1

GUIDANCE NOTE F07

MANAGEMENT HANDOVER
Revised — June 2018

ARMA Standards

The Standards have been written to apply to residential long leasehold properties
(a lease of a term in excess of 21 years when originally granted) in England and Wales
where a service charge, which varies according to expenditure, is payable.

They represent the core of good practice for managing agents. We believe they are
achievable by any well-run company. The applicable (if any) Standards related to this
Guidance Note are stated below.

Standards in RED: An obligation to adhere to the Standard

Standards in GREEN: An obligation to adhere to the Standard unless there is

a justifiable reason not to comply that the Managing Agent must be able to
demonstrate

2.2 Contract & Charges

When agreeing a contract and charges for management services the

Managing Agent:

b) Should agree and clearly detail the length of appointment prior to

commencement together with any process for renewal, review of the
Management Fee (if the Management Fee is agreed to be subject to
indexation, the index to which it is linked should be agreed in advance In
Writing) and the provisions for termination and handover;

c) Must clearly state the period of notice or penalty charges for early
termination in the termination provision;

7.2 Terminations & Handovers

Managing Agents Must follow the guidance contained in the publication

‘Guidance Note — F07 Management Handovers’ (replicated to be publicly
available: see Advice Note “Changing Managing Agents”) issued by the
Association of Residential Managing Agents and:

a) Must deal with any handover in a professional, competent and efficient

manner which Should be within agreed timescales in accordance with
the provisions for termination in the Management Agreement;

b) Must confirm any termination In Writing with the Client clearly

stating the date at which management ceases and when all relevant
documentation and Client Money will be handed over to the Client
and confirm who will deal with on-going litigation, disputes, arrears
collection and any fees to be charged;

© 2018 The Association of Residential Managing Agents Ltd

ARMA Standards (continued)

c) Should supply all relevant information to facilitate the handover not less
than four weeks prior to the date of handover, or as otherwise directed
In Writing. This Should include Leaseholder contact details, contractor
details and insurance information as a minimum;

d) Must pass all agreed documents relating to the management to the

Client on the date of handover or as otherwise directed In Writing;

e) Must prepare reconciled accounts (no later than 3 months unless

otherwise agreed) with itemised accruals and prepayments up to the
final date of management, including schedules of arrears, creditors and
debtors;

f) Must hand over the balance of funds that are not required to meet
commitments already made at the date of handover. The remaining
balance Must be handed over at an agreed later date (no later than 3
months unless otherwise agreed) along with the statement of accounts
made up to the date of handover.

© 2018 The Association of Residential Managing Agents Ltd

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Guidance Note Contents Overview

3 Overview • ARMA members must deal with any

handover in a professional, competent and
4 Termination And Notice efficient manner with agreed timescales
whether they are the outgoing or incoming
4 Resignation By The Managing Agent managing agent.

4 Termination By The Client • All agreed documents and uncommitted

funds must be passed on at the agreed
4 Termination If No Written Contract date of handover.

5 Timescale For Handovers • The balance of funds and a statement of

accounts must be passed over as soon as
5 Deficits possible after handover but no later than 3
months after handover.
5 Disputes Over Unpaid Fees
• The ARMA model management agreement
5 Handover Of Funds contains optional clauses that can be used
by managing agents to govern procedures
5 Management During The Notice Period at handover.
And Handover
• Managing agents should make clear in their
6 Handover Of Documentation management agreements what information
and documents they expect to receive in
7 Right Of Lien order to be able to manage the property
professionally and what documents they
7 Checklist For Handover will hand to the client if their management
agreement is terminated.
8 Appendix 1 - Suggested Professional
Letter • Managing agents may wish to retain copies
of information passed on to the client at
9 Appendix 2 - Form Of Mandate handover in order to deal more easily with
any matters arising after handover.
10 - 11 Appendix 3 - Checklist of Records and
Documents That Might Be Required On • Handovers to RTM Companies are dealt
A Transfer with elsewhere – see Guidance Note A14.

