My Residential Management Predictions for 2018

AI, AI, meet your new Property Manager...

1. Full overarching regulation is coming, but slowly. Expect another two years before any primary legislation arrives, it is a long process and, frankly, only primary legislation will go anywhere near the type of regulatory oversight, consolidation, simplification and improvement of existing leasehold principles that is required for any changes to be meaningful.

No one will be surprised at the outcome of the recent consultation; consumers call for an end to feudal leasehold, managing agents welcome more regulation. Yawn.

The real solution lies in pushing professional managing agents, removing a small number of rogues by creating some strict membership requirements and increasing barriers to entry. Add to this some real education and information for all stakeholders.

For every story of mismanagement, rip-off fees and criminality there are many thousands of success stories, added value and risk mitigation. As an industry our PR is appalling - start telling the good stories and shouting them loud. Many built environments are positively enhanced by the activities of managing agents. Why are we scared to shout about it?

2. More leasehold flats will be built - leasehold is not going away anytime soon (we have seen the back of houses though). Multi- tenure developments are difficult for HAs without the leasehold system. This is because leasehold works well with shared ownership and we all know that shared ownership is growing exponentially. Whether or not that is a good thing, I will visit in a later blog.

Additionally, look at who is investing in freeholds. Pension funds (benefiting a large swathe of the population) with a long term interest in looking after their assets and protecting their reputation. This is resulting in a sea change in the way that property is be managed - more accountable, more transparent, more community driven and therefore more valued. High quality oversight has arrived already, regardless of any future additional regulation.

3. Your clients are changing. Many of them are local authorities or housing associations or hybrid niche developers working with the aforementioned. They have very different ambitions for their customers. They see themselves as placemakers and want to remain embedded in their communities for many years. Managing agents need to be changing too. Some are.

4. Disruptors to leasehold management - it's not just pressure groups, all party parliamentary groups or negative press coverage - its the new approaches to management that will be driven by new entrants into PRS, student and multi tenure housing including hoteliers, venture capitalists, pension funds, US multi family providers. They are not like traditional landlords. They will not behave in the received way. This is a good thing.

5. Community Engagement is the new buzzword! But actions speak louder than words. Expect to be asked to evidence your actual, real, community activities.

6. Housing Associations - work with them? Ignore them? Watch them fill your space? They are better funded and more sophistcated than you ever imagined and will represent a significant part of the future residential management market/opportunity. Get to understand them. How can managing agents improve their relationships with HAs?

7. Commonhold Mark II - A revisit to the original Commonhold and Leasehold reform act is long overdue. Some straightforward amendments could make Commonhold more workable. But, without an element of compulsion or reward, it will remain a distant second to the established system for decades to come.

8. The price for fully compliant, transparent and responsive management is going up... customers will pay for accountable and expert management if they can see measured results.

9. PRS - it's big, it's here, it needs expert property managers - expect owner/developers to come raiding your team for the best soon.

10. Artificial Intelligence - we operate in a people dependent sector. How much do you think could be done by AI? Have a good think about this - a huge percentage of what we do relies on accurate input and output. Robots do processing better, they are always correct and can work 24/7.

Early adopters will steal the market.

11. Grenfell - When I was a kid my Nan lived on 21st floor of Stebbing House, just down the road from Grenfell Tower.  I spent my summers living there and working as a City foot messenger throughout my teens. I was also at school and in the same year as Eddie Daffarn, the blogger who warned of an impending disaster at Grenfell and was, allegedly, ignored.  I am also a property manager and so, like many, I feel a connection to this tragedy, the saddest and most significant residential tragedy in my lifetime.

Have I ever brushed off a cry for help from a resident because it seems to be absurd, exaggerated or unlikely to transpire? Would I do so in the future? No. We must ask ourselves the Grenfell question every time someone suggests something unlikely is possible.

In future agents must be appointed principally not only because of their professionalism and expertise but also because they demonstrably listen to and reflect upon comments and concerns from within the communities whose homes they manage. Sadly this has been the worst way to have to recognise the importance of professional property management and its impact on our built environment.

I would hope that this industry's destructive race to the bottom has now concluded. A more thoughtful, intelligent future beckons.

DCLG Update

Just after I make my predictions along come the DCLG with a statement that includes: making certain that ground rents on new long leases – for both houses and flats – are set at zero.  I had been told that this might happen (by someone close to discussions) but found it hard to believe - after all this will potentially impact the value of the existing leasehold market and has damaging consequences around risk and costs. However the detail is a long way from complete and the statement includes reference to exceptions that are being discussed with the industry. Surely controlling starting ground rent values and reviews, along with promoting a workable commonhold solution as an alternative route is the way forward? 

Managing Agents and Housing Associations - Working Together

Hi Everyone

Many of you will be aware of the work we are doing trying to address the issues that Housing Associations have working with Managing Agents and vice versa.

The attached report is the initial draft of a document which will provide the foundation for subsequent work on:

 ·         A New Development checklist (July 2017)

 ·         Final Report (August 2017)

 ·         NLG Good Practice Guide (September 2017)

 ·         Joint Code of Conduct (November 2017)

I hope you can find the time to review the report and give feedback by Friday 4^th August please?

