Further to government advice ~ should property managers suspect that cladding on a building they manage, is unlikely to be compliant ~ first on the list is:

Notify Fire and Rescue Service

Government advice is to inform the local fire service or protection department as failure to do so may put fire-fighters as well as residents at risk.  The fire and rescue service will carry out an urgent inspection with the responsible person to ensure they know about and are introducing appropriate interim measures.  The fire service will carry out further inspections once the interim measures have been completed.

  In the wake of the Grenfell tragedy, fire safety is receiving an unprecedented level of urgency and attention.  The tragedy is compounded by the fact that a fire of equal but smaller seriousness at Lakanal House also involving awful deaths, was an event from which lessons could have been learned and the necessary procedures put in place which could have prevented the Grenfell fire.  It seems finally the social housing authorities are moving on the issues and taking urgent and drastic action.  But what of the private sector?

We received a letter from Melanie Dawes at the DCLG giving guidance for those of us who manage blocks with potential lethal cladding what to do to have it tested through the Building Research Establishment and put ourselves in a better position to know of any potential dangers to residents.  The testing will be paid for by the DCLG so there is no excuse not to do the tests.  Further costs depending on what the tests reveal will be for the owner of the building.  Priority is being given to buildings over six storeys or 18 metres high and the DCLG emphasised that ‘it goes without saying that owners/landlords have robust fire assessments for their properties. It is likely that many of these assessments do not consider the type of cladding used in a building and we would recommend you look again at your assessments.’

But this is not where it ends.  Our 2 Rivers watchdog IRPM followed up with advice given by the government if any cladding fails the test.  On 23 June the government issued further correspondence to local authorities and housing associations.  The advice was given to their own housing agencies but it is just as valid for us in the private sector.  Click here for connection to the National Fire Chiefs website for their word on the subject but the advice from government as interim mitigating measures, to be immediately implemented, to ensure the safety of residents pending replacement of the cladding had the following headings:

1. Notify Fire and Rescue Service
2. Fire Risk Assessment
3. Inform Residents
4. Consider the competence of the fire risk assessors
5. Sprinklers
6. Emergency rehousing planning

Detail on each of these headings is for future blogs.  Much exposure was given in the press to the fact that certain failed cladding had resulted in buildings being evacuated.  But it was emphasised that “a failure in testing of the cladding does not necessarily mean that a building will have to be evacuated; the decision by Camden Council to evacuate 4 of the 5 towers on the Chalcots Estate was because the failed testing of the external cladding was compounded by multiple other fire safety failures which the fire inspection team found within the buildings.”

So the issues listed, all form part of, and contribute to whether the fire safety management of our blocks of flats are tight and responsible, or playing Russian roulette with people’s lives.

 

 

 

 

 

After the tragedy of Grenfell Tower the testing of cladding became the government’s top priority.  On 20 June the government wrote to all local authorities and social landlords requiring them to submit samples of the cladding materials made of aluminium composite material (ACM) for testing from tower blocks and especially on buildings over six storeys or 18 metres high.

ACMs are made of aluminium composite material; they are flat panels consisting of two thin coil coated aluminium sheets bonded to a non-aluminium core of polyethylene, polyurethane, profiled metal or a mineral core.  Aluminium composite panels are frequently used for external cladding or facades of buildings.  The panels are not for insulation purposes rather as rain screening to prevent excess moisture hitting the main structure.

  Grenfell Tower was clad in aluminium composite panels with a polyethylene core, with insulation made of polyisocyanurate foam.  On 26th June police revealed that both the cladding and the insulation had failed a test.

This tragedy should now be the paradigm shift for all managing agents to do regular, robust fire risk assessments and for God’s sake take action immediately when a serious threat is found.

 RTM (Right to Manage) and RMC (Resident Management Company)

In the case of Right to Manage the landlord continues to own elements of the building. The Commonhold & Leasehold Reform Act 2002 gives leaseholders no-fault right to take over management of their building. They do not have to buy the freehold and any superior leasehold interests. RTM is based on the transfer to a leaseholder owned company of management, not ownership. This means there will still be some oversight and possible ground rent due to a landlord.

Once RTM has been exercised the residents take over management functions including services, repairs, maintenance, improvements and insurance.

The RTM is structured in accordance with the scheme of the resident leases.

One of the issues recently brought to our attention is the fact that RTM does not displace the landlord’s ownership of it’s retained property i.e. the common parts, roof, structure and exterior of the building. This is where the issue of implied rights can become muddy.

