Developers appointing Managing Agents Prior to Handover – How Does it Work?

By Nige on January 4, 2025 at 9:12 am
Type: Post Category: Freehold
Tags: Developers | Handover | Management Companies | Managing Agents | S106

The authority of a Managing Agent to act on behalf of a Management Company is established through contractual agreements typically put in place during the development phase.

This is of particular interest prior to the completion of a Public Open Space (POS) for which the Management Company will take on responsibility.

This arrangement can be somewhat complex and often involves several key documents and agreements among the Developer, Management Company and Managing Agent.

Quick Links

• Developer Appointment and Initial Agreements
• Managing Agent Contract
• Authority Under Power of Attorney or Agency
• Terms and Conditions in the Lease or Transfer Deed
• Pre-Handover Responsibilities
• Delegated Authority from Developer
• Developer as the Initial Director of the Management Company
• Contractual Arrangements for Handover
• Summary
• Why is this Important to Clients of Residents First?

Here’s an overview of how this authority may be legally granted:

Developer Appointment and Initial Agreements

• During the development phase, it is common for the Developer to set up a Management Company intended to manage communal spaces and public open spaces once the estate is completed. Before the POS is fully completed and handed over, the developer may appoint a Managing Agent to handle the initial management and administrative responsibilities on behalf of the Management Company.
• The Developer generally maintains control of the Management Company during the early stages and, as such, has the authority to contractually appoint a Managing Agent to fulfil certain roles and duties.

Managing Agent Contract

• The Developer and Management Company often enter into a contract with the Managing Agent. This agreement defines the roles and responsibilities of the Managing Agent, and it allows them to act on behalf of the Management Company to handle administrative functions, maintain certain standards, and prepare for the handover of communal areas.
• This contract may include authority to:
  • Carry out preliminary site management.
  • Collect initial contributions or prepare documentation like Freehold Management Packs.
  • Handle maintenance planning, oversee site conditions, and coordinate contractors as needed.

Authority Under Power of Attorney or Agency

• The Management Company might give authority to the Managing Agent through a Power of Attorney or agency agreement, even before it becomes fully operational and takes over its enduring responsibilities.
• This document may legally empower the Managing Agent to act on behalf of the Management Company, including interacting with future homeowners, organizing management services, and liaising with the developer to oversee the estate until it is handed over.

Terms and Conditions in the Lease or Transfer Deed

• For individual property owners on the estate, the lease (in the case of leasehold) or transfer deed (in the case of freehold) will often contain specific provisions relating to the Management Company and its ability to appoint a Managing Agent. This document will outline the obligations of the homeowner to pay for communal services and will define the relationship between the Managing Agent, the Management Company, and the property owners.
• Even if the POS is incomplete, the contractual obligations created by the lease or transfer deed effectively allow the Management Company (or developer, as its current controller) to engage a Managing Agent to act in its stead.

Pre-Handover Responsibilities

• The period before the POS is completed and formally handed over to the Management Company involves a variety of preliminary tasks, such as:
  • Ensuring upkeep and security of the space.
  • Providing ongoing site inspections and preparing maintenance schedules.
• The Developer, who is generally in control of the Management Company at this stage, can contractually assign these tasks to a Managing Agent to ensure that everything is in place for a smooth transition once the POS is completed. This authority is given so that the estate does not fall into disrepair and that essential management services are in place during this transitional period.

Delegated Authority from Developer

• Since the Developer initially retains control of the Management Company, they may delegate authority to the Managing Agent through a formal agreement or contract of appointment. This allows the Managing Agent to take the necessary actions, such as:
  • Managing communal areas.
  • Communicating with early residents regarding service charges and communal responsibilities.
• This delegated authority usually remains until the estate or the POS is completed and the Management Company takes on its full operational responsibilities.

Developer as the Initial Director of the Management Company

• The Developer often acts as the initial director of the Management Company, giving them full legal authority over the company’s decisions and operations, including the power to appoint a Managing Agent.
• This means that even though the Management Company may not yet be fully active in terms of day-to-day operations, the developer’s position as the director enables them to formalize an agreement with the Managing Agent for all preparatory and management activities.

Contractual Arrangements for Handover

• The Developer usually sets up handover arrangements to transition the management of the estate to the Management Company once certain conditions are met, such as completion of the POS or when a set number of properties are occupied.
• The Managing Agent’s role during the pre-handover phase is crucial for making sure that everything is ready for the Management Company to assume its full responsibilities. Therefore, the Managing Agent’s authority is contractually bound and often subject to handover milestones defined in agreements with the Developer and the Management Company.

Summary

The Managing Agent’s authority to act on behalf of a Management Company prior to the completion of a POS is based on several layers of contractual agreements:

1. The Developer, who initially retains control of the Management Company, appoints the Managing Agent to handle preliminary management responsibilities.
2. The authority to act is often formalized through a contract of appointment, Power of Attorney, or an agency agreement.
3. The Managing Agent takes on roles such as upkeep of communal areas, document preparation, and resident communications, which are necessary during the transitional period before the Management Company takes on its full responsibilities.

These contractual arrangements ensure that the estate is properly managed during the early phases of development and that essential administrative and management activities are carried out, even before the POS and communal areas are completed and handed over to the Management Company.

Why is this Important to Clients of Residents First?

Understanding why a Managing Agent is in place before the Management Company takes on responsibility for enduring maintenance is key for residents.

Residents may question why they are receiving Service Charge bills prior to handover. They need to question whether the Managing Agent has the authority and whether the Management Company has any legal justification for