NB - We are looking for the final report to include Case Studies and other examples of existing Good and Poor Practice in this area. What has worked in such relationships and what is the impact when arrangements are particularly bad? Please let me have any such examples which will be helpful in promoting sign up to the final Code of Practice

Happy of course to answer any queries.

Regards

Alan Wake FIRPM and David Clark FIRPM

              

alan@castmediagroup.com

davidclark@mainstaygroup.co.uk

A guide to ensuring the best results for all stakeholders when working on leasehold and multi tenure schemes with Managing Agent and Housing Association input.

Executive Summary

There is no avoiding the fact that Managing agents (MAs) and Housing Associations (HAs) are increasingly working together on multi tenure schemes to deliver service charge management to their respective customers. HAs are often the largest single investor in a scheme and see MAs as a 'one size fits all' approach to a complex problem.

Often the MA will have overarching responsibility for the collection and expenditure of the service charges in accordance with statutory and regulatory requirements. HAs will either pass these costs on to their customers or make payment themselves. The cost of service charges for HAs is significant with many HAs now paying out £millions per annum in variable residential service charges and variable estate rent charges.

Too often there has been little communication between those who will directly manage the properties and no training or understanding of how these charges arise. The first communication is therefore a MA chasing payment or the HA asking for detail.

MAs cannot operate effective management without prompt payment of what is often a large proportion of the service charge contribution. HAs cannot pass these charges on to their customers or accounts teams effectively without a detailed understanding of how they arise. Service charges need to demonstrably represent value for both parties.

This report aims to pull together the thoughts of both parties and come up with some helpful pointers to working together to improve outcomes. Typically, the issues outlined in this paper will tend to occur on larger and more complex developments, but understanding them will improve relationships at every level and on all types of mixed tenure development.

The need to work together

Managing agents have been managing service charges for many years but have poor understanding of the aims and purpose of HAs. They simply carry on doing it “by the book” which can mean they will chase hard when there are outstanding charges.

HAs though, do not necessarily pass on service charge information to their customers who want to understand what it is they are paying for. There is also a disconnection in both organisations between property managers delivering frontline services and those in development departments doing the initial deals.

However it is clear that MAs and HAs are working together on many thousands of schemes ranging from small housing developments through to multi tenure mixed use schemes with many hundreds of units and a high degree of complexity.

There is willingness and an opportunity for both sides to work more closely, to benefit greatly themselves and to importantly improve services to customers. HAs have also become significant developers of new housing stock of all tenures. They can be profitable customers and allies for MAs.

·         Double charging

Managing agents charge a management fee, normally on a per unit per annum basis (questionable use of a percentage of expenditure does occasional resurface but is thankfully rare and is definitely contrary to RICS and ARMA guidance). This fee can start to look unreasonable when the HA is also recovering a management fee or admin fee from its customers. HAs need to be there at the outset when these fees are being agreed.

Managing agents need to ensure that they do not load all of their management fee onto, for example, the estate charges, when there are also heads of charge for blocks and parking. The net result of this is that the HA receives a charge that does not allow for the fact that they are managing the common areas of their own block. Management fees need to be allocated to each expenditure head to ensure fairness at every level and reduce the possibility of double charging. This requires good use of service charge schedules and careful drafting of lease terms.

There is some further useful comment on these issues within RICS Guide to Managing Mixed Use Developments.

·         RMCs and HAs

Residents' Management Companies (RMCs) allow developers to pass the responsibility for service charge management to a company whose members are fundamentally the leaseholders. This is a perennial problem for HAs who often hold head leases but in some cases are only granted one vote or who grant leases and have a vote for each, allowing them to control the RMC with potential for confusion and friction. Very careful consideration needs to be given to this element of the corporate set up. Conversely, HAs must engage with RMCs and not take a back seat.

If the HA is purchasing a significant number of dwellings does it make more sense for HA to be appointed manager within the lease or to take a headlease of the whole estate? Or should the HA consider taking informed control of the RMC?

·         Education

There is a requirement to ensure that HA customers are advised in detail about how charges will arise and be recharged. The more information on how charges are derived and how the lease allows for recovery should be provided by the MA and shared by the HA. Service charges can be complicated and the associated services opaque. There is a duty on all parties to ensure absolute transparency and plenty of advice and education in their delivery.

By way of example, Average service charges on new build in London now exceed £2,700 per unit. This means that an average wage earner will be paying around 10% of their pre-tax income contributing to services that remain largely invisible. (Guardian Money March 2016)  It is essential that MAs and HAs combine their services to ensure that customers receive high quality information about how services are paid for and delivered and how they benefit the asset value and the community.

Development departments need to understand the relationship between good design and management costs.

Collaboration and partnership

·         Understanding each other's position

Too often the relationship starts when the first demands for service charges are sent to the HA by the MA. Often this will be a demand for each and every lease held by the Association. Modern leases normally demand in advance so the charge can often be significant and prior to receiving any services.

In order to avoid misunderstandings there needs to be a constructive discussion prior to completion so that each party has clear lines of communication and details of how costs are decided and collected are both understood and agreed. It is not unreasonable to provide a summary of the costs in advance and to total the demand for the period. However this requires an agreement to work closely together at the outset.

·         Have senior level interaction

Managers and directors need to set the standard. This requires discussions agreeing what is to be reasonably expected.

