Leasehold reform and Build to Rent will take centre stage across the sector this year

Property management hasn’t always been considered the most exciting part of the residential sector. It is often associated with routine work: changing lightbulbs; tending to communal gardens; managing the car park.

We have always known that our role is about much more than this. While we often work in the background, what we do is fundamentally important, certainly to the residents of the 185,000 homes across the UK that we oversee.

The changing role of property management is likely to be brought into sharper focus this year as government continues to reform the residential sector – and in particular the leasehold system. Following some high profile failings, leasehold is under pressure. Consumers understandably want more involvement and control in decisions about their home, greater transparency about what happens to their money and stronger rights of redress when things go wrong.

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The government plans to ban the sale of new leasehold houses and is consulting on the case for further reforms, including how to strengthen commonhold. We support much of this programme. Residents’ control of leasehold sites can be hugely beneficial, but it can place onerous responsibilities on officers of resident management companies, such as significant obligations with regard to fire safety.

We believe we can and should take a more ambitious approach than to just distil the debate into a simple leasehold vs commonhold choice. There is an opportunity for a ‘third way’ that combines the very best of both systems, with professional building oversight backed by transparency and strong consumer choice.

Many of the desired outcomes will be achieved by improving the system, including property management.

We support government proposals to introduce mandatory minimum standards and a regulator that has real clout, as well as a requirement for managing agents to have professional qualifications. This should deliver increased transparency by agents, especially on financial matters leading to better information for leaseholders and commonholders on their rights and responsibilities.

Reform should also promote greater choice, by considering new systems that would help residents to influence their managing agent and to exercise fair, democratic choice about its work.

The industry will welcome the right kind of reform and regulation that aims to root out rogue landlords and poor agents, while offering incentives to innovate or adopt best practice.

While the best managing agents are already self-regulating, this should now be made universal.

Challenges facing Build to Rent

Modern residential buildings are often denser, taller and more complex than traditional residential developments. Good property management is therefore becoming more important to residents’ enjoyment of their home and developers’ confidence in building.

This is clearest in the UK’s emerging Build to Rent (BTR) market, where £32.7bn of institutional equity will target the UK’s private rented sector over the next five years.

Relatively few BTR schemes are in operation yet and there are several barriers to investment. The first is lack of scale – there is little institutional-grade product of the size funds are looking for.

Secondly, BTR is a unique, customer-facing product, so whereas investors in traditional alternative assets can trust that their hotel and student accommodation properties are being managed by seasoned operators this is less clear in BTR.

A third barrier to investment is property managers’ lack of capacity. Investors rely on them to market, let and manage their units but many new entrants to the BTR sector lack the scale to carry out these functions across multiple schemes in different locations, while ensuring consistently high standards of customer service.

Investors need partners that can do the basics to a high standard and at a large scale. With investment flowing into the market, the supply chain needs to be ready. Ultimately, BTR relies on high occupancy and low churn to create a strong yield. So the property management industry must step up and play its part in helping meet demand.

More than ever, property managers need to provide a point of connection between those who develop buildings and those who occupy them.

Nigel Howell, Chief Executive at FirstPort Limited

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