Change to your Managing Agent - What you need to be aware of (Part 1 of 2)
Introduction to Part 1
A change in managing agent can often cause confusion when managing a retail property lease. This is largely because you have absolutely no control over when (or how quickly) a change like this will happen; often it might be sprung upon you. These challenges are compounded when there are multiple changes to the managing agent over the lifetime of a lease. So, in this two-part series we look at what you need to be aware of and how you can manage your risks.
There are several things to be aware of when it comes to managing your lease arrangements and transactions in these circumstances.
Why might the Managing Agent change?
A managing agent is appointed by the Landlord, and so a change in managing agent is usually caused by one of two factors:
the current landlord is dissatisfied with the outgoing managing agent, or
a new landlord brings their preferred managing agent with them.
There are several reasons why a landlord might be dissatisfied with their managing agent:
· Poor Performance: If the current managing agent is consistently underperforming or failing to meet expectations, it might be time for a change. This could include issues such as lack of responsiveness, inadequate financial management, ineffective communication, or failure to address maintenance and repair needs.
· High Costs and Inefficiency: If the managing agent's fees are disproportionately high compared to the quality of service provided, or if there is a lack of transparency regarding financial matters, it may be beneficial to seek a more cost-effective and efficient alternative.
· Conflict of Interest: If there are concerns about a managing agent's potential conflict of interest, such as providing preferential treatment to certain contractors or suppliers, it might be necessary to find a new agent to ensure fair and unbiased management.
· Lack of Expertise: If the current managing agent lacks the necessary expertise or industry knowledge to effectively manage a particular type of property or deal with specific challenges, it could be beneficial to find an agent with the required skills and experience.
· Inadequate Technology and Systems: In today's digital age, efficient property management often relies on effective technological systems and tools. If the current managing agent lags in adopting such technology or fails to provide the necessary systems for streamlined operations, it may be time to consider a change.
· Personality Clashes or Professionalism Issues: Sometimes, conflicts arise due to personality clashes or a breakdown in professional relationships. If the working relationship between the managing agent and the property owner or board of directors becomes strained or unproductive, it might be prudent to explore other options.
· Board or Owner Consensus: If there is a general agreement among the property's board members or owners that a change in managing agent is necessary, it can be a compelling reason to make a change.
Whatever the catalyst, proactive action is required on your part if you are to avoid any of the several things that can go wrong when there is a change of managing agent.
What could go wrong?
It is very common for transactional errors to be made when there is a change in managing agent. The most common are as follows:
· The closing balance is not transferred across to the incoming managing agent
· Credit balance is left on the account
· Payments are inadvertently made to the wrong managing agent
· There are duplicate payments, resulting in the outgoing managing agent having unallocated cash on your account. Particular care and attention must be taken when the change takes place on or around the quarter dates. This is because the outgoing managing agent would have already issued an invoice for the forthcoming quarter and it’s likely that the incoming managing agent will do to the same.
Whilst these transactional errors are a nuisance in themselves, there are a couple of additional factors which can make their correction problematic.
Firstly, there may well be a limited time window when the outgoing managing agent will be able to assist with any queries due to their access rights to the account. Secondly, although the managing agent is responsible for the property, they are acting on behalf of the landlord to whom they are answerable. As soon as they relinquish that responsibility, they no longer have any vested interest in the property. This could well lead to a reduction in their overall willingness to help resolve any queries that may well arise. The longer that you leave contacting the outgoing managing agent, the harder the reconciliation process can be.
In the next instalment of this two-part blog, which will be released next week, we will explore what you can do to manage the change well and actions you can take proactively to prepare for your next managing agent change.
Written by Mark, Property Audit Manager
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