For example: MAs should not load all of their fee onto estate charges if these are the only charges met by the HA or its' leaseholders. Charges can reasonably be split between different schedules. Building charges and estate charges should share appropriate proportions of the management fee - thus avoiding double charging when the HA add their fee for managing the building.

·         Working together, joint approaches, partnership, collaboration

Developers really want this too. The best managed schemes are notably partnerships between the main stakeholders. Collaborative approaches deliver much better outcomes and protect and enhance asset values which in turn benefits the community.

·         Training at handover

Generally MAs will be happy to meet with HAs and provide some basic understandings of the specific construction of service charges on a scheme and how this links in to the leases and collection of funds.

Starting early

·         Be in the room!

Developers generally want an early exit. They will set the service charge with a managing agent that allows them to sell units, minimise their voids contribution and exit smoothly. This will not necessarily always be in the interests of the HA or Good Practice. Solicitors for the developer will set up a corporate structure that allows easy handover to an RMC and/or a potential sale of the reversionary interest.

Does this represent an opportunity for the HA? Developers generally want rid of the freehold and want to sell affordable units – why not make it a package deal (subject to available funds)?

What are the HA rights to be? Will the HA be shareholders and/or directors of a RMC? How will your vote or votes be allocated? Will the freehold be sold without your consent, what is the ground rent clause - does it create a future issue?

Is the scheme manageable cost effectively? Does the HA really want 24/7 concierge services for example? Are the proposed systems the most cost effective in the long term? Are the replacement costs and life spans of plant reasonable? Who has the responsibility for insurance - does it sit with the landlord or with a RMC?

·         Bring your experts to the table

If you are investing in a significant number of units then be at the table to influence the lease terms, the corporate structure and the service charges and to maximise opportunities. This means coming to pre sales meetings with your experts, including your lawyer and property manager.

·         Understand what outcome you desire

What do you anticipate to be a fair and reasonable level of charges? Work closely with the managing agent to achieve this. If there are to be separate blocks/entrances is there a costs benefit to delivering services internally or will you benefit from any economies of scale delivered by the MA?

·         Work with any appointed MA.

It is likely that they have experience of setting up management services with the developer and will welcome your input and make adjustments and offer advice. The future success of the scheme is, at least in part, dependent on this relationship.

Leases, corporate structures and voting rights

·         Must suit all parties - RMCs, headleases, commercial elements, Special Purpose Vehicles etc., can all lead to complex corporate structures that will impact how you can interact with the overarching development plan.

·         RMC or no RMC - who shoulders the risk? Is this an opportunity being missed by HAs? RMCs give leaseholders control of budgets and of how management is undertaken but it can be difficult to find directors without a degree of compulsion. Will the RMC properly represent all occupiers including fair rented and private rented tenants and shared owners? In multi tenure schemes will all parties have a balanced influence?

·         Residents' Association - Consider not having a RMC where this is likely to create risks as above or where a golden vote will allow one party to overrule any decision. Residents' Associations can be formally granted by the landlord to give all parties a fair right to consultation and transparency.

·         Voting Rights - one size does not fit all. Where there are HA customers and the HA takes a headlease to a specific block it is quite possible that they will have sufficient voting rights to overrule any decision of the RMC on the broader scheme. Understandably MAs will look to avoid the creation of such voting rights although this can avoid inertia and issues such as a lack of volunteer directors. Certainly it is worth a discussion between the parties at the outset..

In complex schemes service charges can be a significant element of disposable income and clear informative advice on service charge structures, budget management and ongoing controls need to be clear for purchasers. For new purchasers, avoiding cost rises in early years requires an honest appraisal of the management costs from the outset. It is important for parties to recognise and discuss 'commercial challenges' particularly around the point of sale.

Service charge heads and allocation

·         Understanding the matrix and the schedules is key.

How are the charges to be split? Is there an equal estate charge? Are the units split by floor area? What does the lease say? What will be easiest to explain to leaseholders and what is equitable? It is very difficult to row back from the position created once the service charge matrix is completed - one party will always be disadvantaged.

If the matrix is not fixed within the lease there is always potential for challenge and the F-tT imposing alternative apportionments. Juggling certainty with flexibility, to take account of things changing in the longer term, is a delicate balance. This can be particularly tricky where the development also includes commercial units.

·         Why do we contribute to some things and not others? Who decides?

Generally the managing agent will work with the developers' lawyers to come up with a service charge framework that is as equitable as possible for all parties. This means ensuring that everyone makes a contribution to those services from which they will benefit. These will normally be wrapped up in an estate charge that will be apportioned in accordance with the agreed percentages in each lease. There may be charges made equally - such as a parking charge to those with a space. There may be charges for those that benefit from communal services. These may be apportioned in a way that reflects the availability and amount of benefit received (3 pronged - Availability benefit and use is a common expression in case law and particularly within commercial leases). The opportunity for creating complexity is myriad and unless HAs are at the table when these decisions are made they will be stuck with them and probably will never fully understand them.

·         Avoiding complexity

Creating a service charge matrix and budget can be a balancing act between over complexity and the creation of a fair allocation of costs. Simplicity is always easier to explain but there are many mixed schemes running with 20 plus heads of charge and significantly more line items.

