Do managing agents manage small blocks?

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By Alan Draper | Jun 2024

For leaseholders living in small blocks (at Common Ground we define a small block as 14 units or less) the answer is “yes” but the options are in sharp decline.

Why managing agents are moving away from small block management?

Whether your development has 4 flats or 400, there is still a checklist of items that have to be managed annually and that checklist has grown bigger in the last decade with extensive changes to legislation.

Changes to legislation

In the last 5 years alone we have seen the fire safety act 2021, the building safety act 2022 and the Freehold and Leasehold Reform act 2024.

Add to this continual updates to processes and procedures as a consequence of case law, it simply adds to the complexity of leasehold management.

Many smaller blocks self-manage, indeed, this was my introduction to block management where I was a leaseholder and resident management company director of a self-managed block of 10 units. Even back in 2006, we took the decision to outsource the management to an external managing agent due to the time pressures on directors. The story about how that went is a separate topic but can be viewed here.

The changes in legislation have essentially made block management less profitable. The expectation amongst many leaseholders is that managing agents should just take this on the chin and charge the same fee for doing an increasingly larger body of work.

Economic factors

This has also been aggravated by low interest rates. Many managing agents simply increase their management fees in line with inflation or other similar economic measures. In an era of low interest rates and, until recent times, low inflation this means that management fees have remained relatively static but the workload has increased quite dramatically.

Indeed, prior to the 2017 judgement in Corvan (Properties) Limited vs Maha Ahmed Abdel-Mahmoud relating to annual rises in management fees, many agents contractually linked price rises to economic measures such as the rate of inflation, RPI etc.

Market consolidation

The increasing complexity of leasehold management often becomes too much for smaller managing agents to bear and this, coupled with other issues such as a shortage of good quality leasehold property managers has seen many of the smaller agents swallowed up mainly by mid-size competitors. In recent years, however, many mid-size firms are being bought out by much larger firms. By way of example, in Reading, a market served by Common Ground, our three biggest competitors in that market have all been bought by much larger national firms within the last three years.

The process of integrating a smaller leasehold management firm into a larger one often sees senior management take the decision to terminate the agreements of blocks that do not meet certain financial criteria and this is almost always smaller developments.

So where do we go to manage our small block?

At Common Ground, part of our mission is to help leaseholders of all shapes and sizes.

Like all agents, we have had to adapt our offering to be able to cater for small blocks but in a way that makes it financially viable for both parties but the good news is that we will manage any size of block.

Our small site schedule offers the core services that keep small blocks well managed and compliant but without breaking the bank.

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