Managing agents – effective & compliant avoidance of conflicts

Clare Brady, MD of Brady Solicitors, tackles the thorny issue of conflicts of interest within the property management sector.

Successful managing agents understand the value of working within the principles set down by the property management industry’s three primary bodies – IRPM, RICS and ARMA – and will put many hours of work into securing and maintaining their accredited status.

As an accredited managing agent are you confident however that your supply chain – particularly your legal advisers – adhere to the same notions of fairness, transparency, and acting in the client’s best interests?

Avoiding conflicts of interests (being a situation in which the goals or concerns of two parties are incompatible) is a requirement of the following provisions as they hamper your ability to focus on the best interests of your client.

ARMA, IRPM and RICS each has its own ‘code of conduct’ that members must be able to demonstrate and adhere to, and each code tackles the issue of acting in the client’s best interests, as we highlight below.

  • ARMA accreditation (formerly known as ARMA Q) sets out a detailed Consumer Charter that members must adopt. This Charter has 10 main points, including the requirement to “Avoid conflicts of interest”.
  • IRPM members meanwhile are required to operate within a 17 point Code of Professional Conduct. This includes the requirement to “avoid conflicts of interest or perceived conflicts of interest but if they do arise, deal with them promptly, openly and fairly”. The IRPM code also requires members to “not offer or accept gifts, hospitality or services, which might suggest a conflict of interest or other improper obligation”.
  • The RICS service charge residential management code requires its members to “make every attempt to avoid a conflict of interest. In the interests of best practice you should disclose all interests but in all cases you should consult your client, take the client’s instructions and keep full notes of the discussion and instructions in the file.”

Lawyers meanwhile are governed by the Solicitors Regulatory Authority Code of Conduct, which places a duty to inform the client of any conflict. This applies even where there is a substantial common interest between the parties (such as the desire to collect debts owed by one leaseholder).

The conflict must be explained, the lawyer must reasonably believe that the two conflicting parties understand those issues – and consent given in writing by both parties.

The lawyer must also be satisfied that it is reasonable for them to continue to act and in the best interests of both clients and that in doing so the benefit to the clients outweighs the risks.

Your RMC clients’ interests will often conflict with the interest of the freeholder. Both you and your legal advisors have a duty to avoid (and the latter a duty to advise) on conflicts.

You’ve worked hard to secure your accreditation. Deal with conflicts properly and don’t let them undo your hard work!

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