Flat Living Issue 3

Keeping you up to date with all Leasehold matters

£2.50 Summer 2010

SEE INSIDE

• • • • • •

The future of leasehold Repairs and maintenance Self manage or outsource?

Know your lease Outdoor spaces Flat security

PLUS much more

There are over 1.8 million private Flat Owners in the UK The Journal for Residents’ Management Companies supported by ARMA

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Flat-Living.co.uk

Welcome

Advertise For advertising enquiries call 0845 257 6374 or visit www.flat-living.co.uk

Contact Published by www.flat-living.co.uk Ltd, 5 Addisons Way, Lilleshall, Newport TF10 9HH Tel: 0845 257 6374 Fax: 0845 257 6319 Email: info@flat-living.co.uk Although every effort is made to ensure the accuracy of material published in Flat Living Magazine, the publishers cannot accept responsibility for the veracity of claims made by contributors or advertisers. Contributors and advertisers must accept full responsibility for the material they submit for publication in particular for ensuring that they do not infringe copyright, intellectual property rights or trademarks.

Copyright for all materials published in Flat Living Magazine remains with the publishers. Any business advice is given for guidance only and readers must consult relevant bodies before acting on any advice given in the magazine. *Source: ARMA Flat Living is published independently of any trade or professional body and retains editorial control over all articles that appear in this issue.

WELCOME TO YOUR SUMMER ISSUE OF FLAT LIVING MAGAZINE THE PAST FEW MONTHS HAVE BEEN QUITE EVENTFUL FOR US. On page 24 you will find details of Flat Living’s new Leaseholders’ Roadshows. The first roadshow event is being held at One Wimpole Street, Westminster W1 on the 1st November 2010.

We receive many calls and letters from leaseholders needing advice and information on a wide range of topics, for example, how to extend their lease, how to obtain the Right to Manage and how to purchase their freehold. Therefore we thought the best thing would be to get out to see you all. We only have 300 places available for our first event at One Wimpole Street - and half of these places have already been reserved.

We have further roadshows planned for North, South, East and West London, Brighton, Bournemouth, Manchester, Birmingham and Leeds. To register your interest at any of our roadshows please email me, Nik Abel, at info@flat-living.co.uk or call 0845 257 6374.

Our website has just been re-launched, slightly later than planned, and includes a host of new information that is being added to daily. In October we are launching a free downloadable Leaseholders’ Guide, which will provide information on all aspects of running a Residents’ Management Company and being a leaseholder - to be contacted when this is available please register online at www.flat-living.co.uk.

As ever our Health & Safety Guide is available for only £59 (see page 4) and we have a brand new Fire Risk Assessment Guide that can be purchased online for only £39.

We hope you enjoy our Summer Issue of Flat Living magazine, and please continue to send us your stories, questions and queries to the usual address or email us at info@flat-living.co.uk Editor-in-Chief Nik Abel

CORRECTIONS Technical Corrections: Your at-a-glance guide to service charges article, page 37, issue 3, the following corrections have been received: That the Commonhold and Leasehold Reform Act 2002 obliges landlords to provide tenants with annual accounts - this section of the Act has not come in yet and is unlikely to do so for some months.

Under the Act, landlords must consult with tenants under Section 20 under the following circumstances: Where relevant works that will cost any one tenant £250 [it is not per tenant per year] Where the Landlord intends to enter into any long-term agreement (i.e. more than 12 months) and the cost will be more than £100 for any tenant [it is not necessarily for gardening and cleaning and it is not £100 per tenant per year].

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Flat-Living.co.uk

Contents

24

CONTENTS News & views

Damian Greenish interviewed Help & advice,

by Bruce Maunder Taylor

Leader on QLTA, by John Mills Self manage or outsource,

by Lesley Davies

06 09 11

Alex Greenslade Proerty investments,

by Nigel Atkinson Service charges and RICS,

by Gerry Fox Service charges and the solicitor,

by Alison McLachlan

04

ARMA updates, news and views Repairs and maintenance,

by John Byers

18

Security and safety,

16

Workshop 1 - Know Your Lease,

The future of leasehold,

by Bob Smytherman, Tony Essien,

leaseholders’ Roadshow invitation

by James Wickes

by Ian Mitchell

26 34 38 40

Workshop 2 - Use An

18

Insurance Broker,

21

End Note (garden care),

22

ARMA managing agent directory

45

Competition to win security for your block

46

23

by Lesley Davies

by Peter Gilgallon

42 44

Flat-Living.co.uk

News

Case law: Qualifying as a self-contained part of a building for leasehold enfranchisement In Craftrule Ltd v 41-60 Albert Palace Mansions (Freehold) Ltd [2010] EWHC 1230 (Ch), the High Court considered the definition of a qualifying building under section 3 of the Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993). The High Court decided that “a self-contained part of a building”, referred to in section 3, could mean part of a building even if that part would be capable of being subdivided into two or more further self-contained parts.

The decision is of importance to tenants of long leases seeking to enfranchise. Tenants of a self-contained part of a building, that may also have the potential to be treated as two

or more separate parts, can join together to serve an initial enfranchisement notice under section 13 of LRHUDA 1993. This may be significant where the tenants of one of the two or more potential subdivisions would otherwise fail to satisfy the requirement that the initial enfranchisement notice is served by “not less than one half of the total number of flats”.

The case has confirmed that tenants have the flexibility to group together in various configurations that satisfy the requirements of a self-contained part of a building. Freeholders may be disappointed that another potential argument to defeat an enfranchisement claim has been ruled out.

OM Property Management delivers improvements OM Property Management, part of Peverel Property Management, has developed a new order tracking system in a bid to increase transparency of work carried out by contractors at developments it manages across England and Wales. This innovative new functionality, which will be available via its online customer website, will ensure

customers are kept up to date on maintenance works at their development.

Late 2005 the company first launched their customer website to provide property owners and tenants with development specific and financial information which was part of its objective to provide excellent customer service.

In 2007, this website won the RICS Award for Property

Management Strategy and Delivery - Private Sector for demonstrating innovation in property management.

Since then, the business has been evolving its web technology even further by developing a new “Maintenance Update” area which will provide up to date and real time information about the status of maintenance works directly to customers.

Tragic security gate accidents On 30th June a six-year-old girl died after becoming trapped in an electric gate in Manchester as her mother watched on helplessly. Emergency services were called to the entrance to flats off Maine Road in Moss Side. The family of a five-year-old girl who died after being trapped by a sliding automatic gate have paid tribute to her.

On 3rd July Karolina Maria Golabek, a pupil at Penybont Primary School, died after the incident at a block of flats in Bridgend. The waist-high black metal gate is at the entrance to a small car park at a three-storey building.

Residentsline have been providing buildings insurance for blocks of flats and apartments for over 15 years and have just

06

relaunched their website to provide further unique facilities for their Clients. This includes a log-in facility to view insurance documents and access for property managers to access their clients insurance claims online.

Flats first to fall…and first to rise At their lowest point in February 2008 flat prices fell almost twice as fast as all house prices (1.6% drop in all residential property prices, 2.9% drop in flat prices). Fear not. Some commentators believe that although private sector buy-to-let flats have been hard hit, flats in traditionally owner occupied blocks have fared much better than those that are, in the main, let out. Also, flat prices are often the first to fall in a recession, but have been shown to bounce back to pre-recession levels quicker than house prices. And what about those developers?

Having mothballed sites and sold off swathes of new homes at up to 50% off the official valuation to keep the cash coming in, some have survived to build another day.

Many haven’t.

Giving you a clear view.

At Clarke Mairs we have a great deal of experience in acting for both Landlords and Tenants in: Lease Extension Enfranchisement of flats and houses Rights of First Refusal Right to Manage blocks of flats

Whether you own a single leasehold house or flat or a large number of freehold or leasehold properties, we can offer clear, comprehensive advice on the options available to you.

We collect debts for businesses and individuals.

To advertise in the next

Katy Stothard is a member of the Association of Leasehold Enfranchisement Practitioners (ALEP).

issue of

Appointing a manager

Flat Living

For further information please contact Katy Stothard at kss@clarkemairs.com.

0845 111 0795 www.clarkemairs.com Royal House, 5-7 Market Street, Newcastle upon Tyne. NE1 6JN

Call us for more information:

020 8290 0440 www.thackraywilliams.com

call 0845 257 6374

Flat-Living.co.uk

Interview

Aiming for excellence Damian Greenish is the new Honorary President of ALEP. He talks to Flat Living about his plans for the forthcoming year. spring and autumn – and through press coverage and by being more involved in government consultations. Persuading government to listen is vitally important.

Often government takes decisions in this sector that are politically motivated rather than providing practical solutions to problems. More consultation would be better for everyone.

What upcoming changes in regulation will affect your members?

At present there is no appetite for major legislative change – the new government has other things on its mind and I’m not aware that it is looking in particular at leasehold enfranchisement.

What effect will the new government have on your industry in particular and residential property in general?

What is ALEP? ALEP stands for the Association of Leasehold Enfranchisement Practitioners.

The organisation was established in 2007 in response to the concerns of leaseholders, who wanted reassurance that the organisations they were dealing with were reputable. With around 100 members, ALEP brings together barristers, solicitors, valuers, managing agents and others with a professional interest in leasehold enfranchisement, aiming to promote excellence and develop the profile of this complex sector of the law and valuation as it relates to leasehold enfranchisement.

What are the aims of ALEP? Our aim is to provide peace of mind for leaseholders, so that if they use an ALEP member, they will be reassured that person is experienced and competent in matters related to leasehold enfranchisement, and in particular lease extensions and freehold acquisitions. ALEP members are required to demonstrate an agreed standard of competence and must commit to high

professional standards, quality customer service and a strong level of market knowledge. The Association also provides a forum for networking and discussion in order to keep members abreast of new developments and to promote excellence among the membership.

What new dimension do you hope to bring to the organisation?

As a longstanding practising solicitor and author, I have a personal reputation within the leasehold enfranchisement sector. I hope to make good use of this on ALEP’s behalf, raising the profile of the Association and giving us a stronger voice with government and other professional bodies.

What are your plans to expand member numbers?

We have a big potential membership because anyone involved in residential conveyancing should know something about leasehold enfranchisement. We can only increase our membership by raising our profile and we aim to do that via our conferences – two each year in the

The tax implications in the recent emergency budget will inevitably filter through to property and it remains to be seen what the impact of the new Capital Gains Tax rate will have on investors. The coalition government will undoubtedly be less regulatory in their approach – the abolition of HIPs is an early example of this - although the rental sector is fairly well de-regulated already.

How has the recession affected the number of notices served on freeholders?

As you would expect, the recession had a significant impact on notices. In 2008/9 the number of notices being given plummeted.

In 2009/10 there was a sudden uplift in the number of notices being served as people tried to call the bottom of the market, which arguably came at the end of last year. The availability of funding and lease lengths also makes a difference to timing.

Damian Greenish is a highly respected figure in leasehold enfranchisement at solicitors Pemberton Greenish LLP. A leading expert in his field, having practised as a solicitor in the leasehold sector for more than 30 years, he is also co-author of the leading enfranchisement textbook, Hague on Leasehold Enfranchisement, which is now in its fifth edition.

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3/12/07 09:44:37

Flat-Living.co.uk

help & advice

The ARMA Surgery Bruce Maunder Taylor, a chartered surveyor and member of ARMA’s Council, provides answers to readers’ questions. If you have a question, email it to info@flat-living.co.uk. (All names and addresses are withheld).

Question: I am the chairman of a resident management company (RMC). We have a long-running dispute with a leaseholder concerning the causes of damp in her flat. According to our surveyor the problem is caused by condensation but according to the leaseholder’s surveyor it is caused by penetrating damp. In your article on page 45 of the spring issue of the Flat Living magazine you say that “It is important to reliably tell the difference between condensation and penetrating dampness”. But if two members of the RICS cannot agree on this matter, it seems that there is no reliable way of telling the difference.

