What a managing agent actually does — and what it really costs you

Most leaseholders in England and Wales have a managing agent — a property management company appointed by the freeholder to run the day-to-day life of the building. You pay for it through your service charge. Yet a surprisingly large number of leaseholders could not describe precisely what their agent is supposed to do, let alone whether they are doing it well.

This article demystifies the managing-agent role, explains where your money goes (and where it sometimes disappears quietly), and looks honestly at the forthcoming changes to agent regulation and the alternative of taking over yourselves.

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What a managing agent is actually responsible for

A managing agent typically holds authority under the terms of the leases and a management agreement with the freeholder. Their responsibilities usually span six broad areas.

1. Accounting and service-charge budgets

The agent prepares an annual service charge budget — a forecast of what it will cost to run the building over the coming year. This budget drives the service charge demands sent to leaseholders. Typically it covers insurance, maintenance contracts, utility costs for common parts, management fees, and contributions to a reserve or sinking fund for larger future works.

At the year end, the agent should produce certified accounts showing what was spent and reconcile them against what was demanded. Any surplus or deficit is usually carried forward or credited/demanded in the following year.

This is foundational work, and when it is done badly — budgets that bear no relation to actual spend, accounts that arrive years late, reserve funds that have been run down without explanation — it is usually the source of the most serious leaseholder grievances.

2. Service charge demands and collection

The agent issues the periodic demand notices to leaseholders, collects payments, and chases arrears. Under Section 42 of the Landlord and Tenant Act 1987, service charge contributions and reserve fund contributions are held on a statutory trust for the leaseholders. The money must sit in a designated client account at a relevant financial institution, separate from the agent's own money. It is the leaseholders' money — the agent is a custodian, not an owner. Any interest earned follows the trust and belongs to the leaseholders too.

3. Repairs and maintenance

The agent commissions and oversees day-to-day repairs (a broken entry-phone, a leaking roof over the common parts), arranges planned maintenance contracts (lift servicing, fire equipment, cleaning), and manages any larger capital programmes. For major works above the Section 20 threshold — currently, works that will cost any one leaseholder more than £250 — a formal consultation process must be followed. The agent should run this process correctly; failure to do so caps what can be recovered at £250 per leaseholder, regardless of the actual cost.

4. Compliance

Modern residential blocks carry a substantial compliance burden. Fire risk assessments, asbestos surveys, electrical inspections, legionella risk assessments, lift thorough examinations, EPC requirements and — for taller buildings — the additional obligations under the Building Safety Act 2022. A competent agent tracks which assessments are due, commissions them, and acts on any remediation required. This is unglamorous but consequential: getting it wrong has real safety and legal implications.

5. Insurance

The freeholder is almost always responsible for buildings insurance under the terms of the leases, and the agent arranges it on their behalf (typically funded through the service charge). The agent should place insurance that is adequate and at a competitive premium. Since April 2024 there have been stronger transparency requirements around insurance commissions — a theme we will return to.

6. Section 20 consultation and company secretarial duties

Alongside the above, the agent may also handle routine company secretarial work for the freeholder entity, deal with solicitor enquiries on flat sales (known as LPE1 forms), handle applications for consent (subletting, alterations), and manage any ground rent or administration charge processes.

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Where the fees actually go

The headline management fee

Agents typically charge a management fee per unit per year — often expressed either as a flat amount (say, £180–£350 per flat per year in a modest provincial block, sometimes considerably more in London or for larger buildings) or as a percentage of the annual service charge spend. This fee covers the agent's core staffing and administrative costs.

That fee is usually visible in the service charge accounts. What is less visible are the additional revenue streams that some agents layer on top.

Commissions, markups and referral fees

Historically, some agents took a percentage of the contractor invoice for every job they procured — effectively a markup on repairs that leaseholders paid but weren't always told about. Similarly, insurance broking commissions (a percentage of the premium flowing back to the agent or a connected firm) and interest earned on client account balances have sometimes not been fully disclosed.

Regulation has been moving in the right direction: the FCA has imposed stronger transparency requirements around insurance commissions, and the forthcoming regime on managing agent regulation (see below) is expected to address broader conflicts of interest. But until those rules are fully in force, leaseholders are well within their rights to ask their agent to itemise all remuneration sources — and to push back if the answers are vague.

