Community living

It is impossible to please all the people all the time and indeed it is impossible to please some people any of the time. This is human nature and if people didn’t have different opinions on matters then there would be no need for lawyers and Courts! No one has a monopoly of knowing everything and it then becomes a question of those who want to work together consensually and those who don’t.

Of course when it comes to leasehold and all matters on communal living there needs to be a desire to want to respect neighbours, live in harmony and with tolerance. I have lived in flats for over 16 years now and I do not regret a moment of buying leasehold. In fact I bought a leasehold flat to live in 6 years before I turned my business from commercial managers to residential managers.

LEASE has just concluded a survey with Brady’s and the results make interesting reading. 57% of leaseholders regret buying leasehold. That is a pretty strong statement and a sad indictment and one that needs drilling into. This work is currently being undertaken but let us just explore what this could mean and what could be at play.

You will have heard people say they hate their jobs when in reality one particular person is making life difficult. Generalisation and extrapolation are a fact of human interaction and nature. However when it comes to the survey and hating leasehold there are a number of factors that could be at play.

Has someone not realised when buying they would pay service charge? Have they not realised there is a ground rent? Do they have noisy neighbours? Have they been refused to make alterations? Well in reality some of these items are a factor of communal living and nothing to do with leasehold.

We will have seen programmes on neighbours from hell and this can occur in freehold houses as well. Service charge will be needed to be paid whether the flat is leasehold or owns a share of the freehold or even the holy grail of commonhold.

Whether it is in England and Wales or anywhere else in the World, flats can cause problems for the occupants and owners because they are forced into communal living. It doesn’t suit everyone and for those investors owning buy to let flats then it is a whole different perspective. Have costs not been budgeted that means the profits are not what they were thought to be.

Some would say leasehold is broken. I genuinely believe leasehold is not broken. We need to improve the service and skills of the property managers; we need to educate the public to know what to expect with leasehold and the constraints and the obligations; we need to ensure that everyone on all sides works together transparently.

At LEASE we are making strides to improve our service delivery, improve our education tools and improve the leasehold market. The team are committed and dedicated and provide a wonderful service for all.

Roger Southam

Non Exec Chair

8 July 2016

If it didn’t exist you wouldn’t invent it!

Leasehold has been in England and Wales for over 1,000 years and does not exist in any other country in the form we have it. One thing is for sure if we started from scratch leasehold would not be invented now. However, I believe that the nature of the tenure is not really the issue at hand with regard to service charges and communal living.

I recently had the pleasure of listening to Dr Hazel Easthope of the Australian University of New South Wales on the subject of strata tenure. What fascinated me was the fact that results in surveys they had carried out mirrored the results of the survey carried out by LEASE with Brady’s solicitors. Also whatever the tenure and whatever the control there is a real need to increase education of rights and responsibilities for the home owner.

That is of course not the be all and end all. The way we will tackle the long seated mistrust that resulted in 57% of our survey saying they regretted buying freehold is a long shopping list. The fact we need managers to improve customer service, the fact we need to eradicate the bad owners and managers from the market, the fact we need to increase transparency on service charge expenditure is all true. However the start point as I see it is for all to work together, discuss together and to look for solutions not just wanting leasehold abolished.

I genuinely believe if we waved a magic wand and changed all leasehold to commonhold that would not resolve the problems and issues. The tenure of a property is a side show.

If people are buying property without knowing they have a service charge to pay then that is fundamental, there would still be service charge in commonhold. If estate agents are not aware of the essentials of leasehold to differentiate value of freehold to leasehold then that is fundamental. If mortgage companies won’t lend on commonhold flats that is fundamental. If we can all work together then we can see a delivery of better service, more awareness of responsibilities, and a better understanding of what the owner is buying.

Of course if everyone had perfect knowledge, all agents were exemplars of management services and all charges reasonable we would still face an issue on people living in communities. This is really at the heart of the debate in reality. One person’s noisy neighbour is the next persons hip trendy music playing fun loving friend. One person’s irritation on lights shining in windows or ugly colour scheme is the next persons feeling of safety or desired look.

We are on a long road and it is not going to be solved overnight. We should commit to work to see the necessary education and delivery that will keep us moving forward and improve the world of leasehold. This can be done one step at a time and this can be done if we look for how to better inform and be consensual rather than just seeing things as a battle.

