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? 

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. 

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.

Is it time for legislation for freehold houses with estate rent charges?

In the last ten years there has been a massive increase in developments that rely on estate rent charge deeds to collect funds to maintain public open spaces, gates, gutters, play areas and more. Why the increase? Principally because local authorities no longer adopt roads on new developments nor pick up responsibility for play areas, grassed areas, woodland and other amenity and public spaces.

A number of factors resulted in this change. Firstly LA's required roads to be to adoptable standards - and these were often set at impractically high standards for developers. Secondly commuted sums were no longer made available to LA's so that they could manage these areas.

Of course we could argue that new home owners will already be paying a local taxation that should cover such services, but somehow this has been shrouded over time. What we are left with is an additional charge to maintain and insure public amenity space and this management opportunity has been embraced, not only by traditional property management agents but by highly specialised amenity management companies. Neither are not bound by any specific landlord and tenant legislation that would apply to, for example, management of a leasehold block of flats.

Charges tend to be modest and relate to grounds maintenance, road and gutter maintenance and public liability insurances. However they may also include pumps, water purification, water features, play areas, gates etc. Basically anything that cannot be red-lined to a specific property is picked up. There must be a fee for this activity so it is easy to see how costs can quickly move from modest to quite significant.

Sometimes there is an amenity company created to ensure these matters are dealt with that is held by the agent. Sometimes there is simply a deed requiring a payment calculated by an agent. Either way there is nothing that might control the behavior of the service provider and in many cases no way of removing them from office or of ensuring value for money is always achieved. There is no need for the incumbent provider to evidence any price testing or to develop any performance indicators although the Rentcharge Act 1977 does require charges to be reasonable and this is not just limited to the provision of services.

There are no trade bodies, qualifications or regulation in this sector but because costs are generally fairly low the topic does not often reach the headlines. Collection of charges is usually straightforward and covered by s.121 Law of Property Act 1925 which could allow distraint of goods or even re-entry under certain circumstances, leaving the freehold house owner with little choice but to pay regardless of the quality of services (EDIT I am subsequently advised by my learned Twitter friends that this abolished in April2014).

Isn't it time that freehold home owners who contribute to amenity land or estate charges were given the same protections as leaseholders? After all there are a very significant number of large regeneration schemes now underway that will rely on collection of such charges to maintain significant infrastructure on village sized and often mixed use/tenure developments.

For more information look at the Rentcharge Act 1977 http://www.legislation.gov.uk/ukpga/1977/30/part/1

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.

Phillips & Goddard V Francis Episode 5. Halloween - The search for a new case to moan about.

Excitement has been building for months now and the chatter amongst managers had reached a fever pitch of wild speculation, fantasy and urban myth. Yes, Phillips v Francis, the most exciting thing to happen in leasehold management for years, has had managing agents scratching their heads or burying them for nearly two years. But now the waiting is over and I can confirm that judgement in the appeal of Phillips and Goddard v Francis has been handed down and, in summary, the bit we didn't agree with has been overturned. So concerned were we that there was an 'Intervener' in the form of the Secretary of State for Communities and Local Government. This sounds quite threatening to me - I am imagining a black cloaked Machiavellian character, who says nothing but is there to observe the 'correct' outcome.

Nothing too scary this Halloween

Anyway, this is an excellent outcome since pretty much nobody I know has been endeavouring to comply in any event. Apart from the fact that it simply wasn't clear how it was possible to comply, doing so would have required significant additional expense for leaseholders as well as additional mire and confusion. In the current days of value for money and transparency, Phillips was never going to cut it. Once again the simple problem of some landlords failing to comply with the spirit of the law led to the sledgehammer approach affecting everyone. On this occasion common sense seems to have prevailed... Eventually.

Looking at the judgement more closely, Judge Cotter remarked:

“In my judgment a commonsense approach to
construction needs to be taken and in view of the fact that it
acts as a trigger for the protection afforded by consultation. If
the threshold were too low and all minor or non permanent
works covered, the result would be commercially
unmanageable to the detriment of both lessor and lessee. The
phrase building works use to describe significant works with a
permanent effect by way of modification of what was there
before. Whether works are indeed qualifying works, is a
question of fact having regard to the nature and extent of the
works in question.”

