Property management sector in Tanzania is still at its development stage,
which is likely to expose it to more acts of opportunism owing to the
inadequacy of institutions to regulate the conduct of various contracting
parties. This study aimed at examining the nature, extent and mitigation
techniques of agency conflicts in property management in Tanzania. It
involved exploring activities of selected large institutional investors. Data
collection entailed interviews with senior official representatives of the
selected institutional investors, property management firms and reviewing
management contracts and reports. The study revealed that property
management practice in Tanzania is exposed to agency conflicts due to lack
of transparency and comprehensive institutional framework for guiding the
practice. The practice was noted to be exposed to both adverse selection
and moral hazard problems. Property management firm selection process
exposed the investors to adverse selection. Inadequate experts and nonpayment
of letting fee exposed them to moral hazard. Similarly, property
management firms were exposed to adverse selection in the process of
hiring their professional staff. Moral hazard was mainly associated with
receiving rent in cash, mismanaging service charge account, and dishonesty
and non-committed staff. Performance incentives, contract term and
monitoring were noted to be commonly employed by principals in mitigating
agency conflicts. Moreover, slight deviation of theory and practice in
mitigating agency conflicts such as provision of long-term contracts and
stock options was noted. To address some problems, it is recommended
that a specific law catering for property management practice should be
enacted. A regulatory body and professional institutions should also be formed to strengthen the profession, enhance transparency and protect the
interests of different parties. Furthermore, institutional investors should
restructure the contracts and employ more property management experts.
Milamo, Rebecca J., and Moses Mpogole Kusiluka. "An Examination of Agency Conflicts in Property Management in Infant Markets." In 23rd Annual European Real Estate Society Conference. ERES: Conference. Regensburg, Germany, 2016.
Section: Africa Session