Residential Property Management
What is Residential Property Management (Block Management)?
What is the Difference between a Property Management Company and a Property Management Agent?
What are the Maintenance and Management Responsibilities of a Management Company?
What are the Statutory Maintenance Requirements (Obligations) of a Management Company?
Managing Agents - What they Will Look After.
Managing Agents - What they Won't Look After.
What are the Statutory Obligations in the Administration of the Management Company?
Why Use an IPFMA Managing Agent?
Criteria for Selecting a Managing Agent.
What is the Difference between a Property Management Company and a Property Management Agent?
Definition of a Management Company
A management company is a company which exists only in relation to, and for the benefit, of one individual apartment complex. It is structured so that, ultimately, it is to be exclusively owned and controlled by all the owners of the apartments within that complex. In general it is established on a not-for-profit basis.
Management Company Incorporation
The setting up of a management company involves the formal incorporation of the management company by the developer. The developer will usually set up the management company some time after the developer has begun to build the apartment complex but before any apartments have yet been offered for sale.
It is generally a company limited by guarantee, with developer directors to start with, and later with owner directors. The Companies Acts require that a company limited by guarantee not having a share capital must be formed with at least seven members, and it must have at least two directors and a secretary. In general, the developer will nominate some of his associates to fill these roles. The sorts of persons typically nominated are (i) directors or employees of the development company or (ii) employees of the solicitors' firm which represents the developer.
While this is a company limited by guarantee, the members are (or are ultimately intended to be) the owners of apartments, all of which are located within the same complex. The common enjoyment of each individual owner's apartment depends, at least in part, on the provision of certain common services or amenities or the common use of certain shared property. Where it is intended that either now, or in the future, the provision of those services or amenities and the ownership of that shared property should be organised and controlled by the members/apartment-owners acting collectively through their own company through the expenditure of money which is collected by the company from all the members/apartment owners - this is a Management Company.
Definition of a Managing Agent
A Managing Agent is usually a firm, or a self-employed individual, who holds themselves out as having the ability and expertise to co-ordinate the procurement and provision of the services which are needed by management companies on a day-to-day basis.
Managing Agents are businesses which are established on a for profit basis, the profit being derived from the fee which the Managing Agent will charge the management company for making their services available.
Typically, the Managing Agent will be involved in the management of several different complexes - and, in the case of some of the larger firms, the portfolio of complexes under management may be numerous.
Why do Directors of Management Companies engage Managing Agents?
The members and directors of a management company do not usually want to take on the time-consuming and onerous tasks of making arrangements with and having to supervise employees and/or service providers and instead will opt to avail of the services of a Managing Agent. The following areas are typical of the range of services provided by a Managing Agent:
- Buildings Management – painting, cleaning, gardening, fixing security gates, clearing drains, etc.
- Insurance Management
- Community / Estate management
- Communications Management
- Corporate Management and Administration
- Financial Management
Generally, a Managing Agent will not include the following in their standard service contract fee, and where appropriate they will often recommend that specialist professionals be engaged to deal with the following:
- Construction, Alterations etc - Any type of construction, extension or alteration or fitting of the premises
- Legal Proceedings/Dispute Resolution - The entering into either of the above mentioned proceedings of any kind on behalf of the Management Company
- Levies - Supervision of any one-off levies or surcharges for unexpected cost
- Planning issues - Disputes relating to applications within, adjoining or adjacent to the development
The Contract between a Managing Agent and Management Company
Ordinarily, the legal basis which underpins the role of the Managing Agent is one of contract. A contract exists between the management company and the Managing Agent - and not between any individual apartment owner(s) and the Managing Agent.
When tendering for their contract with the Management Company, the Managing Agent will generally outline their Managing Agent’s fee. along with any ancillary charges which may be required to run a development as follows:
- Agent fees
- Company Secretarial Fees & Costs
- Health & Safety Management
- After Hours Emergency Helpline
- Data Record Storage
- Janitor Management Fees
- Postage & Stationary Outlays
That contract, alone, determines what are the obligations of the Managing Agent and, unless it provides otherwise, his/her obligations are owed to the Management Company - not to the individual apartment owners.