© 2018 The Association of Residential Managing Agents Ltd

4 ARMA Guidance Note F07 - Management Handover
Revised — June 2018

Termination And Notice

The management agreement between the outgoing agent and the client should make
provision for termination and the means to do so on behalf of both parties, irrespective
of any fault or if either party breaches its obligations. It should also state the termination
period for which many notice periods are three months; shorter periods may make it
harder to give a smooth handover in some circumstances, especially if a site is large
and / or complex, however notice periods may be a month in many cases and should be
appropriate to each site.

The new managing agent, having had their appointment confirmed in writing and
agreed a management contract, should write to the outgoing managing agent – see
sample letter Appendix I. The client should have informed their current managing
agent of their termination and confirmed they have done so, but a formal letter at this
stage confirms the position for all parties and provides an opportunity for problems,
grievances, or outstanding issues to be aired.

In turn the outgoing managing agent should respond in a factual and professional
manner, even where he feels aggrieved at the termination. Under no circumstances may
the outgoing managing agent attempt “corporate interference” (Bye-Law 3. 2) – any
such attempt may well lead to disciplinary action.

If the outgoing managing agent has not received termination from its client according
to the management agreement, then it should contact its client without delay to confirm
the termination in writing. The client should of course confirm the termination in writing
but if this is not done then the managing agent should confirm it in writing.

Resignation By The Managing Agent

Resignation by the outgoing managing agent should respect the terms of the
management agreement for notice. All resignations must be put in writing and spell
out how and at what times the outgoing managing agent will pass over to the client all
relevant documentation and monies held. If a managing agent wishes to resign on terms
not set out in the management agreement then they will need the express approval of
the client to do so.

Termination By The Client

Just as the managing agent will be bound by the terms of the management agreement
upon termination so will be the client. It is wrong for the client to try to terminate a
managing agent by ignoring the agreement and will only lead to disputes. It is also often
counter productive to seek to reduce the period of notice of termination where the client
is unhappy with the performance of a managing agent. The unhappiness may be a result
of no funds being available in the service charge account and large outstanding arrears.
Putting a new managing agent into such a situation in haste, if the client has not
taken time to get the full facts, will probably only cause more problems. The outgoing
managing agent will be owed fees as per the contracted management agreement and
the new managing agent will have no funds upon handover to provide services.

Termination If No Written Contract

If there is no written management agreement (NB: This is a breach of the ARMA Bye-
Laws and it is of course in both parties’ interests to have a contract as recommended
by the RICS Code) then there may be a “deemed” or assumed oral contract. The norm
for the period of notice of termination of management agreements is 3 months and it
would be reasonable for the parties to work on this basis rather than end up in a court
disputing the unwritten terms of their contract. Whatever is agreed about termination
the managing agent must confirm in writing.

© 2018 The Association of Residential Managing Agents Ltd

5 ARMA Guidance Note F07 - Management Handover
Revised — June 2018

Timescale For Handovers

The mobilisation costs of taking on a new management can be as high for the new
managing agent as the handover costs for the outgoing one. Neither should be
expected to work for free or put in more time than can reasonably be expected for
their fee. Entrance and exit fees, however, can only be charged if agreed with the client/
reflected in the management contract. In the case of RTM the freeholder’s reasonable
costs are recoverable from the participating leaseholders and this should include the
outgoing manager’s fees and expenses.

Any handover should be planned, if possible, for a time when there are no major works
and general management duties are at a low level. Ideally the handover should be timed
to coincide with the next service change demand period or the year- end. Thus the
outgoing managing agent accounts for funds up to a convenient date and the new agent
starts with the next service change demand period, however this may not be practicable
nor realistic to achieve.

If the outgoing or incoming managing agent perceives the timescales cannot or will not
be met then they should inform the other party and provide realistic and reasonable new
deadlines – this is of particular importance in terms of the handover of funds.

Deficits

If the outgoing managing agent resigns or is given notice, and that managing agent is
aware that there is a deficit in the service charge account, the outgoing managing agent
should raise this in writing with the client at once.