Martin v Maryland Estates Limited [1999] L&TR 541 is the relevant piece of case law to which the Master of the Rolls, Lord Justice Kitchin and the Chancellor of the High Court, no less, turned their not inconsiderable attention. Effectively Martin was overturned by the Chancellor in the previous appeal. Martin's common sense approach over whether works are 'qualifying works' and whether they exceed the 'triviality threshold' was the basis on which we all operated prior to Phillips and, it seems, will continue to do.

I do however remain sympathetic with the owners at Point Curlew - Disaggregating major works, to my mind, was already a clear breach of the law as it stands and there is already much case law to support this. Three years in the courts has done nothing but come to the conclusion that everyone already knew was right and proper. Furthermore, the appeal wasn't allowed on the point of management charges, hinging largely on the somewhat unclear lease in this instance. '...it is reasonable to expect that, if the parties to a lease intend that the lessor shall be entitled to receive payment from the tenant in addition to the rent, that obligation
and its extent will be clearly spelled out in the lease...' It isn't clear in this lease and the original Chancellor's decision was upheld on this point by the current Chancellor. He made the further point:

"Lack of clarity on these common issues is capable of affecting huge numbers of lessors and tenants across the country and involving them in expense and disharmony. The reported cases show that many of the disputes turn on similar or nearly similar provisions. Those who draw up or approve residential leases for their clients are plainly under a duty to take care that there is clarity and certainty in relation to those matters."

Once again I am reminded that adding further complexity only makes for more loopholes for the unscrupulous and more penalties for the innocent. Now, who fancies revisiting S.20 consultation levels?

A very happy and slightly less scary Halloween everyone. I'm off to steal sweets from kids. Bye.

Full case can be read here: http://www.irpm.org.uk/docs/public/Phillipsfinal3110.pdf

Resources for managers and leasehold owners.

Information is the missing link in our world. So many issues would be alleviated were we all up to speed with current legislation, regulation, the snappily titled First-Tier Tribunal (Property Chamber) (FTT(PC)) and the overwhelming amount of knowledge needed to understand leases, budgets, accounts, consultation process and the myriad other areas involved in running residential blocks.

Suffice to say there are  few of us who can claim to have a handle on all of it. Not me.

So here is a list of great places to keep in your bookmarks and to review whenever you have a spare moment:

• ARMA  http://www.arma.org.uk - a brilliant source of guidance with over 300 notes for members and much more besides. Even non-members and leaseholders are well served by the freely available documentation and there is so much more if you join.
• Leasehold Advisory Service  http://www.lease-advice.org - again a fantastic source of well written and clear advice as well as case updates.
• IRPM  http://www.irpm.org.uk - great resource for members in particular and growing source of quality analysis
• FPRA http://www.fpra.org.uk/ The Federation of Private Residents' Associations is a not for profit organisation dedicated to supporting leaseholders and lobbying on their behalf. An excellent resource for residents' groups it should also be followed by conscientious managers.
• ALEP http://www.alep.org.uk/ everything you could ever want to know about enfanchisement.

• SLC Solicitors - http://www.slcsolicitors.com/ have an excellent section on their website entitled 'Guides'
• Brady Solicitors - http://bradysolicitors.com/ likewise
• Brethertons - http://www.brethertons.co.uk/

• www.lawandlease.co.uk/  Amanda Gourlay's (of Tanfield Chambers) eloquent dissection of all the latest case news and, for my money, the best sector analysis out there. If you have any involvement in this sector you have to keep this one bookmarked and visit regularly.
• http://leaseholdlawyer.wordpress.com/ - Chris Alexander's blog is also an excellent source of comment.
• http://www.leaseholdlife.info
• www.leaseholdknowledge.com/
• www.leaseholdinfo.com/
• The Residential Manager https://davidclark'sblogspot.co.uk  - In all honesty this one is rubbish.

• News on the Block - http://www.newsontheblock.com/ growing web resource
• FlatLiving - http://www.flat-living.co.uk/ similarly a growing resource
• Property Week - http://www.propertyweek.com/ the old favourite and a little more engaged with the residential sector than Estates Gazette in my opinion.

