When is a Homeowner not a Homeowner?

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

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

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

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

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

PRS - Is Spring in the Air?

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

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

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

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

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

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

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

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

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

My Predictions for the Leasehold Management Sector 2014

Now in its legendary third year!

It is getting more difficult not to predict the stark staring obvious so forgive me if it all seems a little err... meh!

Major works due

1. I will lose 10 kilos. Yes, I've said it before, but this time....
2. The first ARMA Q accredited agents will discover a distinct competitive advantage. Seems to me that it is pretty self evident that customers will want the standards set out in the Consumer Charter and will want those agents included in their re-tenders.
3. ARMA membership went through 300 corporate members as I predicted last year. I think 350 is not an unreasonable expectation for this year - especially given role out of ARMA Q and the OFT's scrutiny of the industry during the coming year.
4. A good number of buildings, especially tall ones built in the last 15 years, will find that the costs of their first scheduled major external refurbishments are massively under budgeted. This is an issue that is looming for the industry as the developments of the last boom come towards their first truly major costs. Short term savings of previous years will start to cost a later generation of owners significantly.
5. The real cost of management will continue to rise as a consequence of increasing energy costs and materials costs across the board. 
6. Syndicated purchasing, procurement expertise and collective negotiation will become important tools for residents and agents - despite the difficulties afforded by a 'one year contract' world. Expect to see lots of S.20 notices.
7. Specialist skills and expertise in asset management with a residential angle will become increasingly important  as residential build to rent schemes start to appear. Again, procurement and cost control expertise will be paramount.
8. There will be continued downward pressure on management fees. Agents will continue to supplement management with letting, resales and other associated services. No one really believes that £100 - £150 per unit, pro rata, represents a satisfactory fee for leasehold block management.
9. The OFT investigation into residential leasehold management will find that many of the issues that have historically concerned consumer groups are being weeded out and that their is genuine impetus to continue to improve services across the sector.
10. The OFT will not find the same conclusions as in Scotland which was a.) not leasehold, b.) had no ombudsman and c.) had no tribunal system. 
11. New Scottish regulatory requirements will lead to a new group of members for the IRPM.
12. Without apology, (although I was wrong) this one is lifted directly from 2013s' predictions. I anticipate more partnership and collaboration amongst agents, as specialities and regional strengths make working together more likely to 'delight' clients than struggling to do it alone. This opportunity seems to have been taken in many other industries in recent times and I think it will work well in property management.
13. In answer to your question. No, I cannot predict the outcome of the appeal in Phillips and Goddard v Francis. It is also a complete coincidence that this is point 13.
14. Until there is a universal form of regulation there will be yet more new entries to the market - since it continues to have no real barriers and an almost uniquely advantageous way of collecting its fees - in advance, in accordance with the lease.
15. Scrutiny will fall upon registered social landlords and local authorities who manage a significant proportion of leasehold property stock and some of whom have been guilty of hair raising errors of judgement in the last couple of years. They must be included in the scope of the OFT investigation.
16. I might be imagining it, but the quality of judgements from the First-tier Tribunal (Property Chamber) seem to be excellent. I hope this is a continuing trend.
17. It really is time to look at rent charges on freehold houses. This area is growing rapidly and remains outside of service charge legislation. Again, I hope the OFT takes note. 
18. New blood. Good to see some new faces coming in to the industry and challenging the norms. I expect that to be theme this year.

Another difficult year ahead, but one which I believe continues to present opportunities to good managing agents who are willing to adapt to new markets and new expectations. There is no doubt that this will involve (if it has not already) some investment in processes and procedures to meet ARMA Q standards and customer and client expectations. A rising housing market is welcomed too since it reduces pressure on our customers and makes our clients more confident.

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.

Good Advice for Consumers of Property Management Services

Recently a flat that I own and sublet has been transferred to another agent by the directors of the RMC. The first knowledge I had of this was on being informed by the new agent. The directors of the RMC had not undertaken any consultation with their members. In fact they had (at the date of writing) failed to advise me of their names, how they were qualified and why they are changing agents.

I do know on the grapevine that they are owners of multiple units in the block and I have assumed therefore that their motivation is entirely based on maximising short term returns. The new agent is cheap, cheap, cheap. The new agent is not affilliated with ARMA or the RICS. The new agent is not accredited for any compliance or health and safety activities. The new agent is (unusually when such changes are made) not based locally. The directors and I are clearly not aligned.  I will ask for a copy of the contract and give them an opportunity to perform. Watch this space!

Sorry for the laboured introduction but other people are taking decisions about your property all the time. Why, when this is often your biggest investment, would you allow that to happen? You wouldn't tolerate it with your car... I feel stupid having let it get to this stage.