Do you have any suggestions on how we might resolve this problem?

Answer: Whatever judgment a professional or expert makes, it is the reasons for the judgment that are important. If you take the example of a court case, judges do not accept expert testimony on the basis of “I am Mr Know It All – I’m Right”, they want the supporting evidence and reasons. When they have looked at that supporting evidence and reasons they will decide which of the experts they believe to be right.

My advice is to ask the RMC surveyor why he says it is condensation and to ask the leaseholder’s surveyor to say why he believes it to be penetrating dampness.

Penetrating dampness does not come from nowhere. If the surveyor blames rainfall, then he will be expected to have monitored the dampness in relation to rainfall patterns. If he blames a defective water pipe then he should be able to identify the location of the pipe and demonstrate the point of escape, exactly if the pipe is exposed, within a reasonable area if the pipe is encased.

If there is condensation then humidity levels can be measured (if it really comes to that) or a dehumidifier can be installed for a temporary period. If the dehumidifier dries out the dampness it is likely to be condensation. If there is penetrating dampness, then that penetration is likely to continue, despite the best efforts of the dehumidifier.

Two sensible surveyors who genuinely want to find the reason for the dampness should not have difficulty in devising appropriate tests for the precise circumstances of the case in question to establish which one of their opinions is correct. Please bear in mind that it is quite possible for both of them to be correct and for the dampness to be caused by more than one source.

Any opinion from any advisor that is not supported by evidence and reasoning is of little or no help or value to anyone.

In the circumstances of your particular case it should not be difficult for each surveyor, having different opinions, to set out in a report their evidence and reasoning for coming to their conclusion that it is condensation, on the one hand, or penetrating dampness on the other hand.

If that does not resolve the issue between them, there should be no difficulty for two surveyors, both of whom want the problem to be resolved, to meet on site and agree what tests or observations should be made in order to establish evidence and reasons with which both of them can agree.

The possibility of more than one cause contributing to the dampness should not be overlooked: it is possible that both surveyors are at least half right!

Q: I am a director of an RMC. Our block has not been well maintained for some years and, at our AGM, the lessees asked for a 10-year major works programme to assess reasonable reserve fund needs. We obtained a report from an experienced chartered surveyor and if we followed the advice we would bankrupt some of our lessees. It seems that the surveyor has followed a new-for-old policy. What are our obligations and what do we do?

A: Your lease probably requires you to “repair and maintain”. In interpreting that obligation, the Courts have long taken account of the age, character and location of the property: a modern luxury prime location block would be treated differently to an old building of basic quality in a modest value location. The instructions given to any surveyor asked to prepare a 10-year forecast should carefully set out the basis of the advice to be given or, yes, you may find that the report you receive will cause anxiety and merely shift the problem from unknown repairs to unknown financial resources of individual lessees.

The standard approach is what you have done: instruct a competent surveyor to inspect the whole building and its services, report to you and suggest a 10-year major works plan with costings based on current building prices. The surveyor should be instructed to be concerned only with major works and not ordinary repairs which will be paid for from the annual service charge payments, and to take account of the age, character and location of the building.

An alternative instruction, which is sometimes followed, is along the lines of: this is what we can afford to collect in the reserve fund each year, prepare a costed 10-year plan with that in mind.

Yet a third option is to instruct the surveyor to identify those major items which will require some work over the next 10 years and place them in order of priority with a cost indication. The intention will be for the lessees to then have a meeting and agree amongst themselves what will be fitted into a 10-year programme and when.

A 10-year programme should never be regarded as “writ in stone”.

Bouts of extreme weather tend to speed up the rate of deterioration of some components; long periods of mild weather tend to slow it down. Circumstances can change: different lessees may be appointed to the board of directors with a different agenda either to raise repair standards or reduce repair costs.

Q: We are a small block of eight private flats, post-war bomb damage, in an otherwise 19th century square, designated a conservation area.

Recently a gas leak was traced to an underground pipe in the road outside. The utility company said that the pipe-work both in the road and leading to the flats would have to be replaced, and that it was no longer their policy to replace pipes inside multiple occupancy buildings. We had no consultation on the possible sitting of such pipes. Internally the supply pipe that ran upwards through the kitchen of each flat was cut off, and the gas meters were relocated near the front wall. We now have vertical and horizontal pipe-work running across the façade.

Continued on page 12

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Flat-Living.co.uk

help & advice

We appreciate that the leak had to be made safe and the gas supply restored. But do gas companies really have the right to bypass planning consent, ignore aesthetic considerations, and possibly reduce the value of our property? Even to put us in the position where the Conservation Section of the local Planning Department may ask us to relocate the pipes at our expense? Can you suggest, please, any possible redress? Have there been any other instances of this?

A: There have been many occasions over the years when gas companies have refused to reconnect to internal gas pipes, insisted on the external location of gas meters and then individual pipe from each meter to each flat. Indeed, there are many blocks with other cables pipes and wires on the outside, often introduced when communal supplies have been replaced with individual supplies. It is a widespread problem.

Some blocks of flats accept external pipes and conduits and nothing further develops. Other blocks take great exception to this multiplicity of individual external surfaces (individual satellite dishes are possibly the most notorious) and great difficulties are created.

Most leases provide that the individual supply pipe or cable is part of the demise as it supplies only that individual flat. Few leases provide that the lessee (or anybody else working for the lessee) can unilaterally put the pipe on the outside of the building where it is technically trespassing. That is often the route by which managing agents or landlords oblige individual lessees to reroute external pipes, cables satellite dishes etc.

Your complaint is against the gas company, but you represent the directors of the RMC and not the individual lessee. It is each individual lessee who is in the contractual position of being able to take issue with the gas company, and the RMC is in the contractual position of being able to take action against the individual lessee. As no steps were taken at the time to stop them whilst the workmen were on site, you now have a situation of acceptance or rectification. It is probably unlikely that the gas company will willingly rectify what they have done. Situations like this often come down to managing peoples expectations: if you expect rectification, you are likely to have to engage in time effort and expense in pursuing remedial works or, arranging for the lessee to remedy the matter, quantify the cost, and attempt recovery action.

A lawyer will tell you that neither party has a cast iron case (nobody has a cast iron case at law) and an assessment will have to be made of your chances of winning and the costs (both money and emotional) of fighting. A gambler will tell you that you have better odds in a bookmaker’s office where it is certain that you will not loose more than your stake before the race is run!

Q: The section on your website on “Trees” is extremely interesting, whereby you state that it is the owner of The Trees who is responsible for the maintenance, inspection of the trees.

Try as I may, over a period of days, including reading your article, I cannot find any actual legislation which states the liability and responsibility of these owners, and I would appreciate any advice and information.

A: If you plant a tree on your land, or one grows on your land, it is your tree and is as much within your ownership as is your garden or the rest of your site.

If the tree grows beyond the boundary (either the roots under ground or the branches over ground) then there are a whole series of court cases that establish that those parts of the tree are trespassing on your neighbour’s property. If they cause damage then your neighbour (or other person who suffers

12

damage) is likely to try and recover financial damages from the tree owner.

The many court decisions on that difficult point leave some uncertainty. For instance, when a court judgement finds that tree roots have caused subsidence damage to a neighbour’s building, before a court assesses whether damages are payable, it will often look to see if the neighbour served notice on the tree owner that the tree might cause damage, if the tree owner is someone (e.g. a surveyor/builder/architect) who ought to know that the tree might cause damage, or whether the tree owner does not have such specialised knowledge and genuinely had no idea that his tree might be causing trouble.

These are all matters on which the court will need to make findings of fact, possible liability and, if there is found to be liability, damages.

It is for that reason that tree owners should periodically check their trees and maintain them appropriately according to their age, condition, proximity of buildings or other structures which may be damaged etc. Unusual problems include a tree that is growing on a boundary and it is difficult to tell whether the tree belongs to the owner on one side of the boundary or the other, or is on the party line and therefore something for which both owners have some responsibility.

Problems sometimes arise when a neighbour decides to cut back overhanging branches (which he is entitled to do because they are trespassing) and returns those branches to the property of the tree owner. Problems sometimes arise because trees are allowed to grow to a height that cuts out light from a neighbour’s property, and sometimes a tree owner returns from holiday to find that his trees, on or near to his boundary, have mysteriously been cut down while he was away!

The reliability and responsibility for trees is largely a matter of common law and court case authorities rather than statutory law, but the general advice is please, do everything you can by agreement with your neighbour, and do everything you can to avoid litigation over trees.

Flat-Living.co.uk

Leader

“QLTA-Quite Likely To Annoy”

A

QLTA means qualifying long term agreements and is part of the regulations about consultation, known as S20 regulations. They are quite likely to annoy resident management companies, lessees and managing agents, writes John Mills, Technical Consultant ARMA.

s directors of a self-managing RMC you may have found a good gardener at last. He is willing to give you a better price if you offer him a two-year contract. But that would be a QLTA and you should stop and consult all lessees with at least two official notices before you can go ahead. You do not want the hassle and the paperwork.

Or your RMC has held the AGM that everyone in the block attended.

A unanimous vote was carried in favour of continuing with the current managing agent and you could get better terms if you agree to two years rather than a one-year extension. But that would be a QLTA and you should stop and consult all lessees with at least two official notices before you can go ahead. You would have the silly situation of having your current agent sending notices asking if any lessees want to nominate another agent, and your current agent being asked to work without a contract until the consultation period was over.

Your managing agent wants to tender a lift maintenance contract for all the blocks that it manages. If it offers a three-year contract it will get a better price and the benefit would be passed on to lessees. But that would be a QLTA and the agent should stop and consult all lessees across every block with at least two official notices before it could go ahead. Notices will have to be specific to each block because the landlord or RMC is different for each one. The agent decides that the extra administration is not worth the bother.

What is a QLTA? A QLTA is any contract or agreement relating to service charge matters entered into by a landlord for a period of more than 12 months. And consultation under what are called S20 procedures is required for QLTAs if the amount payable by any one lessee exceeds or would exceed more than £100 in any one year.

So a contract for two years for gardening for 10 flats, where every lessee pays an equal share of the service charge costs and each lessee pays £90 per year is a QLTA, but does not require consultation. But if the same contract is for a block of 10 flats where the penthouse pays 20% of the service charge requiring the penthouse to pay £180 per year and consultation is then required.

VAT must be added to any figures before deciding whether the consultation threshold has been reached.

What sorts of contracts could be QLTAs? • Managing agents’ contracts • Lifts • Door entry systems • Cleaning, window cleaning & gardening • Electricity for common areas What contracts are not QLTAS? Contracts of employment are specifically excluded by regulations.

What consultation is required for QLTAs? • A notice of intention with at least 30 days for lessees to make comments upon the proposed contract and to nominate possible contractors.

• A notice of proposals including at least two estimates

•

from contractors with at least 30 days for lessees to make observations upon them.

Unless the landlord chooses the lowest price for the contract, a notice of reasons to each lessee.

What if I ignore the consultation requirements?

You may get away with it but why take the chance. If any lessee challenges the contract then they have the right to refuse to pay no more than £100 per year towards that contract.

Can’t I get dispensation from tribunals?

LVTs can dispense with the whole or part of them S20 consultation procedures and dispensation can be given before or after the event.

There is no prescribed dispensation procedure or set of letters or notices to follow.

LVTs can dispense with the whole or a part of the S20 procedures so if you can comply with part of them you should always do so. The LVT may not give dispensation of the whole if you could have followed parts of the consultation procedures.

