Features TECHNOLOGY The conundrum
How can successful block managers ensure that profitability isn’t threatened by the cost of expansion, asks Matthew Smith?
The block management market is on the cusp of dynamic growth. As the demand for new homes grows there is increasing pressure to
build more flats, which in turn is creating opportunities for property managers keen to take on new clients. Since January, one leading property manager has reported taking on 60 new blocks. Multiply this by the whole market and it is easy to see the potential for expansion. This is great news for property managers, but residential management is not a simple task. Block management companies have a complex mix of accounting and property–related challenges to deal with. They need to regularly send out service charge demands and record the progress of maintenance work while keeping budgets under control. They need to have all relevant information available to them in one easily
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accessible place and, at the same time, they have to deal with complex differences between individual leases, payment plans and schedules.
These challenges are likely to be further exacerbated by business growth. Ambitious companies are constantly looking to expand to drive profits and compete against the heavyweight players. Unfortunately growth can lead to escalating costs, with significantly more service charges to collect, more maintenance to organise and suppliers to pay. It may also increase one of the other biggest drivers of expenditure for block managers – postage. Throughout the year, they will have to send out multiple documents to each flat owner. Estimates suggest that there could be about ten documents issued as standard annually, typically including end-of-year
statements and details of planned maintenance work. There are also likely to be several ad hoc letters sent - from general correspondence to arrears letters, as well as information about ad-hoc repairs.
Block managers may on average end up paying as much as £6 per flat owner in postage costs every year, a figure that grows as they take on more blocks - and that’s without considering the time and money spent in administering the whole process. And it’s worth remembering that generally agents don’t charge separately for this postage. Instead, it just comes straight out of their management fee.
Block managers are not always helped in managing the impact of these challenges by the systems and solutions they use. They are
Issue 21
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