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BEHIND THE scenes in the development of the BMSMA....

TUTORIAL 6 -- Managing Agents Introduction

A managing agent is a person or a firm appointed by the M CST to perform the functions of the management council. Thus, a managing agent (MA), under contract law, is an agent of the MCST and must therefore act according to the instructions of the MCST which is represented by the management council (MC). Under the BM SM A, the M C can delegate all or part of its duties and functions to the MA acting for and on behalf of the MCST . For example, in some estates, part of the accounting function is retained by the MCST. This includes keeping the cheque books, issuing cheques for payment, but the book-keeping work, the billing of maintenance and sinking fund levies, would still be undertaken by the MA. There are several functions that can cannot be delegated to the MA which, inter alia, includes the signing of cheques and the chairing of meetings (both council and ge ne ral meetings). Other exclusions are stated in section 67 of the BMS MA. Note that the MCST can delegate its duties and functions to the MA, but not the responsibilities. In other words, if the MA made some mistakes and caused damage to some SPs' properties, the MCST is responsible to make good the damage or pay compensation, not the MA. However, under contract law, the MCST can then seek indemnity from the MA. For this reason, if you are hiring a MA, ensure that he has a valid PI (professional indemnity) insurance for at least S$500,000 if he has 30 or fewer clients, S$1.00m. if more than 30 estates under his management.

Appointment & Removal of the Managing Agent

Section 68 subsection (1) of the LTSA provides for the appointment of a M A, viz: "68. -1) Subject to subsection (4), a management corporation may, by a resolution passed at a general meeting, appoint a managing agent and may, by instrument in writing, delegate to him ......" while subsection (3) provides for the removal of the MA who was appointed at a general meeting, viz: "(3) Any managing agent appointed by a management corporation may at any time be removed from office by a resolution of the managem ent corporation pas sed at a general meeting of w hich notice has been given for that purpose."

W hile S.68 (1) offers the MCST a choice to appoint a managing agent instead of the counc il members managing the estate themselves, and ss (3) merely states that if a MA were appointed at a general meeting, then he can be removed at another general meeting, the law is silent as to whether the council has the power to hire and fire a managing agent which is not a restricted matter under the A ct. However, MAs facing expulsion orders insist that they can only be removed at a general meeting and not otherwise. Likewise, MAs employed by the developer would, at the first AGM, offer themselves for re-appointment insisting that the council has no power to appoint a MA after the AGM because the MA must be appointed at the AGM as stipulated under S.68 (1). They supported their claim that the council has no power to hire or fire the MA by quoting subsection (10) which reads as follows:"(10) The fees and expenses of a managing agent shall be fixed by the management corporation in a general meeting or, if so authorised by the subsidiary proprietors at the last preceding general meeting, by the council of the management corporation. "

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The last clause of S.68(10), "or, if so authorised by the subsidiary proprietors at the last preceding general meeting, by the council of the management corporation", effectively means the council could be authorised by a general meeting to determine the fees of the MA, but this provision did not exist in subsections (1) and (3). The conclusion, therefore, was that the council has no power to hire and fire the MA no matter how poor the performance of the MA was, unless an extra-ordinary general meeting was convened for this purpose. In several estates, the managing agents simply refused to convene the EOGM when so instructed. The irony is that all MA contracts, whether in writing or made orally, contain a termination clause whereby the MA needs to give one month's notice to resign (some agreements offered a two-month notice), and MAs routinely quit their jobs by giving such a notice. W hen the MCST pointed out that since the M A can only be removed at a general meeting, the MAs cannot vacate their offices without been approved at a general meeting, the MAs claimed that there was no such provision with regard to their resignation. In other words, the LTSA is one-sided in favour of the MAs who can fire the MCST without a general meeting, but the MCST c annot fire the MAs without convening a general meeting. Paradoxically, the new MAs w ould take on the job from the outgoing M As without insis ting that an extraordinary general must be convened to appoint them. This appears to be a situation of heads the MAs win, tails the MCSTs lose. Eventually, one condominium decided to test the LTSA by insisting that their MA include the following resolution at their next AGM in 1992:"To appoint M/s XXXX P roperty Management Pte Ltd., as managing agent for the 14th financial year and authorise the Management Council to determine its remuneration. In the event, M/s X XXX Property Management Pte Ltd., is unable to act as managing agent for the Corporation or on terms not acceptable to the Management Council, the Management Council is hereby authorised to appoint any other managing agent for the 14th financial year, and to determine its terms of appointment and remuneration accordingly." The MA in that estate initially refused to include the MC's resolution insis ting that the LTSA did not permit the council to make an appointment, but the MCST pointed out that the appointment was in fact for them to act as MA except that a provision was made to avoid convening an extraordinary general meeting (EOGM) in the event the M CST and the M A cannot agree on the terms of appointment and/or the fees. W hen the MA still refused to comply with the MC's instructions, the MA was asked to drop the item on the appointment of the MA completely off the agenda implying that the MCST would then self-manage. The MA then reluctantly complied with the instruction and after the AGM , it was expected that the MA wou ld not be able to accept the new terms of appointment and was given the one-month notice of termination. The MA insisted that the MCST could not terminate the MA without convening an EOGM to remove them, but the MCST pointed out the appointment of the MA was subject to contract law and since the specified notice period was complied with, the MA had no case. In any case, the MCS T did not appoint another managing agent and as the outgoing MA's performance was far below expectation, none of the SPs in the development objected to the MA's departure. After AM CIS was formed, the above incident was relayed to AMCIS and the above resolution to appoint the MA became standard industry practice such that at the 2004 amendment of the LTSA, the authorities accepted the need for the new BMS MA to provide an equitable basis for the appointment and removal of the managing agent because the LTSA was lop-sided in favour of the MA. The new section 68 re-numbered as section 66 in the BMSM A now reads:

