IMPORTANT lessons to learn from poorly drafted leases
£4.50 Issue 102 / 2019 The Magazine For Apartment Living Build To Rent Special edition
Top tips on how to spot a good property management company PLUS
contents ISSUE 102
news 5 ARMA celebrates achievements with awards Five hundred property professionals celebrated exceptional achievement at an awards event 7 Fire experts ‘warned of risks’ at blaze flats Experts had already warned of fire risks at a London block before a blaze destroyed 10 flats 9 Landlords reminded on new laws banning tenant fees From 1st June, it became illegal for landlords to impose fees for services 11 Appointments Latest appointments in the industry
inresidence 17 Communication conundrum It is essential that agents provide clear answers in a timely manner 18 Lessons to be learned Ground rent investors and enfranchising flat owners need to be sure that leases are not defective
22 Build-to-rent management v block management Apartments being built for renting accounts for just 1% of all those constructed in the UK 23 How to build community spirit It is vital that build-to-rent developers design schemes that promote a strong sense of community, argues Paul Staley 25 How green is build-to-rent? it’s time for the BTR sector to consider the environment, insists Richard Berridge 27 How to attract and retain top talent There’s a need to ensure that people see the sector as a rewarding career path 29 Return on experience! When it comes to the build-to-rent sector the focus must
12 Calls for minimum levels of
property management training ARMA release White Paper
20 Resident’s concerns and
always be on the customer
Call of the month! Readers ask the experts
Management Knowledge Exchange A review of the IRPM Seminar 2019
@newsontheblock News on the Block
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ild to Rent
inpractice 35 Don’t turn a blind eye! Licence to inventories? One smart technology platform is ready to make property managers’ and tenants’ lives easier 31 Just the job for growing sector? This could be the best time to consider a career in it even if it’s a challenge 33 Getting the full picture about alter protects everyone’s interests and ignoring it can be a big mistakes, warns Bill Pryke management company Peter Bigge outlines some of the qualities you need to look for before choosing a PMC 37 How to spot a good property
39 Upcoming events in the industry There’s a packed calendar of events in the next fewmonths
40 Help at hand A selection of companies offering help to leaseholders
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Landlords reminded on new laws banning tenant fees
A n apartment in Notting Hill is causing a stir after being put on the market for just £22,536! The flat in Westbourne Park Road is likely to attract huge interest because it’s also attractively decorated. The selling agent also claims it has a massive rental opportunity. Average prices in the area in the past 12 months was more than £1,108,202! But the catch is that the apartment has only five years left on the lease – and there’s no option to purchase at the end of the term. The listing on Zoopla explains: “Tenants may choose to self occupy this apartment although GPS would advise that this property is set up for and used as serviced accommodation. “The figures provided are potential returns and we offer no guarantees.” Legal advice would normally be to avoid properties with less than 80 years on the least at the very minimum. Notting Hill flat for sale for just £22K!
L andlords and letting agents have been urged to adhere to strict new laws that ban them from charging tenants fees. From 1st June, it is illegal to impose fees for services including viewings, credit checks, references and setting up a tenancy. The changes follow the introduction of the Tenant Act, which also restricts security deposits to the equivalent of five weeks’ rent for properties where rent is less than £50,000 a year. For those over the threshold, the
chefs, housekeepers, massage therapists and dive masters. Rates for Airbnb Luxe properties will average around $2,000 per night, compared to $150 for “Plus” listings, the existing name for smarter rentals. “This is that next level that was necessary so we can fulfil our ‘anyone belongs anywhere’ model,” said Nick Guezen, Airbnb’s director of portfolio strategy. Airbnb has seen a 60% increase in the past year in bookings that cost $1,000 or more a night. He added that tenants who had signed tenancies before 1st June could still face certain charges. letting agents, landlords and renters are aware of how this regulatory change will affect them. It must be highlighted that tenants will still face some upfront fees. “For instance, they still will be expected to pay the first month’s rent and a deposit and there can be charges for lost key replacements and if rent is outstanding for over 14 days.”
deposit is capped at six weeks. Meanwhile, tenants are being warned that the new laws allow letting agents to impose a penalty charge limited to 3 per cent above the Bank of England’s base rate if rent is outstanding Paul Barnes, lettings specialist and director of Loveitts, said the changes were a “seismic shift for the industry” and added that his company had spent months preparing for them. He said: “It is essential that for more than 14 days. This currently stands at 0.75%.
