Residential leasehold property managers have escaped tougher regulation but faced severe criticism for the way they work.
A market study by the Competition and Markets Authority (CMA) revealed many residential leaseholders contribute up to £3.5 billion a year in service charges but face significant problems in the way their homes are managed.
The CMA review found leaseholders:
- Had little control over who was appointed to manage their properties
- Complained about high charges in return for poor standards of service
- Faced unexpected bills for unnecessary work
The investigation also disclosed that many leaseholders did not understand how their relationship with freeholders worked and what charges they should pay and the services they should expect in return.
In response to the findings, the CMA has decided not to regulate residential leasehold property managers, but has suggested ways to improve their relationships with leaseholders.
- Raising the awareness of prospective leasehold property buyers about their obligations
- Easing communication between property managers and leaseholders
- Making access to redress easier for leaseholders with complaints about property managers
- Allowing flat owners to “vote out” property managers if 50% of the leaseholders agree they are doing a poor job
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 intends to work with the sector and government to implement its recommendations. However, should these not prove to be effective in addressing the issues identified, the CMA may choose to re-examine the market in due course.”
Property managers in Scotland are already regulated – but those running properties that comprise around 5 million homes in England and Wales are not.