by James Farrar MIRPM AssocRICS
Partner of JFM Block & Estate Management