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? 

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?

Why clients and customers value accredited and regulated services.

You get what you pay for is often cited in property management - which is great - until something goes wrong that is.

I am asked all the time why we expect all our sub contractors to be Safe Contractor Approved and CHAS Accredited and why we use a preferred contractor list. I am asked what the benefit of our Quality Assurance accreditations are and why bother with Investors in People.

The simple answer is we want to be the best. The more complex response is around the provision of the most effective, safe, value for money services in what remains an industry of widely differing service offerings in an increasingly competitive and highly complex environment.

Mainstay's clients want assurances relating to the safe operation and protection of their assets. Our customers want assurances about the safety and security of their homes and our responsiveness. That is why we are RICS members and ARMA Q accredited and why we are ISO 9001 and OHSAS 18001. It is why we employ engineers, compliance experts and procurement officers.

Our customers and clients want to know that our staff are also valued; so we are currently working from our Silver award for Investors in People to achieve Gold. We have developed our own in house training framework and staff are trained in health and safety, encouraged to take IRPM qualifications and have access to courses such as Leadership, Customer Service and Diversity.

In these areas Mainstay clearly leads the way and none of these badges are easily won or easily retained. We continue to be unique in this critical area.

At Mainstay we believe that property management is an important element in creating happy, stable communities and improving their relationships with the built environment. We believe we have something important to contribute and to do that we must move beyond traditional property management and become thought leaders and change makers in what remains a conservative village industry. Our clients are now demanding this of the new breed of property managers and the starting point is to be fully accredited and properly regulated.

Why is management so important when creating communities?

We rarely stop and think about the impact that we as property managers have on the environment and on the communities who live in the schemes we manage. But if we take some time to think about what our developments would look like with just a year without management. Grounds would be completely overgrown, lifts and other services would have been switched off and/or vandalised. Payments of charges would all but cease and the appearance of just about every aspect of the schemes would devalue the asset considerably. Behaviours of occupants would change significantly too. It quickly becomes obvious that far from being the irritant that managing agents are sometimes seen as, we are in fact essential to the feel and the quality of the built environment and this in turn has an effect on the well being of the communities that live there.

Terms such as 'placemaking' are often attributed to design and build inputs at the outset and this is an important element. But it must also includes how managing agents keep their schemes looking good and feeling safe and inclusive, and how they bring neighbours together with a common purpose.

Increasingly the mixture of tenure types challenges how managing agents interact and deliver services to a wide range of the community, some of whom will have very different needs and ambitions for their living environments. All such challenges will need to be met by sophisticated solutions. Some of these solutions will be achieved by bringing the whole community into the discussion and others by a combination of soft and hard services that allow the collection of funds and maintenance of the quality of the environment. As ever this is a complex role that we property managers have been doing instinctively for a long time but subtle changes mean that we must begin regard ourselves as important factors in the delivery of wider well-being of our customers.

What is this change? New schemes may routinely include leasehold and shared ownership, market rented, fair rented and social rented tenancies. Price pressures will see shared renters next door to families and older people trading down living next door to young professionals, key workers or those previously in housing need. In such mixed communities there is a new responsibility for the managing agent and that is to listen to the needs of all and ensure there is a continuous and community wide discussion taking place. This includes allowing full representation of different groups and engaging with community leaders. Allowing collective action gives managers the power and support to make changes and improvements significantly more efficiently.

As an industry we remain bogged down in technical jargon, regulation and limited working patterns and defensive behaviours that curtail the real improvements that we are able to bring. Whilst continuing to recognise the importance of the safety and technical elements of our role, we need to embrace the wider opportunity to be the hub around which communities, particularly in large developments, can control and bring continuous improvement to their environment.

What an opportunity that must represent to further our importance as the experts in the residential built environment.

My Predictions for 2015

Now in it's legendary 4th year and fashionably late.

Did I get 2014 right? Did I lose 10Kgs? Well yes and then no. It went. It came back.