In a County Court decision in which the RTM Co had management functions, including work on the roof, it was ruled that RTM did not prevent the landlord from developing the roof, the roof space and airspace above to create something like an additional flat. Therefore the landlord can still make further development of the property. RTM directors need to be aware of this situation.

The conclusion drawn was that generally though RTM is cheaper RMC (by collective enfranchisement) is better. This is a matter of perspective. If a building has a lot of flats you may be able to be sure of always having a directorship to manage the building. But if this becomes a problem, the residents can always fall back on the landlord to take back management of the building and this ensures the building and its common parts are kept in good order.

  A Residents Management Company or RMC as it is abbreviated, is a non-profit making company set up to administer the service charge funds collected on a development that contains areas shared in common with neighbours or ‘common parts.’ The service charge fund is held in trust for the property owners at the development via this company.

Common parts typically include garden areas, pathways, car parks, flower beds, fences and boundary walls and the funding of these common parts will extend to lighting, maintaining and insuring these areas.

On new buildings, the RMC is usually incorporated by the developer at the point at which a planning permission is granted by the local authority and building starts.  As each new owner purchases a flat or house on the development, they are granted membership to the RMC; this is confirmed in the Lease document (for a flat) or the TP1 document (for a house) which you will have signed when you purchased your property.  Once the final unit is sold on your development, control and responsibility of the common parts is transferred to the residents by the developer.

The RMC, of which yourself and your neighbours are all members, are then free to elect a board of directors.  The Board of Directors will usually be made up of those who live on-site who like to have an input in the way the development is run and financed, and who can spare some time each month to liaise with a managing agent and/or residents’ committee.  It is this position, as ‘Director’ that is relevant to this advice document.

If a development does not have any directors it may fall foul of Company law and persons at the development wishing to sell their properties may encounter difficulties.  It is in the interest of all property owners at a development to ensure that the RMC has a correctly elected board of directors at all times.

A director will be expected to attend up to 4 meetings a year; One annual general meeting that all members of the RMC are invited to attend, and up to 3 directors’ meetings.  You will also be expected to sign off your RMC’s financial records (or ‘Company Accounts’ as they are correctly known) each year.  You need to be able to read and understand simplistic company accounts but we can guide you in the first instance.

Directors meetings are run according to an agenda which typically allows us to impart information to you and any fellow directors concerning the financial position of the RMC, along with an opportunity to discuss short, medium and long term goals for the development.

You will liaise with your site manager to assist in decision making and to ensure that advice, when it is given, is carefully considered and acted upon.

Typically, a term as director lasts for a year, from the date of the AGM each year, and director can usually be considered for re-election should they wish to serve a second term on the board.  Some RMCs allow the recovery by directors of small amounts of money to cover the cost of telephone calls and postage.

A director is automatically resigned from the Board if he/she are not present at the meeting and have not offered themselves for re-election either in person or by proxy.

The RMC is governed by Company law, with one of the stipulations being that the Company must have at least one ‘natural director,’ a ‘natural director’ being a person rather than a corporate appointment.

You should note the following duties of a Director of an RMC, which are mainly:

• To act within the powers of the Company – a Director must act in accordance with the Company’s constitution (i.e. the Articles of Association) and exercise his/her powers for the proper purpose.
• To promote the success of the Company – a Director must act in good faith in the way he/she considers and promotes the success of the Company for the benefit of its shareholders/members.
• To exercise independent judgement and not be swayed by a dominant Director.
• To avoid conflicts of interest – a Director must avoid situations which he has a direct or indirect interest which conflicts with or may conflict with the Company’s interests.  For example, a Director would not be allowed to appoint a contractor or company they have a financial interest in.
• Not to accept benefits from 3rd Parties – a Director must not accept any benefit (including a bribe) from a 3rd Party which is given because he is a Director or he does or omits to do anything as a Director.
• To exercise reasonable care, skill and diligence.
• If you are considering standing as a Director for your development’s RMC, please call 2 Rivers and ask to speak to your site manager who will be happy to go into further details with you.

 

 

 

 

 In the latest News on the Block magazine (issue 89) they discuss the issue of leasehold with reference to the sale of new-build houses possessing scandalous leases which involve developers selling the freeholds of homes to private companies and leaving the leaseholder with rocketing ground rents. In some instances, the fees have doubled every decade which has made the property almost impossible to sell.

