To Be Or Not To Be An ARMA Member

It is now 16 years since a small group of Chartered Surveyors got together to form ARMA. Their reason for doing so was because there was no trade or professional body in existence at that time that exclusively represented the interests of the residential long leasehold sector. There was no technical support, no benchmark standards and no dialogue with government and other related bodies.

ARMA’s founding fathers were more than aware that rogue landlords existed and earnestly set out to deal with the situation even before the legislation in 1993 (and 1996 and 2002) and the inception of the Government-approved code of practice for service charges.

The founders evolved a series of principles and objectives for members to follow and for ARMA to achieve. Key among these are:
o To create and maintain an awareness between property owners, developers, residents as well as national and local government of the proper role of – and indeed need for – residential managing agents.
o To provide a forum where members involved in the management of residential blocks of flats can discuss and develop management practices to enhance service to clients and lessees.
o To promote the highest standards of management.
o To fix and endeavour to maintain consistent standards of practice amongst members in an otherwise unregulated market.

This unregulated market has been one of the drivers of ARMA, pushing forward ever more stringent standards. ARMA is continually disappointed by the Government’s complete lack of interest in regulating the sector; a sector where at present anybody can set up as a property manager and gain control of people’s homes, and handle substantial amounts of their money. While Government sees fit to regulate the outcomes of poor management, it has done nothing to stop it occurring in the first place through statutory regulation or licence. National Occupational Standards, training and professional qualifications have all been left to our industry to sort out with little or no central support or funds.

Effectively, this Government has left ARMA to become the self-regulator for the sector. Self-regulation relies heavily on those involved abiding by the rules; and property managers who won’t join or cannot meet the joining criteria are not encompassed.

ARMA also needs to deal with complaints about its members. ARMA has no statutory powers to do this, and so our role is to ensure compliance with the Code. In our Annual Report (available on our website www.arma.org.uk), we analyse the complaints dealt with each year, a good number of which relate to poor communication.

One difficult and growing problem we encounter relates to resident management companies (RMCs). More and more lessees of RMCs contact us about our member’s conduct where all they have done is carry out the proper and lawful instructions of their client, the RMC board.

Protecting members’ interests and those of lessees
ARMA has been active in representing lessees’ interest in a wide range of areas that, on first glance, appear to have no relation with the residential leasehold sector. The examples below show just how far-reaching ARMA’s involvement has become.

Digital switchover – In conjunction with the Department for Culture, Media and Sports, ARMA has produced detailed advice for RMCs and lessees on the options for communal systems.

The Regulatory Reform (Fire Safety) Order 2005 – These new requirements for fire safety came into effect in October this year and will clearly apply to the common areas in blocks of flats or on estates (see News on the Block issue 30). ARMA sought clarification on the Order from the Department for Communities and Local Government (DCLG) has produced detailed guidance on the implications and is providing ongoing training to help its members help their clients deal with the requirements.

Disability Discrimination Act – ARMA sits on the Department of Works and Pensions working group and has been able to ensure that while disabled people are not discriminated against, the interests of all lessees were protected, i.e. that the costs of such alterations would not be borne by the lessees through service charges.

Housing Act 2004 – Houses in multiple occupation (HMOs) – S.257 of this Act makes provision for houses converted entirely into self-contained flats to become HMOs if the building and occupants do not meet certain criteria. The impact of this could be enormous. ARMA, together with other bodies, are fully involved with the draft regulations.
Home Information Packs (HIPs)– ARMA has been highlighting the fact that leaseholders will be forced to produce a more comprehensive HIPs than freeholders, which will cost them more. In discussions with the DCLG, ARMA has ensured that the amount of leasehold information required for the HIPs has been reduced and simplified. We are now working on a detailed guide for lessees on how and where to obtain information to try and reduce costs and speed up the collation process.

Trust taxation – Because Landlord and Tenant legislation states that lessees’ service charge funds must be held in trust, the Treasury has seen fit to tax the interest on these funds, above a certain limit (£1,000) at the trust tax rate of 40%. On behalf of lessees, ARMA has been pushing for the Treasury to tax all such interest at the standard rate of 20% – a rate that already applies to the social housing sector.

Brothels – Earlier this year, the Home Office announced strategies for dealing with street prostitution, which included legalising brothels in flats. They failed to consult with the leasehold sector on this strategy so ARMA has put forward strong objections in an attempt to avoid lessees having a brothel within a few feet of their front door.

