Management fee 20% - too high?

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    Management fee 20% - too high?

    I have been a leaseholder in a block of four maisonettes (NE Surrey / London) for many years with a recent change of managing agent (same freeholder).

    The previous managing agent allowed repairs and maintenance to be done by the leaseholders, and there were no management fees.

    The new managing agent is taking over this responsibility and charges a management fee of 20% + VAT.

    This percentage seems very high to me and I am wondering if I could / should challenge the level of the fee through tribunal.

    What is the usual management fee percentage charged for such properties?

    It is very unusual for a managing agent to charge as a percentage of the costs. The RICS recommends a fixed fee so that you know the amount in advance. There is also the question of a conflict of interest, the more the agent spends, the more he earns, whereas he should be keeping costs down to a reasonable level. I would calculate the annual amount as a charge per unit and see how it compares with other agents.


      Hi WAM

      You need to check your lease to see whether or not the agent can charge 20% + VAT. Does the agent charge an annual fee per flat (this is usual)?


        We are due to have a fire alarm / emergency lighting / security door system fitted and exterior and interior redecoration done, so 20% + VAT of these costs would be very high.

        There is no regular service charge - maintenance and repairs will only be done as and when required. The total management fee will vary each year.

        The lease is old (1935) and does not state how management fees are to be charged.


          How the fee is charge is usually a contractual issue with the managing agent, not something in the lease.

          Are they effectively providing service charge collection for free? That' s the only reason I can think of for such a high percentage, i.e. that the total expenditure is not enough to cover the basic administration costs, otherwise.

          As noted, the normal method is to provide basic services, at a fixed fee.


            I don't think any services are going to be free.

            So far, we have paid a 20% + VAT management fee on a fire / health / safety assessment and an asbestos assessment, but these will not need to be completed every year.


              I don't think you understood me. You said you had no standing service charges, but there are standing services that any managing agent provides, in particular the collection of service charges. If they are only charging you for specific jobs, then you are getting those standing services for free. Typically an agent would charge of the order of £200 per flat for those services. if they are not doing so, they need to ensure there is a sufficient mark up on work they can charge for, to yield a similar amount.


                I see - charges for the collection of ground rent, block insurance premium, inspections, answering queries, etc.

                In your example, would that be a £200 charge + a percentage on works or just £200 total?

                I would rather pay a fee of £200 a year than a 20% management fee on what could be a few thousand pounds of major works.

                What should be my next step?

                Can I challenge such a high rate by tribunal, stating the RICS recommendation?


                  The RICS guidelines say just a flat charge, but it seems common to charge 8 to 12% on section 20 works, as well.


                    I wouldn't bet on those inspections not being yearly. Fire alarm inspection is twice a year and you would not believe how unreliable the lights and switches can be.

                    Then the H&S, in our block every 2 years there is a full professional assessment, then in the interim there is a professional review, this must be particularly complex to arrange as there is an extra £50 fee for that

                    You also need to ask to see the management contract, as there may be even more fees for when things become 'major' works.

                    At tribunal you will pay several hundred pounds to fight a bill of a few hundred, then some things you will win, some you will lose, so the tribunal will allow some part of the substantial agents appearance and preparation fees to be charged, wiping out any gains.

                    There is no way out for you, if you approach agents who advertise on pro leaseholder websites the typical reply is that on a small block there is no way to make it worth managing without extortionate fees.

                    It could be much worse, I would happily swap fee structures with you...


                      What does your lease actually say about service charges and management fees? The cost of collecting the ground rent is payable by the freeholder not by the leaseholders.

                      Do not be deterred by the comments regarding the costs of applying to a Tribunal. If you succeed, the costs should be recovered from the freeholder. The freeholder is unlikely to want an adverse decision recorded against him, so once you have built a proper case, I would invite him to reach a compromise.


                        Thank you all for your considered comments.

                        I shall approach the managing agent in the first instance.

                        So, in summary, a 'typical' management fee structure would be a fixed annual fee of about £200 and about 10% of costs of maintenance and repair work?


                          No a typical fee would be a fixed sum of say £200 for the management service which would include arranging maintenance and repair work. It really does depend on the wording of your lease and you have an older type of lease which would not normally be drawn up in the all embracing style of the modern leases. You should ask yourself why the previous managing agent did not make a charge and perhaps your lease does not permit one to be made.


                            'Typical' mananagement fees vary considerably, depending on factors such as how many units in the block (higher cost per unit for smaller blocks) and what services the agent is going to provide. If the agent is going to charge 10% for all work I would not expect to pay £200 as well.

                            For my property the managing agent fees are currently £300 + VAT for doing virtually nothing (40-50% of all costs most years).


                              The lease only requires that the leaseholders pay a 'reasonable proportion' of the expenses of constructing, repairing, cleaning, maintaining, etc. There is nothing specific on fees, including management fees.

                              The previous managing agent only collected the ground rents. All four leaseholders obtained separate building insurances and we managed repairs and maintenance ourselves.

                              The new managing agent, post Grenfell, requires heath and safety surveys, single block insurance and a fire alarm / lighting system, etc - this work, plus redecorating, is to be done in the nearish future.

                              So, this is all new to me, but I know that 20% + VAT of every £1000 = £240!

                              In my approach to the managing agent, should I suggest (as a starting point) that it would be fairer to charge a fixed management fee of 'about' £200 instead of 20% of costs? Or should I suggest 10% of costs instead of 20%?


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