This is just one of the issues about leasehold which could be raised as an example for the ‘abolish leasehold’ debate. For years leaseholders have been put at a disadvantage. Despite the many legislative initiatives and amendments made to existing legislation, which have tried to address problems, the problems remain.

   At 2 Rivers, we ask just one question. Who pays the bills? For us it comes down to one statement ~ ‘The people paying the bill should be the people making the decisions.’ If there is disagreement between those paying the bills, it is like an election. Whoever we vote for individually, we must all live with the party which wins most votes.

So, in terms of leasehold and to our credit as a nation, this has been made possible by Right to Manage and Resident Management. They are similar, but they are not the same and that is a discussion for another day. The point for this debate is, it gives the power of the £ back to the leaseholders. These two systems free the residents to start a debate not just of how they control their management costs, but the culture and environment in which they all live.

At 2 Rivers, we have seen something of the way systems in other countries run blocks of flats. We know them as common-hold but in these countries, they have never known leasehold. In 2014 at the IRPM Annual Seminar there was an invited speaker called Michela Hancock from the USA. The title of her talk was a presentation on the Build to Rent sector in the US and UK. She gave a positive impression of how involved US residents become on residential sites in the US and in so doing create a community with their neighbours.

She introduced a culture not common in the UK (our observation) except among certain resident associations.

2 Rivers believe this community based resident driven agenda is the future for us. Most importantly it would help unravel the past where the landlord and his agent had too much power and sometimes it was abusive power.

  The legislation is already in place for us to create a residential community. Right to Manage is a wonderful opportunity and has been in existence for more than 10 years to encourage residents to take charge of their management and build a community driven culture with all their neighbours. You have control, you get a vote and you are all service charge payers. No more landlord or managing agent acting the bully and doing things without your knowledge or approval.

If it is so wonderful why aren’t there far more RTM companies than there are? Well several reasons.

 

Firstly, the issue of responsibility. Blocks of flats have common areas even if they are just a staircase. This can make coming home a heaven or a hell. Entrances can be warm, clean and attractive or cold, dirty, choked with things like bikes or rubbish and dangerous if threadbare carpeting is causing a trip hazard. Who will take responsibility for that. Those three things, involve cleaning, heating and repairs. Who will ensure the building is insured properly in case of fire or these days the likelihood of a terror attack? If the site has a garden, even a small one, who will supervise the gardener? If security is an issue who will supervise the door entry systems, and for that matter fire alarms and sprinkler systems.

On this point, one of the issues which cause a problem for the managing agent is this issue of responsibility. Residents love to demand a course of action in any given situation but often won’t take responsibility if their decision backfires or produces unintended consequences. Authority and responsibility are inextricably linked and residents who want the power of decision making must take responsibility for their decisions. When that happens, they will be more inclined to consult other residents to ensure the final decision is more collective and not made however tempting by one or two people.

Secondly the issue of time. Resident leaders don’t always want to devote their down time to liaising, consulting and researching for a building where their efforts may be taken for granted and involve a lot more hassle than they expected.

Thirdly the issue of our own approach to leadership. We still think of our leaders holding a privileged position of power over us, not a thankless position of responsibility in which we are all shouting at them to do a good job. We don’t do support very well or acknowledge as residents, we all take responsibility once a vote has been taken and a corporate decision made.

Fourthly if we overcome these, we have the First Tier Tribunal to negotiate. This can involve cost if we hire a specialist solicitor to help us navigate the procedures through this minefield.

So, because of some of these challenges, we are having the discussion in the context of getting rid of leasehold altogether instead of making use and gain what we want from the legislation already in place to help us. No-one wants to be at the mercy of property developers always looking for ways to create what Robert Kiyosaki calls an “asset,” an income stream which needs little if any work.  There are good and bad “assets.” Robert endorses the former. The ground rent scenario described in our first paragraph in News on the Block is a bad “asset.” Nor do we want crumbling buildings with no landlord, managing agent or resident looking out with strong support from his/her neighbours, for all that must be done to keep it pristine.

So, to answer the question ‘could leasehold be outlawed by the next election’ ~ in our view, it is doubtful, for 2 reasons. Firstly, we have not discussed social housing, but we have a huge amount of social housing and some of the people there have disabilities and serious health problems. They need the support of a landlord managing the building.