Roger Southam

Non Exec Chair

Leasehold Advisory Service

11 July 2016

Love thy neighbour

A recurring theme is the challenges of communal living and accepting each other’s foibles and traits. I have often argued that to live in a block of flats requires a mind-set and a discipline of give and take with your neighbours. I live in a block of flats and understand first-hand the needs and responsibilities flat living brings. And have done so for over 15 years now and the lifestyle of one floor living suits me and the lease is not a problem

It is a world of difference to the buy to let investors who own leasehold as their pension pot, all the while looking at extracting maximum value from their rental stream. Consequently I feel that we have to make sure when we are tackling challenges of leasehold that the perspectives that are being portrayed are truly reflected.

It leads to a discussion on whether the challenges faced by owner occupiers of leasehold are different to investor owners. Logically the answer must be yes. For instance living in a flat I want to know the building meets my needs and aspirations of how I want to live. Of course that may not be the same as another owner occupier with different living standards. But for the investor they are logically looking to maximise their returns and therefore any money spent can be perceived as detracting from their income. Of course another investor may see benefit in spending money to drive a better return.

The prevalence of buy to let investment over the last decade and a half has meant that most blocks will be made up of a mix of owner occupiers and investor’s renters. For those living in the building it is their home and I would suggest they care in a different way to the absentee owner.

The faults that are raised in leasehold are all solvable with consensus, working together, collaboration, service delivery and openness. Of course with any service it is easy for accusation, conflict and confrontation to arise. If the legal set up is not correct from the start or there is poor drafting of a lease that doesn’t make the system at fault, it means there needs to be more checks and balances on those areas. In reality any system will have issues or the litigation lawyers would not have a living to make. Even the Australian Strata system which is held up as the “holy grail” has the human issues of conflict, dispute and falling out which is a fact of communal living. I have remarked before even freehold houses have issues with conflict and dispute.

So it would be good if we can engender a debate on how we educate the leasehold market better on working together and problem solving. To engage in debate and discussion to resolve issues. How we get all sides to play their part in the delivery of the homes and services is key. If we can grow debate to build on this would be of great benefit to all.

Roger Southam

Non Exec Chair

Leasehold Advisory Service

10 August 2016

Everything the managing agent has to know but you are not afraid to ask!

If you buy a property in a block of flats then more than likely you will have a managing agent looking after the common parts of the property. What are the common parts? Well that is all the space outside of the front door of your flat. So named because they are the parts used in common with your neighbours! Nothing if not logical! Anyway having been in management of residential buildings for 10 years and property management of all types of property for over 30 years I have some strange tales and interesting anecdotes.

I am not sure if it is a generational thing but back in the day there was an understanding of fuses, electrics, generally how things worked. This either doesn’t seem to be the case now or we have raised expectations on what someone else should look after. For example recently one of my colleagues had a phone call from a flat owner asking us to go round and remove a spider from their flat! Now as much as we want to give customer service and as much as you want to help people, spider removal service is going a bit far.

Of course this is nothing to a phone call I once had from a flat occupier who phoned me and said there was a fire in the block of flats. There was something in the tone and voice that made me say “please tell me I am not your first phone call and you have called the fire brigade?” to which the response was “no, I’ve called you first to sort this out!” Now I have to be honest my reaction was a huge amount of surprise and a response of “seriously I am not your best bet and probably the fire brigade are better placed than me!”

Another call involved a young person saying all the lights in their living room were not working and they needed an electrician. This was outside of our responsibility as it was inside the flat however it dawned on me that it was actually a simple solution. I directed the caller to their hall cupboard and the fuse box. Having talked through finding the switch in the wrong direction and flicking it back on the problem was solved.

Of course it is easy to find tales such as this and every managing agent will have them in abundance. However the point is about what you need to know for living in your home; whose responsibility is what; in short how do you know what you need to know!

There is generally a lack of understanding and respect for the managing agents and you can read a lot of criticism, most of which is unfair. The profession of property management is one that is very easy to criticise but if you spent a day with a manager you would realise just how tricky it is. Having to be a master of all trades, have diplomatic skills to rival leading an overseas embassy along with telepathy as a must!

So if you are going to embark on your first home being in a flat and communal living then I would urge you to understand what your responsibilities are, what you are buying into and what the managing agents can control and deal with. How do you find all this out? Well that is what the Leasehold Advisory Service website is there for. After a lot of strategic planning and development of the website we launched the new version recently with a much more user friendly customer facing website.

