A Guide to Switching Block Management Companies

Navigating change: Explore our guide to smoothly transitioning between Block Management Companies.

Switching block management companies can appear a daunting process. However, with the right guidance, it can become an effortless and rewarding endeavour.

This guide provides an actionable, step by step pathway to seamlessly transition from your existing managing agent to a more suitable one. We also delve into the intricacies of finding a new managing agent, including what to ask, what to look for, and how to make an informed final decision.

1. Understanding the Need for Switching Block Management

The first step in the process of switching block management companies is understanding why the change is necessary. Residents often experience frustration due to poor communication, inconsistent administration, lackadaisical service charge collection services, or a lack of proactive issue management. If you find yourself in such a situation, it’s time to consider a change.

2. Assessing Your Lease Structure

The second step involves assessing your current lease structure. This is pivotal as it largely dictates the process and options available for switching your managing agent. A lease structure usually falls into one of three categories: Tri-Party Lease, Two-Party Lease, or Tri-Party with a Managing Agent named in the Lease.

3. Exploring Types of Lease Structures

Tri-Party Lease

In this type of lease agreement, the freeholder or landlord, the management company and the leaseholder or property owner are involved. As a leaseholder, you can become a member of the board, thus gaining the opportunity to influence decisions including the appointment of a new managing agent.

Two-Party Lease

This type of lease involves the freeholder or landlord and the leaseholder or property owner. The options for changing block management in this case include convincing the freeholder to change the managing agent, claiming your Right to Manage, purchasing the Freehold with other leaseholders, or making an application to the Tribunal to appoint a new block manager.

Tri-Party with a Managing Agent named in the Lease

In this case, the freeholder or landlord, the managing agent and the leaseholder or property owner form the agreement. Typically, there’s a clause in the lease detailing how to terminate the agreement. In such cases, a Resident Management Company may be formed by property owners, who then become shareholders with the ability to elect a board of directors.

4. Check for Breach or Cause to Terminate

Your management agreement terms will dictate whether a cause to terminate is required. If a cause is indeed required, the management agreement will list the valid causes and the necessary actions. Common causes for termination include failure to execute reasonable instructions, financial malpractice, breach of contract, or inadequate performance.

5. Issuing the Notice

Just like any formal agreement, a termination notice period will be specified in your agreement. This period could range anywhere from 30 to 90 days with the typical notice period being 3 months for contracts with managing agents. Ensure to abide by this notice period to avoid breaching the contract. Your notice should be provided in writing, clearly stating the date on which the termination will occur.

6. Receiving Confirmation and Informing Leaseholders

Upon receiving your termination notice, your block management agent should confirm the termination in writing, specifying the date at which their management will cease. Following this, you should inform any leaseholders who pay service charges about the impending change in block management, again, in writing.

7. Finding a New Managing Agent

Now that you’ve successfully terminated your old managing agent, it’s time to find a new one, although we typically advise prospective clients to find a new agent prior to serving notice if possible. This is a crucial step as this agent will be responsible for the effective management of your property. Consider factors such as their experience, expertise, reputation, and the services they offer.

Typically the process of finding a new agent should involved:

– Holding initial calls to assess initial suitability. Ensure you have a ‘shopping list’ of what your perfect agent looks like, then hold calls with a variety to create a short list.

– Then invite each shortlisted agent for a site tour. This allows you to see the agents for the first time, get to know them face to face and it is a good opportunity for each agent to highlight any areas of immediate concern about the development.

– Request proposals. Now that the agents have seen the development and have spoken with the Directors, it’s time to receive their management proposals.

– Finally, hold a Q&A session with 2 or a maximum of 3 final companies based on their proposals. This will allow you to probe them on their proposals more and ensure you are making the best decision for your company, development and leaseholders.

9. Questions to Ask a Potential Managing Agent

When considering a potential managing agent, it’s important to ask a series of questions to gauge their suitability. These could include queries about their experience in managing similar properties, their approach to communication and issue management, their fee structure, and their financial reporting procedures to name but a few. If there are specific areas of concern that are not being met by the current managing agent, ensure you ask the potential new agents approach to dealing with this matter.

10. Making the Final Decision

After gathering all the necessary information and evaluating your options, it’s time to make the final decision. Remember, the choice of a managing agent will greatly impact the efficiency of your block management, so take your time and make an informed decision.

Switching block management companies can seem a challenging task, but with this guide, we hope to have simplified the process for you. Following these steps will pave the way for a smooth transition to a more effective and efficient block management arrangement.

Strangford Management Ltd work with a variety of clients, ranging in size from 40 units up to and over 300+ units in size. If you are looking for a new managing agent or wish Strangford Management Ltd to be part of your tender process, please contact one of our management experts via email at office@strangfordmanagement.com.