Secondly as explained, if the landlord is removed from the mix and residents don’t want the responsibility either, the building and its grounds if there are any, will deteriorate and leave, what can be a safe attractive and well-maintained building, into a place where no-one wants to live. At 2 Rivers, we don’t want to see that happen to any resident.

 In their May newsletter Sean Hooker of the PRS wrote a brilliant article regarding rip offs in the property rental sector.  Read on…

“It is never easy being a victim of crime, you feel violated, shame, anger and feel a real sense of injustice. These feelings are heightened and compounded if the perpetrator of the criminal action was somebody you trusted and had built a relationship with.

This sense of betrayal is a powerful emotion and drives a strong desire that the criminal should not be allowed to get away with it. In the real world however things are never as simple as this and it is not just a matter of calling the Avengers to fight your cause and deliver the justice you deserve.

It is particularly poignant in the world of the property when a landlord enters into a contract with a letting agent and that agreement is flagrantly abused for the personal gain of the agent. Nothing encapsulates this more clearly than when an agent deliberately fails to pass on rent to landlords or deposits to tenants. However you dress this up this is theft and is a criminal action.

Unfortunately, this view is not shared universally by our law enforcement agencies and often when these sorts of matters are brought to the attention of the police they are either dismissed as civil matters or are not prioritised as “real” crimes.

The victim is therefore forced to act through alternative avenues. When these do not deliver the result they hoped for the frustrated victim often shifts the blame to another source, usually the organization try to assist them.

A classic example of this dilemma was highlighted recently, with regards to an agent trading under various guises of the name Carter Stone. This so-called agent had long track record of devising elaborate scams where rent was not being passed onto the landlords and illegal subletting was occurring in the properties they managed. The details are shocking and the actions of agent broke every rule in the book from not protecting deposits, subletting the property to multiple tenants who were forced to live in unsafe and overcrowded properties and ultimately stealing the rents and deposits of their landlords.

We at the PRS first became aware of Carter Stones after they were complained about by a prospective tenant who had paid a holding deposit and were not refunded any money when the property was suddenly no longer available. The Agent was strangely silent when we tried to contact them and of course failed to pay the award triggering our discipline process. Another complaint arrives about the same time involved a landlord not receiving rent and being sold a non-existent rent guarantee policy. Again, the Agent failed to respond. By this time the first discipline case had led to Carter Stones being expelled from the Scheme and we informed the other two schemes and local trading standards. The Agent was therefore acting illegally and the local authority could slap a £5,000 on the Agent for trading illegally.

Not surprisingly this fine was unpaid. The complaints however continued to come in but it was clear that the now expelled Carter Stone was not playing ball and we had to inform the Complainants that we could no longer take the complaint and that they should take legal action. The complainants were naturally not best pleased with this but we have never been regulators or enforcement agencies and our government licenses are clear on this.

This case however does raise a number of issues that do bear looking at and believe you me, they are top of the agenda whenever we meet with the government.

We are now in the midst of a General Election and it is an ideal time to highlight what should be the new government’s priorities.

They are namely the lack of financial recompense for victims of the type of situations highlighted above, the patchy enforcement of the current laws and regulations and finally the loopholes unscrupulous agent use to hide their wrongdoing and evade justice, the primary example of this is dissolving one business and setting up a phoenix company, effectively walking away from their debts and obligations.

There are three government approved consumer redress schemes for the property industry. They are set up to decide if an agent has acted incorrectly and set out any award as a result. Like all other ombudsman/redress schemes they are not set up to compensate complainants.  Therefore, we have supported fully the campaign to make client money protection a mandatory requirement and this is now a step forward. Having such protection does not indemnify the agent from their dishonest actions but does provide some compensation for their victims.

Enforcement is another area that we have sought a robust approach from the Government and whilst there are many powers devolved to local authorities and trading standards, the effectiveness of the action is a postcode lottery and support and resources are needed to ensure a consistent approach. Local Authority resources are scarce and they need persuading to priorities this issue. New powers are coming into force such as banning orders and fit and proper tests but for these to be effective they need teeth.

In the recent consultation on banning orders I submitted a number of points to consider including whether being prohibited from being a member of redress scheme should constitute a banning offence.

My argument is where a redress scheme has expelled a member, usually for non-compliance with a binding decision, if they refuse or cannot comply with the order then we inform the other schemes who then apply a prohibition and the relevant local authority. As the law states that you cannot operate without being a member of redress scheme then local authorities should have the power to seek a banning order on the agent.