It is important to stay informed and get involved and take action when necessary. Residents' groups, in whatever form always need interested volunteers. A watching eye over your agent, landlord, developer and other resident directors tends, in my experience, to force an alignment of views. After all, most of us want clean, safe and tidy common areas since this clearly adds value. It's just that we might all have different ideas about how to get there and at what cost. Having a structured and ongoing conversation with all parties generally makes for consensus and partnership - old fashioned concepts I know - but firing off angry emails is a modern curse, not born of common sense, proportion and cooperation.

So, get involved, understand the issues, be constructive and collaborative and, most of all, don't let it subsume your every waking moment. As we all know, obsession leads to irrationality.

IRPM remains key to raising standards

It is almost always true that in residential property management the Property Manager is central to everything that happens. The Manager may be widely supported by a range of specialists and experts, consultants and partial advisors, but it is he or she that is left with the crucial decisions that can breathe life into schemes or drag them down.

Amazingly then it was not until the creation of the IRPM in 2002 that a specialist, professional, portable, qualification requiring study and examination existed. Most managers in the leasehold sector came to it, as I did, quite by accident. I came from the social housing sector attracted by better money (I am very shallow), others I met came from general practice and many from administrative roles. All of us felt like the slightly dodgy, slightly smelly and not very good looking distant relatives of chartered surveyors. They had business to business relationships and could add up big numbers in big red books. We, on the other hand, had desks in a windowless back room and the tea lady never came by.

One thing we all knew though was that we were essential to the very fabric of our towns and cities. Frankly lots of buildings would have fallen into disrepair and much worse had we not been there. And what, I ask, is more important than our homes?

Recognition of the importance of block management only really came about because a lack of it had attracted rogues who saw it as a sufficiently murky arena to mess around in. What followed were years of unusually badly drafted acts and an urgent need for professionalisation.

In just ten years IRPM has attracted nearly 3000 individuals to membership and to sitting the part 1 and 2 exams that confer associate and member status. This has raised the quality of management skills to sufficient level that, along with experience, those who have reached member level can achieve direct entry to associate level RICS. The next step, as various people have reminded me on Twitter today, is for a full residential property management route to MRICS.

Job adverts in our sector now routinely call for the qualification and the IRPM works closely not only with RICS and CIH but with numerous other professional organisations. More importantly the IRPM is creating a real career path attractive to both graduates and apprentices that will widen the pool of talent available to employers and raise the bar across the board.

The way that we build communities and therefore our living spaces is changing. Placemaking, community involvement and people focussed design make the role of the property manager ever more important and our star continues to rise. I expect nothing less than a future in which residential property management is regarded as a 'proper' profession and attracts the very best talent. After all, how many can genuinely say that their job is to provide for the security, safety, warmth and well being of large communities? IRPM will remain key to this process and will continue to raise the standards in this industry. Mix this with ARMA's fledgling regulatory regime and we will have the best management standards in Europe.

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.

Build to Rent Developments still need Managing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

There are several reasons why we believe this:

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

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

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

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

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

                                                   

Why Managing Agents must be a part of Placemaking strategy.

What is Placemaking?

Placemaking is not a new term, it has been around for many years, but it is being used more widely as regeneration schemes and very large estate schemes have come to the fore in recent years. Placemaking puts the community at the heart of a scheme and requires the collaboration of all stakeholders to create places that people want to live in, contribute to and self govern. Principally it is the combining of a wide range of knowledge and skills to make better places and environments in which to live and work.

Why is it important?

In the UK there remains a significant housing shortage and that is driving big regeneration projects. In order to ensure their success, past mistakes need to be avoided - density, lack of infrastructure, poor management planning, a lack of resident engagement, have all resulted in failed developments over many years. Seeking the involvement and cooperation of communities from the outset has proved valuable in delivering the right solution and one that is widely bought in to. 

Long term management planning is essential to ensure safety, security and economic viability of large complex developments. All parties should be certain that fairness and the balanced allocation of costs is at the centre of the management plan. Developments need to be connected to services and the wider community and to be alive to local culture and tradition. All of this is more easily acheived when all parties are involved at the outset.

Who does it involve?

Placemaking involves all stakeholders including the local community, the new community, local authorities, planners, architects, developers, property managers, asset managers, estate agents and lawyers. Managing Agents have an important role in assisting planners and architects to design viable long term solutions that allow the community to self regulate their environment. All large communities need facilities and central meeting areas, open space and play areas. Managing agents have real experience of what really works and what does not and, in particular, what will stand the test of time economically.

What does it change?