Airbnb launches upmarket service
O nline accommodation platform Airbnb has launched a new service that specialises in lavish places to stay. Airbnb Luxe features more than 2,000 upmarket rental properties worldwide. The portfolio includes beachfront villas in the Caribbean, French châteaux and historic Tuscan
homes, as well as grand apartments in US and European cities. The most expensive Airbnb ever listed is Nukutepipi, a private island in French Polynesia that sleeps up to 52 and comes with staff including
6m packages milestone for Concierge HV
I n July 2019 Dwellant’s Concierge HV has reached yet another milestone of six million packages processed since it’s launch! Concierge HV (HV stands for High Volume) is the most extensively used
management for front desk teams. It is fast and simple to use and makes the front desk a paperless GDPR friendly place. The lucky resident received a bottle of champagne, and the concierge team a basket of cookies!
solution for package, key and visitor
Fire experts ‘warned of risks’ at blaze flats
A not-for-profit housing association has become one of the first in the UK to partner with a software provider that helps tenants report repair issues. Co-op Homes has introduced Fixflo to help streamline and improve its service to customers. The software currently copes with more than 100,000 repairs a month for private housing management companies. Neil Tryner, managing director of Co-op Homes, said: “We’re delighted to be partnering with Fixflo. Continuously improving the experience our customers have of our service is at the heart of all we do.” partners with software firm you. It makes you feel a failure, that you can’t do anything. I couldn’t even be in that flat any more because it depressed me so much. “I’m struggling, I’m on antidepressants, I’m going to a therapist, everything’s just drowning me. “It came to a point where I did want to commit suicide and my anxiety went completely off the rails.”
E xperts had already warned of fire risks at a block of flats where a blaze broke out and destroyed 20 flats and damaged 10 others. Samual Garside House, in Barking, east London, was badly damaged by the fire on 9 June – almost two years to the day of the Grenfell Tower disaster. Residents at the six-storey block in De Pass Gardens claim the fire alarm and sprinkler system hadn’t worked properly for months. Fifteen fire engines and about 100 firefighters attended the blaze, which tore through wooden balconies. The Guardian newspaper reported that it had seen an independent fire risk assessment of the block, built by Bellway L easeholders who have had issues with their lease in the past feel so anxious about their future that some have considered taking their own life. A survey by the National Leasehold Campaign revealed that 72% of people who have had problems are “very worried and anxious” about their future. A total of 17% said they had had suicidal thoughts as a result of their fears, M ore than one third of landlords want the government to introduce fast-track housing tribunals if Section 21 “no fault” evictions are abolished. At the moment, a landlord can evict a tenant without good reason at short notice once their fix-term tenancy period ends. But the government says it wants to abolish the “no fault” Section 21 evictions to “protect
believed to have been started by a barbecue. But residents say fire safety concerns had been raised. Sonia Sahata and her husband, Rav were in their top-floor flat with their two children when a neighbour alerted them to the fire. Mrs Sahata said: “When we got out I looked back and our flat was already on fire. There was no alarm and the sprinklers did not work.” Mr Sahata said that he had raised concerns about a faulty control board that was supposed to operate the fire alarms on several occasions. A spokesperson for Bellway said: “We are taking the matter very seriously and working with all parties to help in establishing the cause of the fire.” freeholder should legally have consulted the leaseholders. But the freeholder went to a tribunal to request that the consultation be scrapped because building was in such a state. Lisa’s mortgage provider covered the cost, but her monthly mortgage bill was hiked by £600 a month, which she couldn’t afford and her home was repossessed. She said: “It absolutely drains guaranteed way to cover their costs, while 7% wanted to be able to submit evidence online. Meanwhile, 84% said they felt the maximum time from serving notice to taking possession should be no longer than eight weeks. The National Landlords Association said its members were forced to use Section 21 notices because they had “no confidence” in the courts to settle
Homes, which was carried out in January. It warned that the wooden structures may not be fire-resistant and could “accelerate fire spread … and this will put residents and visitors at risk of smoke inhalation and burn injuries”. Pete Mason, chairman of Barking Reach Residents’ Association, told reporters he had been assured by Bellway Homes that the external wood had been treated so that it would not catch fire for 30 minutes after a fire started. “There is a tremendous amount of wood used on the buildings but I don’t think they took my concerns seriously,” he said. Bellway had reportedly carried out some remedial fire safety work just weeks before the fire, which is the study of 1,150 people found. One resident explained to the BBC that she felt unable to do anything when her freeholder served 21 residents in her block with a £100,000 invoice for major works. But the work spiralled to £600,000, which left each leaseholder with a bill of almost £50,000 each. Lisa – not her real name – told the Victoria Derbyshire that the renters from unethical” landlords. It announced plans to consult on new legislation in April. A total of 39% of 200 landlords surveyed in a report for Paragon’s PRS Trends Report said they wanted fast-track housing tribunals to replace the “no fault” evictions. Almost a quarter of respondents (24%) called for a shorter court process. Some 15% would like a
Leaseholders’ anxious about their future
Landlords call for fast-track tribunals
John Heron, director of mortgages at Paragon, said: “Some of the main concerns for landlords around a move to the Section 8 eviction process relate to the efficacy of the existing court process. “What we see here is widespread support for a fast- track housing tribunal that can deliver a fair and timely solution for both landlords and tenants.”