·         Understanding Heads

Service charges on complex blocks can have several schedules for example:

o   Estate Charges - All parties including commercial tenants and houses are likely to contribute

o   Buildings Charges, internal - those leasing units in managed buildings on the estate will contribute if they use the internal common areas

o   Buildings charges, external - all building users including those such as commercial using their own entrance

o   Parking Charges - those with the benefit of parking only

o   Staff costs - who benefits from onsite staffing?

o   Commercial units - don’t benefit from much of the internal buildings charges but may cause more wear and tear to the estate as a whole

o   Insurances

There can be many others where costs are allocated to those who have availability, benefit and use. Understanding how the service charge is created and allocated is key to understanding how charges arise.

·         Capped charges

Capped charges are unusual but not uncommon in some regions and still surface from time to time as part of the planning requirement. Effectively this can result in the wider community subsidising the service charges for HA customers in perpetuity. A clear message around this needs to be agreed in advance and lease terms need to be very explicit about recovering additional costs from the wider community.

·         Voids collection policy

It is essential that there is an agreed voids policy. Where units are completed but unsold charges will arise. Developers often agree how void charges will arise and when they will be paid, whether they will include sinking fund costs and how they will be recovered - particularly where a lease has yet to be granted.

Demanding Service Charges

·         Understanding demand requirements

Demands are raised in accordance with the lease. There is no alternative available without undermining the ability to ensure collection of essential funds. This means that you will get a demand for service charge for each and every lease granted unless you agree sensible alternatives. Whilst individual demands may be a requirement to meet lease terms, no one is barred from creating a summary invoice where required and MAs should take a pragmatic role to assist the HA in collecting from their customers.

·         MAs understanding HAs requirement for simplicity

Nothing is less likely to meet with prompt payment than a pile of unexplained demands for 6 months service charge money up front! MAs must work with HAs to agree appropriate and sensible ways of billing. Whilst it is unusual to step outside of the lease terms (this risks collection of bad debts), there is nothing to stop payment in advance followed by monthly instalments by standing order. It requires a dialogue between the parties.

·       

           Service charge funding is critical

MAs cannot always wait for service charges to be paid in the next payment run. The terms of payment are dictated by the leases and these are designed to ensure that services can run smoothly on a day to day basis. All service charge monies are ring fenced in trust for the particular scheme/schedule. MAs cannot commit expenditure until and unless adequate funds are available for the scheme.

Where HAs are passing on the charges for recovery from leaseholders or shared owners then the delay may prove critical for funding:

o   Is there a requirement for the HA to fund charges up front?

o   Can the MA deliver demands earlier?

o   Can demands be made directly to leaseholders by MA?

o   Is it appropriate to share that information with the MA?

o   What are the credit control arrangements for late payers?

Payment for major items, such as insurances and annual contracts benefit from single payments rather than periodic. Cash requirements are not generally smooth. Consequently failure to pay service charges on demand can result in higher costs or cessation of critical services. Generally the HA has an important role in ensuring the smooth running of a scheme since they often have the most units. Lease terms commonly provide for annual or half yearly payments to ensure funds are available at the start of the year. This is in contrast to the typical HA leases / procedures of collecting service charges monthly and HAs often need to understand how they are going to forward fund when offering their own tenants more generous payment terms.

MAs need to be aware that generally HAs are happy to pay, often funding the charges themselves prior to collection from their customers.

·         S.20 consultation

Under the Landlord and Tenant Act 1985 (as amended by S151 of the Commonhold and Leasehold Reform Act 2002) Landlords must consult over qualifying works and long term agreements. This is an essential tenet of residential leasehold management and it is important that parties to a lease understand the importance of consultation and reading and responding appropriately. Details can be found here: http://www.lease-advice.org/advice-guide/section-20-consultation-for-private-landlords-resident-management-companies-and-their-agents/

Since that guidance was written, the upper Tribunal has determined, in the case of Leaseholders of Foundling Court and O’Donnell Court v London borough of Camden, Allied London (Brunswick) Limited and others [2016] UKUT 0366 (LC), that it is for the party which is originating the works to consult with the party who is ultimately responsible for payment of the service charge.

This will most commonly mean that the MA will need to consult with the HA’s service charge payers as well as with the HA themselves. This presents practical difficulties for the MA who is unlikely to have any direct contact with the HA’s sub-tenants and most likely will not even know who they are. The Upper Tribunal suggested that the most appropriate practical solution is for the MA (on behalf of the superior landlord) to request the information be provided by the HA (as intermediate landlord). If the HA  does not assist it may face difficulties in recovering contributions in excess of the triviality threshold (£250 or £100 p.a.) from its own tenants even though its own contributions may not be capped at that level.

Both parties therefore, need to work together to ensure that all tenants are fully consulted and all observations/nominations are received, and had regard to, by the party originating the works.

Communication

Agree lines of communications - Each party should establish named individuals with whom they can discuss processes and iron out problems.

That means finance teams and property managers on both sides need to have a dialogue.

People come and go - there needs to be processes to ensure that lines of communication remain open.

Most of all, both parties need to demonstrate accountability, transparency and good governance. These things only come by regular communication and agreed processes.

Use technology - the increasing use of portals, social media and texting give us new ways to communicate messages to our customers.

There is evidence of success in larger organisations when HAs and MAs have appointed specialist officers to deal solely with the other party on all MA/HA issues. Of course this needs a certain level of scale.