We are constantly working on ways to improve our advice and delivery of service. This is seeing us introduce a booking system for taking calls to give great efficiency and avoid long waits on the phone. It cannot be stressed enough that the time to find out what leasehold means to you is before you by your new home. As you will be only too aware once you embark on your first time purchase you will be so excited thinking of anything practical is tricky let alone having to read dull stuff like your responsibility and liability and lease! So the time to build up your knowledge is before you get immersed. Our advisory service is there to assist in advance with questions and information to assist. Of course we are also there when you are in your new home and need help and advice. However there is nothing to beat that little bit of homework in advance.

Roger Southam

Non Exec Chair Leasehold Advisory Service

14 August 2016

www.lease-advice.org

Leasehold – could it be the answer?

I recently had the pleasure of meeting with a delegation visiting England from Japan. The university professors were researching leasehold and in particular how lease enfranchisement worked. It would appear that the one thing that hasn’t been thought through with ownership being in the hands of all flat owners is what happens when there is a catastrophe and the building needs rebuilding? How do you harness all owners and get agreement on what to do and how to do it?

Apparently following the devastating earthquake of 2011 in Canterbury New Zealand there is still a block of flats waiting to be rebuilt. It is still in ruin because the owners of the flats have no way to force people who have fallen out to deal with the reconstruction or resolve matters. And that brings us to the nub of the issue in reality.

I have said on many occasions that personally I cannot see anything wrong with the principle of leasehold. Well I shouldn’t, I have lived in leasehold for the last 16 years and still do. In fact I was a leaseholder long before I changed my focus to specialise in the residential management arena. Where the problems start is with law interpretation; peoples actions when managing or owning; neighbours who have little interest in consideration for others or community living.

Each of these issues can arise in an apartment block and how do you legislate for that? It is a generality that codes and legislation that are widely drawn will have greater effect than trying to define every item and nuance. Of course in a litigious world any legislation or code will be dissected and analysed and every word unpicked letter by letter and punctuation by punctuation. Therein lies the rub really. If everyone agreed on everything we wouldn’t need Courts, Tribunals or the legal profession. Now that would surely be a shame for my lawyer and barrister friends!

So how do we live harmoniously and without suspicion or conflict being able to be written large in the national press. Well that takes a desire and will on all sides to work together to manage expectation, to explain what rights and responsibilities befall a flat owner and most importantly the management community all working together to deliver best practice, and transparency in management. Of course this means measuring all by the same standards.

For example there has been a lot of comment in Parliament about embedded management companies and managing agents who put themselves into leases with one firm being singled out. Imagine my surprise when I discovered that another two agents who are promoted on a leaseholder lobbying website also embed themselves into leases. One is reminded of glass houses and stones at this juncture but in reality it just highlights the need for all to work together and remove conflict and accusation. Instead harnessing for the common improvement to the education about a leaseholder’s rights and responsibilities and the improvement of delivery of flat management services.

Is this a pipedream? I don’t think so. Everyone involved with leasehold should be on the same side. Assuming we accept that commercial organisations should make a profit while delivering service. I don’t think anyone assumes that managers should be providing a free service. Although from some complaints you here there are a few who probably think they should work for free!

I have described before that you could have a terrace of houses where all the freeholders would have different expectations and standards of maintenance for their houses. You can see this commonly in any city or town. Some are immaculate and well maintained, others ram shackled and poorly maintained and others somewhere in between. This doesn’t make anyone bad people it just means there are different priorities and expectations. This translates into owners of flats where some will want money spent to maintain and others won’t. Someone has to square that circle and that makes the manager’s job challenging.

What it also highlights is the need for managers to go above and beyond to be transparent and open in their management and delivery of service. Of course for some, however transparent a manger is there will be suspicion of conspiracy and bad practice.

Hopefully if we can spend long enough educating and explaining we will make a difference and see a consensus in delivery and service. But of course there will always be someone who won’t be happy with something or other that is service and life.

LEASE exists to give that education and advice and will continue to do so and keep making a difference for all sides.

Roger Southam

Non exec Chair

Leasehold Advisory Service (LEASE)

www.lease-advice.org

26th August 2016

Brave New World!