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

Response to The OFT's Residential Management Scoping Document

I am writing this open letter in response to the OFT's scoping document in relation to their proposed study of the residential management market. I write in my capacity as a leasehold management expert and property manager with over 25 years experience, and as a leasehold flat owner for more than 15 years.

For the purposes of this response I have restricted my comments to the leasehold market, but I believe it should be noted that similar issues occur with estate management and freehold rent charges - a market which remains almost entirely unregulated and without redress mechanisms.  This area is, potentially, growing faster in the UK than any other sector since local authorities have moved away from adopting public open spaces.

Any study must recognise that the residential leasehold management industry is bound by significant statute and regulations that offer a range of remedies and protections for consumers. Since 1985 successive governments have sought to overcome perceived inequities in the balance of power between landlords and leaseholders with a succession of poorly drafted Acts. These have offered some real protections but have also added to complexity and reduced consumer understanding of this type of tenure further.

Such changes have not entirely removed the rogues. They have been able to use this complexity to prevaricate and delay any response to genuine consumer complaints by using the tribunal and court systems and inevitable loopholes. It has, however, forced the responsible agents to look to professionalise and systemise their services to reduce risk and improve delivery.  Professionalisation has come in the form of specific qualifications (IRPM) and guidance notes and education provided by the likes of ARMA, LEASE and IRPM. None of this was available just 15 years ago. The standard of service delivery is higher than it has ever been and there is a recognition that expertise, diligence and compliance does result in the delivery of better services.

All of this comes at a price, but I estimate that the average management fee for full block management services is at an all time low in real terms. In 1988 I recall reviewing management fees for central London mansion blocks to £225 per unit per annum (ex VAT). Anecdotally and through recent tender exercises these fees remain at the same level or thereabouts. Outside London, fees average £160 per unit per annum and this number has been moving down for some years as a consequence of keen market competition during the recession which was marked by a raft of new players entering the market. There remains no real barrier to entry in this sector and this will remain unchanged without some form of  regulation that has the backing of statute. 

In all, it is not easily possible to manage profitably at these numbers given the demands that complying with Acts and regulations requires. Most agents supplement their incomes by involvement in a range of other activities, whether lettings, credit control, resales, health and safety, surveying services or self delivery of other building services. Without those, leasehold block management is increasingly marginal and many smaller businesses are barely profitable, or worse they continue to trade whilst technically insolvent.

The good news for consumers is that all agents are now required to be members of a redress scheme. If they are involved in any form of insurance mediation they must be FCA accredited. Around half of agents are members of ARMA and bound by their code of practice, the RICS code for residential management and their requirements for PI insurance and trust banking. ARMA is growing rapidly and despite the imminent arrival of ARMA-Q regulation which has significant cost implications for agents. Nearly 3000 individuals have qualified for membership of IRPM and so far more than 300 of these have gone on to become RICS associates. Consideration of statutory backing and a requirement for all leasehold managers to sign up to ARMA-Q would level the playing field and ensure a better consistency of standards.

Notwithstanding, many consumers continue to believe that they get a raw deal. This is, in part, due to a lack of understanding and information at the point of purchase. Leases are complex documents that need to be explained carefully. They are legally binding contracts relating to one of the biggest investments that most people will make. Despite this, they remain barely understood in a world where conveyancing has become a price driven, factory activity and insufficient time is given to explaining the covenants and duties set out in the leasehold documents either by sales agents or lawyers.

I do not believe that the scope of such an investigation can be complete whilst excluding registered social landlords and local authorities. Why would they be excluded? They manage leasehold buildings and there are many well publicised examples of the issues they have had to deal with.

It should be recognised that the services provided to close to 2 million leasehold flats in England and Wales are essential and require highly specialist knowledge across a broad range of subjects. It is not a job for amateurs and it is not easy to find train and retain expert staff in a market that is being reduced to a price driven commodity service. Those that are ARMA members and intend to be regulated through ARMA_Q now find themselves in a two tier market with those who choose to remain unregulated and often non compliant.

Finally it is worth considering that many of the buildings completed within the last urban residential development boom are now reaching the stage that major cyclical projects are becoming due. In too many cases cost pressure has resulted in inadequate reserve provision being made and this will result in further pressure on managers to find quick fixes and cut corners. These buildings are the most complex buildings ever used as homes and the costs of maintaining them in the longer term will be enormous. 

