Property entrepreneur group supports pragmatic approach of CMA's residential property management report

Posted: 08/12/2014

The Competition and Markets Authority (CMA) has released its latest report into Residential Property Management Services. The market study was undertaken in response to concern that some property managers may be overcharging customers, providing poor-quality services or spending money on unnecessary works.

Other concerns included whether property managers dealt effectively with complaints and access to effective redress for leaseholders dissatisfied with the services they had received. The report findings revealed that complaints and redress systems, while extremely useful in protecting leaseholders, do not always provide adequate protection. They can be perceived by leaseholders as difficult, intimidating or risky (in terms of potential cost and outcome) to use.

However, the CMA report identified that the majority of leaseholders have a positive relationship with their property managers, with the private sector having higher satisfaction rates than other sectors. It also noted the positive steps already being taken by the sector to self-regulate via ARMA-Q and is satisfied that no increased regulatory intervention is necessary.

These ‘positive steps’ include:

• The adoption of a new self-regulatory regime, ARMA-Q, for ARMA managing agents. It aims to raise standards and quality of service, and features an independent Regulatory Panel and a Consumer Charter.
• Other codes, for RICS and ARHM, are currently under revision and are subject to approval by the Secretary of State.
• The introduction by DCLG of the requirement for property managers to belong to a statutory redress scheme.
• DCLG’s announcement of capping of service charges for local authority leaseholders where works are part funded centrally.
• DCLG has also announced its consideration of a variety of other measures and has referred the issue of transfer (exit) fee covenants to the Law Commission.

From a legislative perspective, the section 20 consultation process for major works provides transparency to leaseholders regarding planned major works and an opportunity to influence decisions on the choice of contractor and on works to be carried out. Although this serves a useful information and consultation function, many parties said that the process for section 20 consultations were inflexible and that consultation thresholds were set too low.

The report has recommended a review of the consultation thresholds together with legislative change to force landlords to re-tender for a new property management company in certain circumstances.

Commenting on the report findings, Martin Codd, head of Penningtons Manches’ property entrepreneurs group, said: “The CMA is to be commended for its extremely thorough, balanced and pragmatic approach to its research and recommendations. Its recommendation to build on the existing self-regulatory regime rather than to recommend major statutory regulation of the sector will be welcomed by many property professionals and advisers.”

The full report can be viewed here.

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