Many gallons of ink have been used in reporting and commentating on the build to rent sector. A lot of it wondering what the sector and product should be called. Currently we have PRS, build to rent and UK multifamily. Then there is the never ending debate on whether we need a specific use class for this product.

Of course what actually matters is the service delivery and ensuring that the renters get the best possible experience and the reality of creating a product where people sleep in their flats and live in the building comes to fruition. In the rental community to ensure you stabilise your building and maximise the income service is all. It is the subject of service that needs focussing on.

As with any new product type there is much thought leadership and dilemma of what is required to deliver the optimal performance. In reality there will be trial and error; there will be challenges not known and of course there will be formulaic delivery endeavoured to be achieved.

One topic that is usually fairly near the surface is how we embrace the American model and what translates across the Atlantic and whether become the 51st State. Having brought the National Apartment Association over from the USA and founded the UK Apartment Association (UKAA) then I feel better informed than most on what the impact and approach is best to adopt in this brave new world.

I have heard some express serious comment that they do not want the Americans to come over and tell them how to have line dancing and cheerleading in their buildings! Equally there is expression of “we know best because we are not America!” Well in reality all of this singularly misses the point and does a huge to learning and developing out the errors.

The USA have had a burgeoning multifamily market rapidly expanded over the last 20 years. The growth has bought challenges and misstates that can provide invaluable lessons to the UK. Why would we not learn from them? This is the critical point in reality. Why would anyone want to make mistakes when from research of others lessons can avoid the pitfalls?

In reality we should take lessons from a whole host of sources. We can learn from the hotel industry, retailing, leisure and airline industries. Every avenue offers a skill, service or lesson to be adapted and utilised. There is nothing new it is always an adaptation and reinvention that brings innovation and change. This can be seen from the disruptors in a market place as well as what appears to be revolution.

Of course the UK had a thriving build to rent asset class up to the rent act of 1977 and from the halcyon days of the 20’s and 30/s the London mansion blocks offered community, lifestyle and service. The concierge was a quintessentially British quasi butler delivery. Of course we now have to reimagine services and delivery. As an aside it is interesting to note that when the first mansion block was constructed in the 19th century the middle classes aspired to live in mansions. Whilst they would not by a flat when the first building saw a marketing opportunity of calling it a mansion block then the flats proved extremely popular!

But while we have had over a generation away from build to rent then we should be sensible enough to learn from others lessons. For example, last Christmas one of the US operators were fed up with the amount of parcels their concierge staff were having to deal with and decided that it was costing them too much so banned residents from using the concierge for parcel delivery. The result was immediate and significant. The residents voted with their feet and left in droves; their competitors immediately saw a competitive advantage of highlighting they cared about the residents and welcomed parcels. Now the simple lesson is to make sure you give provide a parcel service. However there is a wider and bigger piece that arises.

Having spent time with the NAA and worked closely in creating the UKAA I have realised that service delivery is not always about saying yes. It is about confidence and communication. If you can’t do something tell people but make sure you explain so there is transparency. With the parcels my takeaway is not losing site of service delivery. It is not a sterile discussion or decision but rather the holistic picture of what you are trying to achieve. So don’t take a decision based on trying to save money when the end result will affect your income. We have to know the levers and switches and how they interact.

Another lesson from the US is the use of maximised rental models and utilising pricing algorithms. This delivers daily flat rental pricing that can mean you achieve best rents at any point in time to maximise your income across your portfolio along with removing conflict from the get go with your renter. How do you remove conflict? Well starting off any relationship with haggling and negotiating on rents starts off a relationship on the wrong side of the table. If you walk into a store all products are priced and you may try for discount but you pay the price. Then all the experience is built on the service and not haggling and negotiating.

Contrast this to UK traditional letting market where conflict is built in to the letting process with the major part of the transaction being haggling on the rent and terms, with service coming after. Therefore this is one key driver where the UK can directly learn from the USA and utilise their learnings. It will take a while for sophisticated pricing to evolve with products such as Yieldstar but they will take a hold with the smart operators.

So as we journey into our brave new world of build to rent and we create an expectation of higher service levels for our renters then the smart money for making the best returns will be with those operators who can adapt and revolutionise utilising lessons and actions of others. Surely that is just common sense!

Roger Southam

Founder United Kingdom Apartment Association

14th September 2016