Doing it your own way

Doing it your own way

Residential Block Management - Doing it your own way

The definitive number is unknown, however the number of properties self-managed is guessed to be a very high number in the UK. There are many challenges to face for self-managed blocks, and most of these challenges require a particular expertise or knowledge of that given area. 

Owners take things into their own hands in various ways, for example, by purchasing the freehold through Right to Manage (RTM) or Enfranchisement. The most common case will be a Residential Management Companies (RMC) inserted into the original lease delegating the management responsibilities from the landlord to the leaseholders. The power of management is sometimes more comforting in the hands of leaseholders from one perspective. However, a lot needs to be considered when taking on this type of responsibility. Is it practical, but mostly are the wider risks known?

The task of self-management generally ends up falling upon just one or two of the homeowners, who can quickly become out of their depth with the administrative burden and responsibilities. The outweighed risk alone are usually the main reason why a reputable agent is appointed by either one of these entities because its usually the agents who have a wider knowledge and expertise required to manage an estate compliant with the law.

How will you get a flat to pay their service charge when they are already a month behind in payments? What approach will you take when speaking to a leaseholder about their wooden flooring? What steps should be taken if a flat wants to make an alteration in their property? Who will be available when urgent, one to one assistance is needed? All day to day encounters in a property management scenario.

Here is a list of some of the most common unknown entities or failures of a self-managed block, and what the risks may be:

  • Are you demanding in the correct way? The provisions of the Commonhold and Leasehold Reform Act 2002, section 153, require that a demand for the payment of a service charge must be accompanied by a summary of the rights and obligations. Owners have a right to withhold payment of service charges if they are not demanded in the correct way.
  • Are you aware of the risk of Legionella? Duties under the Health and Safety at Work. Act 1974 (HSWA) extend to risks from legionella. The Management of Health and Safety at Work Regulations (MHSWR) provide a broad framework for controlling health and safety at work.  More specifically, the Control of Substances Hazardous to Health Regulations 2002 (COSHH) provide a framework of actions designed to assess, prevent or control the risk from bacteria like Legionella and take suitable precautions. If you have a water tank on site and do no manage them in the right way, the risk of legionella can be life threatening.
  • Is your property safe against fire & safety risk? The person responsible for the management of buildings must provide risk assessments based upon the Enforcement Management Model used by HSE & Environmental Health Officers to identify measurers required to comply with the Law in relation to matters within their control and then ensure compliance. If you cannot demonstrate you have managed this area the consequences can be dangerous, financially risky and can result in prison or even worse death.
  • Are you following consultation procedures? There is a law which safeguards the expenditure of service charges in England when it comes to works carried out on site. This is expenditure over and above £250 to any one leaseholder, but also extends a slightly different set of rules for long term agreements. Detailed regulations have been produced under section 20 of the Landlord and Tenant Act 1985 (as amended by S151 of the Commonhold and Leasehold Reform Act 2002) which set out the precise procedures the person responsible for billing service charges must follow; these are the Service Charges (Consultation Requirements) (England) Regulations 2003 ('the Regulations'). Similar regulations have been enacted in Wales. If you do not follow this legislation properly, you run the risk of not being able to recover any more than £250 for any one project.
  • Are you holding Service charges correctly? In collecting service charges or in holding sinking funds or reserve accounts, the persons responsible for management holds the leaseholders' money for purposes of future expenditure to their benefit - in other words, acting as trustee for the funds. Section 42 of the Landlord & Tenant Act 1987 requires the funds to be held in trust. Failure to hold funds in this way will mean you are breaking the law.
  • Do you have Asbestos? Asbestos still kills around 5000 workers each year, this is more than the number of people killed on the road. Around 20 tradesman die each week as a result of past exposure. However, asbestos is not just a problem of the past. It can be present today in any building built or refurbished before the year 2000. Do you understand what is obligated on you, under Control of Asbestos Regulations 2012, and do you comply?

There are of course the laws of tomorrow, and lots I’ve not detailed above. All of this can make the purpose and job of a manager quite an endless task, but experience is essential. Self-Management has lots of added benefits which are not all negative, but it’s unarguable that any of the likely benefits will be outweighed by the potential risks of a badly self-managed block.

 

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