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

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?

Residential Management is changing fast.

Late last year I was invited to the grand opening of a large retirement village in the Midlands. We all imagine we know what retirement living might be like in our minds and perhaps we allow this to colour our opinion sometimes. I must admit to thinking I knew what to expect. I couldn't have been further from the truth.

Firstly the quality of the accommodation and the luxurious feel to the common areas far surpassed that of most blocks I have seen recently. There were marble floors, high spec. reception facilities and an excellent cafe, bar, gym and hairdresser.

I was taken on the grand tour by a resident. She told me of the fears she had before moving in and how these had all proved to be false. She talked enthusiastically about the gym and about how her fitness and mobility had improved so much since arriving. She told me of the sense of community and the pride taken by residents and of many new friends.

Standing under the giant atrium lights the CEO of the housing association responsible told me that there was a mix of owners, shared owners and renters, many paying more the £5k per year service charges. The flats were fully occupied within a few months. He pointed out the benefits to local businesses that ran the hairdresser, gym and cafe. He reminded me that 25% of the population would be over 70 in ten years time and that this type of accommodation was important and represented a huge opportunity - particularly if we could overcome some of the irrational local resistance they had unexpectedly faced.

The scheme is managed almost entirely on site with its own office and full time staff. Families come and go and if it was not for the wheelchair access doors and wider corridors you would never know that this facility was aimed entirely at the over 55s.

Like all new developments the concerns of those that had them were the typical concerns we see everywhere, parking, broadband, noise and a recently cancelled local bus route. Unlike most developments the community spirit and interest in the development was tangible.

Go and see a new retirement village and be as pleasantly surprised as I was. Both these and institutional PRS are going to change the way that we design, build and manage communities of the future. Who says we don't do community? Who says that management isn't collaborative? In the United States this type of development has been around for more than 30 years and we laughed at their "Sunshine" condos. Is it now time to take notice? Can we learn from them?

first published in RPM Jan 2015

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.