Conclusion

·         Managing agents and housing associations generally want the same thing - to deliver excellent value for money services to their customers

·         HAs must be in the room to influence the developer and the managing agent

·         Agree other avenues of engagement and processes and communicate regularly

·         The development department must talk to management department when looking to invest in large schemes - cost of management must be factored in to appraisals

·         Be pragmatic and flexible but ensure a fair deal for your customers

·         Build trust and look to create real lasting partnerships

·         Information is key

This is a growing opportunity for both parties - not a threat. HAs are growing and a significant proportion of that growth will be through leasehold flats and freehold houses with an estate charge. This represents an opportunity for those managing agents prepared to work closely with HAs, and for HAs who are prepared to put time in to ensuring that their investment is properly considered by the MA and the developer from the outset.

MAs are much more likely to be the developer moving forward and where they are not managing themselves they need to make informed decisions about the MAs that they engage.

Thanks to Alan Wake, Jeff Platt, Caroline Millington, Abbie Gregory, Graham Bennet and others who have lent a hand along the way including LEASE who held the initial roundtable discussions that led to this paper.

Definitions:

HAs - Housing Associations, Social Landlords and any charitable provider of low cost housing

MAs - Managing Agents, generally in the private sector who specialise in collection of service charges for long leasehold properties or estate charges on freehold houses with common areas.

RMC - Residents' Management Company

TA - Tenants' Association

F-tT - First-tier Tribunal

Reversionary Interest - An interest in the freehold or head leasehold held by a landlord that crystalises on the expiration of a lease or leases. Normally this will generate an annual rent or ground rent.

Other Useful documents/websites:

ARMA Guide to working on mixed tenure developments - www.arma.org.uk

Lease Guide to S.20 Consultation for Private Landlords, RMCs and their Agents www.lease-advice.gov.uk

 RICS Guide to Managing Mixed Use Developments 1st Edition 2012. www.rics.org.uk

www.irpm.org.uk

Beware! Lowballing is back. Did it ever leave?

I feel deflated.

Perhaps it never went away, but I am hearing more and more stories recently around the practice of 'lowballing'. Consumers and developers alike need to be aware that this will come back to bite them. I previously wrote about it in 2013 in response to the OFTs scoping document here: http://davidclarks.blogspot.co.uk/2013/12/response-to-ofts-residential-management.html

Lowballing is the practice of setting an artificially low service charge to either win a contract (agents) or to assist the sales process (developers). In some parts of the world it is illegal but in the UK not expicitly so. There is some legal sanction that service charges must be reasonable (works both ways, although I am not sure anyone has ever challenged a charge on the basis that it is too low...) and regulatory requirements set out in the ARMA Q Consumer code:

2.1 New Business & Tendering When seeking new business the Managing Agent: 

d) Must make it clear what services they are proposing to provide and at what cost, as well as the extent and limit of any additional services available; 
e) Must not purposely underestimate costs or provide misleading estimates of future Service Charge contributions required; 
f) Should quote their Management Fee as a fixed fee, unless the Lease specifies otherwise; 
g) Should pre-agree charges; 

Lowballing may take the form of artificially low prices for maintaining the development but often is more sophisticated and may involve ignoring areas of future costs and removing them as a line item. Health and Safety, mechanical and engineering costs as well as artificially low reserve/sinking fund allowances mean that charges are initially set to look very reasonable but quickly grow in the first few years to meet both large deficits and increased ongoing costs. Poor, or deliberately low, estimation of insurance costs often lead to significant hikes in later years. The use of phased and void costs to support an artificially low service charge. On estate schemes freehold house owners do not want to pay for managemenof the open spaces and charges sre often set innapropraitely low to offset this. Some stakeholders will want ot pay nothing, particularly housing associations buying under S.106. Anecdotally I am advised that we are increasingly asked to reduce overall costs despite the loss of quality.

Developers have a responsibility to check that each item of M&E in the specification is correctly priced and that there is a full health and safety regime. Is the manager likely to provide a worthwhile service for the fee proposed? 30 flats at £100 per year does not deliver many hours of service to leaseholders. Where there is an initial guarantee in place (for example lifts) then a note to the effect that there will be a significant future maintenance cost should be added to the estimate.

All agents have experienced a failure of the developer to provide all of the correct information upfront and the consequence of finding previously unmentioned plant at a scheme. Both parties must ensure real diligence in providing and obtaining all details that might lead to contractual, insurance or replacement costs.

We are in a competitive industry that is prepared to win work through artificial pricing and without more care on the part of developers then it is only consumers who will lose. Agents are still relying on the fact that initial management periods are often longer and more complex - allowing for a degree of stickiness and little consumer pressure for change.

I am pleased to be working with developers who recognise that their relationship with purchasers and the communities they create are not just transient. The best developers talk of whole life relationships from student accomodation to retirement villages and all homes in between. It pays them dividends to ensure that service charge budgets are set with honesty, that managing agents are rewarded appropriately as professionals and that cthe clear benefits of transparent management are set out clearly at the point of sale.

