Should new Freeholders self-manage freehold or engage a managing agent?

[Hansi]

Myself and 7 other flats in an 8 flat building have just exchanged on the purchase of the freehold.

When the landlord offered the sale of the freehold we jumped at the chance because the landlord has always been extremely difficult, has often organised shoddily done work to the building and we discovered has been over charging us on our maintenance charges so we are keen to get rid of him and have more control.

1 lessee declined to be part of the sale for financial reasons. Some of the lessees do not live in the building and have tenants in the flats, but 4 out of the 7 leaseholders do live in the building. Our solicitors have established a company for us as the new freeholders.

I am now trying to figure out whether it will be necessary for us to engage a managing agent or whether we should just self-manage as the freehold company?

It is my understanding that we would need to engage an accountant to manage year end book keeping for the freehold company regardless of whether we have a managing agent or not. I am also under the impression that while more administration might be required by members of the freehold company that we would have more control as residents of the building and we would be saving a substantial amount of money.

[scot22]

Being a Company you must have directors who run the Company which is the Freeholder. Having experienced being run by volunteers and by a Property Manager I have almost complete confidence in recommending employing a professional. The only issue is making sure you get a good one. The manager acts on the instructions of the Company and there is no loss of control there are many legal responsibilities involved which are generally better delegated to a professional. One volunteer treasurer decided as he wrote the cheques he decided how money would be spent !
although there is a cost everyone contributes. The workload when run by volunteers is usually not shared fairly and there are a lot of freeloaders.

[Gordon999]

I recommend you buy a copy of the RICS Residential Management Code v. 3 which is the operating guide for managing agents and recognised by the FTT. You may find a copy to view online.

When you interview some local managing agents, you ask for one year fixed contract and continue with option of ninety days notice to terminate by either side and service standard shall be to RICS Management Code. The service charge money shall be held in a separate "client " bank account. The annual service charge accounts shall be audited by a professional accountant and made available 6 months after the end of service charge year.

The freehold company has to file annual returns to Companies House and simpler if you can file dormant accounts for a non profit company and the Tax office will not chase your company for tax return. The one flat still paying ground rent is a problem because the freehold company cannot claim to be dormant.

[Section20z]

With 8 flats you need a managing agent to work for you, you don't want to be chasing your neighbours for money...

[Jericho]

I've been on the board of a RMC who self manage a property of 30 flats for two years. The main benefits are financial of course as you are not paying management fees. Also you avoid the risk of picking a sub-standard MA of which I'm sure there are many.

However you need people with the skills, knowledge and time (unpaid) within the RMC to understand how to run the property to the same level as a MA. This is a considerable challenge that shouldn't be underestimated and has to be sustained over the churn of leaseholders. There are loads of internet resources these days to support RMCs (including this forum) but even so it takes time to build up knowledge of the relevant laws and processes. You need to understand the lease inside out which can be easier said than done for old leases.

As you say you are going to have to engage an accountant to do the annual accounts which isn't a big issue given the relative simplicity of the business.

Finding good contractors for repairs and services is also very time-consuming especially getting people to turn up and provide written quotations. This gets easier once you build up a body of contacts.

Some of the leaseholders not living at the property complicates things somewhat. In my experience these are the ones most likely to need chasing up for arrears, although luckily rare to date. Chasing money owed is not the nicest thing to do but is essential for fairness to other leaseholders who would fully back up the process. Needs to be done in a considered and unemotional manner of course.

If the RMC is run in an amateur way the pitfalls can be very large in deed. Unfortunate examples I have witnessed include not planning long-term for major maintenance works leading to big bills for the leaseholders and also not being aware of the risk assessments required when running a building including fire safety.

The rewards of managing the property yourself can be worthwhile providing you are willing to give the considerable commitment required. If I was choosing a MA I would want them to provide a couple of local references which I'd chase up.

Hope that helps and wasn't too grim

[scot22]

Absolutely perfect summary Jericho.

[sgclacy]

I've been on the board of a RMC who self manage a property of 30 flats for two years. The main benefits are financial of course as you are not paying management fees.

You can save management fees if somebody can do it for no remuneration

the problem with that is that in the end resentment builds as there will be no thanks and the person who is doing it for nothing ends up dealing with all the bickering and squabbling. Some become doctoral and act as if they were the freeholder - supporting their stance on the justification that they do all the work

if they don’t charge its very difficult to lodge a complaint

it is better to pay that person a fee so you can hold them accountable

[Jericho]

You can save management fees if somebody can do it for no remuneration

the problem with that is that in the end resentment builds as there will be no thanks and the person who is doing it for nothing ends up dealing with all the bickering and squabbling. Some become doctoral and act as if they were the freeholder - supporting their stance on the justification that they do all the work

if they don’t charge its very difficult to lodge a complaint

it is better to pay that person a fee so you can hold them accountable

Our RMC owns the freehold and has a number of directors who share the workload to an extent. There will always be some leaseholders (who are also RMC shareholders) who contribute little and easily find fault. That's just the way of the world. It's no picnic but many do appreciate the work put in by the board FoC, especially those who are ex-directors and know exactly what's involved.

If the directors are not doing a good job they can be replaced by the shareholders.

You pays your money ...

[flyingfreehold]

Eventually most (sane) leaseholders groups give the work to a managing agent

[scot22]

Yes, volunteers can only take so much. Occasionally some empty thanks but the moment there is a problem...........!Nearly all absentees, and some permanent just seem to want to spend as little as possible.

[Gordon999]

Better have a managing agent for first year for interested leaseholders to learn the job. Some participating leaseholders think there is no need to pay service charge after the freehold has been bought.

[Hansi]

Thanks for all the brilliant advice!

I will look into finding a trustworthy agent. Does anyone have any recommendations on companies? In London preferably.

Thanks again

[PascoeTeam]

Thanks for all the brilliant advice!

I will look into finding a trustworthy agent. Does anyone have any recommendations on companies? In London preferably.

Thanks again

I second all this wonderful advice and thank you all. Can I ask how your journey towards finding a good managing agent in London has gone? All I get are 'don't use these people' when I ask for recommendations on local forums.

Alternatively, does anyone know of a London based or operating team that support self managed blocks? I found one but they are based in Bristol (Adam Church) but it looks like they might otherwise be a good option for us. We are 8 leaseholders and have been muddling through ourselves for 14 years but have found all the issues stated on this thread absolutely pertinent. And I'm keen to find a supported or managed option to propose to the company.

Thank you all for any further advice.

[SouthernDave]

I can recommend one from Kent? She manages a few blocks Where I have property. She is very good.

[PascoeTeam]

I can recommend one from Kent? She manages a few blocks Where I have property. She is very good.

I'd really appreciate their details as a starting point, thank you.