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Property portal reveals ambitious plans
A portal that allows estate agents to list their properties for free has announced ambitious plans to target 90 per cent of the market. More than 740 independent agencies across the UK already use the free-to-list Residential People platform, which launched in February. As well as free listings, the portal offers agents
we have had from agents and if this continues, we are confident we will be able to create a lot of value for them in terms of lead generation. “We are now looking to gain support from potential partners in the industry that can see the value in what we are trying to achieve. We are free now and will always be. Come what may, this is our unique selling point.”
an optional state-of-the- art marketing suite to help them market their properties and drive traffic to their own websites. The platform’s bosses said they launched the portal to “radically disrupt the property market status quo”. Residential People co-director Christopher May added: “We are really pleased with the support
Uni offers first for planners A London university has become the UK’s first to offer a full, level 7 chartered town planner apprenticeship. Successful apprentices at London South Bank University will gain a Royal Town Planning Institute accredited qualification and become Chartered Member of the Royal Town Planning Institute (MRTPI). Professor Craig Barker, Dean of LSBU’s School of Law and Social Sciences, said: “We are very proud to be able to build on this heritage now, with our new Chartered Town Planner apprenticeship scheme. “There are currently five providers listed with the RTPI at the moment, but LSBU is the only one to offer the full five-year route, taking on people with ‘A levels’ or experience but no formal qualifications, all the way from level 4 to level 7.”
ARMA celebrates achievements with awards
ACE Awards that took place at Tobacco Dock in London’s east end. A total of 18 winners were announced at the event in July and ARMA’s chief executive Dr Nigel Glen said all those awarded were a real credit to the industry. He added: “I know what a hard job the judges had in deciding who should go home with a trophy from so many outstanding finalists. The winning firms and team members are setting the standard for companies that wish to be recognised for achieving excellence and best practice in their field.” Those attending the glittering ceremony also helped raise £3,476 for Dementia UK, which is ARMA’s charity partner for the year. Dementia UK regional fundraising executive said: “We’d like to take this opportunity to say a huge thank you to ARMA for choosing to support us at their fantastic awards ceremony this year.”
F ive hundred property of the UK’s leading residential managing agents, their suppliers professionals celebrated exceptional achievement
and the work of their people at a glittering awards ceremony. They gathered at the annual ARMA (the Association of Residential Managing Agents)
I spy a historic address at former MI6 HQ!
F ancy owning a little bit of history? Then you can with an apartment in the former headquarters of MI6. Once the nerve centre of the Secret Intelligence Service, the building – then called Century
A two-bedroom apartment boasts two bathrooms, a large private double terrace, an underground parking space and 24-hour concierge. It is on the market for £815,000 with Fyfe McDade.
Road is now a popular residential address. Residents enjoy being right next to the Bakerloo line at Lambeth North Station, as well as a short walk from Waterloo tube and train stations.
House – was regularly visited by real-life 007s at the heart of the UK’s espionage operations. Converted into plush apartments more than 15 years ago and named the Perspective Building, 100 Westminster Bridge
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NewMD is ready to Loveitts challenges!
A n estate agents has appointed a new managing director to steer it through the ever-evolving challenges of property market. Warwickshire-based Loveitts has welcomed John Pugh to the helm of the 175-year-old company. John, a chartered surveyor who has been with the firm for 20 years, said that
marketplace we are unique.” John is taking over from Peter Rosier, who has been at Loveitts for 45 years and has had a key role in the
while tradition was valued, the company was forward thinking. He added: “Nowhere is this more evident than in the big push towards new homes — a thriving market in which Loveitts is already making its mark. We recently appointed Laura Wilson as the firm’s area new homes manager. In the Coventry, Nuneaton and Leamington
firm’s success. Peter, who was recently made a Freemen of
the City of Coventry, will remain as a director to the firm.
