Friday 12 December 2014

Why providing good information upfront to your customers is not enough.

"Blah blah blah" said the fourth previous owner as he handed over the keys to my Triumph Spitfire 1500 in signal red. I was 23, it was my first sports car. It was shiny, the sun was out, the hood was down.

Trunnion Bearing - How interesting is that?
Had I chose to listen to what he was saying I would have learnt something very useful; "Remember to periodically remove the front wheels and hubs and then the steerer trunnions. These must be refilled with EP90 oil, no other. Otherwise your front wheels will fall off."

Of course I sort of heard, but then I almost instantly forgot as the romance of powering over the A13 flyover at Canning Town in the sunshine took over.

Two months later I was on my way home from work (East London Housing Association back then) when I noticed a wheel rolling off down a side street. That's odd I thought...

Anyway, I do love my laboured analogies but it has to be said. Providing lots of information about the complexity of leases, the service charge structure etc. at the point of sale, does not really work does it? The recent CMA report suggests that more comprehensive information should be provided by estate agents and conveyancers. My view is that much of this is available, much has been trialled and nothing much has changed.  It is the worst time to try and introduce a complex proposition and it needs a significant investment in time from both sides.  Buying a flat is stressful enough without understanding the lease and your rights and obligations. It is also an emotional time taking the keys of what will possibly be your biggest ever investment. The subject of leasehold is quite frankly dull and complex to all but those of us who work in it and make a living from it. This fact never changes and whilst leasehold owners may appear to be interested, most want to get home for tea as soon as possible - and that's if they turn up. I can't blame them.

You see these days we can drive out of a car showroom in one of the most complex machines known to man without a clue how it works or how to change a flat tyre or how not fill it with the wrong fuel. Such is the reliability of the machinery, and the rarely called emergency breakdown services, that we do not chose to know how it works. It is the same in leasehold property. Does anyone really read the owners manual - or do we just press all the buttons to find out what they do? I didn't realise my current car has an automatic parking system until 6 months had passed. Replace 'owners manual' with 'lease' and you understand where I am going with this.

The difference with motor vehicles is that the industry thrives on high quality products backed up by responsive support when there is an issue. Think how much servicing has changed - they tell me when it needs doing and come and take the car from home and bring it back. This costs the same as if I take it myself. We need to aspire to this level of service if we are to give consumers in our sphere what they get elsewhere and now expect routinely - they do not want to be bothered with the detail.

When things go wrong or when costs are more than your customer thinks reasonable, then there is a great deal of explaining to do. In virtually every other type of transaction there are very clear consumer rights, servicing schedules, care instructions. When buying a flat we do not think that we are purchasing the right to pay service charges over a fixed period, demanded with little explanation and then chased hard to ensure that the wider community is not inconvenienced.

So what is the solution? Well it is up to you - whatever initiatives follow the CMA report, you will still be explaining service charges and lease terms to your customers. So, firstly, we must make the subject more engaging. One way to do this is to ensure that the community is involved in all aspects of your service delivery and can debate it - advise what you are doing and why, advise what you would like to do and why. Send out newsletters that are entertaining and informative not just dry and preachy. Get your customers involved in the discussion and demonstrate your expertise. Consider having consumer champions, consider inviting leaseholders to review your procedures and your proposals.

Secondly, the service you offer must be one of genuine excellence, recorded clearly and delivered on time. What we do is essential and therefore I contend that it must be possible to demonstrate its value by doing it well and taking pictures, if you follow. We have never been better equipped, technologically speaking, to keep our customers fully informed and drip fed with the right messages.

I am a leaseholder as well as a property manager. On one property I was promised the earth when the new agents took over. That was more than 18 months ago. Since then I have had three pieces of correspondence. Two were demands, one a set of accounts. I simply have no idea what they have been doing day to day because they don't feel the need to tell me anything. Now if I imagine what it is like to know nothing of the complexities of leasehold I will already be quite annoyed and maybe even suspicious. Come my first interaction with the agent....

I still hear the plaintive cry of the overworked manager; "We are just doing our job, but leaseholders simply do not understand leasehold and their obligations..." Sorry but this just does not cut it anymore. It is your duty to do everything possible to ensure that your customers are well informed. Believe me, it becomes a virtuous circle.

Friday 5 December 2014

CMA conclusion: Carry on everyone.

Goodness there are loads of CMAs. When looking for a picture I could have used the real one, but the Country Music Association seemed so much more, well, entertaining. I could have gone for Certified Management Accountants, Canadian Medical Association or the Christian Motorcyclists Association. None of this is relevant however.