It pains me deply that I still lose work for being too 'expensive' by comparison to an agent who has not, for example,  had his engineer look at the M&E specification and whose insurance team haven't commented on the insurance reinstatement costs. Increasingly we pick up those schemes 3 or 4 years down the line when residents have tired of paying huge deficits every year whilst enduring massive hikes in costs. Personally I would like to see a requirement for managers to proveide three years of estimate for new devleopments with an element of  risk attaching to their fees. This would quickly ensure accuracy for consumers and fewer unpleasant surprises.

In summary:

• Developers must provide all development details accurately up front
• Agents must undertake to deliver accurate budgets and revise them when new information comes to light
• Notes must be added to explain missing or future costs
• Notes must explain how adequate reserves will be collected
• Fees should reflect the cost of management
• Other fees arising form the lease should be clarified
• Consumers should look for comparables and be wary

One Month Without Property Managers

At this year's IRPM Fellows' meeting there was much debate about how we can ensure that the value of residential property managers is fully recognised. The increasing professionalism of the industry and the rising importance of sector specific qualifications have shifted us some way to achieving this. However, many feel that front line practioners still bear the brunt of consumer dissatisfaction and anger driven by misunderstandings, inequities and the a poor image fostered by those only interested in stories of overcharging and mismanagement. Regretable as these are, they are  the domain of a small minority of rogues who abuse the system and continue to taint the whole industry. Their days are numbered as regulation, consumer pressure, social media and competition makes it increasingly difficult to perpetuate substandard services.

My experience of property managers is that they are some of the nicest people to know and work with and I count many amongst my friends. They are skilled in many areas, work long hours and rarely have anything but the best interests of their buildings and communities at heart. There are many amazing success stories out there that we fail to promote and that has led me to thinking about what the world would be like without the essential service that we offer. To celebrate the value of what we do and try to imagine a world without the critical services we provide.

Would a month without property management lead to street riots and civil insurrection? Sounds like a silly proposition doesn't it? But let's have a think about it; we live in strange times after all.

In my imaginary world all property managers and supporting teams have been mysteriously relocated to a pleasant tropical island with no means of escape for a month. As recognition of their hard work, every luxury has been afforded them whilst they wait to see what happens back home.

A number of buildings quickly suffer from issues that we would normally consider critical. One or two have pump failures, other have lifts that break down. Many experience leaks. There is no one down at the managing agent - phones are not answered and emails sit unopened. Whilst the normal day tpo day services break down, the managers continue to top up their tans, drink virgin cocktails, play complex board games and read novels about dystopian futures. Life is, for them at least, briefly idyllic.

Residents become restless and agitated when they realise the common areas are not going to be cleaned, the grass is getting long, weeds are sprouting from the paths. Cigarette ends litter the paths under balconies.

There is a fire. It is put out but no one comes to look at the damage, the extinguishers aren't replenished. The insurance has not been renewed so residents have to live with the smoke damage.

Security systems start to fail and strangers are found in common areas. Crime starts to rise, more break-ins are reported. The CCTV is still working but no one is looking at the screens. Some residents can't even get into their block, eventually they smash the door down. It'll get fixed they hope.

Some residents take on the management themselves but find it difficult to raise the money for essential repairs and even more difficult to get a line of credit from the engineering company that oversees their plant. Where are the keys for the plant room? What are those flashing lights on the fire panel? Having chosen not to use the Mansafe system, a contractor on a roof falls and is critically injured.

There seems to be more noise, more parties, more anti social behaviour generally. This can't go on say concerned leaseholders. For sale boards start to appear in windows, next to drying washing. There are blocks in the neighbourhood that have had no hot water for a couple of weeks. One has no water at all.

People start to behave with less care. After all, if no one is cleaning up why should they be the ones to do it? Rubbish hasn't been collected this week because the bin doors weren't unlocked for the dustmen. Is that a cockroach over there?

Talking of pests, those Pharaoh ants are back. The regular pest control hasn't happened for a couple of weeks. The rats seem bigger, more confident.

Residents get together to discuss what can be done. They argue loudly at meetings but eventually letters are drafted and sent to politicians. Something falls off the side of a building, narrowly missing a family waiting while their dog excretes on the pathway. No point in picking it up, it's already a disgrace round here.

The emergency services are flat out rescuing people stuck in their apartments because the lifts are out of order and trying to get the water back on. Standpipes are put up in the street.

The very fabric of our communities is quickly tested. Buildings start to look untidy and tenants stop paying their rents in large numbers. What can be done? It is proposed that there will be demonstrations in the major cities. 'Bring back our managing agents' the crowd chants. Some cars are set alight. A politician is 'roughed up'. People are very clear that they do not like their homes being affected by this. I've already paid my service charges in advance shouts one irate pensioner on Question Time. Safety, security, warmth and running water are fundamental rights say campaign leaders.

After one month (or so) most PMs return to their grateful customers and put everything back in order. Some, however, never return, after all the island is a lovely place, immaculately managed, spotlessly tidy and environmentally perfect after a month in the hands of the experts.

Yes, this is a very silly article, but let's foster stories of all the good that property managers do because most of them are brilliant, commited and valuable. Anyone who thinks that we are less than the glue that binds residential communities together can take it up with me.

IRPM goes from strength to strength

 I have reccently finished my period as chair at IRPM and handed over to Felix Keen from First Port who I know will continue to drive IRPM to further success and deliver yet more for our members.

