Why the relationship between Managing Agents, Facility Management Companies and MCSTs must be protected (CoVid Special)

building owners, FMCs, manage property, MAs, MCSTs, property management, Property partners, Real estate

September 4, 2020

Written by Rachael Renovah

Rachael Renovah

Written by Rachael Renovah
on September 4, 2020

CoVid-19 has led to many job losses. Businesses globally are struggling to preserve not just their local workers, but also their clients. More recently, managing agents have been trying to protect its vendors, and also desperately balancing between yielding to the MCSTs demand for reduction in overall costs of service and defending against it.

The renegotiation of contracts between MCSTs, MAs and other counterparts will inadvertently restrain the MAs ability to operate efficiently while maintaining quality, leading to a degeneration of the overall quality of services rendered, and along with it, possibly affecting the entire real estate marketplace as a whole.

Such attempts to reduce overall outgoings by renegotiating service contracts are gradually putting a strain between MCSTs, building owners, MAs, FMCs and vendors. The once amicable and harmonious relationship shared between real estate professionals has, unfortunately, shifted. Inferring an unspoken rift between property professionals, as everyone bargain on ways to scrimp on every dollar and cent possible.

It is imperative that we assuaged the uncomfortable friction caused between managing agents, facility management companies, building owners and MCSTs to where it once was – cooperative, harmonious and riddled with empathy.

Here is an updated tripartite advisory with some helpful, fair practices that can help identify clear boundaries and protect the relationship among property partners, mainly building owners, MCSTs, vendors, MAs and FMCs.

The following regulations are issued by the Ministry of Manpower, Building and Construction Authority, National Trades Union Congress, Singapore National Employers Federation, Real Estate Developers’ Association of Singapore, Association of Property & Facility Managers, Association of Strata Managers, Singapore International Facility Management Association, Building Construction and Timber Industries Employees’ Union, Singapore Industrial & Services Employees’ Union, and the Singapore Manual & Mercantile Workers’ Union.

Pay service providers appropriately.

1. MCSTs and building owners should pay MAs and FMCs as per contract terms unless there are changes in services required. The tripartite partners are aware that there are suggestions by MCSTs and building owners for their MAs and FMCs to pass on to them partially or wholly the payouts received under the Jobs Support Scheme (JSS). MCSTs and building owners should not ask for reduced contract fees simply because their MAs and FMCs receive wage support through the JSS. JSS is intended to help enterprises retain their local employees during this period of economic uncertainty.

2. MAs and FMCs, amongst other service providers, are not regarded as labour suppliers that should pass JSS payouts to their clients. Labour suppliers function like an external recruitment arm of their clients. Typically, they are only responsible for providing manpower to their clients and have no further responsibilities to provide professional management services. Labour suppliers generally retain their employees only as required by clients and do not take on the obligation of redeploying the staff. Therefore, as key decisions on worker employment or termination rest with clients, JSS payouts should flow through to the clients to support local employment.

Refer to MOM’s advisory, and MOF’s and MOM’s joint media reply.

3. The situation is different with outsourced service providers such as MAs and FMCs that contract with service buyers and MCSTs. Service buyers typically do not have direct control over the employment and deployment of specific workers. As the key decisions on worker employment rest with the MAs and FMCs, the JSS payouts should be retained by them to help meet their obligations to workers and to support local employment. This same principle also applies to government-owned properties which are being outsourced and managed and maintained by the MAs or FMCs. The government agencies do not expect a refund for the JSS payout from their MAs and FMCs.

4. During this pandemic, MAs and FMCs also incur other additional costs in complying with the safe management measures as well as other related costs to keep their staff motivated in this very trying time, which may not be charged to the MCSTs and building owners. We understand that residents in developments managed by MCSTs could also be affected by the economic uncertainty. If there is a change in contract terms, MAs/FMCs and MCSTs/building owners should negotiate the new terms based on the new deployment and requirement.

Exercise restraint in activating penalty clauses

5. MCSTs and building owners should exercise flexibility with service contract clauses during this COVID-19 period. In particular, contract clauses on liquidated damages should not be imposed on MAs and FMCs for breaches that are beyond the MAs and FMCs’ control.

Remunerate Workers Appropriately

6. MAs and FMCs should remunerate workers appropriately:

a. For workers with heavier workloads, which may be due to additional deployment to new work areas or insufficient headcount, MAs and FMCs should consider increasing their wages, and/or providing them with additional allowances.

b. For workers with reduced workloads (e.g. due to health or decreased service provision required), MAs and FMCs should comply with the advisories related to salary and leave arrangements, including taking into consideration Government support to manage excess manpower and responsible retrenchment ensuring they pay their employees, even during periods of reduced business activity.

Applying the tripartite advisory is quintessential to building a strong front against the uncertainty Covid-19 has brought about to the property management and facility management scene.

Apart from the advisory, there are other cost-saving tips and best practices to increase business revenue and decrease outgoings, when coupled with the proper usage of available government grants and schemes provided by the Singapore government, businesses like trade professionals, managing agents (MAs) and facility management companies (FMCs) can continue their operations smoothly while sustaining the real estate economy. This allows MAs and FMCs to retain their employees and safeguard their resources to ensure they provide jobs and contracts to vendors, who in turn will deliver quality services to MCSTs and building owners even during these challenging times.

“Remember – the fortunes of workers and businesses are intertwined.” – DPM Heng Swee Keat at the 18th Singapore Business Federation Annual General Meeting.

The real estate ecosystem is deeply interdependent on one another. Just as MAs and FMCs require support from Vendors, so will MCSTs require good management companies to manage their properties. We are reliant on each other to help sustain and maintain our estates.

While the pandemic is causing an upheaval, we should not let it overcome us. Instead, join forces and come together to fortify the real estate economy with resilience and compassion. Top-down collaboration is just as important as bottom-up cooperation in supporting the entire real estate ecosystem. Let us learn to band together through trying times. For it is only a matter of time before we see the light at the end of this tunnel again.