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CMA investigates leasehold management Matthew Warburton - 22/08/2014

Elavator300The Competition and Markets Authority, which replaced the Office of Fair Trading last April, is carrying out a market study of the management of leasehold property, including where the freeholder is a local authority or housing association. 


The study was launched in March and is being carried out in response to concerns - based on complaints and other evidence - that some property managers may be overcharging customers, providing poor quality services or spending money on unnecessary works. There were also concerns about arrangements for handling complaints or providing effective redress.


The CMA has issued an update paper  setting out initial views on which it is inviting responses.   ARCH members would do well to read it and consider submitting their views.


The CMA's approach seems to have been to lump together private and local authority freeholds as if the same issues and principles applied to both, except where the differences are so obvious as to be unavoidable. 


The report sets out a set of concerns about "the market", in most cases without acknowledging or considering the implications of the fact that there are significant differences differences between cases where the freeholder is a profit-oriented private business and those where it is a not-for-profit organization, either a local authority or housing association.  Thus, for example, the report notes a "low level of switching among property managers", where "switching" appears to be code for freeholders regularly inviting competitive tenders for property management services. 


Later, the report considers whether to recommend that local authorities be subject to compulsory competitive tendering of leasehold management services.  While it provisionally comes down against this proposal, views are invited on it.  What seem so far to have escaped the attention of the CMA team are the many lessons to be derived from the experience and ultimate failure of CCT in local government.


Where the report discusses the difference circumstances faced by local authority landlords, some worrying points emerge.   The CMA commissioned MORI to carry out a telephone survey of 1,050 leaseholders, which found, among other things, that 52% of local authority leaseholders reported ever having reason to be satisfied with their property manager, as against an overall average of 42%.


More generally, the report notes that "while processes for transparency and accountability, and for handling complaints, tended in most cases to be better than in the private sector, levels of leaseholder dissatisfaction with service quality and value for money were lower."  Various possible explanations for this divergence are discussed.


The CMA has invited ARCH members to participate in a round table to discuss the report and its findings early in September.  I will be writing shortly to selection of authorities with dates to ask if they would be willing to attend.  But if there are other ARCH members who would like to be represented at the round table, please do not hesitate to contact me at matthew.warburton@arch-housing.org.uk.

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