Disputes Over Unpaid Fees

Disputes over unpaid fees often arise where there are deficits on the service charge
account with large outstanding arrears. The managing agent will feel that he should
be paid but the client may object because he blames the managing agent for failing
to collect debts. If the outgoing managing agent is owed fees that are in dispute then
the outgoing managing agent must raise this issue with the client as soon as notice of
termination is received. As part of the outgoing managing agent’s response to notice
(whether properly notified in writing or not) he should make clear any deficit in the
accounts, what fees he will expect to be paid and whether there will be adequate funds
to pay those fees at the termination date. It is bad practice for all of this to come out
after the termination date. If there is a dispute then there will be a possibility for the
parties to resolve it by mediation or an independent dispute resolution scheme, rather
than through the courts.

Handover Of Funds

Where accounts are required up until the date of handover, there will need to be a two-
stage handover of funds. At handover the outgoing managing agent must handover
the balance of funds held not required to meet commitments already made, with the
remaining balance being handed over with the statement of accounts up until the date
of handover. The completion of final accounts and the passing over of final funds must
be within three months of the handover date unless otherwise agreed.

Management During The Notice Period And Handover

During the notice period leaseholders need to be kept informed by the client of what
is happening – this of course, may have happened earlier through consultation with a
recognised residents association or the shareholders of the residents’ management
company.

© 2018 The Association of Residential Managing Agents Ltd

6 ARMA Guidance Note F07 - Management Handover
Revised — June 2018

All third parties will need to be contacted (including any estate staff, who may be the
subject of TUPE requirements) and informed of the changes and the continuity of
the insurance cover for the building insured – see Appendix 2 for suggested Form of
Mandate for insurances which could be adapted for other formal notifications such as
bank(s).

Other key issues that must be agreed, if not covered in the managing agent’s
management contract, are the questions of who will have the authority to deal with
ongoing litigation, disputes and arrears collection. It is vital that all parties know who will
be dealing with those during and after the handover.

Handover Of Documentation

Managing agents should agree as part of their management agreements or by a

separate contractual arrangement what documents will be returned to the client and
whether any additional fees will be charged for the work involved in handover. The
lists in Appendix 3 to this GN can be used as the basis for such an agreement about
documents.

In practice, the handover of correspondence and other documents can differ between
ARMA members and if managing agents are challenged by their clients to handover
correspondence or other documents when that is not their normal practice, ARMA
strongly recommends that the managing agent seeks legal advice.

No charge should be made by the outgoing managing agent to the client for handing
over the client’s documents unless agreed in writing with the Client. There can be no
contractual basis for the outgoing managing agent to seek a fee from the incoming one
for the handover of documents.

If the outgoing managing agent does handover documents it may of course wish to
keep copies of certain documents at its own expense or alternatively obtain a written
agreement/undertaking from the new agent that access will be given after handover
if required. Because documents may be required in evidence at an FTT or court case
several years after the handover an undertaking not to destroy documents for an agreed
period of years after handover should be sought and obtained from the managing agent
that holds the original documents.

Managing agents involved in handing over or holding onto documents after a handover
should refer to their relevant professional indemnity insurance policy which may require
that any documents are held for a fixed period.

Appendix 3 contains a checklist of many of the usual documents that an outgoing

managing agent may be in possession of or a new managing agent will require to
manage a property in a professional manner. This does not mean that a managing
agent will have those documents in its possession or be prepared to hand them over.
The outgoing managing agent should inform the client and/or the new managing agent
which of these documents are in its possession and will be handed over at or before the
handover date.

Documents which relate to the affairs of a client, resident management company or right
to manage company are not the property of the managing agent and should always be
handed over to the company on request.

It is recommended that the outgoing managing agent receives assurance that the new
managing agent is registered with the Information Commissioner’s Office under the
General Data Protection Regulations before handing over personal details about the
client, leaseholder and any other relevant persons. Furthermore, if at all possible, the
outgoing managing agent should try to ensure that the transfer of leaseholders’ funds
is made into a section 42 compliant account – the outgoing managing agent cannot,
however, enforce this or withhold funds contrary to clients’ instructions.