It’s three big cheers for consultancy firm
P roperty consultancy Pennycuick Collins has three reasons to be cheerful! The award-winning company has announced the promotion of two of its staff, while another has achieved one of the highest accolades in property management. Chartered building surveyor David Baker has been promoted to associate director. David, who joined the Birmingham- based consultancy 15 years ago, oversees major works and maintenance work for longstanding clients. Neil Randle has been appointed senior property manager in the residential and
lettings and management team. Meanwhile, head of the residential service charge team, Lyndsey Cannon-Leach, has been named a Fellow of the Institute of Residential Property Management (IRPM). The discretionary category professionals who have made a significant contribution to the development of the sector over and above that made to their own business. Lyndsey said: “This year is turning out to be our most successful on record. These promotions reflect the commitment of David and Neil in delivering outstanding client service and are thoroughly deserved. “To achieve a Fellowship of the IPRM is the icing on the cake, in a week which also saw Pennycuick Collins awarded the Regional Managing Agency of the Year at the West Midlands Insider awards.” is the highest grade of membership awarded to
Staff changes boost property management firm
A new recruit and a staff promotion have boosted a property management firm’s team. PM Legal Services has welcomed senior litigator Jonathan Cass, who has 13 years of experience working in property litigation for commercial and residential properties. He said: “I’m delighted to have joined PM Legal as they are known industry leaders and I’m very excited to be able to further my knowledge in residential property as a part of this team.” His appointment was made as the Yorkshire-based company announced the promotion of solicitor Asia Munir to associate. The decision is in recognition of Asia’s development of her specialism
in residential property at PM Legal Services. Partner Cassandra Zanelli said: “I’m so pleased with the recent growth we’ve had at PM Legal, and I’m so happy to welcome Jonathan to the team, as his experience and knowledge will be extremely beneficial. “We’re also extremely proud of Asia for her achievement, as she has been with PM Legal since April 2018 and she’s been promoted in recognition for all of her hard work and efforts in her first year with us.” Meanwhile, teammembers Jennifer Knibbs and Ruby Zaman have recently
passed their associate examwith the Institute of Residential Property Management (IRPM). Principle continues rapid growth in first year
A new property assistant has joined the after its launch last year. Daniel Lannon joins the company after Principle, which was set up by Brett Williams, won several new contracts. Daniel previously worked in the retail sector after graduating from Aberystwyth University with a 2:1 honours degree in 2015. Customer services manager Michelle Cox said: customer services department at Principle Estate Management as it continues to grow
“It’s fantastic background to have retail experience for what is a customer service role here at Principle, plus Daniel’s good IT skills also made him the ideal candidate.” Ian Smallman, director at Principle, added: “Principle has grown so rapidly that recruitment is now an ongoing item on our monthly agenda. “We’re confident that Daniel is going to play his part in ensuring we continue to provide the outstanding customer service that we have become really well known for.”
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Calls for minimum property management B usinesses and individuals who are It also outlines the current market and reports that the latest government
housebuilding sector as this represents a long- standing failing to achieve required growth levels. However, the political will is behind reform, witnessed by the significant ramping up of personnel in the Ministry of Housing, Communities and Local Government. As an industry we welcome this direction as it can only serve to improve standards across the sector and level the playing field between those ARMA agents that subscribe to a consumer charter and standards. Leashold reform Apart from regulation there are two main areas to look at under leasehold reform that will affect MA’s, namely ground rents and commonhold. An MA’s role in ground rents is usually restricted to the collection and payment to the landlord of the ground rents. However, the larger implication of the abolition will be the impact upon the landlord community. Why would a landlord stay connected to the building without an income stream? As a result, developers are unlikely to find landlords to manage the buildings and will move towards the RMC type of arrangement to offload the responsibility for the development. The overhaul of leasehold to potentially transfer the ownership of a property to the residents themselves. This can be achieved in various means but for the sake White Paper outlines sector contributes £500m to UK economy
responsible for apartment blocks should undergo a minimum level of education on property law, health and safety and fire training. That is the view of the Association of Residential Managing Agents (ARMA) in a wide-ranging White Paper released by the organisation in June, which reveals that the sector contributes £500m to the UK economy. The extensive report – An Overview of the Residential Block Property Management Sector in England and Wales – outlines that ARMA believes all right to manage (RTM) and residential management company (RMC) board directors and landlords should undergo training. It says: “This should be online so that those people with day jobs can fit it into their schedule. It should be free and provided by a body such as LEASE (Leasehold Advisory Service).” The report also • Outlines the need for more transparency between managing agents and leaseholders to prove how most make little or no profit from leases. • Welcomes discussions for regulation to improve standards across the sector • Warns that leasehold reform could mean difficulty in finding landlords • States that commonhold is not a silver bullet and has its drawbacks ARMA chief executive, Dr Nigel Glen, said: “We’ve compiled the report as a valuable reference tool to help interested parties – either those working directly in the sector or those involved in research – find out more and demystify the sector. “The report contains a rich vein of data, some of which was already available – just not all in the same place – and some from ARMA research and sources further afield.” The White Paper provides a comprehensive overview of the sector, including key statistics such as: market size and tenure, service charges, managing agent industry breakdown, profitably, contribution to UK economy.
