What does 'Managing Agents' mean when buying a property?

Find out what Managing Agents means when you are buying a property. 'What does Managing Agents mean?' plus over 150 other property related terms and jargon in plain English

Managing Agents

If you're buying a leasehold or Share of Freehold property then managing agents are likely to be involved but who are they and what do you need from them?

To understand the role of a Managing Agent you need to understand Leasehold and Freehold. If you do then just skip on to the next heading.

Leaseholders and Freeholders

This is best explained with an example. Let's say I own a building with 3 flats in it. That makes me the freeholder.

I say to you, "You can live in Flat 1 for the next 99 years if you pay me £X;" and you agree. We negotiate an agreement known as "The Lease" which formalizes this deal as a legally binding contract. You then become the leaseholder of a 99 year lease.

Enter the Managing Agent

As the Freeholder I will have some obligations such as maintaining certain parts of the property and paying bills for things like electricity in the communal areas or, if we're talking upmarket, the salaries of reception desk staff.

As the leaseholder you will have certain obligations such as limits on anti-social behaviour and annual payments to me so I can pay for my maintenance and running cost obligations.

So I have to collect your annual payments (known as the service charge), hire maintenance people when needed, organize for builders when there are major works needed, pay bills, etc, etc. It all sounds like a lot of work.

So instead I'll farm all that flaffing around out to a managing agent - a company that does that sort of thing all the time for lots of other Freeholders.

Managing agents, like all organizations, come in all shapes and sizes and range from the highly competent to the utterly useless.

What you need from a Managing Agent?

When you're buying a leasehold you want to be sure what the service charge is and so the standard inquiry your solicitor will ask is for the last three years accounts - the "Managing Agent's Accounts".

That will show if things jump around alot or if the payments were fairly stable. They'll also show if the managing agent has a Sink Fund for the property - a pot of cash for a rainy day such as when the roof of the building will need replaced or the facade will need repair and redecoration.

If there's nothing in the pot then when a big job comes up (and roofs as an example need to be replaced every 20 years or so) your going to get some big bills. That doesn't mean you shouldn't buy the property but it will help you budget.

Your solicitor will also ask what works have been carried out recently and what works are planned.

It'll give you an idea of how well run the building is. In a well maintained block the exterior will be redecorated every 7 to 10 years and the communal areas should also see similar treatment.

It, along with the sink fund, will also give you an idea of any up coming costs you might expect.

All these questions are known as the Managing Agent Enquiries.

Managing Agents in your property purchase

Switched on and competent Managing Agents will send out the requested accounts and answers to the Managing Agent Inquiries in a couple of days. If they manage large numbers of buildings this is all part of the course where leasehold properties they manage are bought and sold all the time.

But not all Managing Agents are switched on and competent. No one likes paying their service charge so managing agents often cut corners on staffing which means they are constantly overworked and slow to respond. Or they might simply be a small organization and "Barbara is on holiday for two weeks and she's the only one who knows how to print the accounts" is not uncommon.

How to handle Managing Agents

A traditional solicitor does thinks in a linear way. He'll tell you that first you should get your survey done and then he'll look at the contract and then he'll raise inquires from the seller and when those are answered he'll ask for the managing agents accounts, etc.

Solicitors think that by acting this way they might save you money. By edging forward you won't spend more than you need if there is anything unexpected at each step. But what this type of solicitor doesn't understand is that Time Costs Deals. The longer you take the more likely it is that the deal will fall through.

There's little reason why it needs to be done this way and as you are paying your solicitor you can instruct them to do otherwise. Getting a response from the Managing Agents can be one of the longest delays so get the requests in from day one.

In How to Really Buy a Property I'll show you how to handle Managing Agents and how to look for warning signs that they could be trouble if you decide to go through with the sale.

Search Results for 'managing agent' in
How to Really Buy a Property

"... deeds (or office copy entries) and starts the local searches As soon as the sellers questionnaire, fixtures and fittings form and managing agents accounts (in the case of a Leasehold purchase) come through he raises enquiries The local searches come back, perhaps prompting a couple of..."
"... the local searches are back he then gathers all the papers together at one time. He looks at the contract, title and lease along with the local searches. He now raises enquiries all at once as this is easier and takes less of his time. These will take 2-4 weeks, often depending on the efficiency of the managing agents, the local council and the vendors..."