In summary then:

•  The scope must give consideration to the myriad of legislation and regulation that encompasses the very wide range of activities required of a manager for even the most basic of buildings.

• Consideration should be given to whether the current legal and regulatory framework is assisting or hindering the delivery of effective, value for money, services and whether simplification and consolidation would benefit all. 
• The study should investigate whether there is currently significantly more consumer driven switching than ever, as a result of both the increase in self governing Residents' Management Companies and successful Right to Manage applications. Is the market already fixing itself?
• The scope should include an investigation into the current Section 20 consultation thresholds and whether these remain realistic.
• The scope should investigate whether limiting contracts to one year (without more detailed consultation) is ensuring that best value can be easily achieved.

• The scope should recognise the increasingly professional service offered by managing agents.
• It should recognise the importance of IRPM and portable professional qualifications.
• It should look at whether sufficient training resource is available to consumers, particularly directors of residents' management companies and officers of tenants' associations.

•  The scope should allow for investigation of pricing and whether good agents are being driven out of the market,
• There is currently significant tension between consumer requirements for exceptional customer service and value for money.

• The likely impact of ARMA-Q regulation must form an important part of the scope of this study.
• The study should review whether an element of compulsion should be added to ARMA-Q to ensure that all agents are required to join so that all consumers benefit from its provisions.

• The study must recognise that consumers are rarely willing purchasers of management services at the point of sale - hence there is an immediate tension when the first service charge demands are received.
• Intermediaries  - lawyers, conveyancers, developers and estate agents -  have a responsibility to explain the real costs of management services over the life of a lease.
• The continued practice of 'lowballing' service costs at initial sale should be looked at carefully. 

• RSLs and local authority leasehold customers have the same right to be included in the scope of this study as those in the private sector.

• The study should recognise the essential,valuable and important nature of the work that managing agents undertake.

Yours Faithfully

 David Clark FIRPM AssocRICS

NB: The findings of the study into Scottish Property Managers were:

• competition in this market was not working well for consumers
• the level of switching was very low and that consumers often did not understand their rights and obligations, and did not have a clear understanding of the standards they expect from a property manager
• when things go wrong, there was no effective redress mechanism.

The same cannot be said of the market in England and Wales where there is significant competition,where switching is becoming increasingly normal and where there are effective redress mechanisms in the form of ombudsmen and tribunals.

Phillips v Francis Update 4 - Leave to Appeal Granted

I am pleased to report that on the 18th November the Court of Appeal granted leave for the landlord to appeal the much discussed outcome in Phillips v Francis (see blogs passim). This was granted despite the appeal being out of time. One can only surmise that the general discomfort surrounding this decision and representations in support of the application from industry professional and trade bodies was sufficient for the judge to allow it nonetheless.

I remain hopeful that this signifies that a more considered and practical outcome might be achieved, albeit this may be some time distant yet. A date will be set next year and in the meanwhile we need to be mindful that the judgment remains in force despite my continued belief that actual implementation is nigh impossible.

I would be interested to hear from those who have had real
difficulties arising from the Phillips case to date.

Good Advice for Property Managers

My first boss in property management and my first mentor was Gerry Fox, then at Fineman Lever, still the most knowledgeable leasehold practitioner I have ever met. He taught me one particularly important lesson.

It is admirably summed up in the cartoon above which was used to illustrate Gerry's talks when ARMA was in its infancy. It still holds true today. Your customers and clients do not want to know why things have happened (or, indeed, not happened), what they really want to know is; what is going to happen next?

Be proactive in your advice, think ahead and set out your timetable for change. If you then stick to it, life is so much more simple for everyone.

ARMA-Q - A Managing Agent’s Viewpoint

Regulation of the residential leasehold sector is largely  welcomed by managing agents and, despite some real  procedural and training adaptations that all ARMA members will need to undertake, the benefits far outweigh any additional time and cost and must result in better choice for consumers. 

ARMA-Q is no half measure and represents a huge achievement on the part of those involved in what, I believe, will shape the future of leasehold management. As a member of both ARMA and RICS, Mainstay is required to adhere to the RICS Residential Management Code. This sets the standard for all managing agents that are members of either RICS, ARMA or both and has statutory approval. The ARMA-Q regulatory framework seeks to build on those standards, and give consumers confidence that their agents are transparent, competent and compliant and are prepared to be called to account by an independent panel. Independence is important because anything less would not have held the level of validity required and, just as importantly, the standards will be audited. This is not a box ticking exercise.