figuresstate that there were 4.3m leasehold households in England, which is 18% of the housing stock. Of those, 67% were leasehold houses while the remaining third are apartments. Some of the key findings of the White Paper included:
Profitability The bulk of residential property
management businesses are small concerns and do not pay a salary to working principals. Firms that turned over less than £500,000 per annummade a 12.5% loss. Larger businesses with an annual turnover in excess of £500,000 made a 6.8% profit. This compares to the average non-financial UK service company net rate of return of 17.8%. The market landscape, at least among the RMC and RTM clients, seems to be that all managing agents are the same and hence the cheapest is the best choice. However, effective property management is a people-intensive business, so working for low (or even negative) margins means that leaseholders cannot be given the level of service that they would want, that the building deserves or that MA’s would like to give them. More transparency between firms and their leaseholders may help here – if leaseholders realised that their managing agent was only making £10 profit per annum per unit perhaps a sensible discussion about how much time could be offered in exchange for a reasonable fee as opposed to the “whoever is the cheapest agent” conversation could take place. Regulation The Call for Evidence on regulation was announced at the 2017 ARMA Conference by the then Secretary of State for Housing, Communities and Local Government, the Rt. Hon. Sajid Javid. The leasehold sector has been described as “broken”, although probably based more on anecdotal examples than cold, hard statistics, which seem lacking in the industry. The Government focus is also more on the
12 ISSUE 102
training levels of
An overview of the residential block property management sector in England and Wales
4.3 million leasehold residential dwellings
Out of 870 4 residentialmanagingagent firms inEngland andWales
Top 10 firms in England
Total annual value of service charges £2.4-£3.5 billion per year
ARMA Membership firms
Booklet outlines role of managing agents L easeholders are being given the opportunity to understand the role of managing agents – thanks to a new booklet. ARMA has launched an A5 booklet entitled, “What does a managing agent do?” It is aimed at leaseholders and prospective buyers to explain the role of the managing agent and to demystify some of the peculiarities of leasehold. It covers what a managing agent is, what they do, who appoints them and the duties they provide. There is also a section on how a leaseholder can find a managing agent and why they should appoint an ARMA managing agent. https://arma.org.uk/downloader/ tx9/MA_booklet_pages_lr.pdf
10% 15% 20% 25% 30% 35% 40%
Owner-occupied sector |privatelyowned/ let in theprivate sector
300 ARE ARMAMEMBER FIRMS
9 ARE ARMAMEMBER FIRMS
2.31m dwellings owner-occupied 1.71m dwellings private rented 0.28m social
NUMBEROFUNITSMANAGED The Managing Agent industry is
1.40m leasehold houses 2.86m leasehold flats
dominated by smaller businesses. Over 80% of ARMA member firms manage fewer than 4,000 units.
15% 10% 20%
870 firms directly employ 25,000 people
870 firms contribute £500,000,000 to the economy via
FIRMSWITH LESSTHAN £500,000 TURNOVER PERANNUM
FIRMSWITH MORETHAN £500,000 TURNOVER PERANNUM
ARMA’s stanceon regulation is that it should primarily reside at the level of the company rather than the individual.
Value Added Tax National Insurance Corporation Tax Sta Income Tax
For more information: www.arma.org.uk @armaleasehold © ARMA June 2019
For commonhold to thrive it cannot be seen as more expensive than leasehold and hence it would seem logical that current leasehold stock will be seen as “second class” and hence discounted. The average price of a unit is £228,147 and the estimate of 4.3m gives a total market value of over £1tn. Every 1% devaluation in the value of leasehold therefore equates to £10 billion being wiped off the collective value of those 4.3m leaseholders. The White Paper concludes: “The managing agent sector faces substantial upheaval, with significant consolidation likely alongside a government led shift in clients away from professional landlords towards self- determination by unit owners. The latter pose both an opportunity for increased business for MA’s, combined with practical difficulties with working with a lay board that meets only occasionally and cannot reasonably be expected to remain contemporary with legislative changes.” To read the full White Paper, visit https:// arma.org.uk/downloader/tx7/ARMA_Overview_ of_Block_Management_Sector.pdf
of simplicity let us consider the commonhold model. Commonhold has its attractions but is not a silver bullet as there are benefits and drawbacks. Starting on the easiest benefit, a common form of contract between properties will make life easier for MA’s and residents alike – as opposed to every building having a different lease as we currently find. Having said that, buildings have such variety it is hard to imagine an all-encompassing single document and we are likely to see a common document but with some form of annex detailing the individual quirks of that particular building. But at least the quirks will be in one place rather than spread out in clauses throughout the document. Having a government-mandated set of rules in the Commonhold Community Statement (CCS) will also allow changes and improvements to the wording to be applied across the whole commonhold stock. If commonhold is perceived to be superior to leasehold, then either commonhold will be more expensive to buy or existing leasehold prices will be affected negatively.
