EXCLUSIVE REVIEW
The Association of Residential Managing Agents (ARMA) celebrated its first decade of annual conferences on November 2nd at the appropriately grand setting of the Institute of Electrical Engineers, Savoy Place, London. It is the only real time for members from all over the UK – as well hundreds of other delegates with an interest in the leasehold sector - to come together and hear not only about ARMA’s plans for the future, but to discuss the residential leasehold sector in general. The Conference has become the focal point for the latest industry news and legislative updates, as well as an opportunity for extensive networking. This year’s event had 682 delegates over the two days.
‘News on the Block’ was honoured to be the media partner. This review is a summary of the major highlights of interest to property managers, RMC’s and leaseholders.
CHAIRMAN’S ADDRESS Duncan Rendall in his opening address to conference as ARMA’s newly instated chairman highlighted the need for residential property management to embellish its professional status. He stressed that this was the key challenge to be addressed by ARMA and the industry as a whole. As one of the ways of meeting this challenge he invited non-member companies to join ARMA. For a full exclusive conference interview with Duncan Rendall see pages 29-30
A PRACTICAL APPROACH TO ARREARS MANAGEMENT AND THE ENFORCEMENT OF COVENANTS UNDER THE NEW REGIME Guy Fetherstonhaugh QC (Falcon Chambers; Member of the Supplementary Panel of Counsel – Common Law – for property law and author/joint editor of Commonhold) delivered ‘A Cautionary Tale’.
Keen to make a quick buck out of property management, newly appointed agents Bob and Phil set about their task with great gusto but scant regard for such minor matters as legislation. When it comes to exterior decorating a dilapidated block, they start by getting Charlie, their mate in the decorating business, to paint the woodwork. Bob and Phil offer the block insurance to a contact in the insurance trade, paying themselves a commission. They sub-contract the ground rent and service charge collection to an agency (aka their friend). That way, the ‘agency’ gets to administer a 10% collection charge, which he shares 50:50 with Bob and Phil, who then levy a further 15% admin charge. They then get their friend to add the cost of the exterior works to the routine service charge demands. When the tenants refuse to pay, the agents get tough and have forfeiture proceedings issued in the county court. When a tenant complains of noise from the flat above, Bob and Phil tell her to turn her telly up. The car park has problems of overcrowding caused by commercial vehicles owned by, yes, acquaintances of Bob and Phil. When the lessee in flat No. 7 pulls down walls to restructure the kitchen other tenants complain. But Bob and Phil stand back and watch in the hope that the owner of flat 7, in the property business himself, might be able to put a piece of the cake their way.
The rules that have been brought in to see off the likes of Bob and Phil affect all managing agents, good and bad, and they are ever more complex. With regard to the exterior decorating, they did not comply with consultation requirements that have been in place for some 25 years. S. 20 of the Landlord and Tenant Act 1985 was radically amended in 2002 to extend to qualifying services as well as works. Bob and Phil’s arrangement regarding the insurance is likely to be a fraud on the tenants, who are entitled to inspect the insurance policy including evidence of payment. The position regarding the levying of management charges depends on the terms of the leases. Courts frown upon the practice where managers charge more because there are others in the chain. In the question of noise and parking, the first port of call is the lease, not the whims of the agent. As for the structural alterations, most leases contain covenants that are very restrictive about the alterations that may be carried out within a block. What about the forfeiture proceedings that Bob and Phil orchestrated? Here, regulations of increasing complexity apply. A landlord may not serve a section 146 notice in relation to arrears of service charges prior to the liability for the amount in question having been agreed or determined. In this case, the money claim part of the proceedings will be transferred to the LVT, where Bob and Phil would face a battering given the way in which the works were carried out, to say nothing of their failure to comply with the consultation requirements.
To summarise, Guy Fetherstonhaugh urged the following advice upon all managing agents: make sure that all paperwork is in good order; keep up to date with legislation – service charge law is a “complex thicket”; make communication documents with lessees as user friendly and as simple as possible; resolve small disputes by being a good listener and eager to help and last but not least, read the lease!
NEW STANDARDS FOR LIFTS Peter Roberts of International Lift & Escalator Consultants gave a summary of the standards and regulations that apply/have applied to lifts, from the early British Standards to the most recent EN directives.
Acts and Legislation relating to lift installation have a clear purpose – the prevention of dangerous practices; the enforcement of regulations and the prosecution of offenders. Since 1995, EU directives have replaced the original British Standards for new and refurbished lifts. One of the most important of these is EN81, part 80 of which contains rules for the improvement of safety of Europe’s 3,2 million passenger lifts, 50% of which are over 20 years old and installed to the safety standards appropriate at the time in individual countries. Under this directive, property managers need to note the responsibilities of a lift’s owner: to ensure that lifts are safe for users; that they are properly maintained; that they are inspected by a competent person every 6 months; that hazards are addressed in a timely manner and assessments of the health & safety risks are undertaken on lifts and any relevant protection measures are implemented. EN81-70, introduced in 2003, provides for accessibility to lifts for disabled persons.
