Lack of regulation costing leaseholders thousands

In 2017, the then Communities Secretary Sajid Javid launched a consultation into “Tackling unfair practices in the leasehold market’. It led to a paper in April of 2018 titled “Protecting consumers in the letting and managing agent market”. This led to a report issued in July 2019 titled “Regulation of Property Agents Working Group”.

It was a comprehensive 50-page report. Amongst the key recommendations was:

• The introduction of a licensing scheme to ensure that managing agents are suitably qualified and adhere to codes of conduct.
• A new regulator provides information on managing agent performance to allow landlord freeholders  and where relevant, leaseholders  to make an informed choice of managing agent. 

Sounds good, so what happened?

In March 2023, I sent a Freedom of Information request to the Levelling Up, Housing and Communities Department. This asked:

The response was both shocking and underwhelming.

So that is now six years of consideration and no action taken. With the general election looming there is little chance of progress.

In a recent BBC News article of 27 May 2024, “Service charges: I'm now paying £8,000 a year for my flat”, Andrew Bulmer of The Property Institute (TPI) - the trade body for managing agents - states:

At the second annual conferences of the Building Safety Regulator held in May 2024, there was quite rightly a heavy emphasis of the new competence framework during the construction process by the Building Safety Act. This will improve the outcomes for the approximate 600 new high-rise buildings that are built each year. 

So that’s great for the new builds but what about the tens of thousands of buildings that are already occupied by leaseholders?

The Building Safety Act did not introduce any new regulatory framework for managing agents. Worse than that, the directors of resident management companies attending the conference were told that managing agents were not legally responsible for outcomes under the new Act.  

So the people managing buildings on behalf of residents, are not regulated and have few legal responsibilities; often lacking the technical knowledge to actually mange the risk.

There has been a significant increase recently in Private Equity investment into managing agents. Everyone knows, Private Equity do not get excited about sectors with tight margins. 

On this point we differ with Andrew Bulmer. It is entirely possible for a managing agent to charge residents for a service that is not delivered and hide cost such as commission on building insurance premiums, safe in the knowledge that there is no sanction. Hardworking people are paying over the odds for bad service.