There is no doubt referrals are an efficient way to go about finding a potential property manager (PM). But good reputations and glowing recommendations aside, bear in mind your PM is one of, if not the, most important person (besides yourself) involved in your commercial real estate investment. This makes it essential to ask potential candidates direct questions about everything from their experience to services provided - and then check their backgrounds with relevant authorities.
While this may feel excessive or even uncomfortable, director of Melbourne-based Facey Industrial Mark Bond says property manager dilemmas listed by landlords are sadly recurrent and familiar.
The overarching problem is often a basic lack of effort, starting with the PM not bothering to visit a site in person, as well as failing to carry out regular market reviews to stay on top of the property’s true leasing value. Neglecting to renew leases in a timely fashion is also a common complaint of landlords. “We recently took over a lease that should have been renewed in late 2016,” Mr Bond cites as an example.
These questions were selected by long standing agents and property managers as among the best to help build a picture of your next potential PM:
1. Do you manage properties similar to mine?
Industry experts are generally united in the belief that no matter how competent a PM, there is no advantage in engaging them unless they have experience in managing your type of asset and its associated complexities.
Even if they are experienced, ensure they read every word of the lease agreement, advises Victor Kelly of Sydney’s Victor Kelly Estate Agents.
“A commercial lease is far lengthier and far more involved than a residential lease,” he explains. “These leases can easily be over 30 pages long and must be read thoroughly as they will stipulate exactly what the tenant is liable for. It needs to be clear who is liable for the strata levies, water rates, land taxes, how the rent increases will be managed and so on. The PM must have a signed copy.”
2. Are you a licensed property manager?
“You would be surprised how many have lapsed licences,” Mr Kelly says. “They’ve either simply forgotten or haven’t got around to renewing.”
Property managers are licensed real estate agents and their details can be checked with the Department of Fair Trading in NSW and equivalent bodies in other states.
3. Are you up to date with your CPD (continuing professional development) requirements?
A real estate agent is legally required to stay up to date with current laws and practices by accruing CPD points via accredited courses in order maintain their licences. Requirements differ between states, though NSW and Victoria are similar in ruling 12 CPD points must be earned before an agent’s annual licence renewal. This information is not officially logged, but checked via random Department of Fair Trading audits which call for proof in the form of certificates, receipts and cross-checking with training providers. Likewise, a landlord can also ask to see such proof of CPD compliance. It is an offence for an agent to falsely declare completion of CPD on a real estate licence.
4. What is your real estate and work background prior to becoming a property manager?
A PM’s real estate background as well as other work experience can indicate how well they will service your commercial property lease.
Long-time commercial agent Mark Bond of Facey Industrial in Melbourne stresses the importance of finding a PM who is a good communicator, one who can establish rapport with tenants as well as landlords and who also takes the initiative to visit your property simply as a matter of course.
“Often the first time a property manager comes out to a property is when there’s a problem,” Mr Bond says. “But we make a point of attending all properties we manage and meeting the tenant so they have an understanding of who we are and what we do. If all you are is an email or a notifier of rates there is no rapport.
“Having a good level of empathy with the tenant maximises the likelihood of a smooth tenancy. Communication is a huge factor.”
Mr Kelly adds that if your potential PM has worked in another profession “you would want it to have been where they dealt with the public and developed excellent communication skills.”
5. How long have you been in the property management business?
The greater the experience the higher the potential to deal with problems and tricky situations. “Say your tenant runs a retail shop or a restaurant, a pipe bursts on their biggest day of trading and the floor is flooded,” Mr Kelly says. “Obviously they can call an emergency plumber immediately but then it is up to the PM to know and employ expert commercial plumbers who can fix it as fast as possible and minimise business losses. A PM with longevity is likely to have dealt with all manner of tricky situations and made solid connections with top tradesmen who are efficient and professional.”
Further, before discounting a PM who is new to the field, find out if they have managed properties in any other capacity. They may have started as an investor themselves, managing their own property portfolios and then decided to gain their own licences in order to open a property management business and have more experience than initially apparent.
6. What services are included in the monthly management fee?
Discuss at length which services are and are not included in the monthly fee. Avoid unwanted arguments by being clear on every aspect of the lease agreement. Find out if, for example, additional fees are incurred for such tasks as organising major repair works or updating leases in the case of legislative changes.
7. Has there ever been a formal complaint made against yourself or your company and if so, what were the circumstances and outcome?
If they say no, don’t take their word for it. Check a PM’s background with your state’s Department of Fair Trading, even if a PM maintains their slate is clear of drama.
8. Which contractors do you use and are they licensed and insured?
This information can also be checked with your state’s Department of Fair Trading and the relevant insurance company. No one needs the hassle of becoming the victim of a shoddy tradesman and fighting for compensation.
Victor Kelly, Victor Kelly Estate Agents - www.victorkelly.com.au Mark Bond, Facey Industrial - www.faceyindustrial.com.au