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Opinion Flat Living whaT The experTSThink

Bob Smytherman

Theissuesfacing long-leaseholdflatowners rarely receive much public attentionfromour law makers but in recent months all this has changed

LeasehoLdmatters arenow beingdiscussed in theHouse of LordscourtesyofConservative PeerBaronessGardner of Parkes –a leaseholderherself–who has taken up twocurrent issues. InNovember shecalledongovernmenttoconsider consolidatinglandlord andtenant legislation,whichresultedina number of peers suggestingthat this should be an issue forthe LawCommissiontoinvestigate. Hopefully theirinterventionwillbe more successful thanmine, as they made it cleartomewhenIraised this issue with themon behalf of the FPRAthat they had no intention of reviewingleaseholdlegislation. In JanuaryBaronessGardner then tabledaquestioncalling foranew statutorycodeofpracticefor allthose carrying out property services in the flatmanagementsectorand afew days later discussed leasehold issues andthe failureofthe Commonhold formof tenure during a debate on the Coalition’s housing strategy. In 2009,Iandawide-ranging

groupofpropertyprofessionals took part inaDepartmentof Communities&Local Government (DCLG) Task andFinishGroup to look at theissueofregulationand thegroup reachedthe general consensusthatsomeformof independentredresswasrequired forlong-leaseholdhomeownersto raisethe standard of theproperty management industry. TheincomingGovernment

ignored ourreport, choosing insteadtorelyonself-regulation whichcontinues to result in a very patchy levelofservice forusflat owners.The sector relies heavilyon trade associations such asARMA (Association of ResidentialProperty Management)and professional bodiessuchasthe Royal Institution


of Chartered Surveyors(RICS)to maintainstandards but, inmy opinion,these organisationstendto putthe interestsoftheirmembers before thoseofthe end-user,the flat owners.The currentRICSCodeof Practice is notonlyvoluntaryfor propertymanagement companiesit is also virtuallyunheard of bymost flatowners. To add to thewoesofleaseholders,

around 50%ofpropertymanagers don’t belong to any trade association or professional body, despite collecting andholding large amountsofservice chargefunds oftenamounting tomillions of pounds andare notcovered by any code of practice or regulation. Anotherconcern is that the

majority of flatownersare obliged to payadvance payments and contributionstosinking/reserve funds.Itissimplyascandal that a largesumof flatowners’ cashthat is paid to secureahighstandard ofmaintenancetotheir homes canbeheldbyunregulated and unprotectedmanaging agents.We estimate the totalmaywell exceed £1 billionatany onetime. Iamnot awareofany othersectorintheUK where such significant funds held by athird partyare totallyunregulated. Ifind it bizarrethatthere is

awhole statutoryschemeof protectionfor rental deposits but nonefor long-leaseholdhome owners’service chargeswhoare obligedtoadvancemuch greater sumsto look after the buildings in whichtheylive. It is true that there is legislationinplace requiring deposits to be held in “trust”but in practice this is very difficultto enforce in anunregulated sector. Greater financial protection

is also neededwhereservice charges or sinking fundsare held

Baroness Gardner of

Parkes has taken up two currentleaseholdissues

It is simply a scandal that a large sumofflat owners’ cash that is paid to secureahigh standard of maintenance to their homes canbe held by unregulated and unprotected managing agents

in deposit accounts. Because of the currentlimitstheyare protected only up to £50,000. In the event of failure of thebanking institutioninquestion thismaywellbeadequateforsmall blocks of flats butlargerblockswould haveminimal protection. This could easily be addressed byaverysimple changeinthe FinancialServices Authority (FSA) rules: by stating that, wheremoniesare held in trustfor leaseholders,the compensation limits wouldapply to theindividualsand nottothe totalsum. Ibelieve theonlyway to getthe

‘rogues’ outofour sector is to have a compulsory independentlicensing schemewithahighminimum standard, along with severe penalties forbreachesofthose required standards. Thereshouldbeanannual auditfor everymanagingagent by an independent regulatory body (not thetrade association)wherebythey wouldobtain approval to practice with sanctionsfor agents failing to comply.Iamfirmin thebeliefthat all this could be achieved atminimal cost to government with substantial savings to every flatowner in England andWales.Itwould be asimpleway to greatlyimprove thelives -and financial protection- of more than twomillion flatowners in England andWales.●

BoBsmytherman Chairman, TheFederationofPrivate Residents Associations

tel0871 2003324 email

Spring2012 Flat Living

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