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Property Management Knowledge Exchange L ast June, more than 700 delegates from the sector attended the Institute of
don’t use managing agents.” Former Housing Minister Mark Prisk MP was the next speaker who presented the ‘long view’ of the housing market, with particular emphasis on the need to change how the sector is managed including A review of the IRPM Seminar 2019
Residential Property Management (IRPM) Annual Seminar held at the QEll Conference Centre in London’s Westminster. The principal sponsor for this event was property law specialists, Brethertons solicitors. The IRPM event filled one of the largest conference venues in the country and featured a B2B exhibition which was held over two floors, enabling the IRPM to provide delegates with the biggest and most comprehensive leasehold/Build-to- Rent learning and networking event of the year. The fast-paced programme began with Lakhbir Hans, Deputy Director Leasehold from the Ministry of Housing, Communities & Local Government who updated delegates on the progress of the government’s consultations. Lakhbir confirmed “The reforms will have a profound effect on those working in the sector.” Lakhbir covered issues around mis-selling, transparency of fees and tenure and redress for flat owners, saying “The government is also looking at ways to support existing leaseholders and those who
the letting and selling of homes. Prisk challenged the IRPM delegates to embrace the change programme and get involved saying, “Those who trade on the edge of the market know how to get around the rules…as professionals you have the opportunity to take
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articulated the “customer first” message whilst being clear that property management “is a bloody hard job”. Towards the end of the day, health and fire safety experts, Dr Sean Lundy and Mark Varley from the IRPMs Health and Safety Working Group looked in detail at the aims of the Building a Safer Future consultation published in June. Finally, FirstPort’s Nigel Howell gave an honest appraisal of turning around a failing business and illustrated how to reclaim a reputation for excellence in the sector. At the end of the event approximately 400 delegates participated in a well-earned drinks reception! Brethertons CEO Alison McCormack summed up the event quite succinctly. She confirmed “To be honest it was almost a no-brainer to get involved with the IRPM to sponsor this event. We knew the event was at a great location. It was. We knew the IRPM would attract great speakers. They did. We knew the IRPM would organise an event to be proud of. They did. The IRPM is leading the way in setting the professional standards of the individual property manager. The quality of the speakers at the event is testament to that. As a law firm, Brethertons are specialists in the property management sector and our mission statement is to share “The Knowledge Within” - what better opportunity to receive and share knowledge than at the industry’s leading event for individual property managers.”
should know.” Brethertons initially prepared a list of what they thought to be the top twenty cases that property managers should know were and then distributed the list to many leading barristers in the sector. The outcome was… that no one agreed! Leading barristers were asked to prepare their own rankings. The responses were scored and collated. The majority of lawyers agreed the top case was Daejan v Benson and to read why and learn the other top cases, NOTB readers can download their copy of the white paper from the Brethertons Knowledge Hub at www.brethertons.co.uk Head of Residential Leasehold Law at Brethertons, Roger Hardwick, confirmed “Creating and researching the White Paper was extremely interesting, controversial at times and enlightening. Presenting the findings in the form of a White Paper at the IRPM Annual Seminar seemed to be the perfect occasion to reveal the top 10 cases.” The legal update theme continued when the delegates heard from Law Commissioner Professor, Nick Hopkins, Commonhold reviews. Delegates were informed that reports on all three consultations should be expected at the end of this year or the beginning of 2020. provided the audience with food for thought as they were asked to consider their own attitudes and practices around diversity and mental health. Martin Boyd of LKP strongly who gave an update on the RTM, Enfranchisement and A session on inclusion and wellbeing in practice then
qualifications that are targeted and proportionate. If Lord Best’s announcement was not enough for the delegates to consider, the Property Ombudsman Katrine Sporle CBE, then demonstrated that claims tend to be about communication rather than technical competence, confirming that agents need to continue to develop their “culture of customer care”. Guddy Burnett from the Domestic Abuse in Housing Alliance (DAHA) concluded the morning session, highlighting how block managers can support residents and staff facing domestic abuse. Nick Whitten, Head of UK Living Research at JLL delivered a top class economic update with a mass of hard data. RESEARCH After the networking lunch, Brethertons Partners, Bukola Obadun-Craigs and Roger Hardwick took to the stage to present the results of a novel piece of thought leadership, “The Top 10 Legal Cases Every Property Manager
the lead in setting standards and calling for change.” The significant news of the day was delivered by Lord Best, Chair of the Regulation of Property Agents Working Group, who told the audience that a new Regulator and mandatory qualifications are on their way. The new regime will apply to property managers, letting and estate agents, to international property agents with reference to UK sales and property guardians. IRPM,
who are on Lord Best’s working group, support mandatory regulation
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Communication conundrum It is essential that
supported this aspect of the
complaint to the extent that the agent could have provided a clearer and more timely explanation. An award of £100 was made for the aggravation caused. Ground rent and service charge demands The leaseholder also complained that service charge and ground rent demands incorrectly stated the name of the freeholder on the reverse and that the agent had delayed billing her for ground rent. The agent acknowledged that service charge demands were sent out with the freeholder’s name incorrectly stated, which they say was due to an administrative error. They apologised for this. The Ombudsman expected the agent to have ensured that service charge demands correctly stated the name of the freeholder. The agent should have issued the ground rent demand promptly prior to or at the start of a charging period. This element of the complaint was supported. An award of £50 for the aggravation caused to the leaseholder when she had to enquire several times about the freeholder’s name on service charge demands. The Ombudsman could not determine that the demands were invalid though, or that any financial disadvantage was caused, as the leaseholder requested. Outcome The two complaints were supported and an award of £150 was made in full and final settlement of this dispute. Katrine Sporle is an ombudsman at The Property Ombudsman
A recent case that The Property Ombudsman was asked to review came from a leaseholder, where the agent was instructed by the freeholder to provide a management service in respect