As for the other predictions I think I got some right and some wrong as ever. Who could have predicted that Law and Lease blog winning a prize at the NOTB Resi Awards? Well deserved I think. I am going to enter this year. I love prizes.

More than 11,000 independent views of my blog now and only 65 comments. My first prediction therefore is that I am going to have to be much more controversial.

1. I am going to be much more controversial.

I predict forests in the sky. Not.

2. ARMA Q is live. I am predicting that it has been a success in terms of the numbers signing up - follow ARMA's Twitter feed if you want to hear who is through the stiff requirements so far. Next stage will be to demonstrate that it has teeth.

3. Reducing energy costs. This is good news for those of us that work in a one year contract market and for our customers. Real savings in gas supplies are only slowly feeding through now. Who knows what this will mean for biomass costs?

4. CMA. Carry on as before.

5. The rise of PRS at last....no really. Look out for genuine attempts to deliver a fully integrated management service.

6. LKP will this year become a real force for leasehold advocacy and generally a force for good. Their opinions have become more balanced and measured - they have real influence and this must be used with care if they are to influence the future of the sector. We should all embrace them.

7. The appointment of Roger Southam to chair LEASE is bound to be controversial. Roger has strong opinions and will undoubtedly shake things up - he knows property management inside out. He is a genuine consumer champion and should be welcomed as a breath of fresh air.

6. After a couple of years, where no one really knew if they were behaving correctly in accordance with S.20, I predict a year of quiet reflection and a return to the old fashioned values pre Phillips v Francis. Actually that's nonsense, I expect the next new thing to be [fill in your own concern here]. (Mine is fees for underletting, I am still unclear as to what is reasonable. I am personally being charged annually for a letting that is holding over on the initial terms. Can that be right? Proxima would suggest not.) 

7. Deflation - could it happen? All the pointers are there.... 3-4 years of low oil prices to come, decreasing demand for goods from ageing population, historically low interest rates, supermarket price wars etc. etc.

8. House prices could go down or remain stubbornly static. No-one is going to get any meaningful capital growth and service costs continue to rise on complex schemes. There is a reckoning coming and it will have a big impact across the sector. As ever London will lead.

9. Insurance costs for leaseholders continue to rise and flooding of leasehold flats will remain outside the government's Flood Re arrangements - they still see block costs as a commercial insurance risk.

10. No one imminently is revisiting S.20 thresholds despite many voices asking for a review. Expect more and more requests for dispensation under S.20za.

11. IRPM will make some important announcements at their annual seminar. They will have some great speakers too and I will be lucky enough to speak (for the one and only time) in the round theatre of the Royal Institution where both Faraday and that smiley chap from D:Ream have spoken.

Errr, and that's it really. Another year flies by and the new one is now well underway. I would like to express more optimism but the economics do worry me greatly. Residential managers continue to do a brilliant and entirely necessary job in increasingly complex and pressurised environments,  keeping us safe secure and watertight in our homes. They really need a big hoorah! from time to time.

ESOS Regulations are here - Are you caught?

No avoiding the obvious...

In December 2015 the Energy Savings Opportunity Scheme comes into force and is mandatory. This is a European regulation that will require all firms employing more than 250 staff and/or with a turnover of more than 50m Euros to identify cost effective savings measures and carry out ESOS assessments every four years.

Crucially for most managing agents you will qualify if there are more than 250 employees within your wider corporate group - so if you are a subsidiary of a large organisation you will need to act now or ensure that your parent is acting.

Also, importantly for some, ISO14001 will not qualify you for ESOS. For this you will need to undertake ISO50001.

In essence ESOS will require you to do three things:

1. Measure your total energy consumption.

2. Conduct energy audits and identify efficiencies.

3. Report compliance to the Environment Agency.

The scheme is estimated to bring £1.6billion of energy saving to UK firms by 2030.

