19 Apr How to evaluate a managing agent’s fees and services

It is undeniable that managing agents are critical to the successful management of a sectional title scheme. Selecting the right managing agent for your scheme is an important decision for which the trustees are responsible for.

So how does one go about making this big decision?

In this blog post, we attempt to distinguish between the different types of agencies and the advantages they bring with their management skills.

The importance of size

Managing agents vary in size, from smaller agencies with a regional focus to larger agencies with offices in every major center. Naturally, the larger an agency, the more complexes they will have under their management. An astute agency will not overburden their property managers with too many schemes, else they will not be able to offer a respectable and attentive management service.

An essential part of managing a portfolio is the support staff. Agencies typically have dedicated staff to deal with creditor payments and debt collection, as well as staff to assist the property managers with their administrative workload.

Agencies can be categorised as small, medium and large, the exceptions being boutique agencies and executive managing agencies. Each category of agency has its own characteristics:

• Small: Owner managed business acting as property manager and assisted by one or two staff members.
• Medium: Owner of business involved in day-to-day management along with managing a small portfolio. The owner is responsible for all aspects of the business and has a few other property managers to manage balance of the portfolio.
• Large: Business is owned by investors or shareholders who may or may not be involved in the day-to-day business operations. A general manager runs the business from an operation point of view and reports to the shareholders. The company likely operates in more than one region of the country. Several property managers with adequate support staff are required to manage the portfolio under contract.
• Boutique agencies: A small agency owned by a respected person with several years of sectional title management experience. A few support staff are employed to assist with management of the portfolio. The agency is likely to be very selective about the caliber of schemes they manage.
• Executive managing agents: This service can be provided by an existing agency or by a boutique agency that operates as a specialist agency. Experienced ownership and managers, along with seasoned administration staff to assist managers, are the hallmarks of this kind of agency.

Considering fees correctly

As the fees charged by managing agencies are not regulated, one can easily get vastly different quotes from different agencies. This is because each agency varies in size and staff complement, and each company has their own cost structure and expenses.

Generally speaking, you can expect to pay a higher fee for a bigger agency, who often have minimum fees for their services, and a lower fee for a smaller agency due to their smaller overhead structure.

It is important to review these fees in relation to the services offered by the agency and not to make assumptions based on the size of the fee. A higher fee does not necessarily mean you will be getting better service, while a lower fee charged by a smaller agency does not necessarily mean the service will be more personalised.

Knowing what you need

Choosing an agency can be an overwhelming task involving evaluating services offering and quotations, and interviewing representatives of each agency. Bodies corporate generally take the view that if their scheme is small, a smaller agency will be better suited to their needs, and vice versa for larger schemes with larger agencies.

This may be true in some circumstances and will be determined by the agency’s but it is more important for the trustees to align their choice of agency with the services their scheme require.

Conclusion

Choosing the right agency for your scheme can be very fulfilling if the trustees thoroughly consider their options and take the decision seriously. If the trustees know what specific services they require from their agency, the process of elimination as well as the overall evaluation process will be far less stressful than anticipated.