Formation of an Ad-Hoc Committee
As in the initial years of a development, the Board of Directors is usually represented by the Developer. In order to facilitate owner involvement during phased periods, a professional managing agent’s practice to encourage the developer’s full cooperation and communication will be to initiate the formation of an Ad Hoc Committee to whom day-to-day property management matters are reported.
In practice, most Managing Agents also recognise the good sense of being receptive to communications from individual apartment owners and of endeavouring to deal with any of their reasonable requests which come within the scope of what is provided for under their contract with the Management Company.
What are the Maintenance and Management Responsibilities of a Management Company?
Management Companies assume the responsibility for maintenance to the estate areas to which residents have communal access and share services and space, including the following:
Mechanical systems, i.e. pumps, gates, lifts
Electrical systems, i.e. Lighting,
Building Fabric, i.e. painting, carpets, roofs
Grounds, i.e. grass cutting
Cleaning, i.e. in foyers and lobbies
Life Safety systems, i.e. fire alarm, extinguishers.
The purpose is to ensure that the development retains all the functionality of its design and the appearance is kept to a good standard for occupation.
In fulfilling these duties, the Management Company must ensure
- Good record keeping of all outsourced supplier documentation
- A good tendering process to be followed for outsourced services
- A method to confirm completion/ satisfaction of works
- Appropriate insurances to be in place relative to services provided.
Management Companies typically adhere to best practice when considering service level requirements for the maintenance of the estate assets and building structures. Some of these may require special consideration in relation to build type and Health & Safety.
Building Investment Funds are also a requirement of management companies. As part of the management of a development, the Management Company would look to accrue a separate fund to cover the replacement or repair of equipment or building elements once they reach the end of their typical economic life. Periodic annual maintenance should therefore be considered to be partly influential in the longevity of an asset, with the view to extending the typical economic life of an asset.
It is expected that the Management Company will need to seek advice from Property Managers or Property Surveyors in relation to the specific requirements of maintenance and associated management of a development.
What are the Statutory Maintenance Requirements (Obligations) of a Management Company?
Statute Regulation is typically applied to building design strategy, systems or equipment, where a direct impact to life safety is foreseen.
Management Companies are required by law to ensure that all statutory maintenance is complied with for the development they serve.
Fire extinguishers, fire alarm systems, lifts, automatic opening vents and sprinklers, to name a few, require maintenance and inspection at specific frequencies over the course of a year.
Each building has a fire management strategy. The Management Company is responsible for ensuring that the building use is inkeeping with these design criteria. Associated to this, a regular inspection is required to ensure that all exit routes inside the building are clear at all times and the emergency vehicle access routes are clear of any obstructions.
There is specific instruction provided in the relevant standards for this maintenance and inspection to which the statute regulation directs.
In fulfilling this duty the following forms part of the statutory requirement:
- Good record keeping of all inspection/ service documentation
- Initial Assessment of contractor for accreditation and suitability
- Service intervals comply with regulation
- Adequate method of reporting
- Immediate repair/ replacement of faulty, damaged or missing equipment
Management Companies need to consult with Technical Advisors to ensure they comply with the appropriate regulation and that all life safety systems in their development are included in a maintenance program.
Managing Agents - What they Will Look After?
The Managing Agent and Management Company are two very different entities. The Managing Agent is employed by the Management Company to carry out many of the Management Company’s covenants in respect to the management and maintenance of the development.
Managing Agents’ services typically include:
(I) FINANCIAL MANAGEMENT
- To prepare a Service Charge Budget annually in advance (This is a professional assessment of the running costs of the development using the best information available)
- To present the budget for consideration and approval to the Board of Directors and to provide relevant supporting documentation and/or justifications for it
- To procure the services of a specialist consultant on behalf of the Management Company to advise on the appropriate level for the Building Investment Fund (Sinking Fund) provision within the budget on an annual basis
- To manage the Building Investment Fund (Sinking Fund) and it is acknowledged that the responsibility and duty of a managing agent in relation to building investment fund (sinking fund) is as follows:
- To promote and ensure the requirement and responsibility of a sinking fund is fully understood by the client.
- To assist in the appointment of a specialist consultant to draw up an inventory of assets and equipment and a requirement assessment
- To consider and advise annually adjustments to the fund according to current up to date forecasts, including vat and fees.