The following have been found not to be good reasons to give dispensation: • An honest mistake • Compliance with the spirit of s20 • The landlord was an RMC that took the decision to go ahead • The lowest quote was chosen Surely the consultation requirements do not apply to RMCs? Just because an RMC has decided to enter into a long-term agreement does not excuse it from the legal requirement for S20 procedures. Even if a majority or all the lessees in a block vote to go ahead does not mean that S20 can be forgotten about. A disgruntled lessee after the event can refuse to pay more than the threshold figure of £100 per year. If the chosen contractor makes a mess of things then lessees may refuse to pay.

Managing agents should always advise RMCs that they must follow S20 procedures for QLTAs in full. Failure to do so may mean they cannot recover the expenditure incurred and the directors may be open to claims for negligence.

What about contracts we inherited on new developments?

We have just taken over the management company on a new development and the developer has locked us into a 15-year contract for an entry phone system and a five-year contract with managing agents we would like to get rid of. There are special rules for QLTAs for new developments. A contract entered into for a period of less than five years that was entered into at a point when there were no lessees at all in the block is not a QLTA. So a developer may for good reasons need to get things arranged before selling any flats, but the contracts should be for no more than five years. If the contracts are for more than 5 years then they are not illegal but lessees can refuse to pay more than £100 per year towards the costs.

At a time when the government does not think it important enough to introduce regulations to protect service charge monies, QLTAs are an example of regulations that produce mostly bad outcomes for lessees.

See pages 22 and 23 for further information about service charges.

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Flat-Living.co.uk

Self manage or outsource

A tale of two properties When Directors of Residents’ Management Companies move or retire, the question for the remaining committee is often, can we continue to self manage or should we appoint a property manager.

Lesley Davies explains.

I

n many cases, particularly where blocks are very large, or residents have experience of effective professional management, there is no question that an independent company will be able to do a better and more effective job than it is possible for residents to do themselves. There is no debate: outsourcing is the only way to go.

However, in some cases, self-managing may be more appropriate.

Those living in a very small, tight-knit residential block where neighbours know each other well and are committed to running the building may be happy to self-manage. They may even enjoy getting involved in the many and varied aspects of property ownership and maintenance that this, often onerous task, entails.

In this article, we look at two very different groups of residents, one using a managing agent and one managing the property through their own management company. If you and your fellow residents are in a situation where you need to make a decision about property management, the different views of two leaseholders might give you an insight into the two different approaches.

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Case study: Stedham Hall, Midhurst Stedham Hall is a beautiful, historic building located in the village of Stedham near Midhurst in West Sussex. Thought to have been originally built in the 16th century, the property was extensively renovated by a 20- man workforce during a two-year period from 1910 to1912 and was divided into eight apartments in 1972. All residents are leaseholders enjoying shares in a 1000-year lease of which 38 years have now expired and joint owners of the freehold.

The building is self-managed by Stedham Hall Management Company, which has three directors: chairman, treasurer and director of property and grounds. The board of directors meets at least five times a year and is entirely responsible for the good management of Stedham Hall, the company and the grounds.

According to Michael Ayling, director responsible for the property and grounds, the decision to self manage was based on a sincere passion for the property, utilisation of the directors skills and commercial contacts and the desire to control costs; “This way, we ensure that

Flat-Living.co.uk shareholders quarterly charges are wisely spent, providing exceptional value as the directors’ services are offered free to the shareholders.

Half of the shareholders/residents are quite elderly and the directors act on their behalf and in everyone’s best interests”, says Michael.

He explains that the house is surveyed annually by a builder who, in conjunction with the property director, decides on the maintenance tasks required for the year. This includes the ancient roof, lead gutters, lead fall pipes, chimney and brick wall restoration. The large grounds are cared for by a family firm of contractors who cut the grass regularly and maintain the extensive copper beech hedges and shrub land for an agreed fee, which is reviewed annually. The drains, leaded windows and electrics are maintained and reviewed annually and dealt with as necessary. The company directors also arrange building insurance cover after a thorough survey and risk assessment by the insurer and broker and produce annual accounts through a registered firm of accountants.

Stedham Hall poses a particular challenge in terms of management as it is almost 500 years old and so requires constant observation and timely maintenance. As the income available to the management company is limited, the directors plan carefully in order to satisfy the needs of the house, gardens and residents.” Occasionally individual shareholders demand action in their own interests”, says Michael, ”however, nothing is done without the consent of the management team and the direction, control and briefing of contractors is strictly managed”.

Michael admits that to self-manage is a huge commitment of time and energy. “What makes it worthwhile is the fact that all the residents have a passion for the property and grounds. From a personal perspective I act as if I were the sole owner. If I get it right, all the shareholders will be more than satisfied …which I’m pleased to report they are”.

The Stedham Hall residents are clearly happy with their decision to self-manage. They have compared the cost of outsourcing and found that leaseholder’s contributions would more than treble if the building were managed by a property managing agent. Without doubt, however, in order to self-manage successfully, those involved must be strong, positive, determined, committed and prepared to devote time and energy in representing the interests of others. Michael confirms this is the case at Stedham Hall: “A wishy, washy committee dealing with a group of leaseholders would be like cubs and brownies fighting the Taliban!”

Case study: Rock Gardens, Bognor Regis Phil Dobby and his fellow residents at Rock Gardens on the seafront at Bognor Regis in West Sussex have taken the opposite approach to Stedham Hall. They are happy to use a professional property manager and work closely with staff at the local office of Parsons, Son and Basley which is a firm of chartered surveyors specialising in property management in the south of England. However, this hasn’t always been the case. As Phil explains, it was residents’ dissatisfaction with their previous agent

Self manage or outsource

that led them down the Right to Manage route.

There are 69 flats at Rock Gardens and a mix of owner-occupiers and tenants – although the latter are in the minority. The building does not present any particular management challenges but faced with a 20% overspend on maintenance and an agent who appeared powerless to enforce the lease conditions when some leaseholders wouldn’t stick to the rules, Phil and his fellow residents took matters into their own hands. “As a result of RTM, we are now in control,” he says.

Once the decision to go for RTM had been taken, one of the residents’ first tasks was to appoint a new agent. With so many flats in the block there was no question of self-managing the property, says Phil, who firmly believes property management is a job for a professional. We looked at a number of candidates and based our decision on four key criteria. We wanted our new agents to be: • • • •

Locally based; Able to demonstrate their ability to carry out budgeting and financial reporting in an orderly manner; Competitively priced; Fully experienced in property management.

“The agents we are now using not only met our expectations but exceeded them because they have skills in-house in addition to property management and so we have been able to use their advice and contacts to help set up our RTM company, establish the board and get to grips with what our new obligations are as leaseholders,” he says.

The managing agent’s view

By Anthony Tokatly, JJ Homes I always ask prospective clients who have been self-managing or Directors who are considering it – “are you experienced in property law, accounting, engineering, personnel, insurance and maintenance?” The answer of course is invariably a resounding no. If this lack of expertise is not enough how about – “Are you happy knocking on your neighbour’s door to remind them they are six months behind in service charge and potentially facing them in court?” Try this one: “would you like to be sued for negligence for not complying and following through on the health & safety report you have recently

sanctioned?” What about: ”have you got the bulk buying power and leverage to secure water-tight buildings insurance policies to ensure your residents pay less premiums year on year?”

The questions go on and on, and clearly anyone considering self-management needs to be truly dedicated to the role and I will guarantee they will not have anytime for anything else in their lives. You’re relying on volunteers to do or volunteers to supervise. That’s not easy. One of the problems with an unguided, self-managed board is they don’t understand what their legal obligations are and they don’t understand how to maintain a property, create budgets, etc.

Yes outsourcing costs a little extra but should be seen as a shrewd investment for any property owner - to pay a nominal fixed annual fee, their most valuable asset will be managed, maintained and future proofed by experienced professionals whose sole purpose is to increase the value of property through effective and pro-active management.

17

Flat-Living.co.uk

Future of leasehold

What does the future hold?

Three leading experts provide their insights on what’s in store for the leasehold sector.

Comment from the Association of Leasehold Enfranchisement Practitioners (ALEP) As we move out of recession and house building resumes, flats are likely to remain a significant proportion of any new build. So in future we can expect more service charge disputes and management issues, unless properties are set up with flat-owner management.

There may be increased regulation of managing agents, long overdue, which could improve the lot of flat owners. If there is not, problems will rise exponentially, possibly leading to more leaseholders resorting to the Right to Manage legislation and taking matters into their own hands.

Since lease extensions are usually linked to flat sales, lease extension activity is likely to pick up as the market improves. Also

there may be a further increase in activity as lenders tighten lending criteria and more flats enter the danger zone of lease length. Already, ’80 years is the new 70 years’ in terms of the minimum lease length expected by lenders.

It is unlikely that the new government will legislate on leasehold very much, although some technical improvements would be welcome (such as allowing powers of attorney to sign notices) and ALEP has lobbied in favour of these. Also there may be changes to the way leasehold valuations operate. In a more austere economic climate, consumers will expect more value for money from their advisers, so we can expect to see greater price competition and transparency on fees.

As the main body in enfranchisement, we aim to provide a reliable and trustworthy pool of enfranchisement specialists to the public, marginalising those who choose to dabble in this field without sufficient knowledge or experience. We will continue to lobby for changes that we think will benefit players in the leasehold sector by sending open letters to those in positions of influence and networking with them.

Alex Greenslade, Honorary Secretary, ALEP

“ ‘80 years is the new 70 years’ in terms of the minimum lease length expected by lenders” Comment from the FPRA The decision of the new Housing Minister to ignore calls to regulate the property management industry will continue to have a real impact on leaseholders. Failing to regulate the industry will do nothing to drive up standards as more and more people will see managing property as an ‘easy option’ with little or no accountability.

Transparency in accounting has been delayed since CLRA 2002 came into force, which has done nothing to make the industry and the practitioners more professional and raise standards for leaseholders.

We believe a long-term policy for the new coalition government should be to have as many blocks as possible converted from leasehold to commonhold. As professional advisers and others become more familiar with the concept, that would help the market develop. At the moment, it is in the interest of leaseholders that commonhold should fail, or at least be second best and that leasehold, which is what they are locked into, should remain the preferred option.

By being limited to new developments, commonhold is set up to fail.

This is because of the combination of a new and unfamiliar system of law to be applied by a new and untried management team, who do not know each other, have no experience of working together and do not know anything about their fellow flat owners, and have to manage a completely new building, with which they are also unfamiliar. Failure to allow existing leaseholders to convert to commonhold without 100% agreement, including that of the freeholder, has resulted in very few converting.

What we believe is needed is a mechanism for a majority of leaseholders to convert from leasehold to commonhold. It could be, at least initially, more than the bare majority needed to enfranchise. Two thirds or even 75%, could well get things started.

We hope over the coming months and years that the FPRA can continue to help more groups of leaseholders set up and run formally recognised residents associations as well as lobbying government for continued improvements to legislation to enable leaseholders to increase the value of their homes and raise the standards of the property management industry.

Bob Smytherman, Chairman, Federation of Private Residents Associations 18

Comment from LEASE It is difficult to predict how the market will change over the next two to five years. The leasehold market is dominated by flats, which until recently had seen new build growth in particular encouraged by the buyto-let market (BTL). It’s unclear if BTL will lead the market charge again in the medium- and long-term.

We believe the strongest influence on the market will be availability of desirable properties together with ensuring that people are properly advised before and during conveyancing. Good advice on what it means to be a residential long leaseholder as well as on the property and its value is vital. Any prospective leaseholder can read up on this in our booklet Living in Leasehold.

