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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
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