- To collect and invest the funds safely and in a separate bank account in the management company’s own name and to maintain and account for such moneys separately so as to insure they are not spent on other works or enhancements not intended for the fund.
- To proactively plan, schedule and arrange for such works as they arise in consultation with the client so that continuous maintenance of the common areas is to a consistent standard. This will ensure that the owners’ investments are protected in the longer term.
- To calculate the service charges, based on the approved budget, for each unit according to the apportionment method set down in the title documents (leases)
- To issue each member with a statement of demand together with a copy of the approved budget
- To operate flexible payment methods in accordance with the lease and/or approved by the Management Company
- To address members enquiries in relation to the budget and statement of demand
- To provide details of receipts for monies received on subsequent statements issues
- To carry out a collection procedure including as relevant the issuing of statement of demand reminders
- To instigate and charge penalties on late payments in accordance with the terms of the leases
- To report to the directors on overdue accounts and take instructions on appropriate action for recovery
- To instruct the Management Company’s nominated solicitor to collect overdue accounts
- To maintain the financial records of the Management Company
- To provide quarterly income and expenditure reports for the directors of the Management Company
- To regularly reconcile bank statements of the Management Company
- To administer the Management Company’s financial affairs in a manner which minimises the risk of fraud and/or misappropriation
- To pay creditors invoices as instructed by the Directors of the Management Company
- To liaise with the Auditors in their preparation of the Management Company’s annual audit and address all appropriate queries arising
- To prepare and arrange the statutory returns to the Office of the Revenue Commissioners (46G and CT1) for the Management Company
(II) PROPERTY MANAGEMENT
- To procure and arrange all Planned Maintenance Services- including (but not limited to) services such as common area cleaning, window and carpet cleaning, grounds and landscape maintenance and waste management
- To procure and arrange all mechanical and electrical services - including plant servicing and maintenance such as, lifts, sewage and water pumps, fire safety systems, access and intercom systems, lighting and ESB generators, vehicular and pedestrian gates and security systems including CCTV
- To procure and arrange reactive repairs and renewals - including (as and when called for) attending to vandalism, graffiti, and repairs arising from wear and tear
- To provide Contractor procurement management for all of the procured services to the buildings, to ensure competence, validation of insurance and competitiveness/value for money
- To provide reasonable Contractor supervision for the verification of attendance and adherence to the service specification contracted
- To provide Site inspections within a sufficiently regular attendance to identify faults and service failings in the complex
- To Liaise with consultants appointed by the Management Company in relation to the ongoing management of Health and Safety programmes, fire safety systems management, and energy consumption management
- To forecast decoration/refurbishment programmes for consideration and implementation by the Management Company
- To forecast plant and machinery refurbishment programmes for consideration and implementation by the Management Company
- To engage and arrange specialist consultants as needed in the event of a building or structural repair or renewal, or where tenders require specialist expertise
- To keep safe any warranties or guarantees as received from the developer
- To maintain records of tender exercises ,work carried out, and other records related to service provision
(III) CORPORATE ADMINISTRATION SERVICES - To retain copies of relevant Title and Estate Documentation for ease of reference (Originals to be held in the care of the Management Company’s solicitor)
- Recommend and prepare “House Rules” for adoption by the Directors of the Management Company
- To define and agree a procedure, with the Management Company, for dealing with House Rules breaches
- To define and agree a procedure for dealing with Members complaints
- To assist the Management Company in its observation of and compliance with relevant legislation such as:
Companies Acts 1963 to 2001,
Data Protection Acts 1988 to 2003,
Fire Services Act 1981,
Occupier Liability Act 1995,
Safety, Health and Welfare Act 2005,
Residential Tenancy Act 2004,
Waste Management and Litter Pollution Acts
(IV) INSURANCE MANAGEMENT
- To procure such Professional expertise to carry out the Building Valuation for Reinstatement purposes to ensure that the scope of insurance cover for fire and perils insurance is adequate and appropriate
- To liaise with the Management Company’s Insurance Broker in the procurement of the Insurance Policy and the negotiations on the annual premium payable
- To arrange additional cover for Public Liability and Employers’ Liability, Alternative Accommodation, Common Area content cover and statutory Lift Engineering cover and at the discretion of the Management Company, Directors and Officers’ Liability cover
- To annually liaise with the Management Company’s broker for the renewal of all policies in consultation with the Board of Directors
- To provide an efficient claims handling process, particularly in relation to multiple claims on behalf of members
- To provide policy administration and management
- To ensure owners and mortgagors interests are noted on the policy
- To Notify brokers of any possible claims against the Management Company’s policy
- In the event of a Loss Adjustor being appointed with respect to a claim to provide administrative and coordination support
- To record and receive insurance settlements and discharge such funds directly to the claimants and or contractors in the settlement of the claim process
(V) ADMINISTRATION SERVICES
Managing Agents - What they Won't Look After.