In most cases, regulation will simply mean changing processes that are not wholly transparent to make them clear to customers and clients alike. It will require published schedules of rates for all charges falling outside of the standard management fee, complete transparency with regards to related companies and will prohibit hidden or undeclared income streams.

ARMA-Q recognises that managers need to be flexible in their delivery and that innovation and creativity should not be stamped out by imperative rules. However, ARMA also knows that everyone in the industry needs to shape up and deliver excellence. Most of all, it needs to be done on a level playing field and consumers would be mad to use a property manager who was not accredited and regulated.

We have more accreditations than I would ever have imagined necessary. I strongly suspect however, that as far as our customers are concerned and, as far as future opportunities are concerned, ARMA-Q will quickly become a highly valuable signifier of quality.

Complexity in leasehold block management continues to increase; complex development and contradictory case law, wrapped up with myriad statutes and regulation make it increasingly risky for operators and increasingly opaque for leaseholders. Regulation will bring some much-needed standardisation and create 

real barriers to those that chose to remain outside of good practice. I believe that there is increased awareness and sophistication among consumers and the need to provide genuinely expert and accredited services. In seeking to meet the standards set out in ARMA-Q we have looked closely at how our current process improvements can assist:

• commitment accounting is allowing us to report earlier and more accurately on budgeted expenditure in a year
• we understand there is a need for a proactive focus and real value for money 
• we understand the role of quality services in asset enhancement 
• we believe that long-term planning is required to deliver certainty in complex buildings 
• we aim to be one of the first fully accredited and independently regulated managing agents during 2013-14.

Our team is actively involved in seeking improvements and innovative ways of delivering the best services. My belief is that accreditations and regulation encourage a collaborative team approach and this successfully wins new business. ARMA-Q accreditation will add further to my conviction that, in future, only the very 

best will succeed in an industry long overdue a regulatory framework.

This article was published in the RICS Journal June 2013

Will the Daejan outcome affect how we deal with Phillips v Francis? Update 3

I have been asked this question alot in the last few days. I wish I could answer it with some certainty. Agreed, there are more grey areas surrounding intention when dealing with S.20, but we should not mistake this for flexibility in the requirement to undertake the full consulation to the letter of the law. That being the case I cannot see how the Daejan outcome would reduce the impact of Phillips.

Having said that, no one is entirely clear as to what will constitute correct interpretation of Phillips by the LVTs. Early signs still suggest that the expectation is that nothing less than a boiler plate approach will suffice. If you miss a trick your client will be penalised and unable to recover the excess over the £250 limit per flat. Some poor souls are going to have to find out the hard way before we are all clear on what the exact process needs to be. I do not anticipate a 'flexible' approach from the panels.

One light on the horizon is a change to the threshold - Baroness Gardner of Parkes has proposed, by amendment to the Enterprise and Regulatory Reform Bill, currently in the Lords, a move to £330 before S.20 kicks in (remember the threshold has changed only once in nearly 30 years, the net effect of inflation meaning that leaseholders get to pay for more and more consultations as time goes by). The Baroness has further proposed some exclusions for essential and unforseen fire safety works, urgent repairs and securitry matters. Let us hope that these very sensible suggestions are adopted.

Landlords may take heart from the Daejan outcome but, whilst I believe that the outcome is a just one, it does not in any way change the requirement to undertake all stages of the consultation fully. Save for manifest error I would not be rerlying on it making life any easier for agents or their customers.

Come on - it really is time to revisit the whole process which remains clunky, expensive to administer, confusing for flat owners and vaguer than ever as a result of Phillips. Who exactly is being served here? The LVTs are awash with reasonableness tests and will soon be flooded with S.20 challenges.

As I have always said, the more complex the law, the more loopholes for the unscrupulous...

Pragmatic outcome at last in Daejan v Benson?

I note that decision for Daejan V Benson in the Supreme Court (heard before Phillips v Goddard unfortunately) has now been published.

