Many managing agents have too much control over spending decisions and property owners need more say in this

MANAGING AGENTS who look after apartment and housing estates have come in for a lot of stick in recent years, most of it well deserved.

The rapid increase in residential lettings in Dublin has been matched by the growth and influence of managing agents who have availed of the unregulated status of the market to introduce ground rules that are frequently not in the best interests of the people who employ them – the owners of the homes.

To understand how the system works, it should be explained that, as a general rule, when a housing or apartment development is sold, the freehold interests are passed on to a management company formed by all the individual owners.

Managing agents are then employed to operate the scheme. Some developers assume responsibility for appointing agents – a practice that should be immediately stopped – and in many instances, where this has occurred, the agents have been only too happy to take overall responsibility and set the ground rules.

For a start, some of them will not settle for an agreed annual fee, opting instead for a series of charges including what they call “maintenance visits” which can cost an absolute fortune. In other instances the agents prefer to take a percentage of the overall cost of running the estate. The higher the overall costs, the more the agents get, so naturally there is little imperative to keep overheads down.

I have seen copies of 11 payments by one agent to the Companies Registration Office in 2004 for late filing of the accounts of estates it manages. The penalties in several instances were as high as €1,200.

One has to wonder if the agent involved got board approval from the various estates to pay these penalties? And did the owners have to pick up the tab? Surely not.

Widespread concern about the way many of these private estates are being managed prompted the last Government to set up the National Property Services Regulatory Authority to introduce a new code of practice. The authority has moved into new offices in Navan but, with the present Government at its wits end trying to keep the show on the road, it has not yet had either the time or the inclination to introduce legislation to give the authority a mandate on how to protect the interests of the owners rather than the management agents.

Owners will doubtlessly have been surprised to have read recently that the Irish Property Facilities Management Association (IPFMA) had been “privileged” to have put forward suggestions as to how the code of practice might operate. Rest assured that it was looking after the interests of its members in the management agencies rather than the people who pay exorbitant fees to keep the various estates ticking over.

Hopefully the new code of practice will outlaw any underhand practices. For a start it should make clear that agents cannot award contracts to service providers they have an interest in.

Equally, the authority should be empowered to take legal sanctions against any agents who might be tempted to take kickbacks from garbage collectors, insurance brokers, plumbers, electricians and others who provide the same services on several estates managed by the same agents. In the meantime, management committees would be well advised to put these contracts out to tender on a regular basis.

Even more importantly, management committees need to show who is boss and take direct control of the finances. After all, would the owner of a shopping centre hand over his cheque book to his managing agent?

In residential schemes, all invoices should be ratified at regular committee meetings and cheques signed off by members of the executive committee. In other words, payment of bills should no longer be a reserved function of the agent. Some agents are happy to leave this responsibility with the owners but, regretfully, not all.

In yet another indication of how it is out of touch with reality, IPFMA signalled at its annual lunch in the Mansion House that “service charges will be higher as a result of the regulation of managing agents”.

Does this mean that they will now have to be compensated for being forced to observe good management practises? Surely not. Apart altogether from the absurdity of this suggestion, the organisation is clearly impervious to the need by all of us to cut costs in the present crisis. Yes, even managing agents. The sooner they realise that the good times are over the better.