As part of the invitation to tender, the Managing Agent should be invited to specify, and include, any services which are not considered standard services of a Managing Agent.
Below is a sample list of services which would normally not be provided by a Managing Agent under the standard contract terms but which may be offered to the Management Company for a separate agreed fee:
- Instructing solicitors to collect service charge arrears
- Attend Court on behalf of the Management Company
- Arrange the delivery of maintenance works which would be categorised as improvement or renewal work
- Arrange the delivery of refurbishment work
- Providing an After Hours Emergency Service to address events such as leaks and electrical failures
- Arrange or provide security services for which a license must be held
- Distributing statutory notices of an EGM and other supporting materials to members
- Attending an EGM and recording and distributing minutes of the EGM
- The printing and circulation of notices in relation to matters which are above and beyond the standard services of the Managing Agent
- Attendance at member’s private meetings, resident association meetings or neighbourhood watch meetings
- Preparation of Health & Safety Statements, and the Annual Health and Safety Certification
- Providing advise to Residents’ Association and Neighbourhood Watch Associations on matters relating to lease covenants
- Dealing with ongoing issues relating to House Rules breaches of Covenant outside of the agreed service specification and procedure
- Liaising with Local Authorities and Government Bodies (including planning Departments or Planning appeal boards)
- Project management of major renewals, refurbishment works or new works including the administration and liaison with consultants
- Dealing with the Technical and Professional Advisors of the Management Company
- In the event of resale’s responding to requisitions on behalf of the Management Company
- Off site Storage of Management Company files
- Providing Stationary, Postage, couriers and phone services
- Where a complex is newly built - Engaging a Surveyor, Engineer or Architect for the preparation of a professional “snag report” of the complexes on behalf of the Management Company
- Where a complex is newly built – inspecting and preparing finishing lists for the attendance of the developers
- Engaging specialist contractors for additional services that may be required such as Security, Car Park Management, Interior Designers, Building Surveyors, Loss Assessor and Fire Safety Consultants.
What are the Statutory Obligations in the Administration of the Management Company?
Each residential property Management Company is a separate legal person as defined under company law. The Management Company is a person separate and distinct from its members and is governed under the Companies Acts (primarily 1963 to 2006). Management Companies are generally set up as a company limited by guarantee, which means that the company has full reporting responsibilities and cannot be considered a small or medium company for restricted reporting as per the Companies’ Acts.
As a distinct legal entity, the Management Company has an obligation to:
(I) Have a Memorandum and Articles of Association
These set out what the company is or is not entitled to do and what are its primary internal governance rules. These are public documents, filed with the Companies Registration Office. This means that any persons interested in the company (including, persons contemplating dealing with the company, but also the public at large) may seek to inspect them, or to obtain copies of the Memorandum and Articles of Association
(II) Maintain Proper Books of Account / Accounting Records
These help to protect the company’s members and creditors, and enable also the preparation of periodic financial statements setting forth the state of the company’s affairs. They should:
Correctly record and explain the transactions of the company
Be kept on a “continuous and consistent basis”, with all entries made in a timely manner, and consistent from one year to the next
Contain entries from day to day of all sums of money received and expended by the company. Each entry should show both the date of the transaction, the amount of money spent or received, and details of the transaction. Usually these details will consist of at least two elements: (i) the name of the person or business from whom the money was received or to whom it was paid and (ii) the reason or purpose of the transaction, e.g., “2006 Service Charges” or “Electricity Bill” Include details of all the assets and liabilities of the company
Include a record of all services provided and of all the invoices relating thereto
Enable the financial position of the company to be determined at any time with reasonable accuracy and allow the directors to ensure that the annual accounts of the company comply with the relevant requirements of company law.
