The end of a decade seems a good time to reflect on the past 10 years within property management, assess what has changed, how far the industry has come – and where progress still needs to be made.
From regulation through to ground rent changes and better-informed leaseholders, Clare Brady, MD of Brady Solicitors, looks back on the last decade and highlights some key developments.
I remember my first ARMA Conference a little before the start of this decade, in the Autumn of 2008. ARMA was as close as there was to a regulator at the time. There were murmurs of regulation, which became louder over the first half of the decade. Pressure was on for Parliament to take steps to regulate the industry but, for many reasons, take up of that baton was not as fast as hoped.
In an attempt to raise standards, pending regulation, January 2015 saw the implementation of ARMA Q, which created a quality benchmark for managing agents as well as a system of auditing. The aims of ARMA Q were to raise standards and quality (hence the ‘Q’) of service across the residential leasehold management sector and create a focus on consumers.
A few years later in October 2018, Lord Best’s working group was announced and just one year later Lord Best himself announced at the ARMA Conference 2019 that there would be a new Regulator in place within the next two years.
Education and Qualifications
At the beginning of the decade, IRPM was in its early stage and ARMA was seen by many as the main source of training for property managers. Property management was arguably less of career choice but rather somewhere you found yourself somewhat thrown into.
10 years on and the IRPM has nearly 5,000 members, providing not just training for the industry but professional qualifications, and a more aspirational route of progression for property managers. More and more Universities are now offering bachelor degrees in Property management. There are also several companies within the industry championing property management as a vocational career, and universities offer undergraduate degrees for aspiring property managers.
Lord Best’s report sets out the power for “the regulator to require qualification to a minimum of Level 4 for property managers that carry out reserved activities with a reduced level of responsibility, such as combined caretaker/site managers.” There will therefore be many more qualified agents when the new Regulator comes in.
Press and Government Pressures
Whilst scrutiny and criticism from the press, government, leaseholders and their pressure groups can sometimes feel unbalanced and even unfounded, it does challenge us all as professionals within the property management industry to raise our standards.
At the start of the decade, online criticism from leaseholders was rife against some managing agents. Whilst this continues, it does seem less now and we have seen a huge focus on service levels by managing agents through training, processes improvement and use of technology.
Ground rent practices came under scrutiny in 2017 and this has led to a wider acceptance that ground rent should be proportionate and not onerous. Around 60 developers, freeholders and managing agents have entered a voluntary code of practice which helps to do away with onerous ground rent clauses.
The Grenfell Tower disaster in June 2017 was one of the UK’s worst modern disasters, and the huge and tragic loss of life was the immediate resonation. Two and a half years on, and the industry is facing long term challenges with implementing reforms (in conjunction with local authorities) in a pragmatic and realistic manner.
The last 10 years of press clearly tells us that, whether developer, freeholder, investor, RMC director or managing agent, focus has to be on providing and demonstrating a fair, compliant and transparent service to the end user. The more we can do to demonstrate this, the better we can thwart any unjustified claims. In time, compliance with regulation and focus on service levels will hopefully reduce the negative press.
No recovery – no fee
Back to the start of the decade, few firms were recovering service charge arrears on a ‘no win no fee’ basis (just Brady Solicitors and one other). Most managing agents were using general commercial law firms and being billed on a ‘time spent’ basis by legal advisers who simply didn’t understand the intricacies of property management, and the challenges faced by RMCs.
The ‘no recovery no fee’ option is now the norm in most arrears recovery cases.
Caselaw, Hearings and Venues
The 69 Marina case in 2011 was a welcome clarification of the right for Landlords and RMC’s to claim costs through the terms of the lease.
Remember the Phillips v Francis case in 2012 which purported to bring major change to major works funding? Some interpretations of the time were that that all properties with a service charge bill over £250 would need to be served with a section 20 notice with every yearly service charge estimate. Largely, however that practice was impracticable and not adopted widely.
In Court Hearings at the start of the decade, our team had a lot of educating to do.
Few judges knew the mechanics of property management and how service charge administration worked. We are now seeing more reasonable decisions and judges with better knowledge and understanding of leasehold machinery. We have also seen a decrease in the number of cases becoming defended and of those that do, fewer and fewer reaching a final hearing.
And, of course, we had the LVT becoming the FTT in July 2013, with a new power to award costs.
Whilst leaseholders anecdotally seem to have become more aware of their rights, we have not seen any significant rise in proactive FTT applications. My perception is that managing agents and their legal advisers are settling more cases before they reach the tribunal.
Right to Manage falls out of favour?
There does seem to be a shift away from Right to Manage as the preferred tool for leaseholders to take control of their development. We deal with fewer RTM matters, with the Triplerose case and the limited nature of RTM making Leaseholder and agents more reluctant. However, Enfranchisement enquiries have increased during the decade recent years, with leaseholders keen to secure ownership of the freehold.
A race to the bottom for leasehold conveyancing
Sadly, it seems that many flat buyers are keen to get the lowest possible quote and therefore do not receive proper advice on their leasehold purchase.
We regularly speak to leaseholders who do not know what a service charge is!
The Government’s various reports on leasehold reform have pointed to this and suggest prescribed information on leasehold interests for leaseholders purchasing from developers. We believe these requirements should be for all leasehold property purchases, not just those acquired from developers.
The last decade has seen huge changes in the property management industry and there is more to come, with much pending parliamentary reform from regulation to ground rent to lease extensions. It is an exciting time for property management.
Looking back on the start of the decade and comparing then to now, we can perhaps be less critical of the rate of progress and take some reassurance in the fact that we have actually come a long way. Property management has suffered the slings and arrows (some well-deserved, others less so) but is now emerging as a stronger and more professional industry.
And so after a decade of pushing the industry forward, we all deserve a long and restful Christmas break – every one of us!