Frequent contributors Phil Parkinson and Katie Edwards of specialist property solicitors JB Leitch, reflect upon the momentous events affecting the property management industry in 2020 and look ahead to the implications for the forthcoming year.

As we approach the end of the year, we customarily take stock of our achievements and successes and prepare to focus on the challenges and opportunities ahead. Looking back on 2020 will undoubtedly be a different proposition for many – and plans for the new year will be focused on sustainability and stability as much as growth. 

It has been a year of turmoil and tragedy. With the promise of mass vaccination now becoming a reality, 2021 at least offers the hope that our society will begin to return to normality in the coming months.

Reflecting on the Impact of Coronavirus

Every sector of the economy has been impacted by the coronavirus. From retail to hospitality, construction to care, we have needed to adapt to unprecedented disruption and maintain continuity of service. 

In the property management sector, we have seen landlords and managing agents rapidly adapting to new rules encompassing building maintenance, safety, income and the wellbeing of residents. Adding to this, the introduction of emergency legislation under the Coronavirus Act (2020) stayed the continued functions of the courts and tribunals, posing further delay and financial risk.

Landlords and managing agents were encouraged to engage with leaseholders regarding the obligation for ongoing payment of rent and service charges. Building maintenance and repairs were ring-fenced to continue, albeit under updated safety guidelines and restrictions.

Significant Developments Despite the Pandemic

However, despite uncertainty and pause, there have continued to be significant developments in legislative reform in key areas affecting the sector. 

The £1bn Building Safety Fund prospectus was issued during the summer and thousands of applications were received by the end of July. The progression of the Draft Building Safety and Fire Safety Bills through consultation to reading at both houses represents a significant step forward in ushering in the new Building Safety Regulator to oversee the large scale process of removing unsafe ACM cladding, a new regulatory regime for construction products and improvements in competence across the built environment sector. 

With these proposals subject to ongoing challenge and debate, the issues surrounding the EWS1 process and the difficulties posed by lenders insisting on the certification irrespective of a buildings height have become increasingly prevalent during the difficult economic conditions. Linked to this is the ongoing challenge of buildings insurance including escalating premiums and the viability of interim safety solutions such as waking watches.

The summer brought another significant milestone for the industry, with the publication of the Law Commission’s long awaited proposals for leasehold reform in July. Covering leasehold enfranchisement, the right to manage and commonhold, the three reports marked the culmination of a series of high profile consultations held across 2018 and 2019. If the proposals become enacted (subject to government review) they will herald significant implications for landlords and managing agents.

2021 Will See the Momentum for Change Continue

With the wider approval and distribution of vaccines imminent, the government still cautions that it will be several months before we are able to return to (a degree) of normality. 

This has been reflected in the extension of the schemes to support employers and employees into early spring next year, and maintaining the new practices for engaging leaseholders, colleagues and suppliers.

With building safety remaining a high priority for government, 2021 will see continued focus and debate on the extent – and effectiveness – of reform.

The recent announcement by the government (in November) that buildings without cladding will not be subject to EWS1, alongside further consultation between lenders, valuers and fire safety bodies to develop new advice, may provide pointers to support unblocking the issue of zero valuations and the allocation of costs. 

The Building Safety Bill may also provide a new approach to building safety certification that could ultimately replace the EWS1, in that the bill requires a new duty holder, the “accountable person”, to register a higher-risk building before it becomes occupied and must register the higher-risk building with the new building safety regulator and obtain a building assurance certificate.

However, there is increasing challenge regarding the delays faced from the major shortage of qualified engineers able to carry out EWS checks and whether the additional funding for a rapid training programme to try and create 2,000 more fire risk assessors to carry out checks on buildings, will be impeded by the high costs engineers incur in securing professional indemnity insurance to cover them for carrying out the work.

The New Year may also bring change regarding the Building Safety Fund, with increasing pressure on government from across the industry to address the need for additional funding and additional time. This will likely focus on those management companies and landlords who have struggled with applications and calls to broaden the scope to address blocks of all heights, (not just 18m or above), balconies, unsafe structures, waking watches, buildings insurance and alarm systems. 

Questions also remain open regarding the prioritisation of remediation works, with greater clarification on these issues expected urgently.

Across the wider sector, the mortgage holiday extension to the 31st January 2021, with the moratorium on the enforcement of lender repossession, will bring continued pressure for both landlords and lenders and it remains to be seen if any further extension will be required. Similarly, the ban on evictions and the 6 month notice periods will be in place until at least the 31st March 2021. Although adding additional economic stress, the government urges that rents and service charges should continue to be paid. 

The coming year is also likely to bring a conclusion to the long running and significant Settlers Court case, addressing the conflict that arises between an RTM Company and existing Management Company or Landlord regarding the management of a shared estate – which is arguably not dealt with appropriately in Gala Unity. It is hoped that, should the Settlers Court Appeal be successful in the Supreme Court, the issues surrounding shared services appurtenant property will be clearer on this complex issue.

In Summary

2020 was a year of disruption. It was also a year that heralded longer term change across the property management sector. 2021 promises to provide greater clarity and stability as well as heightened debate and scrutiny. We will watch, and report, with interest.