Get rid of your freeholder and choose a managing agent or should we self-manage?


16/07/2018
by: Mary-Anne Bowring

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freeholder and choose a managing agent or should we self-manage

Get rid of your freeholder and choose a managing agent or should we self-manage? 

Mary-Anne Bowring, creator of www.leaseholdersupport.co.uk evaluates the risks and benefits attached to choosing a managing agent or self managing a property. Hopefully if you are still reading this series of articles, you have either claimed your right to manage the whole estate, a self-contained building within the estate, or become elected as a Director and are driving a movement to competitively tender the management duties of your site. There were traditionally two real options available to you: self-manage or appoint a managing agent, but now a support or pay as you go management packages are available also. In this article we will focus on all three solutions and evaluate the risks and benefits. Generally choosing a reputable managing agent should be getting easier.

The Association of Residential Managing Agents www.arma.org.uk the trade body for the property management industry, boasts that its membership has grown by 12.5 per cent to 177 corporate members who manage in excess of 30,000 blocks or estates with approximately two thirds being lessee-controlled properties*. However, approximately 29 per cent of ARMA members manage less than 500 units and the obvious advantages of a larger agent will be robust systems and processes to deliver credit control action, expertise to present at County Court and/or Leasehold Valuation Tribunal, dispute resolution and perhaps access to add-ons such as a building engineering team to take care of cyclical works projects.

The general advice is be aware of the add-ons and understand that the main differences between a small firm and a larger firm is often that a small firm will react to decisions that you make, whereas a larger firm will have processes and management procedures in place to guide you to strategic milestones set under the lease, and help you formulate policies such as reserves, planning etc, in house. Don't take the commitment of self-managing too lightly. Without a financial or legal background, a whole lot of empathy to listen to lessees issues and the backbone to deal with contractors and day-to-day maintenance issues, frustration may well overcome you. The route of self-managing is usually chosen on cost grounds, i.e., to reduce service charges by not paying an agent. In practice, unless the burden is split equally with each lessee taking on a specific role the unsung hero syndrome emerges. The ability to keep focused on the lease and available solutions as opposed to a lessee's altruistic desires can be a difficult tightrope to walk.

Things usually run well in the early days when the momentum is strong but as time ticks on or when a specific hurdle, such as a dispute between lessees and a lessee withholding payment occurs, it is easy to run off course. It takes a range of disciplines to deliver a management solution. Legal skills underpin the knowledge of how to run a company, issue share certificates, call company meetings, complete annual returns and make representations to potential buyers as well as advise on the interpretation and implementation of the literal meaning of the lease. Financial skills are needed to demand money, maintain penny perfect ledgers, and allocate payments between the reserves fund and day-to-day maintenance pot. Credit control will need to be consistent to be effective, as if a final notice turns out to be an empty threat, then why would anybody pay on time next time. Turning non-payment into cash necessitates knowledge of the advantages and when to use the County Courts and Leasehold Valuation Tribunal respectively.

Also, without the threat of throwing a contractor off your contractor list, delivering quality day to day maintenance can be a challenge as well as being able to provide for twenty four hour cover and cover when you need a holiday. With health & safety legislation getting more onerous by the day, asbestos audits applying to residential blocks, fire risk assessments now mandatory, it is not difficult to surmount the expertise of the well meaning volunteer. There is something new. Financial administration and legal compliance at a budget fee with add-ons only when you want them. www.leaseholdersupport.co.uk suggests there are 31 reasons why you should consider this and targets blocks of up to 12 flats. Over this size they feel that the mix of agendas and lack of unity necessitates full management. However, this viable alternative finally delivers support to those who want to self-manage but know that at times they will be challenged. The offering is to run the financial cycle of a block, keep the demands coming and get the money in. The money collected from lessees is credited to a private bank account for just your block with a copy bank statement to a named Director.

The minimum legal compliance to keep a block running is also included and your service charge accounts will get prepared and filed with Companies House, new purchasers enquiries will be dealt with, as well as share certificates and registration of transfers to keep the legal ownership registers up to date. What the lessees are left with is policy, strategy and access to the tools of the trade: fact sheets, letter templates to deal with issues, calculators to aid in setting reserve fund collections and much more do-it-yourself tools online. Of course, if you don't want to do-it-yourself, the option exists to use the leaseholder support unit to write anonymously to a lessee responsible for a disturbance. Also there is access to legal services, building engineers and valuers, only chargeable when an issue such as extending the leases, or planning for cyclical works requires it. Finally. When selecting the chosen method of managing your block,

one should prepare questions to cover the following topics: 1. The financial probity of the agent.. 2. Service charge collection procedures and whether your money will be held in a discrete Client account, to whom interest accrues and what body protects/guarantees your funds.. 3. Credit control procedures and experience in obtaining County Court money judgements. 4. Experience in attending Leasehold Valuation Tribunal on issues of reasonable of service charge. 5. Methods of procuring maintenance and cyclical works, contractor selection, willingness to deal with Client nominated suppliers. 6. Competence at reserves estimating and whether a reserves plan is part of their standard service. 7. Procedures for dealing with lessee complaints and quality issues. 8. Which key lease covenants the agent monitors for covenant enforcement, as without robust strategies the value of the estate and flats within can fall, relative to developments nearby. 9. Inspection procedures: how often will the agent visit, what will they do, how will you know, how can you communicate your issues arising. 10. Meetings & reporting mechanisms, what meetings will the agent attend (day time/night time hours) and how will closure on the actions arising be achieved.

These 10 areas are a guide, but why not download a FREE Tender pack for changing managing agents from www.leaseholdersupport.co.uk


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Lease Extension, FH and Right to Manage

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