"... a Service Charge: This is usual where the building has been split into flats or has been built as a block of flats. The Freeholder is responsible for maintaining the external structure from repainting the external walls to replacing the roof. It's the dull and boring side of being a freeholder and so he often hires managing agents to do the job for him. Whether or not he does, you will need to contribute towards these costs. He is responsible for doing them but you are responsible for providing the funds. The exact ins and outs of how this works, what he is responsible for, what percentage you must contribute and a whole lot more are laid out in the..."
"... over this are called the Sink Fund and are savings for the unexpected. Pay for things as they come along. Hire a managing agent to do it all! (see leasehold above) Making Changes to the Property: Many people confuse Share of Freehold with total freedom! Someone who owns a share..."

"... Charge Accounts (Leasehold Only) - where you are buying a leasehold property it is important to gain an idea of how much the managing agents charge every year to maintain and run the property. These charges could include lift maintenance, cleaning, lighting, care of a communal garden, even looking after the TV aerial and satellite dish. The most important factor is that these charges are consistent and reasonable with what is being provided. As such your solicitor will ask for at least the last three years accounts to confirm this or spot any trends that you should be aware of. Any debts that the vendor may have with the managing agents are identified here and are extremely important. Service Charge debts are based on the property. If you buy when there are outstanding debts they will become your..."
"... to Assign (Leasehold Only) - for most purchases this is a formality. It is a document from the managing agents or freeholder saying they accept you as the new leaseholder. There are some blocks, however, where you will have to provide character references, proof of your financial status and sometimes even attend for an interview. They are rare and, more often than not, in the upmarket apartments of Mayfair and..."
"... be familiar with when this actually occurred in the area and so asks for documents that do not exist Leasehold only: The managing agents are extremely slow to provide service charge accounts Leasehold only: The managing agents have been changed within the last three years and the previous..."
"... The managing agents are extremely slow to provide service charge accounts Leasehold only: The managing agents have been changed within the last three years and the previous agents are refusing to pass on any documentation. Leasehold only: Your solicitor believes the service charge accounts are..."
"... years and the previous agents are refusing to pass on any documentation. Leasehold only: Your solicitor believes the service charge accounts are not adequate but the managing agent refuses to provide any further information Leasehold only: The vendor owes the managing agents money but is..."
"... to provide any further information Leasehold only: The vendor owes the managing agents money but is refusing to pay it because he is in dispute with them. An example may be that he has withheld the cleaning charge because no cleaning has occurred! Leasehold only: The vendor owes the..."
"... With so many pitfalls in the documentation it is not surprising that your solicitor may want to ask further questions of the vendor, his managing agents or his freeholder. Much of this comes from the fact that there are no definitive protocols for the forms and documents that pass between them. ..."
"... (Leasehold and Share of Freehold only): From the freeholder or freehold company. Service Charge Accounts (Leasehold only): From the managing agents or from the freeholder if he has not appointed managing agents. Ground Rent Receipts (Leasehold only): From the freeholder. License to Assign..."
"... be familiar with when this actually occurred in the area and so asks for documents that do not exist Leasehold only: The managing agents are extremely slow to provide service charge accounts Leasehold only: The managing agents have been changed within the last three years and the previous..."
"... The managing agents are extremely slow to provide service charge accounts Leasehold only: The managing agents have been changed within the last three years and the previous agents are refusing to pass on any documentation. Leasehold only: Your solicitor believes the service charge accounts are..."
"... consent or building regulation approval if structural changes or additions have been made to the property Leasehold only: Who the managing agents are and who the freeholder is Share of Freehold only: The last three years accounts Share of Freehold only: A share certificate Details of..."

"... agents come in all shapes and sizes from large companies to individuals who buy up freeholds. They can be helpful or down right awkward. If there seem to be delays in getting the information your solicitor needs, ask for the contact details and chase them yourself. If you, the vendor, and both the solicitors are chasing then the managing agents are more likely to respond quickly in order to get all four of you off their..."

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