May 23, 2017

CMA: easier right to manage, re-tendering property management when residents choose, changes to major works rules … but no statutory regulation of block managers

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… And CMA may re-examine sector if no improvements

Below is the press release of the Competition and Markets Authority, whose report into property management was released today at 11am.

LKP / Carlex will be providing a full analysis later.

Jim Fitzpatrick, LKP patron and Labour MP for Poplar and Limehouse said:

“The CMA report represents the sector’s last chance to regulate itself. While the CMA accepts a number of agents on the sector do a good job, the report has highlighted some of the poorer practices.”

The full report can be read here:

https://www.gov.uk/cma-cases/residential-property-management-services

The Competition and Markets Authority (CMA) consulted extensively with consumer groups, leaseholders, the industry and government during the course of its study. It found that overall, while the market works well for many leaseholders, some have experienced significant problems in a sector where total annual service charges are estimated at £2.5 to £3.5 billion.

The issues identified include leaseholder frustration at a lack of control over the appointment of property managers, high charges for services arranged by property managers or poor standards of service, leaseholders suffering unexpected costs and being charged for works they consider unnecessary, poor communication and transparency between property managers and leaseholders, and difficulties in getting redress. The CMA has also identified some concerns about prospective purchasers’ understanding of leasehold, and their obligations and service charge liabilities for leasehold flats.

In light of its findings and on-going developments in the market, the CMA has made a number of detailed recommendations aimed at improving:

prospective purchasers’ awareness of leaseholders’ obligations
disclosure, transparency and communication between property managers and leaseholders
leaseholders’ access to appropriate forms of redress.
These recommendations will make leaseholders better informed about the responsibilities and performance of property managers, while greater transparency will increase pressures on property managers and landlords to take account of leaseholder interests. They will also provide improved mechanisms for dispute resolution, should issues arise that require action.

The CMA is also recommending changes to legislation affecting rights of consultation relating to major works, as well as supplementing the existing Right to Manage legislation to enable leaseholders, where there is a majority in favour, to require the landlord to re-tender the property management of their block.

The CMA is not recommending that property managers should be subject to more formal regulation by government. For many the market works reasonably well, and satisfaction levels are particularly high where leaseholders have exercised their Right to Manage. Existing legislation provides significant protections for many leaseholders, and the sector has engaged constructively with the CMA during the course of its study, recognising that there are improvements to be made and showing a willingness to address the issues that have been identified.

Rachel Merelie, the Senior Director at the CMA who led the study, said:

Many property managers provide a good service to leaseholders, but protection against the worst failures by property managers is vital because when problems do occur they have a major impact on leaseholders.

We are pleased that within the sector there is a consensus that change is needed and a genuine willingness to be part of that change. This is evidenced by the new and revised self-regulatory codes of practice and the enthusiasm of key players, including property managers, to improve how this market functions.

The CMA intends to work with the sector and government to implement its recommendations. However, should these not prove to be effective in addressing the issues identified, the CMA may choose to re-examine the market in due course.

Comments

  1. Michael Epstein says:

    In general terms there is much to commend the CMA report.
    In particular, i like the idea of making it easier to compel the freeholder to change the managing agent if a majority of residents make such a demand.
    One of the issues identified as being of concern to a RTM action is that of obtaining other leaseholders details from the freeholder/managing agent. This should be made compulsory, or if not provided it should be assumed that leaseholder’s vote is not counted. If in a development of 100 flats, 20 are absentee leaseholders and their details are not provided than 41 votes would be required for a RTM and not 51.
    The CMA has noted that trade bodies such as ARMA, ARHM and RICS do not have statutory powers.
    I feel further investigation is required of these bodies, as in certain instances there has been a clear conflict of interests between good governance and the financial dependence on membership in maintaining the trade bodies.
    I am pleased the CMA have also noted the conflicts of interest over insurance placement.

  2. Michael,
    The CMA was an offshoot of the disgraced OFT, who the Government underfunded and so they only partially Investigated the Cirrus/Peverel Price Fixing Scams leaving many potential developments that were also Price Fixed without any recourse for Compensation other than the Courts. I note 3 names mentioned as undertaking the CMA Report were previously working for the OFT. We know that the SFO was also asked to investigate the Price Fixing, but had decided before any investigation was undertaken, they passed on the complaints to the OFT, as the level of Fraud was not considered serious enough?

    So the OFT spent £5,000.00 and 4 years investigating and fined three stooge contractors £57,000.00 of which they collected £1,777.00. What Value for Money???

    What was anybody expecting from these very poor QUANGOS?

    The Scope of the CMA Investigation was as follows regarding:- leaseholders’ perceptions of value for money and the Quality of services, they receive.