leaseholders would be able to monitor their own usage. The agent acknowledged the query but did not respond to it. Some three months later, the leaseholder wrote to the agent to say that she had not received a response to her query and made a complaint. In response to the complaint, the agent advised that charges for heating and hot water would be billed through the service charge, but due to the installation of meters, would be more accurate, since they would be based on the building’s actual usage. The Ombudsman considered that it was reasonably clear from the explanation provided that the amount charged would be based on the building’s usage, rather than individual leaseholder’s usage; but considered the agent could have responded directly to the leaseholder’s specific concerns about whether she would be billed for and able to monitor her individual usage by clearly advising her that she would not. The agent did not make this clear until their second complaints response. The Ombudsman did not criticise the agent if the leaseholder was not consulted about the installation of the meters, since the work was delegated to the installation company directly by the freeholder. It was for the installation company to provide the notice. Overall, the Ombudsman
was made? Would leaseholders be billed individually for their use of water within their properties? And how could leaseholders check their own water bills? The agent responded five weeks later, advising when the meters had been installed; that the installation had been authorised by the water company; that water would be paid for through the service charge; that there should be no individual billing and that the meters were located in the plant rooms. However, the agent did not advise at this point that the installation of the meters had been instigated by the freeholder. Their comment that the water company had “authorised” the meters did not make it clear who had instigated the installation. They did not respond to the query as to whether individual leaseholders could check their own bills, only saying that the overall bill would be split according to the lease. The leaseholder responded, asking again whether agents provide clear answers in a timely manner, insists Katrine Sporle as she looks at a recent Ombudsman case
of the block in which the property was situated.
Installation of water meters
The leaseholder complained that the agent did not consult her about the installation of communal water meters, saying that the agent did not provide clear responses in a timely manner to her queries about the installation of the meters and the effect this would have on her water bill. The agent said that the works that included the installation of water meters were undertaken by another company who had been instructed directly by the freeholder, rather than by themselves. They say that this company notified all the leaseholders that water meters would be installed. The agent said that they had responded to queries raised. In this case, the meter installation company advised all leaseholders about the proposed works, which were carried out two months later. Two months after the meters had been installed, the leaseholder wrote to the agent to ask a number of questions about the installation of the meters. This included who had made the decision to install the meters?When the decision
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Lessons to be learned from
I t is important for flat owners and their landlords alike that the flat lease is not defective and if it is to be able to correct the defect. Flat owners will be concerned to ensure their flat lease doesn’t contain defects that might prevent a sale proceeding smoothly or affect value. Landlords will want to ensure that all costs incurred in connection with the building are recoverable via the service charge amongst other things. This is particularly relevant where some flat owners collectively acquire the freehold to their building leaving others out of the process for example. If the leases are not correctly drawn then there may be a significant shortfall to be funded. Such a situation was subject to this upper tribunal decision. A flat owner – benefiting from a lease that didn’t oblige them to contribute towards all of the costs incurred – sought to fend off a claim by the other flat owners via their freehold company that the lease should be varied to correct this “defect” as the landlord perceived it. Background The case concerned a basement flat in the building made up of four flats where the upper three flat owners held the freehold between them via a company. As is common, the basement flat had its own entrance and didn’t share any common parts, so there was some justification for the service charge provisions being different in the lease of that flat. You would often expect to see that only the upper three flats, for example, would contribute towards the upkeep of the internal communal parts serving those flats. What was unusual here is that the basement flat was only obliged to contribute towards external painting. It did not have to make any contribution towards the maintenance of the structure and roof or management costs incurred by the landlord. So was this a “defect” that the landlord was able to vary the lease for? The flat owner applied to the tribunal to strike out certain service charge demands that went beyond external painting and decorating and, in response, the landlord made an application to vary the flat lease to make the flat owner contribute towards these other usual items of expenditure.
Decision at first instance and appeal The landlord won at first instance and so the tenant appealed. The landlord company wasn’t party to the proceedings by the time the upper tribunal heard the matter, so there was no representation on the landlord’s side. Shortfall The flat leases appeared to have been badly drawn and certainly the wording from the basement flat lease quoted in the decision evidences that as absent; a clause reference error the flat owner would have Ground rent investors and enfranchising flat owners need to be sure that leases are not defective as varying such a lease is limited, warns Mark Vinall
been on the foot for the balance of the service charge costs sought by the landlord. The net effect of the confused leases were that all four flat owners were obliged to contribute towards insurance, but other contributions were split between the owners: • Three of them to 25% each towards maintaining the structure • Two at a quarter each towards management costs • Three at 25% each towards exterior paint and two out of the three upper flats towards maintenance of the internal common parts at a third each. This left significant shortfalls to be suffered by the landlord which, of course, can’t have been the intention of it when drafting the leases absent unusual circumstances. Right to vary The right to seek a variation of a flat lease is regulated by sections 35 and 38 of the Landlord & Tenant Act 1985. That allows a party to the long lease of a flat to apply to the tribunal for a variation. It is discretionary relief as opposed to a right. The relevant
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poorly drafted leases grounds (s.35(2)(e & f)) are that the lease fails to make satisfactory provision in respect of the recovery of expenditure incurred by the landlord for the benefit of the flat owner three flat owners would have to inject capital or loan it to the freehold company to meet the shortfall occasioned when works other than exterior decoration were undertaken.