WATER ISSUES UPDATE Philip Lonsdale a water safety consultant from environmental hygiene and safety specialists, National Britannia, presented an overview of the responsibilities of managing agents with regard to preventing the risk of Legionnaire’s Disease.
Legionnaires Disease is a rare condition caused by the legionella pneumophilia bacterium, an organism that can thrive in hot and cold domestic water systems that are not properly maintained. Legionnaires disease is potentially fatal. People catch the disease by inhaling small droplets of infected water. Outbreaks occur from purpose-built water systems where temperatures are warm enough to encourage growth of the bacteria, and which can spread droplets of water. Prevention must involve the control of the organism at source; regular disinfection is vital. Its control is covered by the Control of Substances Hazardous to Health Regulations 2002.
The managing agent has a responsibility on behalf of the duty holder to undertake all reasonably practicable measures to ensure that the water systems within common areas are managed in such a way as to prevent or control any reasonable foreseeable risk from legionella bacteria or any other water-borne hazards. They need to assess whether they have systems that could give rise to legionella bacteria breeding and to be dispersed where people could inhale them. If the agent does consider that there is a likelihood or if they are in any doubt, the first step is to engage the services of a water consultant to carry out an assessment which would identify areas of concern. The following points may offer some clarification. It is essential that water tanks are free from all contamination. It may be possible for a qualified professional to undertake a quick risk assessment of the properties within an agent’s portfolio and provide an overview of the requirements of each property.
LONE WORKING AND PERSONAL SECURITY Pierre Lombaard (The Suzy Lamplugh Trust) is a consultant and trainer in the field of personal safety at work – an issue of increasing concern to property managers whose work frequently involves exposure to risk of violence and aggression.
Pierre acknowledged that a large number of property managers are lone workers, thereby increasing their likelihood of exposure to violent and aggressive behaviour. Unfortunately, it is a fact that common sense in the workplace is not common practice. While workers can not expect to live in a totally aggression-free society, it is crucial that lone workers learn to recognise the distinction between tolerable and unacceptable aggression in those whom their work brings them into contact with. Reasonably foreseeable risks to property managers include – verbal aggression or threats; being mugged or attacked; arguments; stalking; false accusations leading to hostility and refused exit from someone’s home. Such risks need to be assessed as a procedural / professional matter and, importantly, they need to be considered before the point of conflict or crime. Methods to prevent, manage and diffuse aggression include introducing safe systems in the workplace, training and technology.
PRACTICAL ASPECTS OF BLOCK SECURITY Patrick Cogan, Crime Prevention Design Advisor to Camden Borough Police, identified ways of using thoughtful design and security techniques to deter crime in residential buildings.
It is in everyone’s interest to plan for minimum levels of crime in residential buildings, explained Cogan. The Housing Corporation Scheme Development Standards (4th Edition) sets out 8 essential items to achieve this, including the involvement of police advice before planning permission; avoidance of unnecessary through routes; maximising natural surveillance for residents; key operated windows; doors constructed to SBD standards. New build homes experience far higher levels of burglary compared with Victorian buildings, largely due to poor specifications of doors and windows. In terms of the design of modern residential blocks the consistent cause of crime occurs where private space abuts public space, such as walkways, through routes or car parks. Indefensible space and areas where it is not clear whether outdoor areas are public or communal, which make homes vulnerable to burglary, are too common in the design of modern blocks. Other features that encourage crime – doors that are recessed, a lack of windows over public/communal areas, unsecured garages, too many flats sharing access control buzzers, damaged gates, planting that obscures surveillance, inadequate external lighting and even colour schemes.
Those who work in property management can find out more about safe design at www.securedbydesign.com
CONTROLLING YOUR KEY LIABILITIES David Sanderson a property litigator and associate of Shoosmiths solicitors provided a summary of managing agents’ legal duties.
The most important item of Sanderson’s presentation was in the section, Particular Issues for Managing Agents, covering Health & Safety, gas appliances, lifts, legionella, asbestos, fire safety law regulations and the Work at Height regulations. Procedures for all the above are the onus of the managing agent. Fines of up to £350,000 have been incurred against managing agents for breaches of H&S law. In April 2006, the correct procedures for fire safety will become the responsibility of managing agents. In conclusion, Sanderson observed that the role of managing agent is becoming more complex. The key things to remember are always keep notes; keep up to date with H&S legislation no matter what; file copies of all documentation and stay in touch the professional bodies.
The ARMA Draft Model Management Agreement is due to be published shortly. This agreement, updated to include all issues in the RICS agreement, meets the requirements of ARMA’s and RICS’ codes of practice.
SELLING THE SERVICE Sales director of investment firm, Gray’s Inn Estates, Darren Pither has a great deal of commercial experience in the residential property sector as well as property management. His presentation focused on the marked, compelling need for property managers to sell their service more professionally and proactively.
Property managers need to approach their service provision more in line with a professional and profitable business. The marketplace in which property managers operate is made up of 1.25 million long leasehold apartments (England & Wales); a realistic estimate is that there are another 500,000 flats; ARMA members manage approximately 600,000 units; approximately 150,000 are managed by non-ARMA members. This amounts to an estimated £30m management fees available from non-ARMA managed properties.