    Q. Whether leaseholders have sufficient understanding of their rights and obligations with regard to the management of property:-
    A. The understanding of the leaseholders rights and obligations will never be sufficient until the Estate Agents and Solicitors provide proper information to the new purchasers?

    Q. Whether leaseholders have sufficient influence on decisions taken by freeholders in relation to the appointment of property managers, and subsequently in the supply of RPMS.
    A. We have no influence at all on the decisions taken by freeholders in the relation to appointed property managers, when MA such as Peverel Management Services Ltd have been given a so called contract for life, which is against the very principle of Markets & Competition.

    Q. Whether property managers and freeholders have the same interests as leaseholders in areas such as costs of maintenance work and/or buildings’ insurance and how such decisions are made.
    A. How can property managers and freeholders have the same interest as leaseholders, when the cost of maintenance is carried out by a Subsidiary who Price Fixes to win the contract, then gets paid again by the Stooge Contractor who Sub-Contracts the works for far less money. The same as the commissions when Peverel Retirement use a Subsidiary Company, Kingsborough Insurance to act as a go between, who brings in Oval Brokers, who pay excessive commissions to their Sister Company (in the past over 40% between them) who then passes the Commissions on to the Managing Agent, Peverel Management Services Ltd as stated by Chris Owens, Director of Customer Services?

    Q. Whether property managers’ and freeholders’ choice of contractors and services may be influenced by any links with associated companies and the availability of commissions.
    A. The choice of contractors and service was set up to use in-house Subsidiary Companies, by purchasing CarelineUK, Cirrus Communications, Kingsborough Insurance and then being able to receive other payments as they keep Contractors who pay them retainers for using their services and products, or add on charges from Utility Companies?

    Q. How leaseholders’ rights to self-management work in practice; for example, whether there are difficulties in coordinating leaseholders to work collaboratively, whether self-management gives good outcomes, and whether any problems may be more marked in some areas, such as for retirement properties.
    A. Our late Regional Manager worked tirelessly to prevent us going down the RTM route, telling porkies along the way, which were later found to be incorrect. He was supposed to help me set up a Residents Association but did nothing, constructively.

    Q. Switching levels’ and more generally whether competition between property managers is working well.
    A. Why would Switching Levels ever be considered as the Golden Goose is not given to the SERVANTS/PEASANTS.

    Q. The current and proposed redress and complaint schemes available to leaseholders and any problems with those schemes, including the standard of customer service.
    A. How do these benefit leaseholders, having been through a Level 1. & 2. Complaints Procedure with Chris Owens Director of Customer Services for Peverel Property Management Ltd was like the Master & Servant Roll in Upstairs Downstairs where we as leaseholders are the Servants.

  3. FH and agent enter into 3 year agreement. Leaseholders just don’t like the agents and want a change-in the absence of a lawful reason( or one that needs a court determination) to terminate a contract, they get a new agent and pay the old agents fees for 18 months. Or the legal fees of fighting the contract dispute. LOL

    CMA fundamentally don’t get it and thats why what is wanted and needed wont be what flat owners get. Just like agents wanting stat regulation. And not getting it. All it needs is an SI or two to amend the 79 Act…..

  4. Chas
    Frankly, the sector can relax. The good guys are already doing this and more but the bad guys aren’t trembling in their boots. Changes means costs to pass on!
    Q1 Until so many owners stop wilfully insisting, to their own detriment, that it be “simples”, and accept that they need a certain level of understanding, abuses will continue. No matter what they are told they have to read it.
    Q2 relates to q1, and the easiest answer is now a qualifying work or LTA under section 20 that includes services like cirrus and technical services.

    Q 3 That is only one aspect. In the big picture it is resistance to spending by leaseholders and some FH and MA who want to keep SC low to look good, storing up problems for later. Understanding is key as is building up trust and a track record as is transparency, little of which is going to be achieved by the CMA report.
    Q4 . Well du’h! need they have asked?
    Q5. Broadly speaking resident control of the building is a good thing they have their own interests at the forefront. The worry based on far too many years practice is similar abuses, based on actual examples ” my mates a builder….” “oh if I place the block building insurance with you, I get free contents insurance for my flat, ok” etc and that short term or personal interests “ my wife lost her job so I’ll argue we postpone the new roof” or “lets use the entire reserve fund on our block(2 directors) so we can sell up” and the “diktat of the board” who freely issued rules and regulations without the lease allowing them to do so “ We’ll have no subletting going on here!”. The individual leaseholder or even a group face the same problems as with any freeholder, with the added problem of the hate and gossip campaigns “for the troublemakers”. CMA do little to begin to address these problems.
    No one can expect any agent to actively assist you in applying for RTM or RTE, if they do they want rid of you!
    Q6 Switching is pie in the sky- until residents can, under q2 get to the list of duties, and hold them to account, switching is just fumbling on the dark.

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