Leaseholders hoping to reduce service charges and get better service from their managing agent have long found that to do so is more than simply a case of taking control of their block from their landlord – but it needn’t be any longer, thanks to the emerging alternative provided by block administrators.
The ways to take control
Since the 2002 Commonhold and Leasehold Reform Act there have been two options available to leaseholders wanting to take control over who manages their block – buying the freehold or acquiring the ‘Right to Manage’. Whilst some may be priced out of the former, the latter is eminently affordable to the vast majority of leaseholders.
Problems remain even after leaseholders take control
After taking control, by whichever means, leaseholder generally opt simply to replace their incumbent managing agent with another, put off the option of self-managing their block by the potential administration and ever-increasing legislation that to do so would entail.
However, to their surprise, this rarely brings about the anticipated improvements in cost and level of service, since it is with the managing agents, rather than with the landlord, that the problems lie. The leaseholders’ frustrations, with value for money, quality of services and responsiveness, remain.
Kim Upton, the lead lessee of a twenty unit Victorian mansion block off Fulham Palace Road, notes, “even though we employed the managing agent directly through a Right to Manage company, they acted as though they were in control”.
Kim continues, “our frustrations were mainly in that our agent was unresponsive, didn’t use good quality contractors and didn’t bother getting competitive quotes”.
The new approach to property management
Kim’s block ultimately turned to block administrators to right their property management wrongs. Put simply, this new approach allows leaseholders to remain in charge of management decisions, whilst all administrative and legislative complications are taken care of by professionals.
Crucially, leaseholders’ approval is always sought before invoices are paid, and before contractors are engaged. Likewise their opinions are sought before any other key decisions on management are made.
Each block is issued with its own dedicated website, so that leaseholders can communicate with one another and have access to all relevant documentation concerning their block.
This absence of obligation for the leaseholders to take up whatever and whichever services and contractors a managing agent might thrust upon them makes for reassuringly predictable, transparent and substantially reduced service charges.
The savings you can expect
For Kim’s block, the total service charge expenditure had been running at a base level of £30-35,000 per year. That figure has now been reduced to £13,000.
A saving of this magnitude isn’t uncommon, as Steve Wylie, a director at one of the UK’s leading block administrators, explains. “When taking on new clients we have seen insurance premiums reduced by up to a third of what they were when purchased through a traditional managing agent, together with a 20-50% reduction in service charge expenditure”. Managing agents often take an additional commission on insurance which is not transparent to the leaseholders.
Given that managing agents commonly take these ‘hidden’ commission, it comes as little surprise that managing agents do not always look for the best value for money amongst in the contractors that they appoint to a block.
An agent’s fees are typically fixed, and consequently, far from looking for the best value for money, they are more likely to be focused on minimising their own efforts. Perversely, in some cases, an agent’s fees are based on percentage of spend and therefore increase as the contractor’s cost increases. With leaseholders themselves directing management, verifying contractors, and intent on spending within their means, the focus for finding value for money is re-established.
It’s a scenario Wylie sees frequently. “One block that we took on had been told by their managing agent that their building required £80,000 worth of redecoration. When the leaseholders contracted an independent surveyor themselves to assess the job, with a few sensible tweaks of scope, the building was re-quoted as needing just £6,000 worth of work,” he explains.
In some extremes, residents have become so frustrated with having no choice over the contractors issued to their block by their managing agent that they have been driven to go out and find competitive quotes from alternative contractors themselves, even though they are still effectively paying for their managing agent to provide this service.
Better communication means better service
The cleaning of communal areas frequently becomes a contentious issue between leaseholders and their managing agents. In order to minimise their administration costs, managing agents typically prefer to employ larger cleaning contractors to work across their portfolio. Because of this relationship, the cleaning contractors treat managing agents rather than the leaseholders as their client, so leaseholders’ needs go disregarded.
As Kim recalls, “the cleaners employed by our managing agent were slapdash and unreliable to the point where they would occasionally fail to turn up whatsoever, yet still cost us thousands each year. Having taking control, we now use cheaper local cleaners, and because we employ them directly they are easily contactable and always responsive, should we have specific cleaning requests from week to week.”
Managing agents will claim that they personally inspect properties in order to monitor the ongoing quality of service provided by their contractors, but it’s the leaseholders themselves who are undoubtedly better placed to offer such feedback. With leaseholders employing contractors directly, there’s better communication between the two parties, helping contractors to meet the leaseholders’ expectations.
What’s more, contractors generally appreciate working with leaseholder-run blocks as they get more direct feedback and typically find that invoices are paid more quickly. Leaseholders are happier with the service provided and the contractors are happier with the ease and speed of feedback and payment.
The shortcomings of self-managing
Previously, the only alternative to using a managing agent available to leaseholders wanting to take control has been for them to self-manage their block. Although a cheaper option, the administration required in doing so is burdensome, time-consuming and leaves the self-managing leaseholder open to violating an ever-increasing amount of legislation.
Whilst a block containing only three or four flats might be deemed relatively ‘manageable’, self-managing a larger block is another matter altogether, especially if disputes between residents arise. It is here where engaging block administrators, for a fraction of the cost of a managing agent, is always beneficial.
Daniel Margolis briefly attempted to self-manage his four flat Edwardian conversion in West Hampstead, but found that the legislative and regulatory regime was particularly onerous. “We wanted to run our block ourselves, but discovered that the law governing residential leases and block management is something of a minefield. Fortunately we became aware of the alternative offered by block administrators, whereby we were put in control, had all of the administrative work taken care of and were guaranteed to be operating according to the legislation. The service is better suited to our needs and moreover gives us the value that we always felt was lacking from our previous managing agent,” he explains.
Visit this website for further information on the new approach to property management.
About Urban Owners
Urban Owners is the pioneering provider of block administration services. Our innovative mix of sophisticated web-based communication and administration tools, professional guidance and on-hand support puts leaseholders in control of their block, reducing service charges and improving the standard of service provided to the block.
We specialise in assisting leaseholders with the management of their block, providing them with the level of support that they choose; from complete outsourcing to Urban Owners to self-management using our tool-set and advice.
We have a nationwide portfolio of blocks and groups of houses, all of whom have profited from our flexible service and accessible, up-to-the-minute software. With a team comprised of seasoned property professionals, we ensure that as new methods and legislation emerge, we are right on top of them, so that our clients can always count on receiving the most forward-thinking service on the market.