Whilst I will remain as immediate past chair, for me it is the end of an era. I have been involved with IRPM from conception in 2000 and creation in 2002 and it has been close to my heart ever since. I believe that we have fundamentally improved the quality and skills of residential block management practitioners and this is confirmed by the many job adverts I see that mention IRPM as a desirable or necessary requirement.

IRPM would simply not exist without Janie Strange and Jeff Platt who nursed it through difficult growing pains, tight budgets and unforeseen obstacles in the early years. It is with regret that they too will be stepping down at the end of the year when we will be joined by our new CEO Andrew Bulmer. I wanted to take this opportunity to thank them for their relentless efforts to promote IRPM, to give us a real voice in the residential industry and to make IRPM the go-to qualification for leasehold (and factoring) managers. Their support during my tenure has been invaluable.

Excitingly, there are newer, younger, members coming forward to drive the agenda at IRPM and their efforts can be seen in the Resource Hub and other web led initiatives. Our membership is increasingly made up of under 35s who represent new smart ways of working, broader generalist approaches to management and are full of ideas that we are hoping to harness.

My thanks should also go to the working groups, all volunteers, who devote significant time and effort to delivering our promises to members.

We are all supported by Sarah, Aga and Dipti who have devoted their considerable talents to delivering huge changes in the last few years. The member database has been modernised, we have entered the world of social media and we have diligently managed our funds so that we can invest carefully in some great new initiatives including specific Build to Rent qualifications and Trailbazer Apprenticeships both of which launch in the new year. We have a small but incredibly hard working team serving all of the working groups and the executive. I thank them for keeping us on track and on time and delivering incredible value for members.

During my time as chair I am proud to have experience more than 10% membership growth year on year, testament to the continued value of our qualification and growth in all levels of membership.  I have hosted numerous road shows, training days, our free annual seminar and our fellows' day and spoken to many members on matters as diverse as Brexit, Scotland, LGBT voices and equality, MA/HA's and working together, the impact of mixed tenure, higher education and the skills gap.

IRPM will continue to work on delivering apprenticeships and the first PRS qualifications in the UK, as well as enhancing the Resource Hub so that it becomes the first area our members search when advice and information is needed in our complicated world. In recent years we have seen more emphasis on mixed use and mixed tenure schemes and the advent of the PRS build to rent sector further add to the skill sets that we need to prepare our members for. It is an exciting time for us and there will be many initiatives in the near future designed to broaden our offering, develop our members and attract new faces.

Education and continuing professional development is crucial to practitioners and it is important that we continue to promote our industry to schools and colleges as a valid career choice so that employers have a constant stream of new talent becoming available. These are the strategic matters that will fill the days of our new CEO and chair in the coming year. Janie, Jeff and I will remain available to assist where we can and we trust that we are leaving a great legacy.  

This article first appeared in The RPM magazine in August 2016

What Three Words?

Technology still has the power to add efficiency and improve the 'right first time' delivery of property management services. I am always on the look out for interesting new innovation and the latest find is an app called What3Words.

Pumps at table.forest.sense

Essentially this simple idea splits the world into trillions of three metre squares that are allocated a unique, random three word description. In any language.

Suddenly accurate postal delivery services are available worldwide, accurate locations for people, assets and basically anything is easily possible. It has massive implications for countries that don't have effective addressing systems and is already making an impact in paces like Brazil and Mongolia.

More locally I think it could have great implications for property management. Imaging being able to ensure that the engineer goes straight to the right piece of engineering, via the correct entrance in your massive and complex building.

Imagine as well being able to find you car easily, find your friends at a concert, send a distress signal from the middle of the ocean and so on. For property asset managers I think this app could prove invaluable.

Have a look at http://what3words.com/ 

My Residential Management Predictions for 2016

Belated Happy New Year to all, I think it is going to be a very exciting one.

Now amazingly in its 5th year, this is my prediction of what is going to be important for residential property managers in the coming year. Some themes just keep recurring and residential management is set for unprecedented changes. This is my take on those recurrent themes:

