Incompetent Managing Agent

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    Incompetent Managing Agent

    After years of poor management by our head leaseholder, we adopted the RTM with 4 directors and appointed managing agents. I had reservation about the agents and voiced these but one of the other 3 directors insisted that they had good references. As we were running out of time before the transfer of management, I agreed to appoint them for 1 year as a trial period.

    They turned out to be completely incompetent. For example, they moved our utilities onto business tariffs (deemed tariffs at 20% VAT) which resulted in about £7,000 in excess costs in the first 6 months of the year. Our caretaker is still not employed by the RTM Co and has not been paid in six months. When the insurance renewal came up, they forwarded the policy for me to review!

    In short, there is very little management. Total excessive costs to date (7 months) are £10,000.

    Another complication is that we have planned major works. There was a Section 20 First Notice last year from the Head Leaseholder. On this basis, it appears that my fellow director (who has a personal agenda) instructed the managing agents to proceed to contract specifications and pricing.

    My questions are:
    1- How can the RTM recover the £10,000 losses? Is this an FTT issue?
    2- Am I correct in assuming that the Section 20 First Notice issued by the Head Leaseholder pre-RTM is no longer valid and that the RTM Company must have started from zero and issued this First Notice prior to proceeding to specifications and pricing?
    3- How can I manage my responsibilities as a director of the RTM on the one hand, and on the other hand a leaseholder who is objecting to footing the bill for the incompetence of the managing agent?

    Many thanks in advance for your advice.


    #2
    You should study the terms of the agreement with the managing agent. Does it deal with complaints and how they may be raised? What notice period are you required to give?

    You should be able to recover the excess VAT on the utilities. You appear to have a most patient caretaker. You should start again with the s20 works, obtain quotes etc and inform the leaseholders.

    Just act as a director, challenge the charges of the managing agent and try to recover as much as possible, Give notice to the agent and appoint a new one,

    There is no point going to the FTT and arguing against yourselves.

    Comment


      #3
      Originally posted by aki131960 View Post
      ...they moved our utilities onto business tariffs (deemed tariffs at 20% VAT) which resulted in about £7,000 in excess costs in the first 6 months of the year.
      Presume you are talking about landlord supply meters. Our RTMCo is required to have business tariffs for our landlord managed areas, but we shop around and get decent tariffs ourselves. The agents used brokers who signed us up for ridiculous tariffs.

      Originally posted by aki131960 View Post
      Our caretaker is still not employed by the RTM Co and has not been paid in six months.
      Nope, nothing comes to mind other than presumably there is an annual budget agreed that includes the cost of the long-suffering caretaker?

      Originally posted by aki131960 View Post
      When the insurance renewal came up, they forwarded the policy for me to review!
      I'd say that is to be expected. Our agent forards our renewal policy to us directors to 'review' and authorise. Goes with the job I guess.

      Originally posted by aki131960 View Post
      Total excessive costs to date (7 months) are £10,000.
      So you agreed a budget and issued service charge invoices and within seven months the agent overspent by £10,000? What percentage of the budget is this overspend? Where did the agent get the funds as agents cannot overspend an RTM client account. If it is an overspend on costs incurred, you issue excess charge/balancing charge invoices to the lessees once you issue the annual accounts. meanwhile the deficit shows on the accounts as an asset to be recovered.

      Originally posted by aki131960 View Post
      How can the RTM recover the £10,000 losses? Is this an FTT issue?
      Not sure who you mean to recover from? If the lessees, issue balancing charge invoices with the accounts showing the deficit on the income statement. If you mean to recover from the agent, I'm not aware of any statute the 'landlord' management company takes their agent to tribunal with. The RTM company in is the management company per the 2002 Act.

      Originally posted by aki131960 View Post
      Another complication is that we have planned major works. Am I correct in assuming that the Section 20 First Notice issued by the Head Leaseholder pre-RTM is no longer valid and that the RTM
      The RTM company is a 'clean break' and should reissue to get it right. A maverick director is harder to advise about if he/she acted outside their powers in the articles. One director cannot act alone where other directors played no part but what to do about it. No money to take to court.

      Originally posted by aki131960 View Post
      How can I manage my responsibilities as a director of the RTM on the one hand, and on the other hand a leaseholder who is objecting to footing the bill for the incompetence of the managing agent?
      You have to separate the 'hats' you wear. Your issues as a leaseholder are not the RTM company's issues and your duty as a company director is to promote the success of the company, not anyone else's issues. A director can take the RTM company to tribunal as a leaseholder and has been done, but is messy. Not sure I could work my head around doing it myself. best solution is to get the members to call a special notice meeting and have that meeting sack/replace any director who won't work within the articles.

      Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

      Comment


        #4
        The managing agent for the RTM has to provide a service standard complying to the RICS Residential Management Code.

        If I remember correctly, the electricity supply is charged at 5% VAT for communal areas of residential buildings. It should not be charged at 20% VAT business tariffs.

