A More Ethical Approach to Property Management
When considering revenue streams and remuneration structures in property management, quality agents will ensure that any put in place support an ethical business culture. An area where this falters in the property management industry is the commission policies on general repairs and maintenance. Some large and well-known agents set company targets for achieving a level of commission income in this area. This creates the conditions for unethical approaches which every agency should seek to rule out.
Take a typical contract which endows the managing agent to undertake any repairs under the value of £300 at their discretion. The managing agent has three different but reliable and well-reviewed contractors on their books who can carry out the works:
· Contractor A will charge £200.00
· Contractor B will charge £250.00
· Contractor C will charge £275.00
It is clear to see that where discretion is permitted the conditions of a commission target would bias the agent towards instructing Contractor C. After all, their contractual obligations are satisfied and another step is taken towards achieving their target income. However this clearly isn’t in the best interests of the client given that they are paying unnecessary costs of works which the agent can have carried out more costs effectively. It is also clear from the above example that although an agents fees may be clear in their contract, this will not shed any light on their internal targets & remuneration structures and the type of decision making they may influence.
Some agents may jump on the archaic view that this approach is perfectly ethical given that it meets all contractual obligations whilst contributing to the company’s bottom line. However ethics begins where the law (or contractual obligations) end. In this scenario it should begin when the agent is considering which instruction is in the best overall interests of the client and, all other things being equal, it is not in the best interests of the client that they incur unnecessary costs. An agent’s claim that it helped them meet their commission target would not break any ice with the paying property owner. It may be argued that such companies can put measures in place to offset the risk such as checks to ensure the most cost effective option was taken. This is not an efficient or effective means of achieving goals for any agency committed to an integrated ethical culture throughout its business.
We at Spencer are committed to encouraging just such a culture and understand that this means meeting maintenance costings with a healthy questioning attitude, free of any general maintenance fees or commissions. This approach works in the client’s best interest by providing practical and cost effective courses of action with an unbiased view of which to take. This is in contrast with the above approach aimed at achieving the highest level of commission in the quickest possible time regardless of whether it really is in the best interests of client.
At a time when agencies income streams are being squeezed it is likely that the types of commission and remuneration mentioned above will be drawn on as a way to bolster revenue. So, when seeking out a quality agent it is worth looking beyond the fees outlined in their contract and asking questions about the practices the company may have in place to achieve their targets. Their answers may shed light on whether their approaches are actually consistent with the interests of their clients and the true costs of their property management.
Speak to Spencer about our ethical stance on zero commission on any repairs on 0114 268 3682