Customer retention is one of the most important sources for income in business. When it comes to block management it is essential that you provide an effective and efficient service for your leaseholders.
Freeholders hire block managers to maintain the properties they own, to ensure that they remain in good condition and continue to be a valuable asset in the future. The residents (leaseholders) pay for this with a monthly service charge fee. If they feel that they aren’t getting value for money they can file for Right To Manage (RTM).
What is the Service Charge fee for?
Generally, a block of residential flats and the ground it is built on is owned by a freeholder. A block management agent looks after the communal areas (lift/hallways/car parks) of the building and grounds as well as the external structure (roof/walls) of the block. They also take care of the day-to-day running such as wear and tear on the property, health and safety, insurance and ground rent collection.
This is all covered within the service charge budget, calculated for a fixed term, usually 12 months and divided amongst the leaseholders which is paid monthly.
What is Right To Manage?
RTM gives leaseholders the power to choose how the buildings they live in is managed and maintained. The group of leaseholders form a RTMCo, give notice of their intentions to the freeholder and they will have the responsibility to either manage and maintain the site either by themselves or find a management company of their choice.
Empowering leaseholders or challenging bad landlords?
If more than two thirds of the leaseholders living in a block are unhappy with the service they are receiving they can apply for RTM, part of the Commonhold and Leasehold Reform Act which was introduced in 2002. They don’t need permission or go to court to take on the responsibility, it is exercised by formal notice from the leaseholder. A reason for this doesn’t need to be stated or any evidence for their grievances.
Before beginning the initial application to take on the RTM it is advised that leaseholders understand the rights and obligations of the freeholder, stated in the lease as these will be taken over by the RTMCo.
What type of properties can RTM be applied to?
- At least 2 tenants
- Self-contained blocks of flats
- Self-contained part of a building
- Generally excludes buildings with substantial overhanding parts and underground car parks
What are the benefits?
The leaseholders can choose a block management company who they want to manage the block they live in and not the freeholder. If they want to, they can do this themselves but that can be ill-advised.
Having this right allows them to work more closely with a company who have a greater understanding for their needs and not the freeholders.
What are the negatives?It isn’t always as straight-forward as leaseholders hope especially if a RTMCo takes control of one area of a blocks leaving the freeholder and their chosen block management company to continue with the other. Confusion can arise when two management companies maintain a shared communal area such as car park or bins.
Running a RTMCo doesn’t come cheap either. It is unlikely that the lease will allow costs such as office space, salaries or insurance to be recouped in the service charge budget despite the landlord being able to. Funding for this must come from RTMCo members.
Why does it happen?
Block management isn’t easy. It is one of the most challenging areas in property management as you are having to please freeholders, leaseholders and maintenance suppliers all at the same time. Communicating between different parties can cause crossed wires, confusion and frustration which in turn could affect the service you provide.
Managing blocks over estates or several sites is already difficult, pleasing the freeholders and leaseholders on each site can be even harder. Leaseholders often have expectations that are unrealistic, however it is important to compromise the best you can.
If you lose the faith of your leaseholders then word of mouth can spread and it is even harder to gain more business.
How to prevent it?
Provide a better service. Sounds so simple yet executing it can be quite challenging.
If you can deliver a high-quality service without out-pricing your leaseholders then they won’t have a need to look elsewhere. Working in an organised system will increase productivity, improve efficiency which will stretch out the budget even further whilst you will have more time available to grow your business with new clients.
Interested in a cost-effective solution which will help you provide a better service for your leaseholders?
Request a demonstration of Decorus property management software for Sage to see how you can grow your client base and retain the customers you already have.