The MD of a large block management company, recently publicly supported the need for improved professional standards and suggested this can best be accomplished through size. The explanation was that size equals professionalism and small meant amateur.
Whilst I would strongly disagree with the main thrust of this argument there are some key points to bear in mind;
How open is the market for block management?
Whilst anyone can purport to be a block management company, if you follow the many articles requesting further licensing in the industry, when you take a hard look at the entry requirements this seems more increasingly a demand for protectionism. Essentially, the standard expected of most agents is to have corporate membership of ARMA, in practice this requires two years of trading in adherence client accounting, physical premises, a good working knowledge of the industry and an accountant’s report to recognise your control of Section 42 Landlord & Tenant Act 1987. Unless you already have an extremely good reputation in the market, then without this recognised standards you are unlikely to win contracts.
What are the barriers to entry?
In terms of the barriers, as a minimum you will need a marketing leading accounting package and a client monies banking facility to work with the system. Minimum cost of software implementation would be around £20,000, with training and resources bringing this closer to £35-40K. To then have the sophisticated banking package to complement your IT system usually requires ARMA or RICS membership. Add in the need to have a website, the cost of marketing and dedicated resources to develop this venture, then the wish to enter this market is not for the faint hearted.
Does the consumer have a choice?
As for the customer, how do they choose an agent?
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through the internet via Google, this is mostly dominated by large players paying high fees for sponsored ads.
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By the trade magazines, again dominated by companies with the biggest budgets.
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Through the ARMA website? This appears to be the most meritocratic way in which to do so, but again you have to be a member of the club. Don’t get me wrong, I don’t think the entry standards are set too high, however, the two year trading standard prevents new entrants to the market.
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So if you are to operate effectively as a new entrant, the cost for joining the club is a £100k cost for your first year without profits, so what does this mean for the consumer?
In short, a select group of the same companies from whom you can choose.
Does big mean better, well if you look at other service sectors such as banking and retailing then not necessarily so. Large means conformity to process and a uniform service. My advice to the RMCs is if you want bespoke, take your time, do your own research, choose an independent and enjoy the benefits.
Tony Hymers is Head of Property Management at MJS Property Management.