At LEASE, our aim is to assist people, especially the vulnerable,

“At LEASE, our aim is to assist people, especially the vulnerable, about their rights and obligations under residential long leasehold law.” about their rights and obligations under residential long leasehold law. Our customers then become informed participants in the market where their property is situated. Being informed means they make better decisions and have fewer disputes, which leads to a more efficient market. That’s good both locally and nationally. Our mediation scheme aims to assist parties that do find themselves in dispute, resolve problems for themselves rather than having resolutions imposed on them by the courts and tribunals. Finally, with the independent, neutral and sound advice that we provide in addition to our work with bodies like the RICS, ARMA and ARHM we hope to see the standard of management in the sector continue to rise.

Tony Essien, Chief Executive, LEASE

MANAGEMENT PROBLEM? • Service charge and management disputes

• Unresolved and repetitive repair problems

• No effective procedures for collecting service charge arrears

• On-going rows between those who will not pay and everyone else

• Rebel lessees

• Accounting information out of date or just plain wrong

• Major works project under-funded or out of control • Problems with sub-lettings and unauthorised alterations

• Repetitive or dodgy insurance claims, high premiums and loaded excesses • Failure to achieve a co-operative approach to managing the block.

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Flat-Living.co.uk

Property Investment

Protecting long-term income from property investment In the wake of the emergency budget, private residential landlords are more likely to be looking to their let properties for long-term investment income rather than shorter-term capital gain. Nigel Atkinson, National Business Development Manager of let-property insurance specialists PropertyRisks explains why private landlords need to take a long-term view on protecting that investment income.

W

ith higher Capital Gains Tax (CGT), investors who entered the market in the buy-to-let mortgage boom will need to re-think their strategy if their intention was to capitalise on a rise in property prices. Professional investors too, who are generally committed to staying in the sector long-term will be less likely to sell and buy within their portfolio.

This puts the emphasis far more firmly on rental income and the need to protect it.

In particular, anyone who relies on rental properties to generate a pension with weekly rental income equating to pension income or contributions needs an uninterrupted flow of rental payments. If you view rental income as investment income, the financial loss when a tenant defaults has the same impact as a dramatic fall in interest rates.

The CGT impact is not the only postemergency budget measure that has the potential to impact on rental income. With public spending cuts inevitably raising the threat of redundancies, the risk of tenant defaults is unlikely to diminish.

Tenant default is, however, a risk that landlords are able to cover with a combination of legal expenses and rent guarantee insurance. The legal expenses element is designed to cover the legal costs incurred when it becomes necessary to take action to regain possession of a property if a tenancy agreement is broken. Without insurance, the legal costs involved can amount to an average of between £1000 and £2000, rising to around £5000 if a court hearing is involved. Rent guarantee compensates for the rental payments that are lost in the process: the average time for the eviction process to run its course is 6 months and on average results in the loss of 5 months’ rent.

Void space Legal expenses and rent guarantee cover is widely available, but needs to be chosen with care. Some policies are relatively limited

in their scope. Ideally, cover for loss of rent should extend to cover a void period after vacant possession is obtained to give the landlord breathing space to find a suitable new tenant – or rectify any damage that may have been the cause of the eviction.

The financial impact of tenants unable to meet their monthly payments, refusing to vacate after becoming unable to pay or in some other way breaking their tenancy agreement can have a major impact on a landlord’s investment income. At the same time, the landlord as a leaseholder will have ongoing obligations such as maintenance and service charges to meet.

While some may be reluctant to add a further cost, there are two factors to consider.

Firstly, the insurance premiums involved can be set against the taxable income from the property. Secondly, the premiums can help manage cash flow as the cost of insurance can be identified and budgeted for at the outset of the tenancy, whilst an uninsured loss cannot.

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21

Flat-Living.co.uk

Service charges

New lease of life The new Service Charge Residential Management Code provides a detailed legislative and advisory framework for successful property management, explains Gerry Fox. over what can be expected of managers and recognises that the level of service will usually be directly related to the amount of the fee. The code may be used in evidence and taken into account in court and tribunal proceedings.

The layout, which is unchanged, signals what is current legislation and what is good practice. Wherever legislation is referred to, there are clear margin notes giving the details of the relevant Act. The distinction between legislative requirements and good practice is clear in the text, too, through the use of ‘must’ for the former and ‘should’ for the latter.

Source of learning The topics are presented in different sections of the code, with the text repeated where relevant. This recognises that the document is used as a source of reference, as well as a source of learning and users of the code will search for information from different directions.

This is especially so considering that it is used by residents and their advisors, as well as managers. The sections of the code are:

T

he second edition of the RICs Service Charge Residential Management Code came into affect on 6 April, following its approval by the Secretary of State for England under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993.

Since the publication of the first edition in 1997 the code has been reprinted many times, indicating its continued unique place in the leasehold residential management sector. The code now incorporates the changes brought about by the Commonhold and Leasehold Reform Act 2002, although not all of the 2002 Act has yet been implemented.

The code is essential for all those who deal with leasehold residential property management, especially those practitioners with small portfolios and those who are new to the sector. It tackles all areas of residential property management involving service charges, including the appointment of managing agents and the services normally included in annual fees.

Hundreds of opinions In setting out good practice, it provides guidance as well as valuable decision-making support. This is particularly important in the management of blocks of flats, where, instead of a single client, managers have hundreds of opinions to contend with.

When the first edition was published, some managers were fearful that the code would be used as a weapon against them. In fact, in a sector where lack of understanding of the duties and obligations of the various parties can lead to problems, it has become accepted as a useful tool for managers and leaseholders alike. While it continues to place burdens on practitioners, it does dispel doubts 22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Definitions Appointment and charges of managing agents Manager’s duties/conduct Accounting for other people’s money Right to Manage Service charges, ground rent and administration charges Services Budgeting/estimating Reserve funds Accounting for service charges Audit of service charge accounts Contractors Repairs Work to extend a block or new phase Insurance Provision of information Residents’/Tenants Associations Consultation Disputes between occupiers Complaints and disputes about managers and managing agents by tenants.

Arrears of service charges

There are appendices dealing with lease variations and the statutory rights of tenants. Two further appendices have been added that are not part of the approved code; they list useful regulations and guidance documents and give additional advice to landlords, tenants, and agents.

The code presents legislation and guidance in an accessible format to minimise ambiguity and improve understanding between leaseholders and managers. It makes clear that there are responsibilities on all the parties involved, many of them provided for in the lease and increased in no small measure by legislation. Where there is a gap in understanding, the code seeks to bridge and facilitate a satisfactory outcome.

Gerry Fox chaired the RICS Service Charge Management Working Party. He is Head of Compliance at Peverel Property Management Group.

Flat-Living.co.uk

Service charges

Service charge arrears 6 things you need to know The collection of service charge arrears is a vital part of management, writes Alison McLachlan, Litigation Team Leader, SLC Solicitors.

By whom is it payable?

The lease will require contributions to be paid by the tenant, or successors in title, and not necessarily the occupier. You can expect your solicitor to confirm, through enquiries, the current leaseholder.

Procedural matters – Court proceedings All leases, along with statutory provisions, have pre-conditions for payment by a tenant. Your solicitor should be able to advise you on the requirements that precede or surround the issue of a demand for payment.

Following from this, managers or landlords will be keen to commence proceedings to recover overdue contributions. Prior to undertaking any work, a solicitor should review and advise as to whether legal costs are recoverable in full from a defaulting tenant and in what circumstances recovery will be deferred. A solicitor is obligated to discuss escalating costs, and may chose to cap them where possible, to ensure that they do not become unreasonable or disproportionate to the debt and thereby unenforceable.

Prior to commencing court proceedings, parties must comply with pre-action protocol, which sets out how the parties must conduct themselves prior to litigation. Non-compliance may diminish the prospects of successful recovery or resolution of a dispute and prejudice recoverability of interest and costs. You can expect a solicitor to protect your interests in this respect.

T

he collection of funds must be swift in order that obligations and liabilities are met and leaseholders, whose contributions have been forthcoming, do not suffer any detriment. It should be easy to instruct a solicitor.

Firms are often able to receive instructions and report electronically, issue letters before action and court proceedings swiftly and offer flexible fee structures.

Enforcement

The lease is a contract between a landlord, possibly a manager, and a leaseholder, and sets out how a tenant’s service charge contribution is calculated, whether payment is due in advance or in arrears along with the heads of expenditure that a tenant is liable to contribute towards. Variable service charges are only payable to the extent that they are reasonable..

Your solicitor should assist a landlord or manager to seek immediate payment from a mortgagee, who will be keen to protect their security in a property. Most mortgagees will require a County Court judgment or LVT decision and service of a notice of intention to re-enter the property. You should expect a solicitor to ensure a landlord or manager is in a strong position to exercise a right of re-entry, and to serve relevant notices in order to achieve such payment. Where required, a solicitor will be able to navigate their client through possession proceedings.

In the event that the above is not desirable or appropriate a landlord or manager is at liberty to turn to alternative mechanisms for enforcement whereby sums can be sought direct from a defaulting tenants salary, a leaseholder’s goods are identified and removed to the value of the debt or the debt is secured against the value of the property.

To whom is it payable?

Dispute

The party to whom service charge contributions are due, will be identified by the lease as the landlord or manager. Where contributions are paid to a manager, they will commonly be identified by name or there may be provision for appointment. Managers or landlords may engage agents to carry out collection and provide services. Agents act with the authority of their principal and may demand that leaseholders pay funds to them direct.

Where disputes arise, a solicitor will identify the issues, advise on any defects in performance of obligations and make recommendations for remedy. Where a dispute cannot be resolved amicably, a solicitor may assist by drafting and filing court proceedings, compiling evidence and preparing for hearings. A solicitor practicing in this area will be familiar with the LVT and may assist or act for you in this respect.

What is payable?

23

Invitation

The Leasehold Roadshow One Wimpole Street, London W1 November 1st 2010 6pm – 9pm Living in a flat brings many pleasures, conveniences and efficiencies that house dwellers rarely enjoy. At the same time, living in a flat can often bring its own unique challenges: Who should manage the block? Are our service charges fair? How much should it really cost to extend my lease? Are we adequately insured? Can we make alterations and repairs? Who can we trust with our accounts? Can we buy our freehold? The list of questions goes on.

And who do you turn to? Your residents’ committee? A managing agent? Your freeholder? Get it right and you have a well-run block with happy homeowners. Get it wrong, however…

In answer to these questions and many others besides, Flat Living, the leading leaseholders’ magazine, is hosting an event near you in Central London.

We have assembled a panel of acknowledged experts in London based property management, surveying and leasehold law who will explain leasehold, in fascinating, no-nonsense terms. After their presentations you can join them for an informal discussion and explain to them your own leasehold problem.

Their expert advice at the event is FREE OF CHARGE to all guests.

So – do join us to find out what is really happening in leasehold!

To register your FREE attendance at the Central London Leasehold Roadshow please go to www.flat-living.co.uk Alternatively simply call us on 0845 257 6374, or complete and return the coupon on this page.

Attendance numbers are limited, and therefore we would ask that no more than 2 representatives from any single block register to attend, and we politely request that you only register if you are certain you can attend.

The Flat Living Roadshows are supported by ARMA, the Association of Residential Managing Agents.

Yes, I/we would be delighted to attend the Central London Leasehold Roadshow.

Attendee 1: Name: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Email: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Telephone Number: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Please tick as appropriate: self managed

managing agent in place

residents management committee member,

resident management company director,

resident management company secretary

Attendee 2: Name: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Email: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Telephone Number: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Please tick as appropriate: self managed

managing agent in place

residents management committee member,

resident management company director,

resident management company secretary

Flat Living reserves the right to cancel the Leasehold Roadshow by giving all registered attendees at least 2 weeks prior notice by email and/or telephone.

Flat Living reserves the right to refuse registration to and admission to this event. Flat Living accepts no responsibility in the case of cancellation, or for advice that is taken at the event.