Their Lordships appear to have decided, at first reading, on a sensible solution that does not allow the leaseholders to benefit entirely from a windfall in terms of the works, but requires the landlord to pay the leaseholders legal costs and a sum reflecting the failure to consult. Not a majority decision but practicality of approach seems to have held sway. Very much at odds with Phillips v  perhaps? 

Lord Neuberger stated: 'This conclusion does not enable a landlord to buy its way out of having failed to comply with the Requirements, because a landlord faces significant disadvantages for non-compliance...[it] achieves a fair balance between ensuring the tenants do not recieve a windfall and that landlords are not cavalier about observing Requirements strictly.'

Wow, how much did it cost the parties to get to that common sense solution in one of the longest running property cases? I will write more about how I think this might impact consultation activities once I have had time to digest the full decision in detail.

Meanwhile News on the Block have published an excellent summary here: 
http://www.newsontheblock.com/news-and-opinion/38057/landlord-as-supreme-court-allows-major-works-appeal.thtml

Phillips and Goddard V Francis Update

For banging your head against

I have been putting this off for some days in the hope that some expert, highly qualified professional will come to my rescue with a simple and elegant solution to the thorny problem that we all find ourselves with. Suffice to say this has not happened ( - yet, for it may do in the course of time and once other cases have revisited the issue).

So, what do we know? Well the case is not to be appealed further and stands as it is. For now there is no ability to separate qualifying works into different activities or timeframes within a service charge year. Additionally the cost of all qualifying works cannot exceed the limit per (any) flat without full consultation.

As I have said before, no one benefits from this judgement. It will involve all agents in significant additional work, head scratching and delays. The costs will be passed on to leaseholders.

I will summarise the suggestion made by ARMA and other experts below before looking at what hope there may be for the future.

In responses to ARMA it is clear that many members are playing a waiting game to see what transpires. This may be a calculated risk but it would appear from one response at least that the LVT may take the view that relevant interim costs are caught by this judgement and must be consulted upon. There is a debate currently as to whether interim costs were supposed to be included. For my part I cannot see that they were excluded, although I cannot accept that this was the intention of the Chancellor.

ARMA's excellent summary can be found here: http://www.arma.org.uk/files/Phillips_v_Francis_public_brief.pdf

Other suggestions include; a detailed published schedule of rates for all repair works - a big undertaking for any agent; a catch all style general consulation at the start of each service charge year; persuading the DCLG to raise the threshold to a level that will reduce the number of consulation excercises significantly and getting predeterminations on everything. 

My own concerns continue to be the relatively low threshold for S.20 consulation (see previous blogs) and the difficulty in making the increasingly complex statutory framework in which we operate understandable to my customers. Jonathan Upton of Tanfield Chambers has summarised the position in a comment to ARMA  most neatly:

“This decision is curious given that neither party argued that a landlord was required to consult on a distinct set of qualifying works if a lessee’s contribution to the cost of those particular works would not exceed £250: the lessees’ case was that the qualifying works were all part of the same set of works. The Chancellor felt able to depart from the Court of Appeal’s decision in Martin v Maryland Estates on the basis that the 1985 Act has since been substantially amended. While this may be correct, the decision has serious and possibly unintended consequences for landlords.

This will be an enormous burden on landlords and managing agents, both in terms of cost and time. If landlords are now required to consult on all qualifying works, however small, the cost of such consultation will ultimately be passed on to lessees. This is not in anybody’s interests. It cannot be what Parliament intended.”

Amanda Gourlay also of Tanfield Chambers, whose excellent 'Law and Lease' Blog really is well worth a read, suggests this:

One solution may be to issue a Notice of Intention at the beginning of the year, listing works which the landlord anticipates may need doing in the course of the year. The regulations only require a description of the works “in general terms”.

Whilst the tenant must respond to that notice within a specified period, so far as I am aware, the landlord is not obliged to obtain all estimates for the works at the same time, nor within a specific period. Therefore, the landlord can wait until the works need doing before continuing the consultation process by obtaining estimates and so on.

