Issue 102

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An overview of the residential block property management sector in England and Wales

Nigel Glen

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

0% 5%

MILLIONS

Leaseholdhouses/flats

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.

Profitability

0.04m social

17.8%

15% 10% 20%

MILLIONS

6.8%

5%

870 firms directly employ 25,000 people

870 firms contribute £500,000,000 to the economy via

MANAGING AGENT

-5% 0%

-15% -10%

-12.5%

FIRMSWITH LESSTHAN £500,000 TURNOVER PERANNUM

FIRMSWITH MORETHAN £500,000 TURNOVER PERANNUM

AVERAGE NON-FINANCIAL

ARMA’s stanceon regulation is that it should primarily reside at the level of the company rather than the individual.

UKSERVICE COMPANIES

Value Added Tax National Insurance Corporation Tax StaΠIncome Tax

THOUSANDS

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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