By Nigel Howell, Chief Executive of FirstPort, the UK’s leading residential property manager.
The residential system in England and Wales is changing, with very significant reforms to leasehold and ownership structures due to come into force over the coming years.
FirstPort is the UK’s largest residential property manager, so we have a good understanding of what property owners are looking for. One thing we often hear is how residents want to be more involved with important decisions about their building, with greater control over the things that matter most.
The recent work of the Law Commission, which published three reports in July on this topic, is a positive step and should help to drive this agenda forward. At the same time, the Government’s draft Building Safety Bill – which is currently being scrutinised and reviewed – looks set to put in place a new regulatory regime which will introduce more stringent safety obligations and responsibilities.
As government moves forward with reform of both these areas, it’s important that everyone involved in building management – from residents and property managers, to developers and freeholders – understands how roles are set to change. This is particularly true at developments where Residents’ Management Companies (RMCs) are established.
RMCs are an alternative to the traditional model where a freeholder is the party responsible for management of communal areas and shared services. When an RMC is set up, it is residents who get to make decisions about these things, and also take on the responsibilities and obligations that would usually sit with a freeholder. As the number of RMCs continues to increase, it’s important that we put the right steps in place to help them navigate the system and make it work for them.
The RMC model
RMCs can be set up in a number of ways. When it comes to new-build properties, developers will sometimes create an RMC once building work is complete, handing over responsibility for management and maintenance to new homeowners. This means buyers have a greater sense of ownership and control over the buildings they live in.
In many cases, the RMC model can give residents more choice over communal decisions about their home environments, and it already works well at lots of developments across the country.
While some RMCs take on day-to-day jobs themselves, the job can get harder on larger and more complex sites. That’s where the property managers often come in, being appointed to carry out the necessary maintenance and management functions on behalf of the RMC, in the same way that they do for a traditional freeholder. Employing a responsible, professional operator helps to take those difficult and time-consuming jobs away from residents.
Taking on Risk
The RMC model can empower residents, but changing regulations mean this is also set to come with more complexities, and there are legal issues to be aware of too.
Unlike a more conventional arrangement, where a professional freeholder provides stewardship of the building, an RMC set-up transfers many duties directly to resident directors, who bear all of the normal liabilities of company directorship – in this case that includes things like arranging building insurance, service charge collection and, crucially, responsibility for fire and building safety. These responsibilities cannot be delegated, so RMC directors are therefore ultimately liable for decisions they take.
At FirstPort, we work with more than 570 RMCs so understand the pressures the role can involve. We recently surveyed the RMC directors we work with, and found that a third are concerned to some extent about their roles and responsibilities being changed by new building safety regulations – which are set to introduce more stringent standards and more regular compliance checks.
For this reason, some residents are put off the role in the first place. It’s certainly important to do your research before deciding whether being an RMC director is for you. It’s also vital to think about what you’ll need from your property manager, and that you pick one that has the required capability and expertise to help.
Tools of the Trade
For traditional freeholders and RMC directors alike, it is essential to ensure that responsibilities for building management are carried out professionally. This needs a well-planned and considered approach.
For example, agreeing the standards and costs for the site is key. This helps make sure that services are known from the outset and makes it easier to build reserve funds and budget for work. Equally, good and clear communication and can help ensure neighbours are all on the same page and up to date. Making sure accounts and budgets are properly prepared and audited is also necessary to give residents confidence in how the development is run.
Digital systems are increasingly part of effective property management, especially for RMC directors who are often short of time between other personal and professional commitments. To help with this, recent government reform has introduced the concept of professional directors, which would see independent experts being appointed to RMC roles.
“At FirstPort we support this move as a means to make things simpler for residents while still ensuring they can have control over key decisions.”
Supporting Residents
More resident involvement in developments is undoubtedly positive, and we’re pleased to see that government reform is trying to make it easier for residents to become more involved with decisions about their development.
It is important to remember that buildings are complicated, and responsibility has to be taken for the things that make them that way. Professional freeholders have had that job for many years, and now, increasingly, it is falling to Residents’ Management Companies to do the same.
Many RMCs do this without trouble, and provide great examples of how the model can work well.
“As regulations become tighter, it will be incumbent on industry experts to share their expertise and keep helping residents with the advice and support they need.”