The same principle should apply when mandatory client money protection comes in and an agent has been refused cover for misappropriating client funds. A banning order would make the enforcement of this more effective.

We are concerned about the phoenixing of companies and banned individuals reconstituting agencies or “working” under the cover of a legitimate principle whilst subject to a banning order. The banning orders and database should be sophisticated to help prevent this.

The issue of phoenixing is one that will need a concerted effort and a joint approach to solve. How criminals are able to rip people off and then continue to trade is the real issue that needs tackling and the direction of travel points clearer and cleared to some form of regulation. What form this regulation will take, it remains to be seen, however the most likely approach will be some kind of agent registration and check list of compliance criteria. Further measures can be looked at in terms of say making letting agency a protected term, accreditation and fit and proper tests.

You will note that I have not included banning letting agent fees as one of the pressing priorities. This is because in my view, it is not a major factor in building a safe and reliable industry to serve tenants and landlords. I believe that excessive fees can be dealt with using the redress schemes and other consumer powers and increasing the transparency and accountability of agents.

The ban is however likely to feature in all the main manifestos of the parties during the election and therefore whilst it remains to see the detail of any future policy it is prudent to prepare for this change as coming down the tunnel during the next parliament.

These are my own thoughts and what I am looking for the new Government to address when elected, you of course may have others that you would like to see on the agenda but on the whole the industry should be craving a progressive approach from our leaders to building a safe, professional and reputable sector that address the needs of its customers and contributes to the wealth of the country. It only remains for us all to cast our votes and hope for the best!”

 

 Discussion are under way in Scotland, where it is the view of one of their agents, that the government is going too far, to expect the Letting Agent Code of Practice to be implemented in January 2018.  It is the part where agents become responsible for safety in properties owned by Landlords whose properties they manage.

In practice this means that the Landlord is no longer responsible alone, for the safety of the properties they own, and have to put right something like unsafe wiring or falling down ceiling plasterwork, or risk having the Lettings Agent end their association.

Read more here.

 

Reporting recently on fines imposed for fire risk, health and safety failures, has exposed a question posed as a comment in recent IRPM report.  A fine for the Lakanal House Fire amounted to £270 000 whilst FirstPort Limited who took over the portfolio of Peverel Management Services was fined £360 000 including legal costs.

A fire at Gibson Court, Hinchley Wood caused by a faulty TV and spread rapidly across the retirement home’s entire roof and became a devastating blaze which forced firefighters to return several times to rescue residents and sadly lead to the death of one of them.

Both sites were found guilty of failing to make proper fire risk assessments and failure to take general fire precautions. Failings were also cited about properly training staff/protecting employees.

Deaths occurred at both sites.  In the case of Lakanal House 3 adults and 3 children; in the case of Gibson Court 1 elderly person died.  Although there seems to be a clear case of skewed justice with a £90 000 difference in the fine.

However 2 points need to be made.  In the case of Lakanal House the London Fire Brigade brought charges against Southwark council, which means in effect either insurance pays the claim or the resident tax payer pays the fine; and tax payers will pay anyway, if insurance premiums go up and the council tax goes up to cover it.  In the case of Gibson Court, Surrey Fire and Rescue Service brought charges against a private company, who will definitely make an insurance claim.  There is no tax payer element.

It is true voters are holding the council to account with their vote and this could be the ultimate punishment.   But in the case of FirstPort, they could lose customers or clients.  Due to the nature in both cases, where failures in basic health and safety were committed, the insurance pay-outs could be reduced as a result and premiums put up.

Second point is that the council had 3 times the amount of court costs to pay.  This somewhat mitigates the discrepancy between what one paid over the other.  In the end Southwark Council paid £570 000 including court costs, whilst FirstPort paid £460 000. This is £110 000 difference.  Each case has it’s twists and turns; each fire is a tragedy.

The comment posed in the report still amounts to the same thing.  Do the fire risk assessments! Take the necessary action when you find weaknesses and train staff to maintain fire precautions and procedures.

 

 

 

 Leasehold houses sold with ground rents that double every 10 years have been making the owners feel as if their money is as good as burning.  Future increases in the ground rents were so onerous it was making the houses difficult to sell.

This is now being put right by at least one property developer with millions of pounds being set aside to buy such freeholds.  It is now being argued that other house-builders should follow suit and end the practice of selling leasehold houses when there is no legal reason to do so.