Most body corporates have a managing agent for a wide variety of reasons.
The most important is that running a body corporate is rather technical and most trustees neither have the time nor skills to manage them.
The first question asked by trustees when looking for a new managing agent is: “How much . . .” – which is probably the last question they should be asking.
By that I mean most body corporates pay so little to their managing agents that they actually make it a lost leader for their managing agents.
Yes, I am suggesting that most managing agents make a loss on the schemes that they manage.
It’s true.
A managing agent must have skilled staff. They need a bookkeeper, they need a property manager, they need inspectors.
They need an office – one that can allow them to hold body corporate meetings – just think of the size that they need to hold a meeting of 30 property owners.
They need computers and the internet and a reception, transportation to visit the properties and much more.
Most importantly, they need to have somebody that has knowledge about how to run a body corporate and all the commercial, financial and legal knowledge that is needed to do that.
Being a managing agent is not for the faint-hearted.
In Bloemfontein, the average fee per unit is probably around R120.
So, a normal-sized scheme of 30 units would pay a fee of just R3 600 per month.
I just don’t see how any managing agent can make a profit on such a low fee.
If we think that a plumber will charge an hourly fee of R500 or more for a service job, then the managing agents’ highly skilled staff should be paid at least at this level or more.
Accountants and bookkeepers would certainly earn more than this as a salary.
Having the portfolio manager visiting your property could well entail close to two rather than one hour if you look at travel time and on-site inspection.
At around R800 per hour this is worth R1 600 of anyone’s time.
Not much left over is there?
For instance, an owner recently asked us to visit his flat in Bainsvlei where there is a water leak between his flat and the one below.
This involved a visit by the portfolio manager, the letting agent in our company and myself at a cost of around R2 600 per hour, for a problem that was between him and the neighbour below and not a body corporate problem.
Many body corporates are just too small to employ a managing agent, though they really do need one.
I don’t believe that our company can afford to manage a body corporate of less than 40 units and would prefer to look after schemes that are 100 units or bigger.
A few weeks ago, we were told of a body corporate that is looking for a managing agent that has 15 000 units!
The only problem is that it is in Russia, though I must tell you that we are tempted.
We have noted a trend that body corporate trustees and owners are beginning to realise the value of good managing agents.
These managing agents are the ones that make life simple for owners and trustees alike.
They are able to give accurate and up-to-date budgeting and financial reporting on a monthly basis and in a way that is easy to understand even by a non-financial person.
And for that level of service, they are prepared to pay a higher per-unit fee with a 27-unit scheme paying the fees of a 40-unit scheme to get the services that they need.
Managing agents are in business to make money and to do so they need to look at larger schemes and those that pay higher fees.
Body corporates have to decide what level of service they want and can afford.
But if you don’t pay your managing agents a proper fee, you won’t get the level of service that you would like to have.
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.