Full details can be found here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/351158/ESOS_Guide_FINAL.pdf

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.

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.

Qualified and Competent - Fire Risk Assessors

Not all fire risk assessors stand up to scrutiny and obtaining a ‘suitable and sufficient’ assessment comes down to more than just qualifications. Guest Blogger Kevin Boreham explains:

Building fires not only threaten lives and property, but can also lead to enforcement action, prosecution, stiff fines and even jail. Employing the services of a competent fire risk assessor is therefore paramount for landlords, property managers and company owners.

The Regulatory Reform (Fire Safety) Order 2005 (FSO) stipulates that a person shall be regarded as competent ‘ ...where he has sufficient training and experience or knowledge’. But how much raining, experience or knowledge is sufficient?

There are currently no formal qualifications required to become a fire risk assessor, although there are a number of excellent training programmes available. But regardless of the knowledge gained in a classroom setting, there is nothing like practical experience.

Having assessments peer reviewed or scrutinised by a local fire inspector can really highlight weaknesses in methodology and report formats, and experience shows that even big-name health and safety service providers can get it wrong.

When we recently took on a property, we scrutinised the fire risk assessment provided and found some worrying gaps. A further report by an in-house specialist uncovered some startling and basic omissions:

• dry-riser systems would not hold water as the bolts were only finger tight

• complete stairwells lacked any working emergency lights

• security was compromised, allowing indiscriminate entry

• plant rooms were used as storage facilities by residents

• the automatic smoke-ventilation system was not in working order.

When questioned, the staff on site remarked that the previous assessor had spent less than half an hour on the premises. This might have been enough time for a small apartment block, but not for this substantial property, which consisted of 12 cores over 10 to 12 floors, plus two levels of undercroft parking and several plant rooms.

It is doubtful how a ‘suitable and sufficient’ risk assessment can be conducted with this approach.

Conflict of interest

Formal qualifications are only part of the requirements to become a good fire risk assessor. An understanding of building regulations, construction methods and building materials enable better risk judgements to be made. Yet health and safety journals regularly carry advertisements placed by companies seeking serving or ex-fire officers to be fire risk assessors.

While studying for my formal qualifications, I once asked a serving fire officer for clarification on some of the finer points of fire-risk assessment and was surprised by his response: “How should I know? I just turn up with a hosepipe to put the fire out.”

Apart from the conflict of interest resulting from serving officers acting as fire risk assessors (and especially those who act as enforcers of the FSO), some doubt exists as to their ability to supply a suitable and sufficient risk assessment.

Enforcing the FSO and writing reports to help others abide by it are two entirely different things. Enforcement is a black-and-white issue – a building is either compliant or not. But adherence has real life to deal with, including staffing levels and human interaction.

So what is a ‘suitable and sufficient assessment of the risks’? This depends on who is asking the question, the knowledge of that person and to what type of property it relates. On 8 July 2011, Nottingham Crown Court jailed a fire risk assessor and a hotel manager for eight months for failing to carry out a suitable fire risk assessment, among other offences. In this instance, the enforcing authorities and the courts made the decision as to suitability.

Having assessments peer reviewed by a local fire inspector can really highlight weaknesses in methodology and report formats

After several years of regularly conducting risk assessments in residential, retirement and office blocks, I believe that I can produce ‘suitable and sufficient’ assessments for such properties.  However, an attempt by me to assess industrial sites or shopping complexes would likely be ‘unsuitable and insufficient’. Without the appropriate knowledge and observational skills, it is highly likely that deficient, inappropriate or missing passive/active fire-protection measures will go undetected.

So, who is competent and how can you tell? These are important questions for freeholders, managing agents, residents’ management companies and others with managerial control of properties.

