Business

Flat owners should be given new rights, concludes CMA

block of flats in Greenwich Image copyright Getty Images

Five million people in England and Wales who own their flats should be given new rights, the Competition and Markets Authority (CMA) has said.

During its eight-month study, the CMA found that many leaseholders suffer from excessive charges or poor service by property managers.

It concluded there should be new laws to help flat owners get rid of bad property managers, by a majority vote.

In response, the industry said it was already working to improve standards.

The CMA also recommended a series of voluntary changes, to improve transparency between property managers and leaseholders.

However, it stopped short of recommending that the property management industry should be regulated, as it is already in Scotland.

Mediation

The study previously found that some property managers were engaging contractors on the basis of how much commission they would earn for themselves, rather than the value for money they would provide.

"Many property managers provide a good service to leaseholders, but protection against the worst failures by property managers is vital, because when problems do occur, they have a major impact on leaseholders," said Rachel Merelie, a senior director at the CMA who led the study.

The report recommends:

Image copyright Arma
  • Property managers should set out clear improvement plans, justifying all charges and any commission they are earning. They should also disclose any corporate relationships with contractors or landlords
  • There should be a new mediation service, to prevent leaseholders having to go to court if they are unhappy about the level of charges
  • Flat-buyers should be given more information about service charges and ground rent when they get the property details from the estate agent.

In addition, the CMA is recommending a change in the law that would allow flat-owners to "vote out" poor property managers, if 50% of the leaseholders agree.

Under this scheme, freeholders would be required to re-tender for a different property manager.

'Excellence'

But the Association of Residential Managing Agents (ARMA) said it was already working to improve standards in the industry.

Earlier this year it introduced a new consumer charter called ARMA-Q, which improves transparency and provides a better system of redress for leaseholders who are unhappy.

However it acknowledged that there is room for improvement.

"From next year, all our members will have to be accredited to ARMA-Q, which enforces best practice," said Martin Perry, ARMA's chairman.

"We want our ARMA logo to be the badge of excellence," he said.

While the voluntary changes are likely to be approved - and instigated - by industry bodies, the law change is unlikely to find its way into legislation until the next Parliament.

Property factors - as property managers are known in Scotland - are already subject to regulation. A law passed by the Scottish parliament in 2012 means they have to be registered.

But the CMA said it did not feel there was a similar need for legislation in England and Wales, as the market is otherwise working well south of the border.

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