Memorandum from the Association of Residential
Managing Agents (DDB 126)
1. GENERAL
1.1 ARMA welcomes the opportunity to respond
to this Paper and broadly supports the proposals contained therein
in terms of clauses 6 and 7 which would impact on our sector.
1.2 ARMA's response is broken into two parts:
a description of ARMA and then general comments on the Paper relating
to clauses 6 and 7.
2. ABOUT ARMA
Formed in 1991, ARMA is the only body in England
and Wales to focus exclusively on matters relating to the block
management of leasehold property. With some 140 corporate members
managing around 450,000 units in over 16,000 blocks of flats (at
least 50% of which are lessee-owned properties), the Association's
founding principal aim is working towards improving standards
for lessees, freeholders and resident management companies.
ARMA believes there are some 1.5 million long
leasehold flats in England and Wales roughly split 50:50 between
purpose-built and conversions.
However, Government statistics indicate the
figure is nearer one million and then according to the Survey
of English Housing for 1998-99 "two-fifths of these leasehold
flats are currently managed by the leaseholder themselves, without
the use of an agent."
On the basis of these figures it would appear
that ARMA members manage more than two-thirds of properties under
professional management in England and Wales.
3. GENERAL COMMENTS
3.1 ARMA members are involved with the management
of buildings, whether purpose-built or converted houses, where
residents own the long leases of their flats and the landlord
owns the freehold land and the common parts of the building.
3.2 The lessees "own" their flats
for a given number of years, normally 99 years or more from the
original grant of the lease. The lease is a contract whereby the
landlord covenants to maintain, repair etc. the common parts and
the lessees covenant to reimburse all the (reasonable) costs of
the landlord in delivering such services. Normally the covenants
in the lease will enable the landlord to recover (reasonable)
costs in complying with statutory requirements.
3.3 On 1 October 2004 the Disability Discrimination
Act 1995 will be fully implemented whereby service providers to
the public will be required to take all reasonable steps to ensure
that their physical premises do not discriminate against disability.
3.4 ARMA's current understanding is that
this requirement will not apply to the common areas of blocks
of flats in terms of the landlord being forced to make structural
or physical alterations to the property but that where practical
alternatives exist they should be implemented.
3.5 Similarly ARMA's understanding of the
expectations of this Draft Bill will not impose such requirements
in the future but does extend the requirement to other non-fabric
issues of managing such buildings.
3.6 ARMA, while fully supporting the intentions
of the Bill, would point out that should it apply to blocks of
long leasehold flats then these homeowners may be faced with requirements
and costs that would not apply to freehold house homeowners and
therefore create an imbalance in the types of home ownership.
3.7 While the Paper may assume that the
landlord might either bear the costs or recover the costs over
his whole rent roll this would not necessarily be the case in
a leasehold situation. The landlord may have to bear the costs
because the leases do not permit their recovery or because the
other lessees in the building challenge their reasonableness in
forming part of the service charges levied.
3.8 This point (3.7) is of particular concern
where the landlord is the lessees themselves in the form of a
Residents Management Company (RMC) which is owned and controlled
by the lessees and which in turn owns the freehold and through
a board of (lessee) directors controls the management.
Should such an RMC find it cannot recover such
costs, having no resources of its own, it may be forced into liquidation
or, perhaps even worse, if they are recoverable create a divided
community.
3.9 In summary we would ask the Committee
to give serious consideration as to the impact of this Bill on
residential leasehold blocks of flats in terms of:
(a) Whether it is appropriate that they are
properly in scope.
(b) The imbalance that could be created between
residential leaseholders and freeholders.
(c) The possible extra costs to the service
charges of compliance.
(d) The potential increase compliance costs
of managers of such buildings which will be passed onto the leaseholders.
3.10 By way of two examples known to ARMA
we would like to demonstrate the complexities involved in applying
the Act and the Bill to leasehold blocks of flats:
(a) A wheelchair-bound lessee, living on
the first floor of a low-rise block with no lift, asking that
a stair lift be installed:
— Who would pay for this?
— Who would maintain it?
— What are the fire escape implications?
— What are the insurance implications?
— What are the subsequent reinstatement
arrangements?
(b) A deaf lessee insisting a sign-language
expert is present at a small general meeting of lessees:
— Who should organise it?
— Who would pay for it?
March 2004
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