The fire safety industry is attempting to address this issue as a whole. The new BAFE SP205 Life Safety Fire Risk Assessment Scheme, with a guidance document for certification bodies, has been developed for organisations that provide fire risk assessment services. While the document mentions competency, it clearly states that “it is not the purpose of the scheme to assess the competence of the individuals involved”. Whether it goes far enough remains to be seen. While using registered organisations on the scheme will provide some protection, consumers may still end up with unsuitable fire risk assessments.

There are some things you can do to ensure a suitable assessment:

• seek out assessors with formal qualifications, preferably more than a one-day course

• check their area of specialism; those doing assessments in residential properties require a different  

   knowledge base to those working in other areas

• ask to see samples of previous risk assessments

• use an established company

• ensure that access is provided to all areas of the property and relevant information is made

available to the assessor

• read and question the results to ensure that the assessment is not done as a tick-box exercise.

Enforcement is a black-and-white issue, but adherence has real life to deal with

Conclusion

All clients want value for money and there are providers that will cut their prices to gain business. The reality is that low barriers to entry leave the market open to abuse by those looking to ‘cash in’ on what is seen as a lucrative market. The outcome is assessments that do not stand up to scrutiny and are likely to fail the ‘suitable and sufficient’ test. Be aware: best price does not equal the best results.

So, how do you know a fire risk assessor is truly competent? When they supply a suitable and sufficient assessment that protects you and your clients and stands up to scrutiny, when they take their time when visiting the property and ask the relevant questions, and when the assessment is not seen as a retail opportunity.

Finally, and most importantly, when the assessor is prepared to stand up and be accountable for what they have provided to the client.

More information

Competency Criteria for Fire Risk Assessors (Fire Risk Assessment Competency Council): www.britishfireconsortium.org.uk/fire_risk_assessment_competency_document.pdf

The Regulatory Reform (Fire safety) Order 2005:

www.legislation.gov.uk/uksi/2005/1541/contents/made

Kevin Boreham is the head of Mainstay Group’s Health, Safety and Compliance team. He is a member of the Institute of Residential Property Managers, a specialist member of the International Institute of Risk and Safety Management and a technical member of the Institution of Occupational Safety and Health. kevinboreham@mainstaygroup.co.uk

This article was published in the RICS Residential Property Journal January-February 2013. For full details of RICS and their services please go to www.rics.org

When is a Homeowner not a Homeowner?

A: When they a leaseholder looking for future protection and benefit from the DEFRA's and the insurance industry's proposed Flood Re Insurance scheme.

Flood Re is a not for profit reinsurance scheme and will pool funds and ensure that costs are spread evenly amongst insurers and householders. This will stop insurers simply avoiding this area of the market and level the playing field for all parties, spreading the cost fairly and minimising the impact on individual households.

However, because leasehold blocks are generally insured through commercial policies they are excluded from the proposed scheme. This arises since it is not the individual leaseholders who insure but landlords companies or residents' management companies and they include common areas such as car parks and corridors. It is also argued that they have collective buying power which should offset the increase, but I am not aware of any RMCs that have buying power. It is certain that those affected by flooding will be hit at the next renewal in a way that freehold homeowners will not be.

Just yesterday it was revealed that high value and new build houses that were originally excluded are to be covered after all. Well fancy that.

This is a simple injustice and if you have not already done so you should make your feelings known to DEFRA. Time is running out.

PRS - Is Spring in the Air?

A dinner and conference with the British Property Federation this week convinces me that the build to rent era may at last be upon us. There was definitely evidence of Spring in the air and a spring in the step of the familiar London based residential agents, developers and funds. Talk of a PRS revolution hinged largely on large scale fund led schemes, only a few of which are currently evidenced by site activity, but much more seems genuinely likely to proceed than a year ago.

Leading the field is Delancey's East Village on the site of the Olympic Park and already delivering its first homes as part of the legacy of the Games. Customer service is the priority here and all management activity is site based and includes such small innovations as 'buddies' who will help you move in, 24/7 service, parcel delivery, furniture packs, and three year tenancies. Customers are able to decorate and hang pictures too - a small but valuable freedom in the rented sector.