Company law reform – ARMA is in the process of monitoring this legislation to ensure that RMCs and their directors are not hit with further onerous requirements. ARMA members’ experiences indicate it is already difficult enough to get lessees to be directors.

What ARMA offers corporate members and affiliates
Turning, finally, to what we offer our corporate members and affiliates (the latter including accountants, solicitors, insurers and self-managed blocks), there are the obvious promotional benefits and, having their, and their lessees’ interests represented at the highest level. But by far and away the leading reason property managers join us is because of the technical and learning support we offer.

We have now published 57 detailed Guidance Notes on key issues that impact on property management and have just launched the first of our new Lessee Advisory Notes. We provide members with regular updates on legislation and related matters along with a quarterly newsletter – all of which go into the members-only area on our website fully indexed by subject. We run regional members’ briefings and, of course, our annual conference which this year attracted 500 delegates.

With some 180 professional firms as corporate members, managing around 700,000-800,000 flats in 30,000 blocks, ARMA feels it can be proud of its achievements. However, we are aware that there are those out there who are critical of who and what we are and what we are trying to achieve for the sector. But as our chairman, Duncan Rendall, once said: “I guess that goes with the territory.”

John Mortimer, managing director of John Mortimer Property Management, outlines how ARMA membership has been beneficial for his business.

My company, John Mortimer Property Management Ltd, manages a portfolio in excess of 7,000 units consisting of anything from a block of four flats to a large development in London of 375 flats. I have found during the years that being a member of ARMA has been very beneficial to my company and to me personally.

There is a need for a professional body that has the connections and understanding of the current round of legislation. It is a pity that the DCLG has not listened more closely and taken on board the advice given not only by ARMA, but RICS and other professional bodies.

However, the responsibility placed on managing agents to understand and implement new legislation, and to be able to explain to our clients the reasons why certain actions have to be taken due to this legislation, has shown the merits of being members of ARMA.

Also, ARMA liaises with the various bodies within the Government to clarify aspects of the laws that are coming into being.

Apart from this, ARMA has set stringent guidelines for managing agents. We were in the good position before joining ARMA of having a separate client account for each client that we have, and we therefore found ourselves in a good position when the legislation came in.

I have always found the administration team at ARMA very helpful. They always respond quickly and the guidance notes that go out to the membership, come out on a regular basis and are very informative.

If I were to have a criticism of ARMA it would be that their meetings, in the main, tend to be within London, which I personally find difficult to get to. I would encourage them in the future to arrange meetings just outside the M25 area.

One of the important aspects of being a member of an association is to develop channels of communication between agents, not just to be seen as competitors sharing an organisation and aiming to offer the very best service to our clients but also to be able to exchange experiences with different suppliers and different methods of applying software and products within the industry. I feel that as a body we could apply buying power and work not as individual companies but as a body within ARMA to discuss with software and hardware companies the requirements of their membership and how those companies should be developing products, which are user-friendly and cost effective.

There is a tendency these days for associations such as the Association of Residential Letting Agents (ARLA) and the National Association of Estate Agents (NAEA) to put the needs of the Government above the needs of their membership. ARMA, I think, stand out above all the organisations that I belong to, as one that not only assists us in the interpretation of the law, but gives us guidelines to work to and informs us if there are things that we should be implementing.

Trish Hadden, client manager, Hadden Crespo, has serious reservations about the lack of enforcement of the association’s code of practice.

The idea of having an organisation that managing agents and landlords become members of, and comply with their regulations is an excellent idea. The industry requires this type of body to clean its image and lead the way for future property management. However, in my opinion, it fails in practice due to one main reason. ARMA’s code of practice is not enforced as a rule of membership. Thereby, the same managing agents are repeatedly appearing in Leasehold Valuation Tribunals (LTV’s) for the same breaches of law and breaches of ARMA’s code of practice, but they remain members of ARMA. This continual breach to a large extent invalidates having a code of practice in the first place, a problem which has been pointed out to ARMA and yet no action appears to have been taken.

In my experience, LVTs appear to give credence to managing agents who are members of ARMA, as should be the case if ARMA were enforcing their code. However, I cannot see how you can give credence to a managing agent for being a member of ARMA and not penalise repeat offenders for failing to comply with the code of practice.

