Raising the Bar in Property Management

In conjunction with News on the Block, property management specialists Brady Solicitors commissioned independent market researchers to undertake an in-depth industry survey. 109 property managers took part during November 2012 and Brady Solicitors’ MD Clare Brady shares with you some of the research highlights.

‘WHY WOULD WE NOT WANT TO RAISE STANDARDS?’
Researchers reported an overwhelming 98 percent in favour of regulation, with 52 percent believing it ‘essential’ to professionalise the industry. This near-unanimous welcome for regulation is underpinned by the belief within many property management firms that they already demonstrate best practice - particularly RICS and ARMA members.

The researchers asked for views on potential ‘naming and shaming’ of agents that fail to meet regulatory requirements. 76 percent of respondents favour this tactic but over a third want to see an appeal process in place first.

REGULATION MUST BE ‘FAIR AND CONSIDERED’
There was considerable debate over who should be responsible for ensuring its delivery.
ARMA was cited as the obvious route by many - ‘it is expected that managing agents be members of ARMA to get recognised as a reputable firm’, whereas others felt government regulation was needed - ‘there are large agents out there that are not members of ARMA or RICS and they do not always follow the rules’. There were also calls for ‘RTM companies to be included from the outset’.
With 26 percent of respondents concerned about the cost and time implications of regulation, the researchers asked participants to identify the steps they had taken to prepare.

67 percent have reviewed processes and procedures, whilst 55 percent have reviewed their complaints policy and 51 percent have looked at their insurance arrangements. A fifth of property managers reported having done nothing to prepare – although the majority of this group felt that they were ‘already in good shape’.
From an external perspective it’s encouraging to see so many managing agents committed to raising standards among their property management teams.

A MORE TEMPERED VIEW OF RIGHT TO MANAGE
In last year’s survey, 72 percent of respondents had a bullish approach to right to manage (RTM), seeing it as a clear opportunity for growth. One year on and 41 percent of participants now describe RTM as being a ‘core part’ of their business.
On the other side of the coin, 21 percent of participants have taken a clear decision to not get involved in RTM work, and a further 10 percent only work with RTMs ‘when it’s essential’. This tempered view of RTM was captured in comments such as ‘they need a lot of management time and want to pay lower fees’; ‘there is apathy after control is obtained’; and ‘leaseholders have a lack of appreciation in the complexity of block management’.
Leaseholder education is important in RTM matters to ensure directors are aware of the reality of running an RMC and understand their duties as directors.

GREATER EXPECTATIONS
A key part of the survey centred on the role of the property manager and how (if at all) this has changed. Survey participants were asked what they felt were the two most important elements of a property manager’s job.
The top three were ‘leaseholder liaison’ (73 percent), ‘building management’ (61 percent) and ‘service charge management’ (40 percent). 19 percent of respondents included ‘landlord and freeholder liaison’ within the top two jobs for a property manager. This indicates a delicate juggle between the twin demands of the landlord and leaseholder.

When asked about the changing role of the property manager, respondents largely concurred that leaseholders and clients want ‘more for less’, with ‘property management now much more labour intensive but with dropping incomes’.  ‘We need to offer a more personal service, with a dedicated person to speak to’, and, ‘... there is more focus on customer service and out-of-hours assistance.’
Property managers reported an increase in administration, with ‘paper trails needed for everything’. This need for good housekeeping is reinforced by the majority (60 percent) of respondents, who believe leaseholders to be ‘better informed’ about their rights.
The need to maintain an open and professional dialogue with leaseholders is recognised by many property managers: ‘there is much more leaseholder interaction – and rightly so’; ‘communication is key, with email making this so much easier’; and ‘we are more transparent with our documentation’.

SERVICE CHARGE CONCERNS
The research team asked if property managers had experienced a downward pressure on service charges. A confident 45 percent reported no pressure, whereas 40 percent of respondents said they had either had to reduce service charge levels to win a new block or were facing difficulties in raising service charge levels on existing blocks under management.

Additionally, respondents reported that the issue of service charge collection had become more relevant in recent years due to the financial climate and the boom in buy-to-let. Settlement times for arrears will come under pressure as leaseholders grow increasingly sophisticated and it will be important for managing agents to ensure their processes and procedures are watertight so potential loop-holes for non-payment are firmly closed.
Encouragingly, our researchers received positive comments about the value of the LVT in service charge wrangles, such as ‘we do not see the LVT as a problem and in fact welcome their involvement in dealing with disputes.’ One agent commented that ‘Hopefully the tendency for agents, especially those acting for RTMs and RMCs to be automatically treated as the bad guys is changing.’
As legal advisers to the property management industry we encourage our clients to embrace the LVT, both in terms of arrears recovery and to secure a helpful pre-determination of service charge levels. Additionally, if you are struggling to increase or even maintain service charge levels on your blocks under management we recommend you ask your lawyers to attend a leaseholder AGM to help you set a fair price and answer queries.

CONCLUSION
It’s extremely positive to see such support for a strong regulatory structure. As this structure takes shape, property managers will need to be aware of the practicalities of its implementation in terms of time and cost. The survey shows good levels of confidence in terms of readiness for a stiffer regime but it will be important for property managers to not rest on their laurels and to ensure that their procedures, documentation – and people! – are all at the top of their game.
Cash-flow will remain as important as ever so don’t let service charge arrears get stale - and embrace all your available communication tools to maintain an open dialogue with your leaseholders.

SURVEY NOTES
The survey was conducted through a mix of telephone interviews and an online survey tool. The telephone research was handled by Mainstream Marketing and the online research by V Formation Ltd. 109 people took part, representing a range of property management roles across the UK. The survey was conducted during October and November 2012 on behalf of Brady Solicitors and News on the Block.