Other talk was of branding to appeal to the horribly entitled 'rentysomethings' all of whom have perfect teeth and enviable hipster lifestyles.

Existing mature European and US models of rental were also explored in detail, and generally every delegate looked very happy, as if they had just found a £50 note under their chair.

Of course all this will come at a cost and affordability did not feature high on the agenda. I am uncertain how many 20-35s who can afford the rents at East Village which start at £1600 per month for an unfurnished two bed and presumably excludes other costs. As all managing agents will know, 24/7 on site services are expensive to deliver and modern complex developments with extensive grounds and facilities require intensive management and a detailed capex plan. Cost control will be number one priority on these scale developments.

Institutionally backed large scale developments are one thing, but they really only add up to a few thousand, as yet largely unbuilt, units. This is not going to solve the housing shortage any time soon and the viability of such schemes outside the separate country we know as London remains to be proven.

It will be interesting to see how successful management is after a few years. This is not simple rental portfolio management - it requires a sophisticated asset approach that will drive returns for investors whilst ensuring that management costs remain transparent and sufficient reserves are put aside for non annual maintenance and replacements.

I can't think of any sector that is better qualified to oversee that element than managing agents from the leasehold sector. They have had to invest heavily in skills, systems and accreditation in recent years to meet increasing demands for transparency and accountability from their customers.

Sadly, another theme of the day was that management remains a weakness in the UK and that getting this right was the key to encouraging funds to invest. I have heard this argument trotted out for 15 years now as the main barrier to PRS investment on a large scale. Time to lift the stuck needle, most of us have moved on a long way.

Build to Rent Developments still need Managing

Finally, after years of talk, and long after the term ‘build-to-rent’ became an accepted part of the industry parlance, there is evidence of real schemes coming through planning and of real investment in this asset class from private sector funds.

The new activity is a reflection the increasing numbers of people who are choosing to rent because they prefer to be mobile or cannot see any benefits in ownership or they simply cannot afford to buy. In the Southeast this is magnified sharply and plans for large schemes run to many thousands of units already. But these new renters are not prepared to accept the mediocrity that pervades much of the existing market outside of the social rented sector. Private landlords do not generally have the scale that allows for investment and upgrading of existing stock and units are often disparate and not part of a unitary strategy.

The private rented sector has the opportunity to offer much higher quality products, to add in services and to create longer term communities with people who want to stay put. In the USA and most of the rest of Europe this has long been the norm.

I have not, however, seen any evidence of real management strategies. When looking through the plans for new build-to-rent developments there is scant information on how the assets are to be maintained and enhanced over time in a cost effective way. There is a danger that many of the same mistakes will be made as were made in the last urban regeneration boom.  Developers are still learning from mistakes made in the early days of the leasehold flat resurgence in the 90s. The issues will remain the same with build to rent, but I suspect that institutional investors will be keener to understand the true returns after the real cost of managing complex buildings is factored in.

New large schemes will temper the market, add variety and drive up the quality of properties and services to tenants. But letting agents are not generally able to provide sophisticated property asset management solutions.

However, in all other respects the buildings are the same as those that managing agents across the country already manage for private leasehold owners and freeholders - in excess of 2.5 million units.

Modern blocks require sophisticated management solutions. They are filled with plant and machinery that requires adequate maintenance and long term capital expenditure and sustainability strategies. The compliance and health and safety regimes are the same. They need fire strategies, parking strategies, they require cleaning, decorating and landscaping and importantly they need customer services and response lines – just like long leasehold units.

Client landlords will demand long term strategies and modelling based on accurate budgeting and pre agreed returns. This is where understanding cost controls and budgetary management becomes essential. It is where asset register, cyclical plans and energy efficiencies need to be understood from the outset. It is where early attention to detail will reward investors. No one has more experience in this area than managing agents who have been working with developers on large new build urban blocks for many years.

