Evaluating Additional Possibilities for Small Blocks of Flats: How to Avoid a Management Agent's Expensive Minimum Fees


31/01/2024

Author : Mary-Anne Bowring


Why do managing agents demand low fees?

Managing agents in block property management are essential to the efficient running of residential apartments. A managing agent's professional responsibilities include maintenance, budgetary control, and regulatory compliance. Small apartment buildings cannot afford to hire a managing agency because of the exorbitant minimum costs that these agents ask; therefore, they too require professional advice. We want to explain why managing agents in this blog. Fees are costly; therefore, it is important to find out if there are any affordable managing agents and, if so, what kind of assistance they provide to help tiny apartment buildings run themselves.

Operational Scale and Complexity

The challenge is that the scope of what a managing agent has to do is vast: bookkeeping, administration, budgeting, repairs, health and safety and fire compliance, company meetings, minutes, covenant enforcement, dispute resolution, accounting, legal inquiries, support sales, and more. Operating a business model that covers all of this requires a certain level of scale to cover their overhead expenses.

Whilst a smaller block will have fewer apartments and may have fewer transactions, the risk and complexity of them are no less. Therefore, the inherent risk rather than the size of the block determines the need for a minimum fee. Of course, the fees can be distributed among more units for larger blocks of flats, reducing the cost per unit. Conversely, smaller blocks with fewer units would naturally incur higher per-unit costs.

A managing agent who charges a fixed fee per unit per the guidance in the RICS Code of Practice for Residential Managing Agents will be hedging their bets. Predicting how much time will be spent on a particular block is impossible. A minimum fee of 2,000pa would be 666.67 per flat per year if there were three flats. Put another way, 2,000 per annum is 5.48 per day, less than 1/2 the hourly UK minimum wage for all the required scale and complexity of operations. So, what specialist skills or qualifications will exist in a Managing Agent's firm?

Liability and Professional Expertise:

Managing agents are entrusted with various responsibilities, including legal compliance, financial management, and maintenance coordination. This means they will recruit, train, and employ accountants, block property managers with Institute of Residential Property Management qualifications, Chartered Surveyors qualified by the Royal Institution of Chartered Surveyors, and maybe lawyers and engineers. A managing agent wanting to provide quality services must hire professionals with specialised skills and knowledge. Specialising rather than trying to treat all the block management as admin requires investment - ultimately, that is passed on in fees. Qualified professionals command higher salaries, contributing to the overall cost of managing agents' services.

Which is better, a more popular managing agent with scale, or local?

- Administration and Operational Costs:

Managing agents have several administrative and operational costs, such as staffing, office space, insurance, technology infrastructure, and marketing. These expenses are spread across the client base, resulting in minimum fees that will adversely affect smaller blocks of flats.

The Need for a Low-Cost Managing Agent is undeniable

Recognising the financial challenges faced by small blocks of flats, several alternatives have emerged to facilitate self-management at affordable costs:

Self-management possibilities for blocks of flats explored:

Many blocks post-enfranchisement have bought the freehold and formed a Freehold Management Company, giving them the choice of management arrangements. Some blocks have leases set up with a Residents Management Company on day one - this means a democratically elected board can be voted in and choose their management arrangements. Other blocks may have claimed their right to manage to take control.

All the above might provide an opportunity to self-manage, but mainly for most blocks, their motivation is to take control of decision-making, not the actual doing. Many leaseholder directors remain wary and scared of numerous governance requirements. Where a block of flats is fortunate enough to have leaseholders with specific expertise, e.g., solicitors, accountants, or chartered surveyors on their board, some small blocks of flats take up the reigns of self-management. By collectively sharing responsibilities and tasks, such volunteer boards can reduce their dependence on managing agents and lower overall costs.

Online Property Management Platforms for Small. Blocks of flats:

The rise of technology has led to the development of online property management platforms offering cost-effective solutions for small flats. These platforms provide tools for financial management, maintenance tracking, document storage, and communication, empowering residents to self-manage their properties efficiently. The problem with property management software is that using it still requires someone with good expertise to manage the bank account, bank the service charges paid and pay the bills, reconcile the bank, and prepare the books to be handed over each year-end to a service charge accountant. Compliant demands must be issued, accounts served, and section 20B limitations, which could render only 250 payable by each flat, swerved.

So, do specialist Managing Agents for small blocks of flats exist:

The good news is a resounding yes. The Ringley Group, one of London's leading Managing Agents, has created a package or service level, especially for small blocks of flats and estates of houses. Ringley recognised the opportunity to leverage their decades of expertise and experience as a managing agent. The product is called Block Care 300 and is delivered through a dedicated website called ServiceChargeSorted.co.uk.

Block Care 300 is the essentials of block management, and all for about the exact cost as it would cost for an accountant to prepare the service charge accounts. What makes it even better value for money is that Block Care 300 includes the service charge accounts. ServiceChargesSorted.co.uk is a comprehensive online platform designed to assist leaseholders in navigating the complexities of leasehold property ownership. Whether you are a first-time leaseholder or an experienced homeowner, our platform offers a range of resources, guidance, and support to help you understand your rights, resolve disputes, and make informed decisions regarding your leasehold property.

To avoid unattractive minimum fees, what has been removed is running meetings and dealing with repairs. This leaves the board of directors in the role of managing but without all the financial and legal admin, the worry of compliant demands, and having to check neighbours for arrears removed. The result is a package tailored to cater to small communities' unique needs and limited budgets in private housing estates and small blocks of flats. It still requires the board of directors to be in charge as decision-makers. Indeed, when they want bills paid, they go online as you would if you wanted to make a bank transfer, upload the invoice and instruct the payment. The director who wants a bill paid selects a second director to authorise the payment, which adds it to the following automated payment run.

Similarly, the chairperson or a director of the board inputs their service charge budget, which a second director authorises, which triggers the Block Care 300 team to apportion the relevant amount of the budget to each apartment and send out the demands, polite reminders, final notices, and then instruct debt chase action too. The block does not need to worry about managing the money, banking service charges received, reconciling the bank, and all that, as a managed bank account, is part of the service.

Therefore, in conclusion, there is another way.

While managing agents charge high minimum fees because of the scale, complexity, and operational costs of their services, alternatives exist for small blocks of flats seeking cost-effective management solutions. Check out SeeviceChargeSorted.co.uk. The result is a hybrid service that allows the control of self-management peerlessly facilitated by an online platform backed by a leading managing agent. Check it out, as for the first time, small blocks of flats can strike a balance between efficient management and financial feasibility.

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