Our Residents Management Company has a management contract. Why are there extra charges?

Managing agents are paid for their management services and additional charges often prove to be emotive but why is this?
Often, the perception among leaseholders is that the appointment of a managing agent is akin to an insurance policy. i.e. You pay your money and all events relating to a site are covered.
All sites are different in their design, management requirement and culture but there are simply too many variables that are beyond the control of any managing agent and, as such, the management contract has to cover these contingencies. Add to these constant changes in legislation and you’ll see that the role of the managing agent could quickly expand, and it is simply not sustainable for any managing agent to bear these variable risks. So, what are these variables?

1. Leaseholder behaviour
   I tell my property managers that 80% of what you do is managing people and about 20% is managing the building. This is to be expected as this is people’s homes and all the emotion that comes with it. However, in the leasehold environment, there are laws, rules and regulations that have to be adhered and when these are broken and need to be enforced then the managing agent usually has to step in.
2. Work specific to a leaseholder
   Often leaseholders may wish to make improvements and/or alterations to their property. Additionally, they may wish to sell it and all of this is additional work that involves the managing agent. Management contracts are always with the site be it the RMC, RTM or freeholder and not with individual leaseholders so any work for individual leaseholders is by separate arrangement.
3. Improvements
   Managing agents contracts usually cover the management of the facilities at the time of signing the management agreement. Whilst maintenance and repair is usually covered within the management fee, improvements aren’t. Improvements represent additional work for managing agents both in terms of implementing the improvement and subsequently managing it. The addition of electric gates is a good example of this. The project to install the gates will involve a lot of additional work as will maintaining the gates beyond installation.
4. Section 20/Major project work.
   Whilst the management contract will usually cover the administration of minor repairs and day-to-day maintenance, major projects that happen every few years (e.g. re-decoration) have to be charged for due to the substantial amount of work involved. Whilst I personally believe section 20 to be a very flawed process, it is a legal requirement and administratively heavy.
5. Changes to legislation
   Post-Grenfell, we have seen dramatic changes to the fire safety landscape with managing agents now being required to do considerably more to ensure compliance with fire safety regulations.
   The government has not helped by making fire safety regulations (especially for buildings below 18 metres) somewhat open to interpretation. I have covered my views on this in a separate document which can be downloaded here.
6. Work that pre-dates the appointment of a managing agent
   Often managing agents may take on a block with a long-standing problem. In our experience, this is often self-managed blocks that have kicked the can down the road to save money or new builds where the developer-appointed managing agent hasn’t acted in the interests of the leaseholder for fear of losing future business with the same developer.
7. Managing situations caused by neighbours
   Often actions (or inactions) by neighbours may require the intervention of a managing agent. Often this will be things like trees overgrowing from a neighbouring property or anti-social behaviour.
   Whilst most agents will try to do as much as they can within the scope of the management fee, what we can’t be expected to do is mitigate the risk of variables over which we have no or little control. This is fundamentally why managing agents make additional charges.