Management Explained

It is important to understand how money is collected and used within a management company.  Moreover, it is important to understand the difference between a management company and a managing agent, including the roles and responsibilities each has in relation to looking after your development.

The Management Company

Every flat owner in a development with a management company usually has an equal share holding in the company and therefore the development.  This entitles them to vote on all matters within the company, such as who should be Directors, how should their money be spent and even what should they pay in terms of maintenance charges.

Yes, it really is essentially up to you to voice your opinion on how much you pay and how it is spent.  This is why it is important that the handling of your money is transparent and accountable.

The Managing Agent

The managing agent is, typically chosen by you, via your Directors.  Since you should have elected your Directors, you are asking them to ensure that your development is looked after properly.  A transparent managing agent is essential in making sure your money works for you.

The managing agent is usually responsible for negotiating and maintaining insurances and maintenance contracts for the development, using the service charges to maintain these contracts on your behalf.

The Relationship

Each year, preferably at an Annual General Meeting (AGM), the managing agent will report to Directors and members present, and via the AGM minutes to other members, how they intend to spend your money, including a justification of the service charge.  The managing agent cannot simply change the service charge without the permission of the Directors or members present.  This simply would not be fair to you all as shareholders.

A good agent will justify all expenditure and balances to you as members of your management company.  You have every right to question these figures as a managing agent works for you.

There will always be a number of regular costs (cleaning, gardening, window cleaning, etc), which rarely change from year to year, save to say that they should be regularly be reviewed based upon cost and visual results.

In addition, there will also be statutory costs, i.e. annual block insurance, Directors and Officers insurance, Accountants Fees, etc.

Finally, there are the costs of building a reserve fund.  For example, it might be agreed that the cost of replacing a roof to a building will be £50,000 and that this is likely to be required once every 50 years.  Therefore, £1,000 needs to be collected from each flat over the next 50 years, or £20 a year.  This would be good accounting practice.  However, it’s amazing how many times managing agents don’t factor these costs in, resulting in a sudden demand for a £1,000 for each flat due to a lack of sufficient reserves.

Once the above have been accounted for, there is simply the cost of the services of the managing agent.  Many leaseholders are under the belief that their money goes directly to the managing agent.  The reality is that approximately 10-15% is actually earned by your agent.

Ask yourself this? 

  • Do you not know how your money is being spent?
  • Do you not think it is being spent wisely?
  • Do you think you are paying too much for the services you receive?
  • Would you like to be more informed on the day to day handling of your money?

If the answer to any of the above is ‘Yes’, contact us and find out what you can do to change this.  You have the power to control how your block is run.  Take control of your development today and ask AProps to show you how.

 

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