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Why transparency is often poor

The honest answer is structural. The agent is appointed by and accountable to the freeholder, not the leaseholders. The leaseholders pay, but they are not the client. This misalignment means leaseholders have historically had to rely on statutory rights — demand inspections of accounts, challenge charges at the First-tier Tribunal — to get information that a normal client-supplier relationship would provide automatically.

The forthcoming changes to service charge transparency (covered in a separate article on the 2025 consultation) aim to fix some of this by standardising demand formats and requiring annual reports. But for now, opacity remains the default experience for many leaseholders.

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Managing-agent regulation: what is changing

The case for mandatory professional regulation of property managers has been building for years, most notably through the work of the Regulation of Property Agents (RoPA) working group chaired by Lord Best, which reported in 2019. The key proposals — mandatory qualifications, a statutory code of conduct, a licensing regime — have not yet become law.

A government consultation specifically on strengthening the regulation of managing agents closed on 26 September 2025. The government is now analysing responses. The direction of travel is clearly towards mandatory professional qualifications and a code of practice, but no legislation has been introduced. For now, regulation remains voluntary and self-regulatory body membership optional.

This matters because a leaseholder's ability to hold a poor agent to account remains limited to statutory rights (demanding accounts, going to tribunal) and, ultimately, the RTM process — taking over management altogether.

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The honest trade-off of self-managing

Right to Manage (RTM) gives qualifying leaseholders the statutory right to take over management of their building without proving fault and without buying the freehold. It is a no-fault process. You form an RTM company, gather support from at least half of the flats, serve the statutory notices, and — assuming the building qualifies — the management transfers to you.

What RTM actually means in practice is that the work the managing agent was doing becomes your work (or the work of a company you appoint and control). You take on:

• Setting and demanding a lawful service charge budget
• Maintaining a designated client account (the trust-account obligations under s.42 LTA 1987 apply to you exactly as they did to the agent)
• Running the maintenance programme and Section 20 consultations
• Tracking compliance requirements
• Placing buildings insurance
• Filing confirmation statements and accounts at Companies House

The benefit is control: you choose the contractors, you see every invoice, you set the standard, and you no longer pay a management fee to an agent whose interests may not align with yours. For a well-organised group of residents in a straightforward block, this can mean material savings and a noticeably better-maintained building.

The cost is time and responsibility. Directors are volunteer leaseholders who owe duties under the Companies Act 2006. If you get the compliance wrong — miss a fire risk assessment, fail to follow Section 20 correctly, co-mingle service charge money with company funds — the consequences are real.

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How Reeve helps self-managing blocks

For blocks that have taken (or are taking) the RTM route, Reeve is designed to do the operational jobs the managing agent was doing — budgets and compliant service charge demands, Direct Debit collections, compliance tracking, Section 20 consultation management — without an agent's fee or the opacity that so often comes with it. Funds remain in the block's own trust account throughout; Reeve never holds the money.

The goal is to make self-management genuinely practicable for volunteer directors who have day jobs.

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FAQ

Can I see my managing agent's full fee breakdown, including commissions? You have the right to inspect the service charge accounts and supporting receipts. Under the Landlord and Tenant Act 1985, leaseholders can formally request a written summary of costs and inspect receipts and other documents. If your agent refuses or stonewalls, the First-tier Tribunal can order disclosure.

What is a "Section 20" and why does it matter? Section 20 of the Landlord and Tenant Act 1985 requires the person managing the building to consult leaseholders before undertaking major works (costing any one leaseholder more than £250) or entering a long-term contract. If the consultation is not done correctly, the amount recoverable is capped at £250 per leaseholder per work phase.

Does RTM let me sack the current agent immediately? Not on the day of takeover. The RTM company acquires management on the acquisition date, at which point you can choose whether to appoint your own agent, self-manage, or — in theory — reappoint the existing agent. The existing contracts (maintenance agreements, insurance) may have notice periods that carry over.

Is the managing-agent regulation consultation outcome final? No. The consultation closed in September 2025 and the government is analysing responses. No legislation has been introduced. Any new regulatory regime for managing agents is some way off.

Are service charge funds protected if the agent goes insolvent? They should be, because the statutory trust under s.42 LTA 1987 means service charge money is held for leaseholders and should not form part of the agent's estate. In practice, enforcement depends on whether the agent actually maintained properly segregated accounts. This is one reason why a clean, designated trust account and clear records matter enormously.