Calls to improve residential property management

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 will 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 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 the market works reasonably well, and satisfaction levels are particularly high where leaseholders have exercised their Right to Manage. 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.

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."