company potentially constituting the necessary evidence. This seems odd, as there must come a point where that will be the case and the landlord company has no financial strength, so it would become insolvent as soon as such works are required. Of course that wouldn’t be in the interests of the flat owner “benefiting” from the “defect” in the lease as the building would then fall into disrepair and so the value of their interest would be adversely affected along with saleability. It was not determinative that it may be difficult to decide whether a particular item of expenditure falls within the external painting clause or not. It then went on to consider the question of prejudice and compensation, even though it wasn’t strictly necessary in view of the first part of the decision. The flat owner’s value determined compensation by using “a range of methods in the absence of direct comparables”. The average of those was taken and then a one-third allowance made for the increase in value of the lease that would flow from the variation being made, producing a compensation figure of £9,500 in circumstances where the surveyor estimated the service charge saving to be around £750 per annum flowing from the flat owner not having to contribute towards anything beyond external painting. Conclusion The ability to vary a flat lease is limited; it is unlikely to be enough that the landlord is left in a shortfall situation as a result of apparently poor drafting of the lease. This case demonstrates the importance for ground rent investors and enfranchising flat owners alike to review the terms of the flat leases prior to acquiring the freehold. Flat owners seeking to benefit from such apparent errors in drafting will need to think twice before seeking to hold out for that benefit as it may adversely affect their ability to sell or remortgage the property as a buyer, and by extension their lender, will be concerned that the landlord may become insolvent as a consequence of the shortfall.
(either alone or amongst others) or as regards the computation of service charge payable under the lease. As regards the computation ground, this will be made out where the aggregate of the service charge shares fall short of meeting the total expenditure laid out by the landlord. The tribunal is prevented from exercising its discretion if the variation sought would be likely substantially to prejudice the respondent (in this case the flat owner) and that an award of compensation (under sub-section (10)) would not be adequate. Case law Authorities cited at the same level included Cleray v Lakeside Developments Limited  UK UT 264(LC) which concerns a tribunal decision that certain leases in a block fail to make satisfactory provision for the recovery of management fees in circumstances where two out of the six flats were liable to contribute in this regard. Managing agents were engaged in practice and so all leaseholders received the benefits but weren’t obliged to contribute accordingly. In that case, the upper tribunal had little sympathy for the landlord’s shortfall on the basis that the lease contractual arrangements had been freely entered into between the parties when the flat was first sold off in that way. Further in that case, there had been recent lease modification and the landlord hadn’t taken the opportunity to add an obligation to this effect then from which it concluded that if it was so unsatisfactory to the landlord it would have ensured such a provision was included then. So it found nothing “unsatisfactory” about the different arrangements between the six flat leases. It did, however, acknowledge a first-tier tribunal decision with circumstances where the financial position of the landlord might make the absence of a flat owner’s obligation to pay for a certain item unsatisfactory i.e. if there was a RTM company with no other source of income. There was no difference on the facts with this case to those circumstances as the upper
Compensation It also questioned the first-tier tribunal’s finding that no compensation should be paid, its reasoning that “no proper evidence” had been advanced by the flat owners to show that the new obligation would result in the diminution in value of their leases or the extent of that. The upper tribunal’s comment in passing in this regard is useful as it stated that the compensation is not just to be based on diminution in value of the parties’ interest in the property. The relevant sub-section talks of “any loss or disadvantage that the tribunal considers he is likely to suffer as a result of the variation”. In this case the upper tribunal went on to find that had the variation been supported then compensation would have been payable after netting off the increase in value of the lease that would flow from “remove[ing] this detrimental effect” which somewhat contradicts their conclusion that the lease was not “unsatisfactory” in this regard. In another decision of the upper tribunal (Fairburn v Etal Court Maintenance Limited  UK UT 639(LC) the circumstances of the landlord were described as being irrelevant for the purpose of deciding whether a particular term was “satisfactory”. Outcome Ultimately, the upper tribunal in this case decided that the fact that different flat owners made different contributions didn’t make the absence of an obligation to contribute towards given items of service charge expenditure unsatisfactory in this lease. It accepted that as the landlord is a lessee- owned company then in light of the above Cleray and Shellpoint decision there might be circumstances where the lack of adequate contributions from this flat owner could render the lease unsatisfactory. But it wasn’t prepared to find that at this stage as no evidence to that effect had been adduced. It gave the example of the building requiring a major structural repair beyond the means of the members of the landlord
Mark Vinall, Partner at Winckworth Sherwood
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