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"66. --(1) Subject to subsection (3), a managing agent for a management corporation may be appointed -(a) by the management corporation by ordinary resolution; or (b) by the co uncil of the management corporation without a general meeting if duly authorised to do so by the subsidiary proprietors at the last preceding general meeting of the management corporation" The new subs ection (1)(b) removes the need to first appoint the MA at a general meeting and then make provision for the council to appoint another MA should the appointed MA failed to accept the terms and conditions of appointment. Thus, the authorities have recognised the weaknesses of the repealed LTSA and remedied them in the BMSMA. Furthermore, the BMSMA also included a new provision under subsection 6 of section 66 to explicitly permit the council to terminate the appointment of the MA if so authorised by the MCST at its preceding general meeting. S.66 ss(6) reads as follows:"(6) A management corporation may terminate the app oin tment of its managing agent under this section at any time in accordance w ith the terms of the appointment -- (a) if authorised by ordinary resolution at a general meeting; or (b) without a general meeting if authorised by its subsidiary proprietors at the last preced ing general m eeting."

Prohibited Activity for Managing Agents

As we had, In Tutorial 5, explained why the new B MSMA had created a new provision under Section 68 with regard to the collection of proxies by the MA with the primary objective of installing a council that would re-appoint the MA and be agreeable to better terms of appointment, including the MA fees, we will not repeat this issue here.

Licensing & Accreditation of Managing Agents

The need for the authorities to include a section in the BMSM A to check on the conduct of ma na gin g agents indicate a lack of professionalism in the industry unlike Australia where all managing agents must be trained and licensed. The number of complaints AMCIS received from MCSTs about managing agents lead AMCIS to develop an accreditation scheme known as the APMA in which managing agents are expected to have formal training in real estate or facilities management, a certain number of years of experience in property management, and are able to observe a high standard of professionalism. Thus, in January 2003, the APM A scheme for the accredited professional managing agent, was launched. For details of the accreditation, the standards of performance expected and the professional code of conduct APMAs must observe, please refer to our publication Property Management Reference Version 2 of 2003 (see Home page, c lick Industry Standards PMR 2 on left banner). As there is no formal training for managing agents, unlike Australia, only three managing agents whose principal director held degrees in real estate or facilities management, were acc redited. Several others tried, but failed to meet the standards. For example, a large MA with about a hundred estates under its management, even hired several graduates of our professional diploma in condominium and complex management as their site managers in the hope that the firm could meet AMCIS's PM R 2. W hile the site management in these estates im proved and did meet PMR 2, the back office operations left much to be desired.

