CMA Update Paper - Please don't add further Complexity.

Unnecessary complexity?

The CMA update paper for its market study of residential leasehold management fails to understand some fundamental tenets of the leasehold system and cannot succeed until it gets them right. Perhaps they would benefit from some IRPM training?!

But more seriously, this is a real reflection of why consumers misunderstand the role of managing agents consistently. Let's face it, residential leasehold is complex and further complicated by layers of ownership that lead to misunderstandings about who is freeholder or head leaseholder and who is landlord or has landlord's covenants. The CMA have still not nailed this one.

Given the highly detailed response to this part of the consultation undertaken by Jeff Platt on behalf of the IRPM, I did not respond directly this time but contented myself with the knowledge that IRPM have really covered everything.

The full 35 page response can be found here:

http://www.irpm.org.uk/docs/public/CMAMarketStudyupdatepaperresponsefinal.pdf

It is well worth a read.

I do think it is important that we are aware of the limitations of the CMA's understanding so far. Allowing these errors to permeate into any final recommendations will do no one any favours - excepting those who make a living pulling apart badly drafted legislation, regulation and codes in the tribunals.

We operate in a complex legal framework with case law dating back many years and enshrined within that is the concept of 'reasonableness'. This shapes our behaviour as agents. When it doesn't consumers have various routes to achieve redress, shortly to include ARMA Q. All agents are required to be members of an Ombudsman and the sector has it's very own tribunal. Both RICS and ARMA members are bound by the RICS UK Residential Property Standards. In fact all agents are bound by the RICS Code since it has statutory backing.

There is much talk in the review of 'switching' opportunities. I think there as a misunderstanding of the relative ease with which this is taking place now, particularly where the threat of RTM is sufficient to either force a change of behaviour or for a landlord to agree to switching in order to avoid the RTM process. RTM is a fairly big and effective hammer given it is a 'no fault' right. Just the threat of it has caused both agents and landlords to change their approach. There is no mention of this in the report.

Switching of agents is currently, in part, being driven by price. But managing agents are not selling a simple one-stop product, it is an essential and relatively complex one. Prices should reflect that level of complexity and not be driven entirely by cost. We need to see our industry valued as essential and professional and not treated as a simple commodity. That alone will allow standards to continue the push to service excellence. Understanding what agents do is the responsibility of not just agents but intermediaries across the purchase process.

Finally, there is the education of managers and other suppliers. Specialist qualifications are now the norm for those involved in block management and more and more specialist topics are being added, including finance, mixed use, PRS and soft skills such as customer services. Managers are better equipped and qualified than ever before.

Residential management is on the right trajectory. Any poorly drafted interference in that process has the potential to create yet more confusion and potentially ignores the raft of regulation and case law that already envelops surrounds consumers in this sector.

A simple recommendation that all agents must abide by the RICS Code and must aim to meet the requirements of the self regulatory regime ARMA Q within a stated period would more than exceed the ambition of the CMA as reflected by their interim report. Poorly performing agents are being weeded out by increased barriers to entry, significantly higher levels of competition and increased consumer understanding. Further complexity helps no one.