By signing up to attend this event you agree to attend the event. Flat Living may contact you in the run up to the event with an attendance reminder.

Flat Living will not pass your details to any third party, other than the expert panel.

Send your reply to:- 5 Addisons Way, Lilleshall, NEWPORT TF10 9HH or call 0845 257 6374 or email your contact details to Sue Hodnett at sue@flat-living.com.

Flat-Living.co.uk

ARMA

ARMA LESSEE ADVISORY NOTE: LAN 7 S.20

Consultation and Major Works One of ARMA’s key roles is to provide its members with technical support. However, from time to time, technical or other issues arise where guidance for lessees as well as their property manager is deemed appropriate. Such guidance is contained in these Lessee Advisory Notes (LANs) that ARMA members can copy and distribute to their lessees as appropriate.

SUMMARy •

•

•

• •

S.20 procedures apply to major works whether carried out by resident management companies (RMCos) or other landlords.

The procedure is prescribed in detail in regulations issued

by Government. Failure to follow the detail of the procedure can result in penalties.

The penalty for failing to consult is to limit to £250 per leaseholder the amount that can be recovered for the major works.

RMCos that fail to consult lay themselves open to loss of income and claims for negligence.

Consultation is required with lessees and any recognised tenants association (RTA). In this LAN lessees means lessee and any RTA.

SECTION 20 - WHAT IS IT? Section 20 is the number of a clause in the Landlord and Tenant Act 1985 as amended. It is a clause to protect lessees. In summary it says that service charges for major works will be limited if the landlord or its agent does not consult lessees first. S.20 severely limits the amount a landlord can charge for major works if the correct consultation procedure is not followed.

discuss the issues and costs between us anyhow and everyone knows. No this is wrong. S.20 consultation applies to all landlords and all resident management companies, whether they are landlords or not. If the RMCo is the body responsible for committing the service charges for major works it is subject to S.20 rules.

WHAT ARE THE PENALTIES IF WE FAIL TO CONSULT? The penalty is that the sums lessees can be made to pay for the major works will be limited. The limit is £250 per leaseholder (joint lessees count as one). So if an RMCo of a block of 8 flats spent £5,000 on major works and failed to consult; then if the lessees refused to pay, the maximum they can be made to pay in law is 8 x £250 each = £2000. Who would have to find the rest if there was a problem? Well, very possibly, the directors of the RMCo would be liable because they were negligent in failing to follow S.20 rules. You may argue “surely in our block we all know each other and there will be no arguments.” Yes, but what if a flat is sold whilst works are in progress, or the contractor upsets lessees and fails to do a good job. There will be arguments and lessees may well refuse to pay.

CANNOT TRIBUNALS DISPENSE WITH S.20 RULES?

WHAT IS THE PROCEDURE? The procedure is required if the landlord estimates or in fact does spend on major works more than £250 payable by any one leaseholder.

• Stage 1 the Notice of Intention. A notice setting out what works are proposed, why they need doing, inviting comments from lessees, and inviting nominations of contractors from lessees.

• Stage 2 the Statement of Estimates. Once estimates for the works are obtained a notice to all lessees about the costs, how to inspect the estimates and inviting any comments.

• Stage 3 the Notice of Reasons. Once the contract is awarded this notice must be sent if the landlord does not choose the cheapest estimate or any contractor nominated by lessees. It must explain why the landlord chose that particular estimate.

WHY DOES S.20 TAKE SO LONG? For stages one and two lessees must be given at least 30 days to reply with any comments. So even if an agent can obtain estimates quickly it will take at least 2 and probably 3 months as a minimum.

Indeed agents are advised to allow slightly more than 30 days for comments because of delays in post being received by lessees after mailing.

Yes, Leasehold Valuation Tribunals (LVTs) can dispense with S.20 rules either before or after major works have been carried out; but only if a very good case can be made. LVTs have only considered dispensation generally where there was an emergency and works had to be started at once, or for urgent health and safety reasons.

WON’T TRIBUNALS ALLOW FOR MISTAKES? In general LVTs have interpreted S.20 rules strictly and have ruled that landlords or RMCos cannot recover the cost of major works in cases where the notices had not given the full 30 days, or failed to state when the date for comments ended, or failed to include how estimates could be inspected. Failure to consult is not justified by an honest mistake, compliance with the ‘spirit’ of S.20, wrong dates, lowest quote chosen, no prejudice to lessees, good contractor or the fact that the RMCo represents lessees.

FURTHER INFORMATION • • •

SURELY S.20 DOES NOT APPLY TO RMCOS? Surely there is no need for resident management companies where each lessee is a member of the company to comply with S.20? We 26

•

S.20 of the Landlord and Tenant Act 1985.

The Service Charges (Consultation Requirements) (England) Regulations 2003. SI2003/1987.

The Service Charges (Consultation Requirements) (Wales) Regulations 2004. SI2004/684.

S.20 Consultation. A free booklet from ARMA, www.arma.org.uk, or the Leasehold Advisory Service. www.lease-advice.org.

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ARMA

Has the Coalition abandoned leaseholders?

The chairman of the Association of Residential Managing Agents (ARMA) and Partner at Curry & Partners in Birmingham, Brett Williams explains.

I

t was with dismay but not too much surprise that we heard in June that the Government has abandoned plans to regulate the private rented sector. The Housing Minister’s thinking being that local authorities already have adequate powers to deal with rogue landlords and their letting Brett Williams agents.

However, Grant Shapps, the minister, has missed one vital point.

The plans to regulate letting agents were to include managers of leasehold properties, but local authorities have very few powers to deal with rogue leasehold landlords and their managing agents. After calling for regulation of the leasehold sector for over 10 years we are right back to square one!

But, we thought, there are still the provisions in the Commonhold and Leasehold Reform Act 2002 to come on the holding and accounting for lessees’ service charge monies. At least lessees’ money was to be held in a separate designated bank account and lessees would have the right to automatically receive a full set of annual service charge accounts along with an accountant’s report.

to complete – we were so near to giving lessees some really worthwhile protection and then ‘for the want of a nail’, nothing! Grant Shapps, at the time of writing, has still to make a public statement on this, but we are given to understand his reason is to reduce the regulatory burden! On whom? The very rogues who do not handle lessee money properly! Good leasehold landlords and managing agents are fully accounting for lessee money already so where is the burden on them?

The end result is we are back to self-regulation and I can assure readers ARMA will play its part in filling the dreadful void in lessee protection this Coalition has created. Not least we will be looking to produce detailed guidance on good accounting practice to supplement the existing Codes.

And, to at least give lessees a ‘fighting chance’, we are calling for all managers of leasehold property to be subject to independent redress through an Ombudsman Scheme as is already the case for members of ARMA and our fellow trade and professional bodies.

Grant Shapps

Intensive work And guess what? At the end of June the Communities and Local Government department informed ARMA that, after eight years since the Act was passed and three years of intensive work to produce the regulations, matters were not going to be progressed. The law was in place, the regulations near to completion and simple parliamentary processes left 27

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ARMA

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Call 08452 571164 galbraithproperty.com

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ARMA

No let up on leasehold lettings Despite the downturn, the letting of leasehold flats is still continuing at a healthy rate, writes Flat Living.

F

ollowing the huge growth of buy-to-let properties from 2000 to 2007 it is estimated there are well above 400,000 leasehold flats being let out by their owners; this is over 20% of all leasehold flats in England and Wales. This can give cause for concern though when the letting is not done properly.

Unlike freehold houses, leasehold flats come with detailed rules and restrictions (in the form of the lease) designed to ensure that the flat owners live in an ordered and cohesive society for the benefit of the development overall. However, where a large proportion of the flats are sublet to tenants this society can breakdown as tenants are not stakeholders in the property as with owner occupiers and are not necessarily subject to the terms of the lease. In a survey of its members The Association of Residential Managing Agents (ARMA) found 62% of respondents reported having at least one block of flats under management where 90% or more of the flats are sublet and most blocks had at least some flats sublet.

Hard to manage When this situation occurs the block of flats can be extremely hard to manage because the Landlord (of the block) and the managing agent have no legal relationship with or control over any tenant who is renting a flat. If the leaseholder sublets the flat and does not ensure the tenant is subject to all the same housekeeping rules as the owner occupiers then real problems arise for everyone – ARMA’s survey showed this to be at the top of the list of its members’ concerns.

To overcome the issues that may arise from ill-thought out lettings of leasehold flats, such as loud noise outside permitted hours, parking in the wrong place, excessive wear and tear of the common areas – all guaranteed to upset other residents - ARMA has produced a 12-page guide to good practice and related issues. The guide was written with the assistance of all the relevant trade and professional bodies that have an involvement with the lettings sector.

Divided into a number of sections it provides The LeTTing of LeasehoLd fLaTs advice to, and checklists for, all parties that could be involved in the lettings chain; from landlord and managing agent to the leaseholder and his/her letting agent. The aim of the guide is to ensure a successful letting that is compatible with the community as a whole. The extract below, for example, is taken directly from the guide and is a summary of the major concerns of lessees and managing agents about lettings in leasehold flats.

With this publication to hand there is no reason why buy-to-let should be the problem it has sometimes been, so all leaseholders who are or are thinking of subletting are encouraged to download a free copy from the ARMA website, www.arma.org.uk. a guide to good practice and related issues

ARMA is grateful to the following organisations for their assistance in producing this guide:

Lessees’ and Managing Agents’ Concerns about Lettings • The security of blocks may be jeopardised by tenants.

• Fire safety concerns when managing agents do not know who is in occupation and tenants are therefore not informed about fire safety instructions for the block.

• Fly tipping by tenants can happen upon changeover of tenancies.

• Tenants may bring in pets when they are not allowed to do so.

• Satellite dishes may be put up when they are not allowed or a communal system exists.

• Tenants move in and are not aware of parking arrangements and restrictions.

• Subletting to local authorities may increase the risk of anti-social behaviour problems in a block.

• Lettings may be as weekly serviced apartments or holiday lets which are prohibited in leases.

• Lessees who sublet often fail to give the managing agent an alternative contact address regarding problems and paying bills.

• Lettings to large number of persons may result in the creation of a house in multiple occupation with complications for the landlord and agent.

• Prohibited lettings may invalidate the block insurance policy.

29

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ARMA

ARMA Conference programme announced The Association of Residential Managing Agents (ARMA) has recently announced the full programme for its 15th Annual Conference on 4th November in Central London. The ARMA Conference is now firmly established as the event for all those involved with the management of long leasehold estates and blocks of flats.

This year’s conference will be particularly significant given the Government’s decision to abandon Regulation of the leasehold sector and the new Accounting Regulations that would have given added protection to thousands of lessees’ service charge funds; many will be wondering what the future holds

and the conference in part will try to address that along with all the other important current topics by leading industry figures: updates on the latest legislation, dealing with nightmare leases, making sure you are safe on site, preparing for and presenting at the LVTs, supporting new property managers, moving up the value chain, estate staff and illegals and much more...

If you want to find out more and are interested in attending then the full conference brochure and booking form can be downloaded from the ARMA website, www.arma.org.uk. The event tends to sell out quickly so you are advised to submit your booking form asap!

Mitie 250th for ARMA MITIE which provides facilities, property and asset management for some of the largest public and private sector businesses has become the 250th corporate member of the Association of Residential Managing Agents (ARMA) which represents the vast majority of those managing residential leasehold properties.

In welcoming MITIE as a member ARMA’s chairman, Brett Williams, commented: “This is a double achievement. We have grown our membership of residential leasehold management firms by 25% over these last two difficult years and we are celebrating it through a highly respected business.

