Ian Hollins, founder and director of Clear Building Management, asks if leaseholders and RMC directors really understand how much they are paying for their property management services.
For leaseholders and RMC directors looking to switch managing agent or perhaps outsource their building management for the first time, cost will inevitably be a factor in the decision-making. Not least because it’s one of the easier metrics to assess: it’s hard to gauge service levels until you’re actually working with an agent or to assess their ability to tackle emergency repairs until that difficult situation crops up. But price – on the face of it – is easy to assess. Or is it? All too often managing agents will ‘low-ball’ on the headline price, ie: the cost per property, only to add in additional costs throughout the year or to shave off commission from sub-contractors and services such as insurance.
You can think of it as being akin to the Ryanair pricing model, something we all now understand. You pay for your seat, fine. You then pay for your bag, your check-in, your drinks, food and, before you know it, the cost ends up being higher than the flight options you rejected because they were more expensive.
From a property management perspective, if the initial price seems to good to be true then it probably is.
At best, the agent will have been over-ambitious in pricing the management of your block and you will find this reflected in diminishing service levels as they struggle to deliver within the income constraints.
At worst – and this is becoming increasingly common as the downward pressure on the service charge continues – the managing agent will have used a low headline figure to secure the management of the block and will then need to prop this up through opaque contractor commissions, with the end result that leaseholders end up paying more than they should.
This lack of transparency makes it near impossible for leaseholders to gauge the real cost of the management of their building.
Managing agents with in-house maintenance teams can be as equally guilty of ramping up the cost for leaseholders. When maintenance is carried out in-house it can be difficult for leaseholders to get a market comparison on rates and there may be little redress for poor workmanship. There’s also the risk that unnecessary jobs are carried out to keep the maintenance team busy.
Open and honest property management pricing
If the management fee is set at the correct level then the agent can offer truly open and honest pricing, without the need to prop it up with additional income streams at the leaseholders’ expense. A ‘good’ managing agent will often be able to secure for leaseholders considerable savings by re-tendering supplier contracts. If the supplier is paying the agent a commission, there is arguably less incentive for them to negotiate on your behalf.
The managing agent’s total fee should be published, fair and not the sole basis of the decision; the temptation to choose the lowest price is unlikely to end in a happy block management experience.
Clear Building Management was founded on the principles of transparency, value and quality to deliver professional residential development management in a better, more inclusive way ensuring customers and their needs are at the heart of its operations.
In July 2016, we were awarded the Customer Service Excellence award by the Cabinet Office, making Clear Building Management the first private property management company to be recognised with this award.
If you are a leaseholder or RMC director looking for a fresh and transparent approach to property management then we would be very happy to speak to you.