Placemaking is changing the way that we will design, interact and share space. Creation of real pride and sense of belonging is important in ensuring that schemes will stand the test of time, generate best value for investors and demand for homes. Public open spaces, the provision of services, transportation, running costs, cyclical costs, security and safety are all important considerations from the outset. Other matters such as traffic restrictions, cycle paths, central squares, secure designs, kitchen windows overlooking play areas, recycling and sustainability are all part of ensuring places remain desirable in the long term.

The key components and how does a managing agent play a part?

Transparency, collaborative management styles, partnership with developers and the community are key factors. Managers must demonstrate real expertise, availability and willingness to share and participate in community engagement and should be the binding central factor around communications with all parties.

Agents need to demonstrate measureable service delivery that is enshrined in contractual terms and where possible rewarding success and penalising failure. A detailed community management plan is essential and needs to be provided and explained in detail and amended as and when necessary to meet the needs of those living and working on the scheme. This plan needs to allow the community to have an important place in the decision making process and to allow their vision to prevail. Managers should facilitate community involvement, provide advice and information and where necessary training to ensure that communities can make the right decisions.

Summary

Successful placemaking enhances environments, improves values and future investment in the locality and it never ends. Managing agents are long term community partners in this process and will be involved long after developers and other experts have moved on. It is important therefore that they are included in the early stage consultation and design and selected in consultation with stakeholders and not as an afterthought.

It is up to agents to maintain collaboration between the communities long into the future, ensuring that the physical environment remains at its best and that people choose happily to live within. That is no easy task and one for which the residential management sector needs to adapt to rapidly if it is to keep pace with the social sector.

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

It's not Rocket Science! A Guide to preparing for Meetings for Managing Agents.

I recently had an interesting experience - I attended a Residents' Association meeting as a customer/leaseholder for the first time ever and, frankly, I cannot believe I have never done this before. It always seemed a bit like a busman's holiday, but then I might have learnt a great deal.

At an evening meeting some 30 residents sat in front of a panel made up of a very hard working Tenants' Association chair and secretary, the client's site manager, the managing agent's site manager, the property manager and his boss, the regional manager who had travelled a long distance and were staying overnight. The development is mixed use, listed, complex, as yet unfinished and substantial in terms of size and costs.

So, what did I learn? Well, it was not a first to hear a manager wholeheartedly blaming their client for delays to budgets and accounts and, as often is the case, the agent was entirely honest in doing so. Just, perhaps, not in front of the client's representative(!). However, that did not mean that he could not have discussed the draft budget and previous years (as yet unsigned) accounts in some detail. But, as far as I could ascertain, he had not thought to bring copies of these important documents. The budget is 2 months overdue, the accounts 8 months overdue. The agent is in serious breach of all sorts of very clear rules and regulations. Blaming the client does not change this.

Major works are due this year but he had no details other than that they would be serving S.20 notices soon for external redecoration. I asked if it was to be phased but his answer was, 'we'll have to see how much it is first'. It was clear he didn't really know what was being proposed in any detail.

Questions relating to sub letting and pets were asked. But since no one had thought to bring a lease along the questions could not be answered with any real clarity. Nor could the question as to why they would not accept monthly standing orders be answered. The correct answer is because the lease only allows for quarterly payments in advance. No reason why you shouldn't pay one quarter in advance and then monthly...

As a customer I was left fuming because I left the meeting no better informed than when I arrived. I had read the lease, I had with me copies of previous accounts and the last budget. I had driven 3 and a half hours to get to the meeting and had to leave at 5.30 the following morning. I would dearly like to think that my company do not treat our customers this way. I intend to find out by doing some mystery shopping excercises in the next few months. So be warned - as a 'customer' I felt very badly treated. A little knowledge is a powerful thing. It felt as if there was an assumption of general ignorance that would allow for being unprepared.

The meeting should really have been cancelled.

So here is my advice to managers presenting to Residents' Associations or to their Client. It is not particularly complicated:

1. READ THE LEASE
2. READ THE LEASE AGAIN AND UNDERSTAND IT.
3. Take a copy of THE LEASE with you to the meeting. Derrrr!
4. Take a copy of the BUDGET along - whether or not it is finalised. It is my money you are requesting - the least I can have is a chat about it.
5. A copy of the ACCOUNTS if they are due. Even if they are draft.
6. Bring a SCHEDULE OF ARREARS. Know what the total aged debt is and how many people you are proposing to take action against. Is there an issue?
7. If you are planning works, understand what is being proposed and how the costs are likely to be met.
8. Understand what is on residents' minds. Quite plainly (in this instance) the issue of dogs, parking, allocation of estate costs and subletting come up at every meeting. Have a planned response.
9. Speak to everyone involved in running the development. Who is deciding what works are due? Who knows what is being done to install LED lighting for example? Is all compliance up to date? Tell your customers what you have been doing to mitigate costs. You owe that to them at the very least.
10. Discuss how you are taking a systematic approach to dealing with letting agents.
11. PREPARE PROPERLY!