© 2018 The Association of Residential Managing Agents Ltd

7 ARMA Guidance Note F07 - Management Handover
Revised — June 2018

Right Of Lien

In the absence of any contractual provision managing agents do not have any general
right of lien over the documents which belong to their clients. It is not worthwhile
asserting a right of lien unless the agency agreement expressly gives the right to the
managing agent. The use of lien is not reasonable where your client has a genuine
dispute about the managing agent’s conduct and fees; the dispute should be resolved
by other means.

Checklist For Handover

• What are the correct notice and handover arrangements in the management
agreement?
• Agree date for handover;
• What are the insurance arrangements after handover and who will be responsible?
• Who will be notifying suppliers and contractors?
• Are any contracts specific to the outgoing managing agent, eg. utility deals and so
will have to terminate at handover?
• Who will be responsible for outstanding arrears and/or litigation?
• Outgoing managing agent to draw up a list of documents that will be handed over.
• Agree undertakings about holding of documents between the parties.
• Agree timetable for handover of service charge monies and bank account details.
• Handover all agreed documents and any funds not required to meet expenditure
already committed by the outgoing agent;
• Pass any balance of funds held and the final statement of account at the handover
date as soon as possible after handover but no later than three months after the
handover date;
• Agree timetable for drawing up statement of account up until the handover date;
• What will happen to any staff or contractors working solely at that property?
• Does TUPE apply?
• What about any company secretarial records kept by the outgoing managing agent
if any?

Important note to reader:

Guidance Notes (GN) are produced for the use of members only; they should not be distributed to
third parties unless the particular GN has a note to that effect.

The Association of Residential Whilst every effort has been made to ensure the accuracy of the information contained in this GN,
Managing Agents Ltd it must be emphasised that because the Association has no control over the precise circumstances
3rd Floor in which it will be used, the Association, its officers, employees and members can accept no
2-4 St George's Road liability arising out of its use, whether by members of the Association or otherwise. The GN is of a
London , SW19 4ND general nature only and makes no attempt to state or conform to legal requirements; compliance with
these must be the individual user’s own responsibility and therefore should seek independent advice.
Tel 020 7978 2607
[email protected]
www.arma.org.uk © 2018 The Association of Residential Managing Agents Ltd
8 ARMA Guidance Note F07 - Management Handover
Revised — June 2018

APPENDIX 1 - SUGGESTED PROFESSIONAL LETTER

Dear.............

Re [Name of client and building]

As you should be aware the above have appointed us to manage their property from (date).

Accordingly we are writing to enquire whether there is any professional reason why we should not accept this
assignment and whether there are any major issues or ongoing litigation of which we should be made aware at this
time.

xxx of our management department will contact you shortly to fix a suitably convenient date for a visit to your
offices to plan the handover. Attached is a list of the principal records and documents we will require, but, of
course, there may be others we will identify during the course of the handover process.

Yours

© 2018 The Association of Residential Managing Agents Ltd

9 ARMA Guidance Note F07 - Management Handover
Revised — June 2018

APPENDIX 2 - FORM FOR MANDATE

TO: (property managers details)

...............................................................
...............................................................
...............................................................
...............................................................

FROM: (clients details)

...............................................................
...............................................................
...............................................................
...............................................................

RE: (property address) .......................................................................

............................................................................................................

(*insurance policy referee) ...........................................................

...............................................................................................................

(*policy holder) ..........................................................................

..............................................................................................................

As *Freeholder/Director of the Residents Management Company of the above building, *I/we confirm that you are
the appointed Managing Agents of the property on behalf of .............................................. and as the *Policy Holder *I/
we hereby authorise you to deal with any matters appertaining to the above *Insurance Policy, including making
financial settlements directly payable to all and any appropriate persons in respect of claims acknowledged and ac-
cepted by the Insurers.

This instruction is effective forthwith and shall be restricted only upon written confirmation from *myself/ourselves.
* delete or amend as appropriate

_________________________________________________________________________________

Signed: ..........................................................

(Name): ..........................................................

Date: ..........................................................