At the recent ARMA conference, I noticed a negative attitude by the speakers in respect of leaseholders. We are all working in a service industry and, as such, we deal with members of the public. The majority of queries I have received over the years from leaseholders have been reasonable. A few have been ridiculous. However, all lessees deserve to be treated in the way that you or I would wish to be treated regardless of what the query is.

ARMA is a good idea, but the organisation needs to review their criteria of accepting and retaining members and how best to enforce their code of practice, enabling the industry to clean its image so that agents who have no intention of behaving in a decent manner, let alone complying with any code of practice, have no place left to hide.

Roger Southam, Chainbow’s chief executive, weighs up, in turn, the pros and cons of ARMA membership.

Since Chainbow went full pelt into residential property management 14 months ago, I have not seen much benefit in joining ARMA. I must confess up front that I am not an ARMA member, but I am on the periphery of activity, as I Chair the Property Board of Asset Skills, so communicate regularly with their executive secretary through that body.

However, my concerns do not relate to the body, to the personalities or how they are established. My concern is tied to the fact that the bulk of the membership are dinosaurs when it comes to customer service, and that the old practice of overworked staff without backup or support is still prevalent today.

Instead of ARMA taking a stand and guiding the way on service levels, communication and customer satisfaction, they find themselves neutered by elements of the membership who want to pile it high and sell it cheap!

Because there is no qualification to join and the membership is voluntary, the organisation has little chance to truly make a difference. ARMA can discipline, but how many times can you throw the same organisation out and let them back in again before all credibility goes out of the window?

Logically, the Government should be heading towards regulation for the residential sector. If it does, where will ARMA be placed? Surely now is its chance to stand up and be counted. Encourage people to be qualified and insist on members having a large percentage of qualified members through IRPM or other recognised bodies. There would be short-term pain from a subscription point of view, but the long-term benefits would be immeasurable to all.
This all pre-supposes that ARMA wants to raise standards and isn’t just worried about income – or would that sound too like some of its members’ behaviour in management?

Chainbow is constantly reviewing whether it should join ARMA. At this point in time I cannot see a need to join from a marketing point of view, or any real tangible benefit. Perhaps that will change. I hope so, but only time will tell.

Simon Devonald, Director of Trinity Estates, despite earlier reservations, is considering joining ARMA to benefit from the exchange of ideas afforded by industry networking.
Trinity Estates is a growing national company working with the major housebuilders, with 15,000 units in management and a similar size pipeline due to come through in the next year or two.
We are not members of ARMA, although we are now actively looking at joining. Since starting the company five years ago, we always said to ourselves that we would join ARMA when one of our developer clients or our customers started to ask the question. I have to say that to date this has yet to happen!

The membership fees were also an issue to start with and although there is a rising scale according to size, when you are establishing a new company and profit seems a distant goal, there are many other things that you can spend a few hundred pounds on. The application process is also daunting when you are smaller.

Being part of the wider property management community has been less of a priority and I suppose that one’s focus tends to be inward looking rather than to the industry as a whole.

Having said that, we are now recognising that there might be benefits to joining ARMA. We attended the Conference this year and were impressed to learn about the range of Guidance Notes and potential to have the inside track on new legislation. We also feel that we have reached the stage where we can benefit from – and indeed have the time to invest in – the exchange of ideas with colleagues in the industry which membership undoubtedly offers. Because we are rarely, if ever, asked by anyone if we are members, we see the advantages of joining being less the badge of credibility on the letterhead, but more the exchange of ideas and good practice.

Terry White, managing director, Crabtree Property, is a long-standing ARMA member who has benefited broadly from the association.

We have been members of ARMA virtually since its formation and there are a number of key areas where we believe our membership to be beneficial.

ARMA has acted as the focal point for the industry in relation to impending legislation and has acted as an industry voice in raising concerns and lobbying for any changes that are thought to be necessary.

We find the guidance notes extremely useful and these can be used as a part of the procedure in dealing with the topics within the notes. These notes frequently provide definite advice that those members, without an in-house legal department, would have to obtain from their legal advisors, with the obvious cost implications.

We have found the ARMA conferences and meetings arranged for the larger corporate members extremely valuable in fostering relationships and exchanging views with fellow members.

ARMA has been a useful source of new business as prospective clients contact us having obtained our details from the ARMA website. ARMA membership is something that we heavily promote during new business presentations, particularly the benefit of appointing an agent who has to comply with the ARMA code of practice. There is no such protection if using non-ARMA members.