There is a further opportunity also. Managing agents are well placed to provide additional services and time poor young professionals will be looking for hotel style services such as furniture packs, cleaning, laundry and concierge. Management of rental blocks is not constrained by leasehold legislation and will allow for considerable innovation and imaginative costs control, cross subsidy and leverage of purchasing power.

There is one group already gearing up to provide the solution and they have a good deal of experience. Registered Social Landlords have had a few years of taking on developer built apartment blocks and have learnt fast. They understand that cost control is imperative and quality is rising. They have learnt from the private sector.  They are far from perfect, but do not underestimate their resolve. One has recently purchased a large managing agent. The risk is obvious.

Managing agents have had a long and difficult journey in the last ten years but lessons have been learnt and new and innovative ways of delivering safety, security and quiet enjoyment to their customers are now becoming the norm. Private rental of the scale that build-to-rent proposes must be regarded as a significant opportunity for property managers. It is for the industry to sell its unique skills to this new investment class and the clock is ticking.

Phillips and Goddard v Francis Update 3. Errr, do nothing!

Trawl the internet for advice and you will not find much written about this case since March 2013. Simply put, no one knows what to do, and to a greater extent are doing nothing.

A date has now been set for November 18^th for the landlords appeal. The appeal was out of date but a decision has been taken to hear it anyway – perhaps letters from various professional bodies and interested groups expressing concerns had an influence on this.

Having reviewed carefully with my team the ways in which we might interpret the current position and meet the requirements at least cost to our customers we have reached the following conclusion: It is impossible in all practical terms to do so. Any solution is a fudge and does not meet the requirement, as it stands, fully. Therefore in our opinion there is no point in doing so and it would be calamitous to try. 

There are several reasons why we believe this:

1. In order to serve notice on all qualifying works in advance, a calculation on a flat by flat, expenditure line by expenditure line analysis has to be undertaken. Whilst this is onerous it is not impossible. However, unless you can predict the future, you have an issue and may at some stage have to seek dispensation where you have exceeded the budget for qualifying works. Practically then you might as well rely on either post cost dispensation or adding any qualifying works to S.20 notices when you are doing a major project. Neither of these routes is particularly practical nor will they add clarity to an already clunky procedure
2. None of the experts have been able to provide any real clear guidance. ARMA, RICS and LEASE have pointed merely to the difficulties thrown up by the judgement and have been unable to offer solutions. 
3. The option to serve notice of intention to cover generalities and future unknowns as well as planned maintenance is messy, impractical and could not in any event meet the requirements of the case in full. 
4. The RPTS have made it clear that attempting to get predeterminations on every budget will be thrown out. Patently this would break the system. 
5. Using one contractor and a fixed schedule of rates under a Long Term Qualifying Agreement – again practically impossible we believe.

 Maintaining your current position and consulting on major works in the time honoured way seems to be the only common sense way forward for now.  If a lessee challenges a service charge then the landlord can seek dispensation under S20za.  This option obviously carries a continuous risk of challenge, unless and until action is taken to overturn the judgement.

Some concerns have been raised over the principal that the Chancellor sought to achieve here because his intention is a good one for consumers. Practically, he wished to avoid the possibility of aggregating linked works – all managing agents know that this is not acceptable practice – by going one step further and including all works in a year. However, an honourable intention alone is insufficient to make a case for changing rules that have worked well to a larger extent, for those that are impracticable and unworkable. This case simply opens the door for further abuses and would increase costs for leaseholders.  

I genuinely believe that trying to apply the ruling in practice would bring all works to a standstill within a couple of years because the RPTS would be unable to cope with the number of dispensation requests (all undertaken at a cost to consumers). You would have to breach the requirements to move forward, deal with emergencies and urgent works and provide a level of practical service to your clients.

My thanks to the very astute Dan Potter at Mainstay whose assistance with article this has been significant and who I have ruthlessly plagiarised. Thanks Dan!