When asked why MITIE were joining ARMA at this time Neil Oakey, operations manager of MITIE, explained: “We are looking to grow our leasehold management portfolio, so it was a logical step to become part of this self-regulatory body in an otherwise unregulated sector. We also see that ARMA’s technical support fits in with our philosophy of ‘not just what we do, but how we do it.’”

WORDS OF WARNING ABOUT ‘HAVING A GO’ While encouraged by the continuing growth in membership Williams is concerned about the dangers of ‘pop-up’ leasehold property managers.

“With the housing market expected to stay becalmed in 2010, those involved in other areas of the residential property sector will continue to look for alternative sources of revenue,” he says.

“The Association of Residential Letting Agents early last year

warned of an influx of unregulated estate agents entering the lettings market. Now we are voicing similar sentiments over estate agents and even letting agents seeking to bolster their income streams by entering the leasehold sector. As a result over the past 18 months ARMA has seen the percentage of firms engaged in sales and or lettings enquiring about membership reach an all time high.”

“However residential leasehold management is highly complex and fraught with myriad technical and legislative requirements so a couple of days training is far from enough to equip new entrants into the sector. Indeed we have a strict requirement that any applicant firm must have two years proven experience before we will consider an application for Corporate membership.

“Our fear is,” Williams continues, “other professions will ‘have a go’ and when the market picks up find it less profitable and walk away. Putting managing agent’s fees next to what estate agents’ get on the average sale for example, and they don’t look so exciting. A managing agent might get a couple of hundred pounds a year management fee for each flat in a block – whereas an estate agent might get over £5,000 for selling the average property. With our members, they have an ongoing contractual relationship with the landlord and therefore the leaseholders as well.”

ARMA does offer an affiliation status for those firms entering the field of block management who do not have the required knowledge and skills to become full corporate members. This status enables new entrants to a have access to ARMA’s technical support and training leading to full membership after two years.

Some of the estates that MITIE manage 33

Flat-Living.co.uk

Repairs and maintenance

The myth of the maintenance free building Chartered Building Surveyor and Director of Langley Byers Bennett Chartered Surveyors, John Byers explodes the myth of the maintenance free block of flats.

I

n the course of our consultancy work with residential managing agents and RMCs we frequently come across the need to deal with cyclical maintenance work (often required as a Landlords’ obligation under the terms of the lease), or to investigate specific defects within even relatively new blocks.

In the course of this work it comes as a shock to resident management company (RMC) directors that there is a need to carry out any work at all, because all too often they, like other leaseholders, have bought flats on the promise of low service charges, full NHBC insurance (to cover

34

any defects) and the promise of a maintenance free building. Sadly that is rarely the case.

The entire building structure whether it be the roof, plastic windows, carpets or communal lighting, all gradually deteriorate over time, meaning they need occasional maintenance, repair and ultimately renewal. Just because a building does not have painted wooden windows and old slate roofs does not mean it can be considered maintenance free.

Flat-Living.co.uk

Repairs and maintenance

Property managers – an asset Bob Simonds, Curry & Partners

The role of property managers is a crucial one – not only can they help you maintain your bricks and mortar investment, they can also help assure its profitability.

Curry & Partners manages over 10,000 units nationwide through a comprehensive team of property managers, assistants and accounts staff, backed up by the latest IT

solutions. The investment in people and technology is vital as the company can receive over one hundred maintenance calls a day from owners and tenants.

It classifies all required work into either major (needing Section 20 consultation – see below) or routine maintenance. Major works have full supervision throughout the contract, with final accounts only being agreed when works are completed satisfactorily.

Maintenance is carried out using contractors who are graded on competency and risk and, whilst it is not possible to physically supervise these works, its property managers will carry out the requisite inspections on the next routine site visit.

To manage perceptions effectively on the cost and extent of works, tender documents and quotations are available

for viewing by all involved parties and only when approved will the contractor be authorised to complete the works.

Curry & Partners has a legal duty of care to clients and lessees when selecting and overseeing contractors. This process involves obtaining contractor information to enable it to allocate a quality rating.

Completion of a company risk management form is required to highlight hazards and agree on a method statement.

Throughout the repair management process, standard specifications are used and contractors become used to this process. The company also partners with well-respected companies, involving independent visits during construction works as well as visits by its own staff. Upon completion, major works are guaranteed.

Case Study During a recent inspection we looked at a property in the Midlands of some 120 flats. They are of very typical modern construction comprising a series of framed buildings with brick and rendered cladding externally. The flats were fitted with uPVC windows. The roofs were tiled and the common parts simply finished with painted plaster walls and carpeted floors. One larger block contained a lift.

The residents were currently paying a service charge, which after regular costs were deducted allowed only around £70 per unit to be added each year to a reserve fund, meaning that costs of only £8,400 were being collected each year. Whilst this might sound satisfactory, consider the brief illustration below (with approximated costs) to view the sort of effect major refurbishment / replacement costs can have over a longer time period.

Life Span (years)

Estimated Replacement / Refurbishment Cost (£)

Amount required £ (pa to accumulate replacement cost)

Tiled Roofs

60

£175,000

£2,917

External Brickwork

100

£175,000

£1,750

External Render

20

£40,000

£2,000

New uPVC Windows

30

£60,000

£2,000

Decorations

10

£21,000

£2,100

Carpets

10

£17,500

£1,750

Electrical Services

25

£70,000

£2,800

Fire Safety Services

15

£35,000

£2,333

Lift

30

£40,000

£1,333

Building Element

External

Internal

Total Amount required pa

£18,983

Total Amount required pa per flat

£158

Langley Byers Bennett regularly advise managing agents in a wide variety of Building Surveying matters including Service Charge disputes, defect diagnosis and building works.

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Flat-Living.co.uk

Repairs and maintenance

Throughout the life of the building various factors cause it to deteriorate.

(such as the NHBC) do not necessarily cover all these items and the claims procedure can be slow, complex and expensive.

Weathering – Obviously the effects of wind, rain, snow and frost mean that the surfaces of tiles, slates, brickwork and render gradually become worn.

Strong recommendation

Occupation – Items such as internal carpets or other floor coverings, communal decorations, internal doors and the like, get used every day and become soiled, chipped and worn out.

Statutory Regulations and Legislation – We live in an increasingly regulated world and there are updates or changes in legislation which sometimes mean alterations or improvements have to be made to buildings, such as electrical installations, fire safety equipment, communal heating, etc.

Defects – Sometimes even new buildings have defects in them.

Sometimes they have not been constructed as well as they should have been, or they have poor quality components incorporated in them, giving rise to water penetration, cracking or other defects. Sadly, contrary to many peoples’ expectations, new building guarantees

My strong recommendation is that directors of RMCs work closely with their managing agents to make sensible (although not excessive) provision for some of these factors, so that there is the financial means to deal with issues when they arise.

These need not necessarily cost a lot of money but it can sometimes be difficult convincing lessees that it is sensible to set money aside for expenditure in future years, when they anticipate that by then they may have sold and be gone. Over the years we have acted for many lessees who are the unfortunate ones left when this high risk game of “pass-the-parcel” comes to an end and they are left holding an extremely expensive problem when the music finally stops.

There is a considerable amount of study on life-cycle costings within the building and surveying industries that goes beyond the parameters of this short article but we set out below a few very approximate indications of life span for certain common elements of the building and the effects on service charge.

Landlords – beware Andrew Raby, Thackeray Williams provide services where the costs to each tenant will exceed £100. There is no substitute for looking at the provisions of the Act but, in very broad terms, if a landlord wishes to carry out major works then he must serve a Notice of Intention to carry out works, which must be sent to each leaseholder and to any recognised Tenants Association (if any).

The notice must: 1.

Describe in general terms the works proposed to be carried out or specify

a place and hours where the proposals can be inspected; Section 20 of the Landlord & Tenant Act 1985 requires a landlord to consult with its tenants or lessees before carrying out major works to a building.

The consultation process enables the lessees to comment on the proposed works.

It is very important for landlords to understand that if they fail to consult with lessees properly they may find themselves with a very large bill to pay for major works. The reason for this is that the lessees’ liability to pay a contribution to major works can be capped at no more than £250 per lessee if the landlord fails to consult properly.

The Act requires a landlord to consult when carrying out major works to its building where each tenant’s contribution will exceed £250 or when entering into a long term agreement to

36

2.

state the Landlords reasons for considering it necessary to carry out the proposed works;

3.

invite observations in writing;

4.

And specify;

•

the address to which observations must be sent;

•

the date on which the consultation period ends; and

•

indicate that any observations must be sent by this date

5.

invite each tenant and the residents association (if any) to nominate a person from whom the Landlord should try to obtain an estimate for carrying out the works.

The place and hours for inspection must be reasonable and a description of the relevant matters must be available for inspection free of charge. If copies cannot be made on inspection the landlord must provide a copy on request by the lessee, again free of charge.

If any tenant(s) make observations within the time limit set out in the notice then the landlord must have regard to them. In obtaining estimates at least two estimates for the work must be obtained. Where a contractor is nominated by the leaseholders the regulations provide that if only one leaseholder has nominated a contractor then the landlord must try to obtain an estimate from that contractor.

There are further provisions where nominations are made by more than one leaseholder. Following receipt of tenders a further notice must be sent to the lessees and any recognised Tenants Association.

The legislation goes further, setting out more detail as to what must be contained in various notices, including a further notification of the estimates to the Lessees. It is impossible to summarise accurately here every detail in the regulations. What landlords need to be aware of is that a failure to fully comply with the statutory consultation requirements may result in the Landlords ability to recover full cost of the works from the lessees.

Please, as always, seek further advice on these matters.

Flat-Living.co.uk

Lifestyle

Be safe, be secure

A

If you own a ground floor flat, writes James Wickes of Jabbakam, you are probably a lot more security conscious than if you live in a property on the top floor. It is an obvious thing to say, but if someone breaks into the building your flat is likely to be the first place a burglar will visit.

s a ground-floor flat owner, obviously you are physically closer to the street and this makes you more of a target, therefore you need to think carefully about making your property secure. If this is the case, you should consider the following:

•

• • •

Do you have your own door or is it shared with other people in the building? If it is the latter make sure you are on good terms with them.

What are your neighbours like?

Are they trustworthy?

Remember anyone your neighbours let in is only a kick of a door away from being inside your property.

If you are looking to buy or rent a ground floor flat then take a good look around the communal areas. If they are tidy, clean and well organised you are living with people who care about their surroundings and that should extend to security issues too. If they are dirty or unkempt that might mean they take security less seriously.

Take a lead If you happen to live in a ground floor flat, then most likely your door will be nearest to the main door. If so, you may need to take a lead in security issues. Take a good look at the shared door. Is it heavy and strong or could someone break in. Has it got locks? How many?

Are they good quality locks? Also ask yourself would it be easy for someone to smash the glass and break into the house? If you have any concerns about these issues you should get them addressed as soon as possible – you will need to take the lead on these issues and gather support from your fellow leaseholders in the building.

Insist that good quality locks are fitted throughout the building.

Once you have secured the shared areas you need to take a long look at your own security. Again what is your door like? Is it strong? Could it withstand a push or two? Remember if someone is already in the building they might not be so worried about making a noise breaking your door down. Again, ensure you have powerful locks.

On a ground floor flat windows are also a potential problem. An awful lot of opportunistic burglars are most successful at grabbing items through windows that are accessible from the street. First, make sure you have secure window locks at the front. If you do keep the windows open, make sure that someone can’t get into your flat from the street.

Also don’t leave anything 38

of value such as computers and mobile phones near the window.

If you are concerned about your security, or if there has been a lot of crime in your area, you might want to think about putting bars across the windows. Also if you can get away without opening the front windows, and you can air your room using windows elsewhere in the room, why not just leave them permanently locked?