1. Are we training our teams to manage yesterday’s model? This was the theme of the IRPM Fellow's Day late last year. It remains an important current theme. Things are changing. Better value, retention and reputation comes from doing a good job that focuses on the tenant (read customer) and not just the client. We have been training property managers to act solely in accordance with the lease and prevailing statute but ignoring the softer skills that are needed for a new world of consumer confidence, education and social media. New managers are very different animals in 2016.
2. Service and customer focused residential asset managers - not just 'block managers' but experts in a much wider field that takes in communities, placemaking and customer care whilst understanding the built environment sufficiently to add value to residential assets at all levels. In a market where high quality rental environments are likely to become a real alternative option, competing to have the best managed most attractive properties with real kerb appeal becomes an necessity. 
3. Institutional PRS - purpose built to rent. Try as I might I cannot get the numbers to stack up, particularly given interest rates will only go one way and margins for retailing long leases remain fairly strong. However, the evidence remains overwhelmingly against me and this year is the year that will prove the genuine interest that is out there is not all talk. Expect rents to be the highest you've seen. If the model does work then we will see real large scale investment - but it needs a few more years to prove itself and there are other obvious factors at play. Housing Associations will probably lead the way outside London. 
4. The rise of the Housing Association in the private sector - as above. The world of the social landlord is being shaken up, no more automatic rent increases, fewer S.106 opportunities for starter homes, less subsidy. I anticipate more HAs stating that 'we are providers of housing - in any form that takes' not 'we are providers of social housing'. Is it now their aim to assist in meeting the annual housing shortfall by any means?  Let's not forget, top 50 providers aside, the average number of new homes HAs develop each year is around 15.... Social rented property is potentially declining whilst property for private rental is increasing. Their model is being forced through very significant changes.
5. Partnership - always one of my favourite themes - expect to hear more about how managing agents and housing associations can better work together on mixed tenure developments. Meetings are taking place. The word 'partnership' will be used alot... sadly, we remain mired in suspicion of eachother (we need to grow up) so alot of hard work is still needed.
6. The rise of mixed tenure - this is ongoing but continuing from last year, there will be much talk of truly integrating communities and making them work for social and private renters, owners, part owners and families who are inevitably springing up as a new factor in flats - people simply cannot afford to move on. Expect the demise of signs saying 'No Ball Games'. ..Expect practical steps to get communities talking and working together. Expect managing agents to have an important role in this.
7. CHP - a new local way to power schemes with built in savings....lots of schemes will push the green button on their big plants. Fingers crossed! The Heat Network (Metering and Billing) Regulations 2014 will begin to impact how we measure supply and pass on costs, I suspect many are not yet geared up for this complicated piece of regulation. 
8. Over here... - Here come the big multi-family providers from the US. And their trade association, the NAA.
9. A different model - the rise of the new style agents. Those who now put customers at the centre of their operations and add proper value will surge ahead. The US model will (if not already) change the way managers behave. More importantly it will affect landlords and what they offer and how they chose to manage.
10. ARMA Q - it really does have teeth - expect to see them bared in 2016. It also is becoming  a common requirement in tenders that I see. No, I dont know who the new CEO of ARMA is, best kept secret in the leakiest industry ever.

We managing agents still underestimate and undersell ourselves.  It takes experience, time and constant training to deliver a good professional service and we sometimes dismiss how important our role in building communities is.  A modern development may contain every type of tenure and we need to understand the practicalities of dealing with every one of them.  Our service needs to reflect that but also incorporate the same level of service for all - not just for our clients.  We need to anticipate the way the market is changing and adapt for the future, not just react when the change has taken place. Those who have adopted portfolio and asset management skills, learnt to be customer focused and efficient in response will be ready for new and very high standards that will be set by the PRS suppliers who succeed. 

The new players in our sector include HAs, who are now delivering in the PRS, qualifying for IRPM in leasehold and joining ARMA. U.S. multi-family specialists will build and manage to a standard that we must aspire to match or beat. Institutional investors who are currently putting countless millions in residential assets will require exceptionally skilled residential asset managers. Most of all, residential managing agents need to learn and adopt best practice from the new players in our markets and adapt or quickly be left behind. 

What can we learn from the USA?

It is conference season and, as always, I have been catching up with old friends and new stories at several of them. I have come away with some interesting updates and some new enlightened thinking. Best of all I have filled in my CPD for the year.

On Wednesday I attended a PRS Conference to hear delegates from the US trade association, the National Apartment Association (NAA) and big multi-family apartment managers tell us about their experience. I learnt a great deal:

• Apartment Managers are not scared of charging for good service and of installing additional revenue earning activities (even including 'doggy day care' centres - one of the fastest growing facilities) to ensure that they keep their customers happy. Unashamedly, profit is a measure of success and comes as a result of getting it right for customers.

• Managers have found a sensible way to ensure that they share important data through their trade body and rents are set hourly by revenue management technology that collates demand and rent details to ensure no one is ever prejudiced or undercut. Turnover has dropped as a consequence of everyone knowing that rents are set fairly.

• Occupancy is around 96% - any more and the rents would be too low. Average stay is 18 months and growing fast. Their is a massive growth in 'Millennials' looking to rent and it is no longer considered the 'poor' option.

• There are no inclusives, every thing is an extra. Nowadays tenant's meet their own utility costs - this has resulted in significant reductions in usage.

• The agents love technology and are constantly searching for new ways to keep ahead of the market and improve their customer experience. Apps to control everything, including heating, lighting, deliveries and even door access, are the next big thing.

• However, by far the most interesting aspect of what I heard was the employee transformation that has taken place. Managers do not poach staff or teams from each other. About ten years ago the NAA decided that it would support larger members to start a programme of eduction that would attract new people from colleges and universities and put them through a thorough 6 months training for a career in multi-family apartment management. In return poaching and recirculation of existing staff and teams would have to stop. Ten years later this has been a huge success, bringing new blood into the industry and opening the door to partnerships and welcoming new levels of success for apartment managers.

All of this works because the possibilities of a career in management are marketed in a genuinely exciting way to school and college leavers. Principally they aim to attract the undecided - those who are not sure what they want to do. After all,  no day is ever the same in apartment management is it? You can try accountancy, maintenance, customer care, hospitality, landscaping, marketing, communications, technology and many other things. It seems to work and many stay for long and fulfilling careers.

Clearly we have much to learn from over the pond. Perhaps we should learn it before they come and do it for us - after all they weren't just here to talk to delegates at a half day conference. Look out for the UK branch of the NAA very soon.


PS For you valuers - residential property in the US is valued by its occupational value! Surely it is time we followed suit?