CMA study identifies areas of concern in property management sector

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.

The CMA has made a number of recommendations aimed at improving: prospective purchasers’ awareness of leaseholders’ obligations; disclosure, transparency and communication between property managers and leaseholders, and leaseholders’ access to appropriate forms of redress.

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.

However, the CMA is not recommending that property managers should be subject to more formal regulation by government.

Rachel Merelie, the Senior Director at the CMA who led the study, said: “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, it may choose to re-examine the market in due course.

Commenting on the CMA’s findings, Chairman of the Association of Residential Managing Agents (ARMA), Martin Perry said: “While we welcome the CMA’s acknowledgment that many property managers provide a good service to leaseholders, it is clear from their findings that there is room for improvement in the way that the industry operates.

“ARMA is on the case. From next year, all our members will have to be accredited to ARMA-Q, which enforces best practice. We want our ARMA logo to be the badge of excellence – the natural choice for consumers. We are ready to work with the CMA, government and other residential property interests, to achieve the improvements that are needed.”

The British Property Federation (BPF) welcomed the report, saying that while the industry is making progress, it is hopeful the findings will be a catalyst for improved communication and partnership.

Ian Fletcher, Director of Policy (Real Estate), said: “The CMA has identified the positive steps already being taken by the sector to self-regulate and we are confident that ARMA-Q will codify the high standards the industry should be adhering to. ARMA-Q, however, will only help to widen the gap between those who pursue good standards and those who don’t and we would have liked to have seen some statutory underpinning of the industry’s efforts to help level the playing field.

“The suggested legislative changes to s20 consultations are very welcome, and with the Phillips vs Francis case now resolved, it seems an appropriate time to revisit this issue given the negative impact of the current limits identified by the CMA for all involved.

“The devil will be in the detail of the CMA’s proposed legislative change to force the landlord to re-tender for a new property management company in certain circumstances, and we will want to engage fully and positively in working that up so as to avoid any unforeseen consequences.”

James Lavery, Head of Marketing at Qube Global Software, a supplier of property management software in the UK, added: “It’s encouraging to hear that the CMA recognises that overall the market works well for many leaseholders and formal government regulation of the sector is not required.

“Residential property managers are already making considerable headway in tackling standards through the introduction of ARMA-Q this year, enforcing a self regulatory Consumer Charter and professional standards for ARMA members. We have already been supporting this and will continue to help our customers and the industry with improvements in standards.”