        Comment


          #5
          Apologies for the slow response. Thank you all for your responses. Most useful. Just to answer some of the questions:
          1- The excess charges of £10,000 are about 25% of the agreed expenditure.
          2- I managed to move all of the utilities onto fixed rates and charged at 5% VAT. VAT paid at 20% can be recovered so this reduces the excessive charges to about £8,000.
          3- Haven't been able to sack the incompetent manager yet!

          Comment


            #6
            You should be able to remove the agent by simply giving 3 months notice or not renewing at the end of the year, whichever comes first, but it depends on the wording of the management agreement,

            Comment


              #7
              Maintenance for residential buildings block of flats ) should be managed to RICS Residential |Management Code..

              Electricity bills in a residential building should charged VAT at 5% rate..

              Comment


                #8
                An discussion about "excess charges", or how to deal with them, is likely to be pointless unless information is provided explaining what these charges are for.

                For example, if the budget at the beginning of the year provided only the minimum that would be required for services that were essential and already known about, and the need for a roof repair that had not been budgeted for then arose, an overspend on the budgeted amount would not be unreasonable (although it might indicate that whoever made/agreed the initial budget didn't plan well).

                Comment


                  #9
                  Thank you all again.

                  The excess charges are mainly accounted for by the extortionate gas unit. Although the gas company has agreed to refund the excess VAT, they are not willing to accept that the tariff that we were put on was inappropriate.

                  The notice is indeed 3 months to get rid of the manager however, despite their proven incompetence, one of the other directors of the RTM Co (the one who insisted on them in the first place) is still fighting their corner!

                  Comment


                    #10
                    Removing the agent should be your priority, it is unlikely to admit liability so giving the 3 months notice is your easiest option.

                    You may be able to take action against the agent at a later stage if evidence of any wrong doing comes to light, but you will be able to take your time and consider the pros and cons properly, You would need to study the agreement carefully and consider whether the agent was acting at all times on behalf of the RTM Company and whether or not the RTM Company indemnified the agent.

                    If you are recovering the excess VAT, you have achieved the main objective. Whose responsibility it was depends on what information was supplied at the time when the contract was entered into with the utility company and I suspect that the version of events will differ. Again you will encounter the problem of the agent acting on behalf of the RTM Company,

                    A concierge is sometimes employed by an agent, especially when the RTM Company is regarded as dormant but it is unusual for wages not to be paid, the concierge would usually be chasing payment,



                    Comment


                      #11
                      Thank you for all of the advice received.

                      We have finally agreed at a board meeting of the RTM Company to terminate the managing agent and instruct a new which came highly recommended by the freeholder (one of the large estates in London).

                      The vote (to terminate old and instruct new) was 4 in favour and 1 abstaining (the lessee who brought in the incompetent manager). Now this lessee (who wants to control the building) is threatening to resign and terminate the RTM Co. Can he do that?

                      Many thanks.

                      Comment


                        #12
                        The idea of a RTM Company is to remove yourselves from the freeholder, so I am not sure why you would wish to choose an agent recommended by the freeholder, but you can always suggest a trial and see how you get on.

                        The leaseholder can resign from the RTM Company but you will still have 3 members to operate the Company. If he remains a member, he has a single vote so you outnumber him, He cannot terminate the Company without support from others.

                        Comment


                          #13
                          The RTM was formed to get rid of the Head Leaseholder who was useless, and not the freeholder. We asked the freeholder for recommendations for expediency because they manage a lot of buildings and we do not have the time to go around interviewing agents.

                          The rogue lessee is now asking to reverse the vote. He is saying that he will stop paying his service charges if we proceed with the termination of his chosen manager and the appointment of the new one.

                          The other lessees are getting irritated by his position. That said, we don't want to end up in a situation where he stops paying. I know that we can go to a tribunal but this would be quite a lengthy process, particularly with the delays of COVID.

                          Any suggestions?

                          Comment


                            #14
                            1. Leaseholders are required to pay their share of the service charge contribution under the terms of Lease and any arrears in paying service charge can be claimed through the small claims court.

                            2. The RTM is responsible for the service charge after "handover date". You should buy a copy of the RICS Residential Management Code Version . 3 ? Or view a copy online.

                            3. Losses prior to " handover date" are under the previous management company and the leaseholders would have to claim through the FTT against the previous management company .

                            Comment


                              #15
                              The member cannot reverse a vote on his own but I agree that you should meet him and discuss a way forward to work together. It calls for a firm but friendly conversation explaining what he can and what he cannot do and asking him to raise comments for consideration and pay contributions promptly,

                              You should try to avoid legal action including Tribunals because they are time consuming and it is usually pointless, neither side "wins".

                              It is a pity that you did not take the time to interview agents, you would have discovered differences between them and it would have answered any objections which the leaseholder could raise, I hope that you are satisfied with the agent which you have appointed.

                              Comment

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