Finally, always make sure you close windows when you leave your home. It is so easy to forget to do this and so tempting for any opportunistic burglar. Consider a burglar alarm (or at least a fake box) as once again this will put off casual criminals who are the most likely to target your home. Make sure you have strong powerful lighting that switches on automatically when someone approaches. This might be enough to put off all but the most determined criminals.

AN ONLINE SECURITY SOLUTION

Your best option, if you live in a block of flats is to consider a shared security solution in which everyone in the building has a stake. One really great way to address this is by using a system such as Jabbakam’s online security camera network.

A group of people in flats can come together and set up this system, sharing access to footage from communal cameras, yet maintaining sole access to the cameras protecting their own property. If Jabbakam is shared among a group of flat owners, a Jabbakam system can be cost effective. For more details click on www.jabbakam.com.

To win a Jabbakam online security solution for your block worth up to £1,000 please see page 46.

Leasehold property?

For expert legal advice on

lease extensions or purchase of freehold call us on 020 8663 0503 www.thackraywilliams.com

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Workshop

10 things you should know about your lease

By Ian Mitchell Head of Leasehold Services, Anthony Gold Solicitors

I

magine a large house purchased circa 1960.

Ten years later, the owner sells the upstairs part of the house by splitting the property into two flats. He does this by granting a 99-year lease of the upstairs. He sells the lease and retains the freehold interest. He continues to reside downstairs. Thirty years later he moves out and grants a lease of the ground floor flat on identical terms to the upstairs lease. He retains the freehold interest.

Present day, the owner of the first floor flat has decided to sell up.

You are considering buying the flat. What do you need to look out for when reviewing the lease?

1. Has the lease sufficient length?

As the length of the lease runs down, the value in the flat reverts back to the freehold interest. This process begins to speed up at the point when the lease term drops below 80 years. The lease of the first floor flat has approximately 59 years remaining. A prudent buyer would reflect this in their offer and request that their solicitor advise how to resolve the lease length. The lease can be extended by statutory entitlement or negotiation. Most mainstream lenders will not lend against this flat on account of the term being below 60 years.

2. State of building Are major building repairs on the horizon? Repair costs are usually divided between the leaseholders, even though the freeholder may carry out the works. You would want to reflect outstanding building repairs in your offer price. It is important to look at the state of the building as a whole, not just the flat you are proposing to purchase.

3. What is the average annual service charge?

If this is a lease under which a service charge is payable, then ask for copies 40

of the service charge accounts for at least the past three to five years.

4. Does the lease contain an adequate insurance provision?

If the building was for any reason destroyed it is fundamental that the entire building is reinstated. It is desirable to have one single policy for the building as a whole.

5. What is your landlord’s ethos?

Some freeholds are owned and managed by large property companies.

Their charges may sometimes be higher. Ask the neighbours their views on the current management arrangements.

6. Does the lease protect your continued use and enjoyment of the property?

Check that the lease adequately allows you to deal with issues that could later arise between you and the neighbouring flat owners such as excessive noise or water ingress emanating from upstairs.

7. Is the lease free of defects that would affect resale?

Leases can have minor and major defects. The list of possible defects is non-exhaustive; your solicitor will review this position and advise you accordingly.

8. Does the lease permit you to rent out your flat?

The answer will be in the lease 9. Does the terms of the lease permit alterations within your demise?

The answer will be in the lease 10. The ground rent increase Review how the ground rent increases over the term of the lease so you are not in for any surprises.

Owning a leasehold flat should not be a concern as long as you know and appreciate your rights and obligations. With a well-written lease and a properly managed building, a leasehold flat should provide a perfectly good home and a secure investment.

Complete Property Management Solutions Ltd

Our professional service is tailored exclusively to your developments needs.

Complete are experts in working with problem sites where past managing agents have not performed to the requirements of the residents or in accordance with the company’s lease and legislation. If you are looking for a New Managing Agent, call 08432 084492 or visit our website for further details.

t: 08432 084492 f: 08444 432259 e: info@completepropertymanagement.co.uk w: completepropertymanagement.co.uk

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Workshop

Getting the best from your broker As a homeowner, taking out the right level of buildings and contents insurance is important. Therefore, as a director of a Residents’ Management Company (RMC), choosing the right policy is absolutely vital, writes Flat Living.

Y

our fellow leaseholders, as well as your own family are relying on your judgement to ensure that, should the worst happen, your block will be covered – not only for fire, flood and other damage, but also for unforeseen problems with cleaners, (external) contractors, and “third parties”.

Instant access to the internet means that insurance policies and quotes are easily available. However the fact that it is easy doesn’t make the decision-making process straightforward. How do you select the right insurance product? How do you decide which policy is right for your needs and those of the other leaseholders in your block? And how do you make sense of all that small print?

Unless you fancy becoming an insurance expert yourself, the obvious solution is to use a specialist insurance broker, an independent professional, who will act on your behalf to determine your insurance needs and then find the right policy. Their task is to help you locate the insurance cover that best suits your requirements and canvas the insurance market to obtain the best protection at the most competitive price. This should be coupled with information on the levels and type of cover you need, together with help when claims are made.

Best value for money A broker is able to evaluate the type of cover required and will go to a number of different underwriters who specialise in that particular class of business in order to get the best deal for you. Having more options to choose from should leave you comfortable in the knowledge that you are getting the best value for your money.

When dealing with customers direct or via a broker in most cases, an insurance company will prefer dealing with a broker, particularly in a specialist field such as property insurance. Insurance underwriters acknowledge that an experienced broker will often have a better understanding of customers’ requirements than the customers themselves. Brokers can also provide quotations, summaries of cover and sample policies. Some can also issue policy and renewal documents, as well as invoices. They will collect premiums and can also assist in the claim process.

Complex Taking on the role of director in an RMC can be complex enough without having to become an expert in every aspect of property ownership. AVIVA, one of the country’s largest insurance providers positively promotes the use of brokers, David Bruce, Commercial Product Manager at Aviva advises: “Instead of worrying about what sort of insurance you should have why not let your insurance broker sort it all out for you. That would be one less job for you to do and peace of mind that you are adequately protected.”

From 14 January 2005, all insurance brokers and intermediaries operating in the UK had to be regulated and authorised by the Financial Services Authority. This gives you the security of knowing that: • •

42

There is someone to whom you can complain if things go wrong; your money is held in an ‘insurance broking account’ which the broker cannot dip into to run their business;

• •

the solvency and working capital of your broker will be regularly tested by the FSA; and your broker will have many years broking experience and has a first duty of care to you and not to the insurer.

A good insurance broker may also be able to offer you and your fellow RMC directors advice on areas such as risk management and changes in legislation to ensure that you keep your risk to a minimum and are covered for those risks that are unavoidable.

However, RMC directors do not always take responsibility for arranging insurance because many RMCs will have their policies arranged by their managing agent. Where this is the case, there are a few things that it is important to know. Agents can be FSA authorised in their own right, enabling them to obtain quotes from many sources.

Royal Institute of Chartered Surveyors (RICS) members may be authorised under their RICS membership, but this is not an automatic right. Some agents are Appointed Representatives. This ties them to one broker or intermediary but allows them to complete many functions such as notifying insurers of a claim and arranging an insurance policy.

Agents can also be Introducer Appointed Representatives, which allows them to introduce insurance products to their client(s). However they cannot decide which product is suitable or arrange cover (this needs to be done by the RMC) and nor can they notify a claim, although they can be involved once the incident has been notified.

If you are not sure which, if any, of these categories your managing agent may fall into, just ask. They should be only too willing to explain what their status in terms of insurance means for you and your fellow leaseholders.

For more information about insurance as well as a range of legal and health and safety matters, go to www.flat-living.co.uk/insurance To check the current FSA status of any broker, go to www.fsa.gov.uk/register/home/do

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End Note

How does your garden grow?

A

In times of financial restraint you need to be sure you are getting good value for money from your service charges, and this includes the cost of garden maintenance. Peter Gilgallon of the GOL Group provides some hands-on advice.

s an RMC director your eye may fall on a line in your accounts that reads ‘garden maintenance’. You may also notice that the figure is pretty high and that is when you ask yourself the question, is this is really necessary? Surely any Tom, Dick or Harry can cut grass, weed and prune a few hedges for a much better rate?

This may be true, but if you use a low-cost garden maintenance provider to save money, you need to ask the following questions:• • • • • •

What experience do they have?

Do they have any references?

Have they a local site you can look at?

Have they got the correct insurance?

Do they have a spraying licence (PA1 / PA6)?

Do they have a complaints procedure?

Garden maintenance is not rocket science but a good company will offer all the above and they will also be able to advise on what maintenance is required dependant on your budget. If you only have a very limited budget, then you will have to accept that the gardens will not look perfect all year round and they will advise you the best schedule that would hopefully satisfy all residents.

As a rule of thumb the following tasks need to be carried out throughout the year but obviously this will depend on the frequency schedule that has been agreed with your contractor.

This is not a full list but covers most basics.

Spring Define beds, weed and feed grass, some pruning of certain hedges/shrubs and starting to cut grassed areas – by June all areas of gardening are rapidly growing. Any spring bulbs should be allowed to die off naturally as cutting these back too soon will stop them from flowering next year.

44

Summer Weeding and cutting grass will still need to be done but by midsummer the grass will slow its growth and with the heat you should not cut the grass too short as this will weaken the root and any moisture will not be trapped. It is not advisable to prune back any hedges/shrubs that are flowering as this will stress the plant and may cause flowering the next season to be limited. If you know that the weather is going to be long, hot and dry for a few weeks it is not advisable to put down any feed to grass areas as the majority of these require watering in.

Autumn Leaves are dropping fast and furious and on some developments all that can be done in the first few weeks of this season is to pick them up. The last feed of the year to be done and cutting back on majority of shrubs and hedges. Cutting of grassed areas will be less frequent but with the warmer weather staying longer you will need to be cutting into mid November. Edge all borders and hoe the beds before the winter sets in and makes the ground too hard to do this. Beginning of October is also the time to ask about planting any spring and summer bulbs.

Winter Keep on top of any shrub/hedge pruning.

Dependant on weather really determines

what work can be done. Some contracts may include that rock salting is to be done when needed and paths kept clear of snow and ice - but do check with your property manager as some insurance companies do not cover this work and it is a bit of a grey area.

Also bear in mind that when you have chosen a contractor for your garden maintenance, you should also give them a reasonable time before you see results as some work done in the Autumn may not show until Spring or Summer.

