BLOCKmanagement


Ethics and regulation R


The more we lack one, the more we need the other, says Rob Plumb


ecently, much has been said in the media about abuse in the residential property management services


industry. It is a great sadness to those who compete fairly in this market that the overall reputation of the sector will be negatively affected by it, but as much as I believe that the overwhelming majority of managing agents conduct their business ethically, there are an alarming number of instances of less than honourable practice within the property management sector. One of the central points is a


general misunderstanding of, or lack of clarity between, the roles and responsibilities of the owners (or landlords) of freehold property and that of their appointed managing agents. For centuries, British law has sought to protect the rights of tenants against those unscrupulous landlords who have found property ownership, and the law governing it, complex enough to disguise the ‘sharp practice’. The laws and codes of practice


that have evolved, seeking to ensure a more transparent service from property managers and landlords would, in my view, do well to focus on the need to separate out the entitlement of property ownership from the responsibility of property management. More specifically, for property managers to avoid the conflict of interest in the selection of contractors or service providers is of critical importance. The obligation, for example, for a managing agent to disclose that it is under the same ownership as the landlord/ freeholder would significantly


enhance transparency and go a long way to reducing the actual or perceived power to abuse that accrues to landlords through the terms of the lease which, all too often, the lessees are unaware of.


THE ‘RIGHT TO MANAGE’ ‘Right to Manage’ law does facilitate the transfer of management responsibilities to agents of the lessees’ choosing. Sadly the need and ability to use this right is not always apparent and is sometimes extremely difficult to effect. In the first instance there is a lack


of visibility of conflicts of interest which means that lessees are not always aware of the potential abuse. Secondly, inertia and the high number of units in an estate can often make Right to Manage statistically difficult to achieve. Amongst other requirements, 50 per cent of the qualifying tenants need to vote in favour of the process and when there are many of them (and a number of them absentees) this can be difficult to achieve. Property managers committed to providing an open and transparent service must embrace lessees’ right to use the Right to Manage mechanism and assist where necessary.


REGULATION IN THIS SECTOR The lack of professionalism in some managers leads me, disappointingly, to lobby for more comprehensive regulation of managing agents in the residential property management sector. Businesses in the services sector do not necessarily welcome more regulation. It is interesting to see how many quangos that were set


The lack of professionalism leads me to lobby for comprehensive regulation.’


Property management is different – it needs disciplines, accreditations and rules.


up to regulate various aspects of our lives are dispensed with when we get to the “budgetary restraints” part of the economic cycle. But property management is


different. It needs the equivalent disciplines, accreditations and rules of those found in the legal, medical or auditing professions; property management has a similar combination of complexity and necessity for trust as these professions. We property managers look after other people’s money with a responsibility not dissimilar from those in the heavily regulated financial services sector. Yet there is no legal authorisation required to operate and no licence required to look after the communal funds of leaseholders in a block of flats. Many property managers have


had the experience of taking over the management of a block from another property manager whose fundamental understanding of the law and the disciplines of sound financial management have clearly been questionable.


CODES OF CONDUCT AND PROFESSIONALISM It is true that excellent progress has been made in recent years with codes of conduct (and training) from professional bodies and associations such as RICS (Royal Institution of Chartered Surveyors) and ARMA (Association of Residential Managing Agents) and the


PROPERTYdrum MAY 2011 57


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