Block management experts, Urban Owners, reveal the top five managing agent scams that are seeing UK flat owners lose out on a total of £700 million a year - an average loss of £400 per flat.

1. Accepting hidden sales commissions

   In over 70% of cases, managing agents accept hidden commissions on buildings insurance. However, like-for-like insurance premiums can in fact be arranged commission-free, producing an annual average saving per block of £865 or 32%, according to Urban Owners. Some agents are also known to take commission on building works and other services.

   Example: For one block in Notting Hill, insurance went from £11,307 under the original managing agent, to £4,130 the following year, after the flat owners acquired the Right to Manage from the agent and switched to Urban Owners' Block Administration Services - slashing the cost by nearly two thirds and making a saving of £7,177.

2. Using financially linked contractors

   Managing agents commonly use contractors who are in the same group of companies, or have financial links with the agent, to carry out works on the building, irrespective of the cost or quality of the completed job. Such links enable the agent to indirectly extract a share of the profits from works done. This can go as far as deliberately signing blocks up blocks for unnecessary service contracts, or obtaining particularly high quotes for a job from other contractors so that the favoured company comes out artificially as the least expensive.

   Example 1: Often one particular managing agent signs up even small blocks for an entry phone maintenance contract (at over £500 per year) with one of its sister companies, even though for smaller blocks this type of maintenance contract is rarely needed.

   Example 2: One lift maintenance company pays for the managing agent's staff days out in return for being awarded contracts.

   These scams drive agents to award contracts to the companies offering the biggest financial benefit to them rather than the best value for the flat owner. All additional costs get passed straight to the flat owners.

3. Arranging unnecessary works

   Managing agents frequently arrange more extensive or expensive work than is necessary to repair or maintain the property. In most cases, little if any time is spent on determining the right scope of work or getting the best deal on the cost of materials or labour.

   Example: Flat owners were quoted £80,000 for external decoration of their five-storey block by their managing agent. However, given the modest amount of wear & tear present, independent evaluation concluded that the ground floor alone required redecoration at a cost of just £6,000. The managing agent was looking to pick up commission based on the value of these works.

   Managing agents are often employed by a developer for a new or refurbished block and take on repeated properties from that developer. To maintain the professional relationship, agents will often look to fund any work needed to correct development defects from the flat owners' service charge budget, rather insist the developer pay.

   Example: Flat owners in a block of ten flats in Central London managed to reclaim approximately £27,000 in service charges after a Leasehold Valuation Tribunal hearing ruled that the managing agent had charged them rather than the developer to fix latent defects.

   Overall maintenance costs can be cut by as much as 25% or £600 per block by acquiring the Right to Manage and switching to Block Administration Services.

4. Setting unreasonable contract terms

   The most unscrupulous managing agents insist on tying blocks in to a contact termination notice period of twelve months. Others require a three to six months' notice period and will still charge a termination penalty equivalent to three months' management fees even though handover can be easily undertaken within 2-4 weeks.

   It is not uncommon for agents to tie blocks in to management contracts for a further twelve months if they miss the contract cut-off date by one day. Urban Owners requires just one month's notice and doesn't charge a termination fee.

5. Adding hidden charges or disbursements to their fees

   Lots of agents charge a hefty mark-up for sending letters, rather than simply the cost of the stamp.

   Example: One particular agent is known to charge an 'arrangement fee' of £3.33 for receiving correspondence, a cheque payment surcharge of £6.49, postal charges of £14.97... the list goes on.

Steve Wylie, Director at Urban Owners, comments:

"For many leasehold flat owners, it is simply not in their best interests to continue with their current managing agent. At the end of the day, agents are in the business to make money. They are rarely concerned about what is best for the block at heart and certainly have no scruples about taking hidden payments and passing the work on to connected companies - some of the oldest tricks in the book.

Flat owners should use the power they have been given by law to buy the freehold or acquire the 'Right to Manage' their block from the freeholder, in order to take control of the decision making themselves and move away from managing agents. That way they can avoid thousands of pounds a year in unnecessary charges for work and services that are not always up to scratch, as well as saving time and stress."