Debated regularly, the formula for calculating what a managing agent should be charging per unit per annum remains an interesting one.
The average management fee, by my calculation, is currently going down due to increased competition, the liquid nature of the market and the vast number of Residents' Management Companies that have been handed over to resident directors in the last few years (specifically as a result of the boom in urban developments up to 2008) and are looking for value.
Let us assume that a qualified manager manages 20 blocks averaging 25 units. A total of 500 units at say £150. This indicates an income of £75,000. Note: All the prices quoted below are modest to say the least.
Given there are 20 blocks he will require some sort of admin support and a service charge accountant.
His/her salary say £30k (he has 5 years experience) plus car say £3K plus benefits etc.
Admin, say £15K
Service charge accountant, say £22k
Overheads: office, IT, PI Insurance, memberships inc. ARMA, FSA, stationery, etc. etc. £20k
Whoops! No profit.
OK let's see, he/she could manage more - but only really if the average block size comes down or the number of units goes up. How about 800 units with average block size of 40?
Now we are talking - but this is still 20 blocks across a possibly wide geographical area.
He/she needs to attend 3 to 4 meetings (mostly evening) a year for each block. That means that in his 48 week year he will average 1.5 evening meetings a week. He will visit each scheme once per month and more if there is an issue. So 5 visits a week average. He will get upwards of 50 emails a day. He/she will need to oversee all health and safety activity, liaise with contractors, issue orders review activity on site, approve payments. He will need to oversee credit controls, appoint debt collection agents, appear at court and LVT and issue 20 budgets and organise 20 sets of accounts every year. He/she will be on call 24/7. There is a good chance that he or she will be time poor and stressed and consequently not giving of his or her best.
Doubtless there are some out there who will comment that they can manage 10 or 15 schemes without assistance and I have no doubt that given straightforward and local schemes this is possible. I don't know what the right formula is - and I have been looking at these numbers for over 25 years! We have settled on 18-22 blocks dependent on all sorts of factors including size, geographical location, experience of the manager, the size of the support team and total income. Clearly in prime central London management fees are much higher but then so too are staff and office costs (which is why we continue to operate our support team from Worcester).
Understanding why your manager does not respond as promptly as you might like will help you to working out why there is a continual lack of satisfaction with services in leasehold management. Fact is, pricing structures are completely wrong leading to a historic lack of transparency and increasing risks of using the cheap and cheerful alternatives that are springing up everywhere. Residential property managers are a fairly unique and widely skilled bunch. Not only must they be building and financial experts but they must be good with people and understand and apply huge rafts of legislation and regulation. They should be very highly valued.
Clarity can be provided through good contracts and service agreements with clear pricing and rewards that work for both sides. Experience counts for a great deal when something serious goes wrong, I genuinely believe cheap is not necessarily cheerful in the long term.
The average management fee, by my calculation, is currently going down due to increased competition, the liquid nature of the market and the vast number of Residents' Management Companies that have been handed over to resident directors in the last few years (specifically as a result of the boom in urban developments up to 2008) and are looking for value.
Let us assume that a qualified manager manages 20 blocks averaging 25 units. A total of 500 units at say £150. This indicates an income of £75,000. Note: All the prices quoted below are modest to say the least.
Given there are 20 blocks he will require some sort of admin support and a service charge accountant.
His/her salary say £30k (he has 5 years experience) plus car say £3K plus benefits etc.
Admin, say £15K
Service charge accountant, say £22k
Overheads: office, IT, PI Insurance, memberships inc. ARMA, FSA, stationery, etc. etc. £20k
Whoops! No profit.
OK let's see, he/she could manage more - but only really if the average block size comes down or the number of units goes up. How about 800 units with average block size of 40?
Now we are talking - but this is still 20 blocks across a possibly wide geographical area.
He/she needs to attend 3 to 4 meetings (mostly evening) a year for each block. That means that in his 48 week year he will average 1.5 evening meetings a week. He will visit each scheme once per month and more if there is an issue. So 5 visits a week average. He will get upwards of 50 emails a day. He/she will need to oversee all health and safety activity, liaise with contractors, issue orders review activity on site, approve payments. He will need to oversee credit controls, appoint debt collection agents, appear at court and LVT and issue 20 budgets and organise 20 sets of accounts every year. He/she will be on call 24/7. There is a good chance that he or she will be time poor and stressed and consequently not giving of his or her best.
Doubtless there are some out there who will comment that they can manage 10 or 15 schemes without assistance and I have no doubt that given straightforward and local schemes this is possible. I don't know what the right formula is - and I have been looking at these numbers for over 25 years! We have settled on 18-22 blocks dependent on all sorts of factors including size, geographical location, experience of the manager, the size of the support team and total income. Clearly in prime central London management fees are much higher but then so too are staff and office costs (which is why we continue to operate our support team from Worcester).
Understanding why your manager does not respond as promptly as you might like will help you to working out why there is a continual lack of satisfaction with services in leasehold management. Fact is, pricing structures are completely wrong leading to a historic lack of transparency and increasing risks of using the cheap and cheerful alternatives that are springing up everywhere. Residential property managers are a fairly unique and widely skilled bunch. Not only must they be building and financial experts but they must be good with people and understand and apply huge rafts of legislation and regulation. They should be very highly valued.
Clarity can be provided through good contracts and service agreements with clear pricing and rewards that work for both sides. Experience counts for a great deal when something serious goes wrong, I genuinely believe cheap is not necessarily cheerful in the long term.
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