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For instance, cheques issued by the SPs of MCS T XXXX were credited to the SPs of MC ST YYYY. Eventually, SPRING S ingapore introduced a Singapore Standard, the SS 519 entitled "Specification for Performance of managing agents for strata residential properties", which is a simplified version of PMR 2 and contained basically the MA agreement (already found in PMR2), minus the standards of performance of PMR 2 (see PMR 2 The Third Schedule ­ Standards of Performance and Schedule of Penalties on page 24), or the Professional Code of Conduct (see PMR 2 ­ Fourth Schedule on page 25). SS 519 was launched in 2006, but as at August 2010, we were advised by the authorities that SPRING Singapore intends to review SS 519 because its adoption rate is very low, even managing agents are not adopting SS 519 although it was the M As who initially lobbied SPRING S ingapore to develop SS519. The unfortunate fact is that there is no professional training for managing agents and therefore any attempt to accredit managing agents, not to talk about licensing them, cannot be successful since there are simply too few MA s that can meet even the most elementary standards which is to produce minutes of council meetings within 7 days of the meeting. Note that under PMR 2 standards, the managing agent is required to submit properly prepared draft minutes of council meetings within seven days of the meeting (see item 1, Third Schedule of PMR 2 on page 24), and as there were only 3 APMA s adopting this standard, the authorities endorsed this in the new BMS MA and required minutes of council meetings to be posted on the estate's Notice Boards within 7 days of the meeting and to remain posted for at least 14 days. This recognition of AMCIS's industry standards, PMR 2:2003, by Parliament did help to improve the unregulated industry, but few were actually able to live up to the PMR 2:2003 standards let alone the more rigid BMSMA requirements. Note that under PM R 2, only draft minutes were required to be submitted to the council for approval, and the grace period is 7 WORK ING days, not 7 calendar days. The BMSM A's requirements are even more rigid: 7 days (calendar days) and on the notice board, not just draft minutes. Hence, if the council meeting were held on a Friday evening, with the weekends off and a public holiday on Monday, the MA has only three working days to produce the draft minutes, get it approved by council, prepare a second draft, if necessary, etc., and post it on the notice board by the following Thursday! W e wondered how many MAs could do this when only a handful can meet PMR 2 standards. Consequently, BCA advised that managing agents have petitioned the authorities to amend the BMSMA to double this grace period to 14 days. The reason for including such a requirement in AMCIS's PMR 2, and subsequently in the BMSM A, is that many MAs simply did not prepare minutes of council meetings, while those who did so only tendered the minutes just before the start of the next council meeting which is usually a month or two later. Hence, matters discussed at the previous council meeting were easily forgotten and no one knew who was to take what action post council meeting. In a recent meeting with the authorities, the authorities were not in favour of licensing M As although there were calls from the indus try to do so following the licensing of housing agents. AMCIS agrees with the authorities that th ere is no purpose licensing managing agents when only a handful of the 200-odd MAs are professionally trained. In other words, the industry is already short of MAs, qualified or otherwise, trained or untrained, and if licensing requirements are imposed, it simply means that more MCS Ts would need to self-manage since they cannot find an agent to hire. Even the accreditation schemes find few qualified candidates. Consequently, AMCIS has suspended its APM A accreditation programme and intends to resume the training of property officers and managers by relaunching its profess ional diploma in condominium and complex management. Until a sizeable pool of professionals is available, accrediting MAs is akin to putting the cart before the horse, let alone licensing them.

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Hiring a MA or Self-Management?

This is a perennial question which MCST s faced. Our answer is simply based on economics, viz: 1. if your estate has less than 75 units, and if you have a few dedicated council members, then you should self-manage because the co st s o f hiring a MA is too high in the first place, and there is not enough work to keep the MA occupied, in the second place. The only assistance you may need is to out-source the accounting function for a small monthly fee between $100 and $300 (depending on the size of the estate and the requirements). If you need administrative support, join AMCIS as an ordinary member and help is always around. But, on the other hand, if no council member is prepared to take an active role, i.e. all council members w ant to be sleeping partners, then hire a MA or a part-time administrator. 2. if your estate has 200 units or more, you don't need a MA because you can now afford to hire a full-time condo manager. Ev en if you were to hire a MA , the MA will insist that you hire a fulltime site manager, plus an admin officer and a facilities officer (or handyman). Hence, having a MA for estates of 200 units and larger simply increases your costs, adding an extra layer of management which will create more confusion because the site staff may receive conflicting instructions from the council as well as the MA. In fact, it is undesirable to hire a M A when you need to hire a full-time condo manager. W hen the MA recommend that a full-time condo manager (or officer) is needed in addition to their services, they have to lower the budget for the condo manager to ensure that the total management costs (MA plus condo manager) do not overshadow the budget (i.e. become too expensive). Cons equently, the candidates for the condo manager's p os t w ou ld be below par since the salary is suppress ed. The MCS T may end up with two "half baked" loaves and this is the experience of many estates with the condo manager coming and going at warp speed. 3. if your estate has more than 75 units, but less than 200 units, and you do not have a strong team in the council, then it justifies hiring a MA who will assign a site manager on a part-time basis. An estate of a size in this range would be able to afford a MA , but does not justify a full-time site manager as the work load is still relatively light.

Examples of estates without a MA would include W oodsvale EC (696 units), Bishan 8 (200 units), Eng Kong Green (64 units), Toh Yi Court (18 units), etc. In fact, more than tw o-thirds of MCSTs do not hire a MA because there are just not enough MAs to go around, in the first place. Although there are about 200 MA s, only a handful has the capacity to manage about 100 estates, with the vast majority handling less than 10 estates, but there are more than 3,400 MCSTs in Singapore (after deducting those which have been s old en bloc).

Posted on: 12 September 2010

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