All of this will save you lots of time later and time is important in a managers very busy life.

I am mystified as to how managers can go to a meeting without basic financials and a lease. I would never have done this - but then I had a file for every property with the relevant data easily to hand. Perhaps it is technology that is letting us down? I know that is partly to blame for the lowering of all sorts of standards. But most importantly, please don't assume that your audience are uninformed - it is arrogant beyond belief.

My Rules of Modern Communication

Of all the ways available for us to communicate, face to face is clearly outright winner.  There are so many signals sent when you can see someone that there is a whole separate dialogue going on that tells us all instinctively much that we need to know. This is part of being human, and yet we will go a long way to avoid it if there is a quicker, easier way that avoids direct contact.

A telephone call is good. Did you know you can only hear 10% of a person's real voice on the phone? Our brains can fill in the gap in knowledge but it is not competition for face to face and so comes a distant second.

Then there is a letter. Handwritten always used to be the best, care had to be taken with the construction and tidiness - it could not be rushed. A good writer can convey a great deal. Sadly this skill is diminishing. Often a hand written letter these days is an precursor to bad news - no longer simply an effective and enjoyable form of communication.

Then there is email. Where do I start? Email is so immediate, convenient and accesible that it has become nothing more than a shortcut tool for busy people with complex lives. A tool that allows one to avoid real contact and indeed, sometimes, reality. I don't like email, but I always adopt technology and have been emailing for as long as it has been possible. But let's face it, 90% of the real message is lost in emails and, because they are ubiquitous, senders often fail to read them back carefully and consider the message they wish to convey.

In easy last place is texting. I use it, but no one will ever persuade me that it provides anything other than convenience. Most of the time it is used to avoid proper communication.

Sadly, both personally and in business there is no way of avoiding these short form types of communication and both business and customers are worse off for it.

I get a lot of emails, most of them want to sell me a service. Here are my rules to help you succeed:

1. A personalised approach is always best. Follow up a written and interesting letter/email with a call. Do some research first though. Am I really the right person to talk to? For example I don't approve contractors, I don't place orders, I don't buy office supplies etc. etc. Find out who the right person is.

2. Don't send me standard generic emails. I delete them. You got my name off a list. I didn't ask you to contact me.

3. Don't just add my name by way of personalisation. Personalise it properly and there is a chance I will read it.

4. Just because I have LinkedIn with you it does not necessarily mean I want to do business with you. If I do I will almost certainly let you know.

5. Cold calling does not work at all.

6. Pretending I know you does not work. Being extra 'chummy' really gets my goat.

7. Business is a two way street. We are more likely to have a meaningful conversation if you have something I want and vice versa.

8. No, I do not want a table for ten at a sporting event in 8 months time. If I do I will hunt around for the best price. Usually cheaper than yours.

If you don't want to sell me something then pick the phone up to me or email me with a clear summary of the opportunity or the issue. I always read my important emails.

1. However do not expect me to respond within 10 minutes. 4-5 working days is not unrealistic, but it depends on many factors.

2. If it is an emergency - am I the right person at this stage?

3. Be courteous. I am always so.

4. If you have never met me I cannot be your enemy. Step back and tell me why you are frustrated and/or angry. I will always try to help if I can.

5. Don't withhold your number. I am naturally suspicious.

6. Don't ask your assistant to set up a call unless you are a.) Royalty, b.) almost as important.

7. Just because my 'out of hours' is not on, it doesn't mean I am not on holiday. I always keep an eye on things and pass on important stuff to others if I am away.

8. If you email me please spell check your communication. Then sense check it. Then click the correct 'send' button. It happens, it can be embarrassing, or worse.

If you get a glimmer of interest from me, I suggest you buy me coffee somewhere convenient or come to my office. If you want to sell me something then you should come to me.

Call me old fashioned but I like to meet people, assess the cut of their jib, look into their eyes. I've got it wrong once or twice but mostly my instinct is right. The best people to do business with have sometimes been those with the least likely proposition. Indeed, sometimes a problem has been turned into an opportunity for both of us.

The good news is that I think we are starting to relearn communication skills, particularly written. As you will have gleaned, I like blogging and there are many thousands of brilliant writers out there now using this technology to get their views or interests out to a wider audience. Twitter may not add to written quality but it does throw up links to the most interesting and widely varied participants in blogging - across the globe. I am a convert to the way that technology is shrinking the world and outing the fanatics to the ridicule of the majority.

However, those are big themes. I would just like you to pick up the phone and try and get a meeting. Even if it is to complain about my blogging. Old fashioned I know, but it sometimes works!

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?!