asset management fees property management guideAsset management is very much linked with core property management, and is to do with the bigger-picture property asset and how it can be managed and worked in order to become a more valuable and desirable asset. This benefits from lots of day-to-day core property management tasks like rent collection, compliance and maintenance, and effective service charges in order to keep costs down, tenants happily in occupation, and rents and values up.

However, asset management then goes further to look at wider strategies to improve things, so for example if any new lettings and terms can be agreed, any existing leases and occupation tweaked, and even any future re-development or refurbishment angles considered. It’s about extracting that value out of the property as an asset.

Which is why specialist advice is worth looking at. At first glance this may seem non-essential and expensive for what it is, after all a lot of donkey-work and research could be completed yourself or core services rather than paying someone else to do this. To a large degree this is correct, and in fact it is beneficial to come from a core property management perspective as you tend to appreciate what’s really involved, but having that wider and unbiased advice which has an ear to the ground of the actual property market can truly pay dividends, particularly when you’re dealing with bigger numbers.

You also need to carefully accommodate the requirements and priorities of a client, a classic one being how much longer term security and flexibility is more important than immediate short term incentives and savings. So, if a tenant is able to commit to a longer term lease then you’ll be able to negotiate more immediate savings by offering this longer term security to the landlord.

When you’re speaking with agents, surveyors, or property managers about this additional asset management advice, there’s often three different ways you can agree a clear fee structure for this. Appreciating these means you go into it open-eyed and don’t get any nasty surprises and costs afterwards.

1. Agreeing a Percentage of the Rent or Value Involved

Nice and simple and meaning a bigger actual fee for the bigger properties and monies, which although in theory should correspond to more work involved you do have to be careful of the smaller ones actually taking more time than maybe the larger ones. Two other aspects to this; firstly to look at the area and size of property rather than the money side, so rather than, say, a 10% cut of the first year’s rent for a new office lease, maybe £1 per square foot of space instead.

Secondly, you may need to adjust this for the work involved, so under normal circumstances a 10% cut may assume you need to first search and find a tenant before then agreeing and completing terms, whereas if someone has already been found and the basics considered it might be 5% more to negotiate the finer detail such as rent free periods, repairing and service charge limits, and other incentives and contributions for fit out.

2. Agreeing a Percentage of Savings Negotiated

This is still using the same principle of a percentage cut, but looking at it from the opposite angle of what additional savings are agreed and not just the overall figures. So a 10% cut may be on the overall savings secured from the initial terms proposed, although care must be taken to accurately define what this includes, for example all property cost savings and not just rent, and whether you take just the first year or over the life of a whole leasehold interest.

3. A Straightforward Hourly Rate

Very simple, just an hourly rate of the advisor involved, particularly for just ad-hoc advice that is maybe more behind the scenes with the client still being the up-front negotiator. As above, you need to carefully define this and fully appreciate how things do take time, including behind-the-scenes things such as meeting, telephone calls, and letter and email-writing.

Whichever way you prefer, whether a percentage of the monies involved or the savings saved, or a simple hourly rate, make sure you realise everything that’s involved first. Chat through the options with the advisors as you should be able to come to a mutually beneficial situation for both sides, and then make sure it’s clearly documented afterwards.

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