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Watson Property Management 0845 675 5676 York Laurent Ltd 0121 236 5757

Eastern North East Adair Paxton LLP 0113 205 4190 Appletons 01642 675 555 Atlantis Estates Ltd 0800 612 1515 Avoca Estate Management Ltd 0191 212 5030 Eddisons Residential Ltd 0113 243 0101 Omnia Estates Ltd 0114 279 2840 Premier Property Management & Maintenance Co. Ltd 01226 770 088 Town & City Management Limited 0191 300 0233 Town & City Management Limited 01325 389 689 Watson Property Management 0845 458 1228

North West Andrew Louis Property Management Ltd 0151 330 5355 Atlantis Estates Ltd 0800 612 1515 Braemar Estates (Residential) Limited 0161 929 2300 Homestead Consultancy Services Ltd 01253 640 040 Countrywide 0161 332 7551 Livingcity Asset Management Ltd 0161 274 1400 Manchester Residential Management Ltd 0161 707 4873 P R Gibbs & Co Ltd 01942 844100 Portland Block Management Ltd 0161 799 6288 Premier Estates Limited 0845 491 8899 Realty Management Limited 0161 474 7677 Revolution Property Management Ltd 0161 850 0022 Royle Estates (Lancaster) Ltd 01524 36311 Scanlans Property Management LLP 0161 236 8888 The Guthrie Partnership 01565 755 390 Watson Property Management 0845 458 1228 West Kirby Property Management Limited 0151 632 1844

Wales Atlantis Estates 0800 612 1515 Compton Property Management Ltd 01792 315 457 Seel & Co 02920 370 100 Western Permanent Property 029 2023 5151

Midlands Atlantis Estates Ltd 0800 612 1515 BK 0121 200 1100 Blue Property Management UK Limited 0845 331 3585 Centrick Property Management 0845 6800 981 Cottons 0121 247 2030 Countrywide 02476 550303 Countrywide 0121 454 9167 Countrywide 0116 254 8364 Curry & Partners 0121 233 0500 D & B Property Management Company Ltd 0115 979 2794 Freehold Property Services Ltd 0121 551 5988 Hadrian Property Management Company Limited 01543 410 922 Lambert Smith Hampton 0121 236 2066 Lloyd Property Management 01509 503 600 Mainstay Residential Ltd 01905 357777 Metro PM 0121 428 4747 MITIE Scotgate Ltd 01778 382 240 Nock Deighton 01746 766 998 Orchard Block Management Services Ltd 01604 620 422 Pennycuick Collins 0121 665 4150 Philip Laney & Jolly 01684 575100 Regalty Estates 0845 456 4980

Amber Management 0845 2713 300 Atlantis Estates Ltd 0800 612 1515 Banner Property Services Ltd 01628 522 888 Boydens 01206 762 244 Broadlands Estate Management LLP 01908 698 804 Bush Property Management Ltd 01603 614 004 Carringtons Residential Management Ltd 01279 408 740 Consort Property Management 08451 947 044 Countrywide 01702 236 400 Covenant Management 01993 847 601 DJC Property Management Limited 0870 481 0110 Francis Butson & Associates 01480 226 740 Hillcrest Estate Management Ltd 01277 356 231 Homes & Watson Partnership Ltd 01277 355 200 Hurford Salvi Carr Property Management 01992 500 040 Jakes Property Services Ltd 01277 651 432 Lucy Block Management Ltd 01865 559 973 Marlborough House Management 01582 798 148 Maunder Taylor 01707 871 710 MCS 01920 466 500 OM Property Management 01582 393 700 PMS Leasehold Management Ltd 01206 835 350 Qualitas Residential 01923 211 331 Red Brick Management Ltd 08458 621 823 Residential Management Group Ltd 0845 002 4444 Rumball Sedgwick 01727 854 516 Sheridan’s 01462 814 087 Sorrell 01702 342 225 St Andrews Bureau Ltd 01223 352 170 St Andrews Bureau Ltd 01992 501 752 Touchstone 01908 633 918 Trinity Estates 01442 437 655

Greater London Abbott Management 020 7225 1995 Adelaide Jones 020 7725 5800 Allsop Residential Investment Management Ltd 020 8675 7046 Amber Management 01992 769 143 Arkleygate 020 8731 4577 Aspect Property Management Limited 020 7581 7900 Aston Rose 020 7629 1533 Atlantis Estates Ltd 0800 612 1515 Bells Chartered Surveyors 020 7326 8363 Blenheims Estate and Asset Management Limited 020 7368 4150 Bowood Commercial 020 7223 6940 Buckingham Management Services 020 7839 2347 Capital Property Management 020 7328 4001 Carringtons 020 8960 0001 Castlebar Management Ltd 020 8991 2564 Castlereagh Management Limited 020 7258 9670 Chainbow 020 7928 9944 Chelsea Property Management Ltd 020 7584 7850 Chesterton Humberts 020 7359 0922 City Estates 020 8809 5051 ext 0022 CJ Delemere International 020 8444 9914 Cluttons LLP 020 7647 7196 Colin Cohen Property Management 0208 959 6870 Countrywide 020 8686 7773 Crabtree PM Limited 020 8371 7070 Craig Sheehan 020 7385 5020 Crescent Estate Management Ltd 020 7352 0761 Dauntons Soar Management Limited 020 7834 1032 Defries & Associates Ltd 020 8202 0759 Douglas & Gordon 020 7963 4650 Drivers & Norris 020 7607 4040 E A Shaw Chartered Surveyors 020 7240 2255

Directory

ERA Property Services Ltd 020 7837 6186 Esskay Management Services 020 7331 8888 F W Gapp (Management Services) Ltd 020 7221 8838 Farebrother 020 7855 3500 Farrar Property Management 020 7341 0220 Fresson & Tee Ltd 020 7391 7100 Fry & Company 020 7821 0099 Galleons Point Management Ltd 020 7511 8585 Gordon & Co (Property Consultants) 020 7724 4477 Grace Miller & Co. 020 8944 9889 Granville & Company 020 8995 5284 Hallmark Property Management Ltd 01992 761 419 Harrods Estates Asset Management 020 8479 5260 HML Hathaways Ltd 020 7472 5757 HML Hawksworth Ltd 020 7802 0000 Hooper Naylor Friend 020 8766 0123 Houston Lawrence Management Ltd 020 7801 9009 Ian Gibbs 020 8370 4810 Investment Solutions 020 8286 9285 Islington Properties Limited 020 7812 0480 JJ Homes (Properties) Ltd 020 8296 0181 Kensington Flats 020 7589 6699 Kinleigh Folkard & Hayward 020 8739 2150 Lamberts Chartered Surveyors 020 7278 8191 Langley-Taylor 020 7092 3100 Lewis & Tucker 020 7323 2321 London Residential Management Ltd 020 7438 1080 M H Associates 020 7737 2552 Management Accountants Ltd 020 7224 5678 May & Co Management Ltd 020 7376 3726 Michael Laurie Magar Ltd 020 8492 9850 My Home Surveyor 020 7183 9020 Northleach Property Management Ltd 020 8315 0050 Parkgate-Aspen Property Management 020 8732 8888 Parkwood Management Company (London) Ltd 020 8368 8111 Pembertons Residential Ltd 020 7483 8429 Pinnacle Housing 020 7017 2000 Premier Management Partners Ltd 020 8457 2955 PRESIDE 020 7224 0011 Qbit Property Management Ltd 020 8320 2718 Quadrant Property Management Limited 020 7386 8800 Rendall & Rittner Ltd 020 7702 0701 Residential Block Management Services Ltd 020 8318 5544 Ringley Chartered Surveyors 020 7428 1976 RMC (The Residents Management Co.) 020 8748 1229 RMD Properties 020 7723 2111 Roger McMillan Properties Ltd 01932 576 444 Salter Rex 020 7267 2071 Scotts 020 8789 1200 Sinclairs Block Management 020 7221 4935 Smith Waters LLP 020 7839 3950 Spencer Lewis 020 7627 2660 St Anselm Property Management Ltd 020 7495 3599 Stiles Harold Williams 020 7389 1501 Stonedale Property Management Limited 020 3117 2600 Sutton Heights Management Services Ltd 020 7585 2202 The Management 020 7231 3545 The Robinson White Partnership Ltd 020 8255 6298 Urang Property Management Limited 020 7751 8356 Wilson Hawkins 020 8869 7963 Woollens of Wimbledon Ltd 020 8542 9551

South East Allsop Residential Investment Management Ltd 01273 322 011 Amax Estates and Property Services Ltd 01474 564 444 Arko Property Management Limited 01424 439 786 Atlantis Estates Ltd 0800 612 1515 Ayling & Strudwick 01444 415 222 Bartholomews 020 8546 9441 BBM - Burkinshaw Block Management 01892 501 100 Belgarum Property & Management 0845 330 0727 Blake Property Management Ltd 01296 614 882 Bourne Estates Ltd 01202 784 280

45

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Bridgeford & Co 01590 677 725 Bridgeford & Co 01424 439 242 Burns Property Management 01202 391 663 Campsie 01753 410 705 Castleford (Poole) Ltd 01202 682 299 CastleKeyes 01420 566 860 Caxtons Commercial Ltd 01474 537 733 Clifford Dann LLP 01273 407 900 Concept Property Management Ltd 020 8916 2468 Countrywide 01273 608 746 Denfords Property Management 023 8038 6970 DMA Chartered Surveyors 02380 629 823 DMG Property Management Limited 01622 831 017 Edgerley Simpson Howe LLP 01932 860 505 Estate & Property Management Ltd 01444 410 069 F & S Property Management (So’ton) 02380 226 686 Fell Reynolds 01303 854 123 Ford Property Services Ltd 02392 610 240 Fortune Management 020 8905 1621 Foxes Property Management Limited 01202 299 099 Frank Bailey & Partners 01256 473 400 GCS Property Management Limited 01932 254 090 Graves Son & Pilcher LLP 01273 321 123 Gray Property Management Ltd 02392 597 567 Hamilton Townsend 01202 765 404 Hamways Ltd 01883 730 890 Hazlett Cox 020 8891 1601 Heritage Management Limited 01737 850 260 HML Andertons Ltd 01252 320 777 HML Andertons Ltd 0845 177 8800 HML Shaw Ltd 020 8948 3211 Hobdens Property Management Ltd 01903 724 040 Homecare Property Management 01425 270 751 House & Son Property Consultants Ltd 01202 244 824 Housemartins Property Management 01323 896 418 Huggins Edwards & Sharp 01372 455 246 Hydehead Ltd 01273 579 796

Itsyourplace Limited 0845 094 0854 Jacksons 01273 204401 John Mortimer Property Management Ltd 01344 823650 Jordan & Cook 01903 821 919 Kent Gateway Block Management 01634 814 867 Leasehold Management Limited 01903 238 909 Leasehold Management Limited 01403 251 570 MH Property Management 01795 599 010 Minster Property Management Limited 01202 883360 / 01202 842 812 Now Professional Property Management 02380 224 189 Omnicroft Ltd 01634 362 097 Owens & Porter Limited 01202 522 012 Oyster Estates 01243 586 939 Parsons Son & Basley 01273 274 063 Parsons Son & Basley 01243 868 600 Peter Overill Associates 01273 820 202 Philip A Chapman 01303 233 969 Pinnacle Property Management Ltd 01189 320 180 Port Hall Property Management Ltd 01273 504 125 Prior Estates Limited 020 8676 3020 Priors 01273 737 586 Rayners 01883 742 690 Rebbeck Brothers 01202 780 780 Ross & Co 01323 841 814 Stride & Son 01243 813 760 Sweetings Property Management Limited 020 8941 7799 Watson Property Management 0845 675 5541 Worthing & District Estate Management 01903 212 857

Blenheims Estate and Asset Management Limited 01626 779 200 Blenheims Estate and Asset Management Limited 0117 973 0041 BNS Management Services 0117 9570 809 Carrick Johnson Management Services Limited 01803 389 211 Chilton Estate Management Limited 01225 442 431 CMG Leasehold Management Ltd 01452 331 289 Cotswold Property Management Services Limited 01453 825 694 Countrywide 01202 589 587 Crown Property Management 01803 324 405 DowlingDodd Property Management Ltd 01872 260 606 ETC Block Management Ltd 01395 269 955 Hillcrest Estate Management Ltd 0117 973 0600 Hillsdon Management Ltd 01395 517 950 HML Andertons Ltd 0117 906 3443 Napier Management Services Limited 01202 314 511 Napier Management Services Limited 01425 650 656 Peter Haddon Property Management Services 01752 256 600 Red Brick Management Ltd 0845 8621 823 Saxons Estate Agents 01934 411 830 The Flat Managers Ltd 01242 227 188 TMS South West Limited 0844 800 7931 West of England Estate Mgmt Co Ltd 01225 485 910

South west Andrews Letting & Management 0117 929 4400 APA Management & Lettings Ltd 01803 214 861 Atlantis Estates Ltd 0800 612 1515

For more information on ARMA members please visit www.arma.org.uk

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46

is a broadband connection and a camera.

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What does CCTV stand for?

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