It is a peculiarly human trait that we love administrating, regulating, rule making and have whole public services based around the notion that we need to be controlled and that oversight of our activities, in whatever form, is important. And, of course, it is. Except that we now live in a world where the actual cost of statutory regulation with real enforcement is prohibitive so we have to self regulate - which means the market decides.  I suppose therefore the CMA were never likely to come to any other conclusion. 

If you like CMAs there are many...
Moving on then to the CMA's final report on Residential Property Management - we can see that X experts were used over X months to come to the conclusion that the market for residential leasehold management works pretty well  - although there are a small minority of landlords and agents who have historically abused their position and potentially continue to do so. No shit Sherlock!

The report recommends a number of improvements to be made through the existing codes including the RICS and ARMA Q and two pieces of potential primary legislation.

Dealing with the legislation. The first would require legislation that would allow leaseholders to force landlords to retender management if 50% of leaseholders agree. This is a good thing as its adds to the powers given by RTM and I suspect would be a 'no fault' right as well. It would be another reason to ensure agents put customers at the centre of their activities and would be much easier to trigger than RTM I suspect.

Secondly in a change to the 1985 Act, they suggest that S.20 is reviewed. No one will argue with that (well I do know of one!) and I have blogged about this previously.

However, don't hold your breath:

Work on new legislation to give leaseholders the right to
trigger re-tendering and rights to veto landlords’ choice of property manager is
unlikely to commence in less than 12 months. The timescale for
implementation would then depend on preparatory scoping and feasibility
work and the Government’s legislative priorities. 

So 2-3 years minimum then.

The remaining report is best summed up by the following extract:

1.51 In considering what remedies would be appropriate, we noted that for many
leaseholders, overall the market works reasonably well, but that particular
problems can and do occur where existing safeguards fail to provide
adequate protection. We consider that the problems that exist in the market
are best dealt with through targeted measures to improve the working of the
current model, rather than through a fundamental reform of the regulatory
framework. We note the existence of redress systems and/or safeguards,
which provide a degree of protection in many cases and whose performance,
where shortfalls are identified, can be enhanced. 

Pretty clear then that there will be no attempt to tidy up the complex statutory framework in which managers operate or to add some compulsion to the use of regulatory codes. We continue with a two tier market in the vaguely stated hope that the market will sort out the rogues over time as consumers chose agents on their reputation, accreditations and membership of the appropriate bodies.

I have heard this before, in 1985, 87, 96, 2003 etc.etc. The industry is improving but sadly new players with no rules or governance and existing bad practice continue in some areas. The changes have, by and large, been glacial but the CMA believe that the market will resolve itself and consumers will make the right choices without a fully regulated industry. Sadly there is no previous evidence of that.

So what is good then?
  • It is great news that the CMA has recognised the efforts of the industry to improve its reputation and that ARMA Q is given full recognition. 
  • I am pleased to see that the public sector was not excluded from the report - why should leaseholders of local authorities and housing associations be excluded? 
  • Disclosure of fees and corporate links is a good thing and is already covered by ARMA Q.
  • Standardising pre purchase questions would be useful although it has been tried before. Unfortunately conveyancing is a highly competitive market driven by price and not prone to adding to its workload. Not compulsion - no success. 
  • The proposed additional fact sheets - they do already exist though.
  • Efforts to improve the availability of alternative dispute resolution (ADR), neutral evaluation, or mediation services rather than FTT should be applauded.
We recommend that property managers have a plan and strategy for regular
communication and engagement with leaseholders to explain and discuss the
decisions affecting them. 

This one is so obvious it shames me that it needs to be said at all.

Overall then not much real change other than an endorsement of activities that are largely already underway and with a couple of helpful, albeit distant, legislative recommendations. Sadly, without some compulsion to move to regulation we will still see most of the behaviours highlighted continue from those who remain outside of the accredited routes. Despite my naturally cynical approach I do feel that the CMA have summed things up pretty well. Sadly, like others before them, they have not really found a solution and can only reinforce all that is going on and hope, vainly in my view, that the market will sort itself out.

It remains my belief that until we have compulsory regulation that is backed by statute we will continue to entertain the chancers, opportunists and the downright criminal hiding in the shadows of leasehold - where so much money is now sloshing around - that only real legal enforcement will finally clear it up.



Here is a link to the full report:
https://www.gov.uk/cma-cases/residential-property-management-services
If you are a property manager you should read it in full (about 3 hours) - I reckon it is worth it.