So, what hope do we have for a return to the now, comparatively, good old days of Martin v Maryland? Any change will need to arise through a revisit at Court of Appeal level. This could leave us waiting for 18 months and having changed all our processes and procedures we get to return to the old system. One might hope for a pragmatic approach form LVTs, but I sense from others that this may not be forthcoming.  Agents may decide to put as many budgets through to LVTs for pre approval as necessary and swamp the system into submission. (I dont think this will happen - we are just not militant enough!) The DCLG may decide to review the thresholds which would at least reduce the number of consultations. 

Suffice to say I do not have a practical answer as to how we should be behaving yet, but I urge caution - a comprehensive approach will best serve your clients at this time. Sadly I do not believe that leaseholders are well served by continously revisiting accepted norms in what is already a complex area. Some clarification would be welcomed and I do think that, sooner or later, this case will lead to a revisit of the whole clunky and complex S.20 requirements. That must be a good thing. 

In the meanwhile do let me know if you do have a sensible solution won't you?!

Upper Tribunal slaps LVT repeatedly until it behaves

It has long been a concern of mine that the LVT does, from time to time, overstep its authority and is occasionally inconsistent in its approach. In particular my concerns have related to hearings where the panel have included matters not raised by either party. The LVT has no mandate to exceed its remit but, in my experience and anecdotally from other agents it regularly does, by either raising additional matters (outside of those raised by the parties) or pointing the applicant elsewhere. Of course, most landlords do not have the time or the resources to appeal these decisions and consequently the LVT has acted with a degree of impunity.


I am pleased to report however that time has been called on some of these practices and a series of Upper Tribunal (UT) decisions have clarified, in no uncertain terms, the limitation in the scope of what can be dealt with without both parties having the opportunity to comment, defend or put right.

There is an important principal at stake here. All parties have the opportunity to seek advice in advance of any action. It is not for the LVT to steer the applicant nor to assist their position - although I accept that the panel may direct them. In my view there is some bias, but no one should be surprised here. Landlords can turn up armed with barristers and deep pockets, but this is principally a forum for leaseholders to object to the activities of landlords and/or their agents and rightly they should be given direction if required. However courts and tribunals are limited to dealing with the matters in hand and should not feel free to open other avenues of investigation.

I have also recently seen a case where the manager had negotiated a new contract with a reduced management fee on the previous year. We might regard this as a normal commercial activity given the competitiveness of the market but an LVT panel has subsequently taken that to mean that previous year's fees must have been too high and reduced those to the same level. This is an absurd notion that puts all agents at risk of being penalised simply for negotiating in an effort to retain work. In the one-year contract environment in which we operate, who is to say that the fee wasn't correct in year one but reduced in later years due to familiarity and countless other commercial factors? The LVT should not be interfering in the market.

In another instance the LVT has decided that it would hear a case, despite there already being a county court judgement in the matter. In another the managing agent was made the respondent despite it clearly being the landlord. The list goes on, and all agents have stories of inconsistency, unfairness and of downright stupidity when it comes to dealing with this tribunal.

I expect more slappings to follow but I am also heartened by some of the cases I have read very recently. These included a recent case where the Chairman was at pains to point out the limitations of the LVTs jurisdiction and that, whilst the Act allows for discretion to be used, this is only where it is just and equitable to do so in all circumstances. In this instance the Applicants were reminded that the LVT could only deal with matters of payability and reasonableness under S.27A.

If you are interested in reading the pertinent UT cases (there are some good analyses online) they are as follows:

Redrow Regeneration (Barking) Ltd v Edwards - Lease terms are law, plain and simple, it is not for the developer to have to prove their right to collect charges.

Wales and West Housing Association v Paine - LVT reduced management fees. Landlord appealed, the UT held that this was not the matter raised.

Birmingham City Council V Keddie and Hill - LVT decided windows should not have been replaced at all. Again on appeal this was not deemed the matter that was raised.

Crosspite v Sachdev - LVT questioned payability of subletting fees. Overruled by UT who stated that payability was not the question, it was the amount that was disputed.



An excellent blog here:

http://nearlylegal.co.uk/blog/2012/10/how-many-times-to-i-have-to-tell-you/

And here:

http://www.lawandlease.co.uk/2012/10/28/1-redrow-regeneration-barking-ltd-2-barking-central-management-company-no2-ltd-v-1-ryan-edwards-2-adewale-anibaba-3-planimir-kostov-petkov-4-david-gill-2012-ukut-373-lc/