© 2018 The Association of Residential Managing Agents Ltd

10 ARMA Guidance Note F07 - Management Handover
Revised — June 2018

APPENDIX 3 - CHECKLIST OF RECORDS AND DOCUMENTS THAT MIGHT BE REQUIRED ON A TRANSFER

It should be clearly understood this is a checklist of potential records and documents that might be transferred,
in so far as they are available, on a handover. Readers are referred back to this Guidance Note’s comments under
BACKGROUND.

THE PROPERTY

• Copy of the Land Certificate.

• Plans and drawings if any of the site and buildings.
• Details of utilities and location of main stop-cocks etc.
• Details of any major works and long term agreements ongoing and copies of S.20 notices and responses given.
• Details of any major works and long term agreements planned and copies of any related S.20 notices and
responses given.
• Details of plant, machinery and relevant documentation.
• Copies of statutory inspection reports.
• Arrangement for out of hours emergencies.

INSURANCE

• Contact details of current broker/insurers.

• Original of schedule and policy for the property.
• Details of most recent valuation of the property.
• Summary of claims history over past three years.
• Files on open insurance claims and agreement on who will handle such.
• Details of third party and employers liability (including current and all previous certificates for employers liability
where employer is not changing).
• Originals of Mechanical Engineering Insurance and the last three years' Inspector's reports.

CONTRACTS AND CONTRACTORS

[Refer also to any ARMA Guidance Note on Right to Manage Insurance and Contractor Notices.]

• Details of all current contracts.

• Details of regular contractors used and the scope of their duties and payment terms.
• Details of any current warranties.

THE LESSEES

• Originals or copies of all leases and deeds of variation and other licences etc.
• Copy of any current house rules.
• Details of any ongoing assignments.
• Names and contact details of all lessees, including those who are not resident.
• Details of any sub-let flats and their occupants.
• Schedule of ground rents payable.
• Schedule of service charge apportionment per unit.

LEGAL

• Details of any current disputes whether involving lessees, contractors or other parties.
• Details of any current or impending litigation whether for or against the client.
• Details of solicitors employed.

© 2018 The Association of Residential Managing Agents Ltd

11 ARMA Guidance Note F07 - Management Handover
Revised — June 2018

APPENDIX 3 - CHECKLIST OF RECORDS AND DOCUMENTS THAT MIGHT BE REQUIRED ON A TRANSFER

CONT....

ACCOUNTING INFORMATION

• Certified service charge accounts for at least the last three years and preferably six years or longer.
• Copy of the current service charge budget.
• Bank statements relating to lessee and client monies for the property.
• A reconciled copy of the cash book.
• Service charge balances and statements.
• Paid contractors and suppliers invoices for the current period and previous years. The receipts and invoices to
support service charges belong to the client so all years held should be handed over. FTT’s can go back many
years if a challenge is made by lessees.
• Outstanding contractors and suppliers invoices.
• Reconciled trial balance and supporting schedules made up to the date of the handover.
• A transfer of the balance of funds in hand.
• Method of payment used by each lessee.
• Agreed payment plans for arrears if any.
• Copy correspondence about any outstanding arrears.

STAFF

• Copies of any Contracts of Employment along with a job description.

• A full record of each person's employment history.
• Details of any disciplinary action taken or other special circumstances.
• PAYE records for the current period and the previous years if appropriate.

MISCELLANEOUS

• Details of any guarantees.

• A full set of labelled keys, any spares and access codes and programming procedures.
• Copies of unanswered correspondence and other relevant enquiries.

HEALTH AND SAFETY

• Copy of any Risk Assessments carried out.

• Copy of any accident records.
• Copy of any asbestos register.
• CDM file if appropriate.

COMPANY INFORMATION
[Where a Company is the client - and subject to arrangements over the Company Secretarial role.]

• Copy of Memorandum & Articles of Association.

• The Legal Books including minutes, stock transfer forms, Certificate of Incorporation, seal etc.
• Copies of previous annual returns.
• The last six years' (audited) accounts.
• All financial records and supporting documentation for the last six years.
• Details of accountants/auditors used.
• Details any Directors and officers Liability Insurance.

© 2018 The Association of Residential Managing Agents Ltd