If you are a director of a residents’ management company (RMC) or right to manage (RTM) company, you carry real responsibility for your building, often as a volunteer and alongside a full-time job. A good managing agent should make that role easier. When the relationship stops working, changing agent is a normal and entirely legitimate decision, but it pays to approach it in the right order.
This guide sets out the signs that you may need a change, what to check before you act, what to ask a prospective agent and what a proper handover should include.
Key takeaways
- There is no need to put up with a pattern of poor service, but raise concerns formally with your current agent first.
- Check your existing agreement for the notice period, any minimum term and exit fees.
- A new management agreement lasting more than 12 months may need Section 20 consultation before you sign it.
- Insist on a full handover of funds, records and compliance documents.
Signs it may be time for a change
Every agent has the occasional difficult week. The concern is a pattern. Common warning signs include:
- Slow or no responses to directors and leaseholders, or repeated chasing to get basic answers.
- Late or unclear accounts. The RICS Service Charge Residential Management Code expects your agent to prepare service charge accounts and make them available within six months of the year end, or sooner if the lease requires it.
- Budgets you cannot follow, with costs that appear without explanation.
- Compliance gaps, such as overdue fire risk assessments, electrical testing or insurance revaluations, or uncertainty about building safety obligations.
- Little knowledge of the building, with infrequent visits and no clear point of contact.
If several of these sound familiar, raise them formally with your current agent first. Sometimes a frank conversation resolves things. If it does not, you will at least have a clear record of why the board decided to move on.
Before you act: check your current agreement
The management agreement sets the terms of your exit, so start there. Look for:
- The notice period and how you must serve notice.
- Any minimum term or fixed period that has not yet expired.
- Exit or handover fees, and what they cover.
The board should make the decision to change agent in line with your company’s articles, and record it in the minutes. For RTM companies, remember that the RTM company itself holds the management functions, so the appointment sits with its board.
A point many boards miss: Section 20 consultation
A management agreement that lasts for more than 12 months can be a qualifying long-term agreement under Section 20 of the Landlord and Tenant Act 1985. If any one leaseholder will contribute more than £100 a year towards it, the company must carry out the statutory consultation before entering into it. If it does not, the law limits the amount it can recover from each leaseholder for that agreement to £100 a year, unless the tribunal grants dispensation.
This applies to the new agreement you are about to sign. Some boards keep the agreement to a fixed term of 12 months or less for this reason. Be careful with wording, though: the Upper Tribunal has treated an agreement for an initial 12 months that then continues until terminated as a qualifying long-term agreement. Take advice on the terms before you sign.
What to ask a prospective managing agent
The cheapest quote is rarely the best value. Useful questions include:
- Is your firm regulated by RICS, and is it a member of an independent redress scheme, such as The Property Ombudsman?
- How do you hold and protect client money? Service charge funds are trust money for the benefit of leaseholders, so ask how the agent keeps them separate, which bank accounts it uses and how it manages reserves.
- Who will actually manage our building, how many buildings do they look after and how often will they visit?
- What does the fee include? Ask for a clear schedule showing what the annual fee covers and what the agent charges separately.
- How do you manage building safety and compliance? Ask how they track risk assessments, testing and remedial actions.
- How will you report to the board and communicate with leaseholders?
- How do you handle the handover from the outgoing agent?
What a proper handover should include
A well-managed handover protects the directors, the leaseholders and the building. As a minimum, the following should transfer from the outgoing agent:
- All service charge and reserve funds, with a reconciliation showing how the agent calculated the balances.
- Leaseholder records, including contact details, account balances and any arrears or disputes, transferred in line with data protection law.
- Financial records: current budget, previous accounts, invoices and any outstanding liabilities.
- Contracts and insurance: contractor agreements, warranties, the buildings insurance policy and claims history.
- Compliance and building safety records, such as fire risk assessments, asbestos surveys, electrical and water hygiene records and lift inspections.
- Details of any live matters, including Section 20 consultations, major works or ongoing disputes.
- Keys, fobs and access codes.
Your new agent should manage this process for you, but directors should keep an eye on it. Missing records and delayed fund transfers are the most common causes of handover problems.
Making the change: the steps in order
- Record the board’s concerns and give the current agent a chance to respond.
- Review the existing management agreement for notice, minimum terms and exit fees.
- Invite proposals from prospective agents and compare them on service, not just price.
- Check whether the new agreement needs Section 20 consultation and, if so, carry it out.
- Make the board decision and minute it.
- Serve notice in accordance with the existing agreement.
- Agree a handover date and checklist with both agents.
- Tell leaseholders who their new agent is, how to pay and how to get in touch.
How Larchfield can help
At Larchfield Asset Management, we work with RMC and RTM boards across Torbay and the surrounding area. If you are considering a change, we are happy to have an informal, no-obligation conversation about your building, what is and is not working, and what a move would involve.
This article provides general information only and is not legal advice. Every lease and management agreement is different. Directors should take specific advice where needed.
