The Competition and Markets Authority (CMA) recently (December 2014) published its findings and recommendations following its market study into the residential property management services sector in England and Wales.
The Association of Residential Managing Agents (ARMA), the leading trade body in residential property management, has responded to the review, which was largely complimentary and positive on the industry, by introducing and enforcing on its members a self-regulatory Consumer Charter and professional standards, called ARMA-Q (Q for quality).
The CMA consulted extensively with consumer groups, leaseholders, the industry and government during the course of its study. It found that overall, while the market works well for many leaseholders, some have experienced significant problems in a sector where total annual service charges are estimated at £2.5 to £3.5 billion.
The issues identified include leaseholder frustration at a lack of control over the appointment of property managers, high charges for services arranged by property managers or poor standards of service, leaseholders suffering unexpected costs and being charged for works they consider unnecessary, poor communication and transparency between property managers and leaseholders, and difficulties in getting redress.
The CMA has also identified some concerns about prospective purchasers’ understanding of leasehold, and their obligations and service charge liabilities for leasehold flats.
In light of its findings and on-going developments in the market, the CMA has made a number of detailed recommendations aimed at improving:
– prospective purchasers’ awareness of leaseholders’ obligations
– disclosure, transparency and communication between property managers and leaseholders
– leaseholders’ access to appropriate forms of redress.
These recommendations aim to make leaseholders better informed about the responsibilities and performance of property managers, while greater transparency will increase pressures on property managers and landlords to take account of leaseholder interests. They will also attempt tp provide improved mechanisms for dispute resolution, should issues arise that require action.
The CMA is also recommending changes to legislation affecting rights of consultation relating to major works, as well as supplementing the existing Right to Manage legislation to enable leaseholders, where there is a majority in favour, to require the landlord to re-tender the property management of their block.
The CMA is not recommending that property managers should be subject to more formal regulation by government. For many they have concluded, the market works reasonably well, and satisfaction levels are particularly high where leaseholders have exercised their Right to Manage.
The CMA study acknowledges that existing legislation provides significant protections for many leaseholders, and the sector has engaged constructively with the CMA during the course of its study, recognising that there are improvements to be made and showing a willingness to address the issues that have been identified.
Commenting on Rachel Merelie, the Senior Director at the CMA who led the study, said:
“Many property managers provide a good service to leaseholders, but protection against the worst failures by property managers is vital because when problems do occur they have a major impact on leaseholders.
“We are pleased that within the sector there is a consensus that change is needed and a genuine willingness to be part of that change. This is evidenced by the new and revised self-regulatory codes of practice and the enthusiasm of key players, including property managers, to improve how this market functions.”
The CMA says it intends to work with the sector and government to implement its recommendations, but should these prove to be ineffective in addressing the issues identified, the CMA will re-examine the market in due course.
Response from the Association of Residential Managing Agents (ARMA)
As the issues identified in the CMS study are central to ARMA’s ambition as the leading trade body in residential property management, ARMA says it is taking bold steps to help the industry to improve standards.
ARMA has taken the initiative this year to introduce and enforce a self-regulatory Consumer Charter and professional standards for its members, called ARMA-Q (Q for quality).
As of March 2015 no managing agent can be a member of ARMA without ARMA-Q accreditation.
Laura Luxton Marketing and Communications Manager for ARMA has said,
“This has been a tough process for most of our members, some of which have failed, and others have radically changed their business models as a result. And it has certainly shaken up the industry to the benefit of landlords and freeholders.”
ARMA-Q aims to provide a focused and immediate solution to securing improved performance by managing agents. ARMA says ARMA-Q clear, sets high standards, has robust monitoring and enforcements and is already delivering results. ARMA-Q places the consumer at its heart and addresses many of the CMA’s recommendations to improve disclosure, transparency and communication between property managers and leaseholders.
ARMA claims has led the way on improving leaseholders’ access to appropriate forms of redress by insisting that ARMA members must have a published internal handling complaints procedure. Members “must offer free access to a recognized independent ombudsman scheme if leaseholders are not satisfied with the way an ARMA member handles their complaint.”
ARMA says it has appointed an independent regulator, to make sure that these arrangements work properly
Martin Perry – Chairman of ARMA said:
“While we welcome the CMA’s acknowledgment that many property managers provide a good service to leaseholders, it is clear from their findings that there is room for improvement in the way that the industry operates. ARMA is on the case! From next year, all our members will have to be accredited to ARMA-Q, which enforces best practice. We want our ARMA logo to be the badge of excellence – the natural choice for consumers. We are ready to work with the CMA, government and other residential property interests, to achieve the improvements that are needed.”
— LandlordZONE (@LandlordZONE) March 6, 2015