Last week saw the long- trailed publication of the Regulation of Property Agents Working Group report, introducing a raft of proposals to regulate sales, letting and leasehold managing agents in what has until now been essentially a collection of self- regulating industries.
The current structure is recognised as long overdue for review. As it stands presently, an individual with no relevant qualifications, no industry experience and a relaxed attitude to compliance can set up a leasehold management business, holding unlimited client funds and responsibility for the safety of the building occupants. This seems patently absurd. I have written previously about the various facets that property management encompasses, but it seems self- evident that a regulatory structure be required to incorporate disparate areas including staff employment, financial control and fire safety compliance.
The working group chaired by Lord Best recommends introduction of an independent regulator, mandatory licencing of firms and qualifications for practising individuals, new codes of practice, and a review of the transparency in fees and charges levied to leaseholders. The notion is to put regulation of property agents undertaking ‘reserved activities’on the same footing as solicitors or accountants, where this has long been an integral factor. Indeed the Report directly compared the systems currently in place for the Financial Conduct Authority, Solicitors Regulation Authority and General Medical Council when considering the regulatory format to adopt for property agents.
This is all to be welcomed and should weed out the less scrupulous property firms purporting to provide these services. Members of the Association of Residential Managing Agents (ARMA) and the Royal Institution of Chartered Surveyors (RICS) are already subject to external audit, but membership of these bodies is voluntary and certainly not mandatory throughout the industry. Figures released by ARMA suggest that of the 870 managing agent firms currently operating in the UK for example, approximately two-thirds are not members of ARMA.
It is notable that the report extends to regulation of property agents but specifically excludes freeholders, developers, or private landlords (be they international investment companies or the single Buy-to-Let landlord). This seems to me an omission as it introduces an unlevel playing field for leaseholders. It is estimated that 1.7 million leasehold properties in the UK are either self- managed or directly by landlords and so not by external agents. These leaseholders will not be covered by the introduction of this new regulation. In fairness however, the report recommends extending the remit to include these parties at some future point.
In conjunction with the structural elements of the regulation but what I would argue is conceptually more important is the continuing notion throughout the report that there needs to be cultural as well as technical change within the industry. The references to ‘acting ethically’, being ‘open and transparent’, and treating ‘all customers fairly and equally’as integral elements of the property agent offering spell out the intended shift of the definition of leaseholders as ‘consumers‘ or ‘customers’as opposed to simply flat-owners.
Due in part to the nature of the leasehold management business which at times is essentially complaint management, the customer service experience of the industry is unfortunately not always positive. There is a perception that leasehold sector has dragged behind the public and private rented sectors in terms of service offering, where new PRS schemes for example recognise the concept of the customer experience.
In any industry there is a rogue’s gallery, and leasehold management is no different. My experience however has been that this is a minority and the majority of agents provide a comprehensive and conscientious service. The introduction of regulation will build on this – licensing and qualifications will in time wheedle out those firms who do not put a professional and dispassionate service at the heart of their business.
The flipside of this will be to educate leaseholders that there is a price to pay for this higher quality of service – current management fees in London often equate to around £1.50 per day per flat, often on a multi- million pound asset, and clearly the disparity between expectation and reality of what critical mass that fee level can support will be integral to the quality of the personnel and the ability to react promptly and effectively to enquiries.
The introduction of a regulatory structure is therefore a positive and welcomed step. Implementing the structure and educating both property agents and leaseholders will be the critical next step. To paraphrase a previous Prime Minister, the only way that this will be successful will be to focus on ‘communication, communication and communication’.
