What Makes a Good Property Manager?

One question that occasionally crosses my firm is: What makes a good property manager in the modern world where social distancing, mask mandates and public health are of primary concern? To answer the question, I checked with a business contact of mine whom has over a decade of experience in the property management industry. He initially joked that the firm must begin with the letter “J”, but then seriously went on to say that a good property management firm in the region should possess the following key attributes: (1) Keep apprised of occupier and owner requirements; (2) be technology savvy in a modern world where communications, community resolutions and decision-making are often done by electronic means; (3) be flexible and agile to enable improvements in operations and efficiency in a challenging supply and demand market; (4) be innovative under current circumstances and knowledgeable in the market to support different property types and developers; and (5) possess a strong sustainability platform. After thanking him for his feedback, I thought to myself that being flexible and able to support different types of needs will surely be a paramount requirement for any property manager in the Thai resort markets going forward, and this could also very certainly be on the minds of some owners and landlords as the markets recover over time.

Some owners, landlords, and tenants might even ask whether it is time to consider a review of their current property management arrangements and revitalize them to address each of the suggestions my business contact listed. In considering the commercial, practical and operational points of my industry contract, it is also worth considering a few additional points, some of which are legal and others which are drawn from our experience in working with owners, developers, occupiers and property management firms in the Thai market. To be clear, I am not, and have never, worked directly in the property management industry, but the requirements of my day-to-day job working in a legal consulting firm which has a substantial real estate practice, means that I have been exposed to property management matters and firms on nearly a daily basis over the past 12 years. So, as the world returns to some semblance of what we used to call ”normal”, and owners return to their long-vacant residential properties in Thailand, there are a few key tips, collected from the experience of my firm, that I suggest one consider in any review of one’s property management arrangements as follows:

1. Understand the scope of the management agreement. All property management firms will require a development to enter into an agreement to appoint the manager. The terms of the agreement will dictate the scope of the duties of the manager and the obligations of the development and owners to the manager. One frequent complaint we hear is that there is often a misunderstanding between specific owners and the manager in a project in respect of expectations of the manager. This can easily be clarified and agreed in the management agreement, which will, for the life of the appointment, dictate what the manager is obligated to do for the property. Often management agreements expressly exclude certain services as well, and therefore the management agreement is the main source of understanding the scope of the management obligations.

2. Understand the management fees and costs. Another source of confusion is the extent of what the management fee includes, and who pays what costs of the management of a project. Normally, the management fee includes the scope of services specifically set forth in the management agreement, and not more – although many good managers will in good faith attempt to work with developers and owners to support the needs of the project. It should also be clear in the management agreement who pays for what. For example, site staff and security and other services provided by third parties can be excluded. Always check the terms of the management agreement to clearly understand how these costs are apportioned, especially in light of the current global circumstances.

3. Understand the extent of the manager’s resources. A good manager will be well-based and grounded in the locality, with knowledge of third-party suppliers and advisors. When an issue arises that falls outside the scope of management’s duties, and a third-party advisor or service is required, consider recommendations from the manager as the experienced management firm will usually have similar past experiences with suppliers. What developers and owners should not expect is the manager to suddenly become an expert in another industry, which is why managers will be readily available to make recommendations on third-party advisors.

4. Understand indemnities. Often, experienced managers will require a project to indemnify them from losses and claims. It is imperative for developers and owners to understand why a manager would request such a term in a management agreement or separate indemnity agreement. The manager will be taking on responsibilities as an agent of the project as its principal under law, and therefore it is reasonable for the manager, as an agent, to request an indemnity for losses.

Taken into consideration with the commercial and practical suggestions of my colleagues, I expect this article will be helpful to anyone considering a review of their current property management arrangements in a world dominated by concerns with Covid-19 and public health amidst pressure for countries and industries to reopen their borders and doors.

By Robert Krupica, Senior Partner of Hughes Krupica