Managing Agents and Missing Funds

By Nige on December 12, 2024 at 8:06 pm
Type: Post Category: Freehold | Leasehold
Tags: Managing Agents | Transitions

If a site is lucky enough to escape from one of the large, unscrupulous managing agents, what happens if that managing agent holds on to site funds?

Normally, managing agents need to serve a minimum three month notice period. That’s a reasonable period of time during which the old managing agent can safely transition everything over to the new managing agent.

As often happens when transitioning away from a large unscrupulous managing agent, they hold on to funds for as long as they can get away with it. So what can residents do to recover their funds?

Quick Links

Key Steps Before Reporting
Options to Escalate
Conclusion
Why is this Important to Clients of Residents First?

Key Steps Before Reporting

Check the Contract or Management Agreement: Look for clauses about the transfer of funds during a transition.
Request an Account Statement: Ask the old managing agent for a full account of the reserve funds and where they are held.
Send a Formal Letter: Write a letter formally requesting the transfer of funds, citing their obligations under property law and industry standards.
Document All Communication: Keep records of all correspondence for evidence in case of escalation.

Options to Escalate

1. ARMA (Association of Residential Managing Agents)

If the old managing agent is a member of ARMA, you can file a complaint with ARMA. They have a code of practice that members must follow, including obligations regarding the proper handling and transfer of funds.
Check if the managing agent is listed on the ARMA website.

2. RICS (Royal Institution of Chartered Surveyors)

If the old managing agent is regulated by RICS, you can report the matter to them. RICS has professional standards that members must adhere to, including those concerning financial matters and client money.

3. The Property Ombudsman (TPO) or Other Redress Scheme

Managing agents are legally required to belong to a government-approved redress scheme (e.g., The Property Ombudsman, Property Redress Scheme). Check their membership and raise a complaint.
If the old managing agent is found to have acted improperly, the redress scheme can assist in resolving the dispute.

4. The Financial Conduct Authority (FCA)

Reserve funds are typically held in trust accounts. If you suspect mismanagement or improper handling of these funds, you can report the managing agent to the FCA for further investigation.

5. Tribunal

You can escalate the matter to the First-tier Tribunal (FTT) (Property Chamber) if the reserve funds’ withholding results in a failure to fulfill the obligations to maintain the property.

6. Solicitor’s Intervention

If the reserve funds are substantial, you may wish to consult a solicitor specializing in property law. They can send a legal letter demanding the transfer of funds and, if necessary, initiate legal action.

7. Local Trading Standards

If the old managing agent is withholding funds unfairly, you can report them to Trading Standards, who can investigate potential breaches of consumer protection laws.

Conclusion

By pursuing one or more of these options, you may be able to hold the old managing agent accountable and work toward resolving the issue effectively.

Why is this Important to Clients of Residents First?

We have been engaged by a number of clients that have suffered from these types of problems. It tends to be the same culprits: the large unscrupulous managing agents that feel they have the right to ignore the law.

In most cases, we can expedite the return of funds using one of the escalation options listed above. Normally, residents just need to threaten to escalate to the FCA or the FTT is enough.