I have recently discovered that the managing agent of our block has been uplifting the charge from a subcontractor that they used for repair work. The uplift was not disclosed to the owners’ management company (OMC). Is this an acceptable practice or industry norm?
In my experience, adding an uplift to subcontractor charges without disclosure is not an industry norm and is not good practice.
In general, transparency in service charges is important to maintain trust from property owners. The OMC budget must be agreed each year at a general meeting of members and sets out the basis for billing service charges to owners. In presenting the budget and the charges, transparency is important, so owners understand where their money is going and how it is used. A good part of an agm is normally devoted to going through the detail of the budget and, in my experience of OMCs and agents, the different costs are normally passed on as they are charged and there are no uplifts involved.
A professional managing agent must be licensed and must have a letter of agreement with each OMC that they work with. This includes a section on fees payable and this should state clearly what is to be paid to the agent. The letter of agreement would also normally include an annex which lists the specific tasks to be undertaken by the agent.
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On top of the fees set out in the letter of agreement, the agent may be permitted to receive further fees if work arises that is not envisaged by the letter of agreement. For example, the management of a non-routine project might require extra work from the agent. However, any such extra fees would have to be agreed with the OMC board on a case-by-case basis.
As such, if you are on the board of your OMC, you should share your concerns with your fellow directors and ask the managing agent for a detailed breakdown of charges applied. You could also query if this arises for any other services and set out the requirement of the board for full transparency on all fees. You could also review the existing letter of engagement and look to amend this if required and you could decide as a board if you wish to take the matter further.
If you are not on the OMC board, you could submit your query in writing to the agent. If you are not satisfied with the response, you could ask for details of the OMC directors and ask them to follow up on your behalf. You will also be able to raise the matter with the agent and with the directors at the next agm of the company.
Finbar McDonnell is a chartered property manager and a member of the Society of Chartered Surveyors Ireland
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