In order to convert this potential viable marketplace into business property managers need to learn to approach their business as a professional sales exercise. Pither said that some of the key ways of going about this are to analyse buyer behaviour; increase the agency’s brand profile; raise awareness via the media (Pither advocated a collective ARMA media campaign to promote itself to the general public); develop an integrated marketing campaign; organise a promotional seminar programme; develop a rapport with the client (as opposed to a ‘heavy sell’); increase the management fees in line with what is expected for a professional service and analyse the profitability of each project.
A DIRECTORS’ MEETING OF TUMBLEDOWN MANSIONS Ltd. John Nouch FIRPM, Regional Property Manager in the South for Mainstay Residential and a former Chairman of ARMA, used the context of a humorous spoof RMCo meeting of fictional block, ‘Tumbledown Mansions’ to illustrate how a directors’ meeting should (and shouldn’t) be run and to highlight some of the pitfalls of such meetings.
See ARMA Guidance Note 33/05 RMCos – Directors Meetings - for detailed information
ACTS & REGULATIONS UPDATE John Mills FCIH MIRPM, ARMA’s Technical Consultant provided an overview of the latest legislation affecting property managers.
Mills warned that all property managers need to be au fait with all the latest legislation and amendments as well as pending regulations in the pipeline. He referred in particular to Licensing of Houses in Multiple Occupation; Home Information Packs; Empty Dwellings Management Orders; The Disability Discrimination Act; FSA requirements; Health & Safety regulations and Digital Switchover.
Fortunately to help keep up with the raft of legislation ARMA has published several Guidance Notes - Licensing of Houses in Multiple Occupation (37/05); Home Information Packs (38/05); The Disability Discrimination Act (15a/05) and an interim guidance Note, Digital Switchover (34/05).
MANAGING DIGITAL SWITCHOVER Analogue switch-off is now going to be a reality, with the date fixed by the government commencing in 2008. Simon Jackson, Head of Sky Homes (BSkyB) spoke of the options for those who manage residential blocks.
How do your tenants get access to digital TV? Doing nothing about digital switchover will result in blank screens and the last minute mass-purchase of Sky mini-dishes. DTT upgrade (Freeview) is the basic option, but limits residents’ TV choice and is restricted by existing cables. Integrated Reception System (IRS) costs up to £150 per household, but incorporates a greater range of viewing – and radio - options than DTT. Free Shared Dish (FSD) is a new system that offers flexibility in that a Sky TV-only service is available to just the residents who want digital TV; customers who don’t want Pay TV can get Freesat. A minimum of 4 residents need to sign up to Sky TV to qualify and further tenants can easily be added. Jackson pointed out that installing FSD enhances an agent’s properties.
A LEGAL UPDATE ON CLRA 2002 Peter Haler MCIH FIRPM, Chief Executive of LEASE, concluded the speeches to Conference with an eye-opening look at the Commonhold and Leasehold Reform Act 2002 and some noteworthy cases arising from its provisions.
The ODPM has announced that statements of account (s152 of CLRA 2002 ) will not be commenced. The main reason being cited for this backdown is opposition from the public sector. Haler lamented this, as the s152 provisions have been in the offing since 1998, surely ample time to overcome obstacles. Government says it remains committed to the principles, but primary legislation is required to move on. Other provisions of CLRA 2002 not yet commenced are s153 (Statement of rights) and s156 (Separate accounts). These are possibly to be commenced Spring 2006 and April 2007.
Haler said that right to manage “hasn’t taken off the way we expected and interest has dropped off.” In many cases eligibility of the building has been the principal reason. On management fees, Haler poured scorn on a managing agent who was deemed to have failed to deliver an appropriate level of service, claiming that the fees were too low to warrant a higher level of service. The moral? Managing agents set their own fees: they must therefore charge the amount that is appropriate in order to be able to deliver a quality service to a particular building, otherwise management levels can not improve.
Haler referred to a case of a managing agent appointed by a RMC. Many of the tenants opposed the use of an agent and in order to reach a compromise the RMC decided to bend the terms of the lease in an attempt to keep everyone happy. Haler called this “complete idiocy”. “It is not for the RMC (or the agent for that matter) to decide what we can or can’t do. You have to follow the lease and know your obligations.”
WE ASK THE QUESTIONS This question and answer session turned the tables on the traditional ‘ask the experts’ formula. Instead, a panel composed of Siobhan McGrath (Senior President, Residential Property Tribunal Service); Jeff Platt (Chairman, Institute of Residential Property Management); Duncan Rendall (Chairman, ARMA) and Robert Levene (Chief Executive, FPRA) put the questions to the audience. Some of the questions that got the audience talking and, no doubt providing food for thought were: - Are you prepared to pay more in membership subscriptions for a higher level of campaigning from ARMA? (Duncan Rendall) - Is it necessary to have legal representation at an LVT? (Siobhan McGrath) - Is it important to have a professional qualification to be a property manager? (Jeff Platt) - Should there be a star-rating scheme applied to managing agents’ service? (Robert Levene).