(III) Prepare Annual Accounts and Audit Same
The annual accounts must be audited on annual basis by a professionally certified audit firm. The audit must be conducted in accordance with international auditing standards to ensure that the annual accounts give a true and fair view of the company’s affairs.
(IV) Maintain Register of Members
The company must maintain certain minimal statutory records, such as accurate and up-to-date registers of its members and its officers.
(V) Hold Members General Meetings
The internal governance of the company must be conducted in accordance with certain basic standards. For example, minutes must be kept of directors’ meetings and there must also be at least one Annual General Meeting of the members. Likewise, there are provisions which ensure that all members are entitled to be adequately notified of general meetings of the company, and to be furnished with timely information in relation both to the company’s operations and its finances.
(VI) Have a Registered Office
This is a location at which, ordinarily, the more important of the company’s records will be maintained. In addition the law provides that documents duly sent or delivered to the company’s registered offices will generally be deemed to have been validly served upon it.
(VII) Documentation Filing with the Companies Registration Office
The company must once every year file an Annual Return with the Companies Registration Office which contains certain fundamental information about the company. In addition that return must usually be accompanied by up-to-date Financial Statements in relation to the company. These should include:
- the balance sheet as laid before the AGM of the company held during the period to which the return relates
- the related profit and loss account of the company
- the directors’ report accompanying the balance sheet
- the auditors’ report on the balance sheet
- there is no requirement for it to contain a listing of all the members of the company.
(VIII) Maintain Company Records
The company must maintain all financial records for a period of seven years in a secure location to be accessible as required.
(IX) Have a Board of Directors & Company Secretary
The responsibilities for the directors and secretary are as set out under statute and common law and the main responsibilities include:
exercising their powers in good faith and in the interests of the company as a whole
not being allowed to make an undisclosed profit from their position as directors and must account for any profit which they secretly derive from their position as a director
they are obliged to carry out their functions with due care, skill and diligence.
(X) Maintain a Bank Account in the Name of the Company
While this is not required by law, it is considered best practice to enable the company keep an adequate account of its funds.
SOURCES: ODCE Website; Draft ODCE Guidance - The Governance of Apartment Owners' Management Companies (AOMCS); Companies Acts (1963 to 2006)
Why Use an IPFMA Managing Agent?
The management of long leasehold residential property is a complex business, requiring a full understanding of the management company structure, associated title documents and a thorough knowledge of the statutory requirements of the various legislation that management companies are required to comply with e.g. company law. landlord & tenant law.
All IPFMA members endorse, accept and undertake to comply with the Irish Property and Facility Management Association Code of Professional Conduct and Ethical Standards.
In effect, managing a residential development is like managing a business which requires specific skills and time, and if you select the right managing agent, they will:
- Have a full understanding of leases and relevant legislation
- Comply with the Code of Professional Conduct and Ethical Standards
- Have an in-house team (and outside contractors) to deal with all aspects of property management
- Be able to provide full accounting facilities for budgeting, service charge collection and year-end accounting
- Deal with arrears collection and disputes between lessees in an independent and fair manner
- Most importantly, free up the lessees to enjoy their homes, avoid lessees becoming involved directly with disputes with neighbours and reduce the personal time that lessees would otherwise have to give in managing the property themselves.
Criteria for Selecting a Managing Agent
- Is the Managing Agent a member of Irish Property and Facilities Management Association (IPFMA)?
- Is the Managing Agent registered with the National Property Services Regulatory Authority (NPSRA)?
- Has the Managing Agent provided you with a contract, outlining all agent and ancillary fees therein?
- What service level offering is being provided by the managing agent and is this outlined in the contract?
- Has the Managing Agent a strong track record in managing developments (particularly if it is a large development)?
- Have three references been provided?
- What building management systems will be used to ensure the efficient management of your development?
- Are all service suppliers and contractors used by the Managing Agent vetted and insurance levels checked?
- Does the Managing Agent have robust financial systems, particularly in relation to how the service charge collection procedures are operated and the controls in place to safeguard your funds?
- Does the Managing Agent have suitably experienced and qualified staff in all areas of expertise required to manage residential developments?
- Does the Managing Agent carry the appropriate level of professional indemnity insurance?
