Nick Hargrave: Time to put rental reform at the top of the agenda

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Nick Hargrave is a former special adviser to David Cameron and Theresa May and writes here in a personal capacity.

One of my regrets from my time in Downing Street is that I haven’t done more to fret over the letting. It’s a big country, a big government, and there are a lot of things to fix.

However, once you buy a rental apartment, you understand the dividend potential for politicians who embrace reform. Buying your first home is an emotional and aspiring experience to millions of people. But very few people, before buying a rental apartment, understand the acute lack of property they will feel after making the purchase.

The clue is in the name, you are actually buying the “lessor” of a property from an owner for a significant period of time. If you live in an apartment building, the owner is responsible for maintaining the surrounding environment. The owner will typically hire a “management agent” to do this for them.

This is where the problem begins. The management agents in England and Wales do not have a legal regulator. They have to abide by the law like all of us, but the lease law is outdated and there is no statutory code of ethics or practice. This is a recipe for bad behavior.

My story is very modest compared to hundreds of thousands of tenants in this country, many of whom also have to do with the pain of the cladding.

Our management agent, a Richard Davidoff of ABC Block Management, was appointed by our owner to become the sole administrator of our residents’ management company, which in our lease was to be controlled by the residents. As residents began exploring this topic in detail, it changed the company’s bylaws in a way that would have made it more difficult for us to remove it. In the meantime, he hired his firm to provide services to the block with a standard we didn’t think was acceptable.

As director of the resident management company he then unsuccessfully opposed attempts by residents to manage his own block in the courts. More details on this complicated case can be found here.

On another block, Davidoff and ABC’s behavior was much more concerning. He was tried by a court for violating his fiduciary duty to tenants, his company “disguised” their relationship with contractors and the residents were levied exorbitant, life-changing sums that were not justifiable. As a result, his company was expelled from the ARMA trade body last week. More details on this case can be found here.

In a regulated system, Davidoff and ABC would likely face larger penalties. But as there is no statutory regulator, they continue to operate many more blocks in the London area. Each individual block would have to go through the property court system to contest changes to the service and / or request the right to manage its own block. This is time-consuming and beyond the discretion of many tenants.

This lack of protection for tenants – many of whom don’t have a platform or contacts – can’t be right.

The above are just symptoms of a system in dire need of reform.The leasehold issue is rising on the agenda in Parliament, with many Conservative MPs receiving far worse complaints than the above from their constituents. Here are some suggestions from me as to what could be done.

Rather than aiming for perfection right away, there are some granular reforms that could be included in a future lease:

  • The creation of a legal regulator with teeth to investigate and punish the misbehavior of management agents – the property court system should be able to report the behavior patterns of any management agent to this regulator.
  • The end of the “pay now, dispute later” system whereby tenants must pay sums they deem unreasonable before contesting them in court. This constitutes a significant disincentive to contest unfair service charges. It would obviously be necessary to apply a balance to this reform to prevent the blocs from falling into ruin.
  • New mechanisms to hold cardholders accountable for the behavior of the managing agents they engage: It’s too easy for pocket-sized cardholders at the moment to hide behind a mixture of silence and costly legal representation.
  • Reform of Notice Section 20B of the Landlord & Tenant Act of 1985, which allows management agents to postpone the posting of service charge accounts for up to 18 months without any real challenge. Again, this prevents proper supervision by the tenants
  • The process for the management right could be shortened significantly: ours took most of the year due to the intangible objections raised by the other side. A route would be a presumption of a management right unless proven otherwise – at the moment the burden of proving the entitlement rests with the tenants.

All of the above would lead to significant improvements in the lives of tenants – and none are “too hard to fix”. I am by no means an expert on the subject; there are many experts in this area that i am sure would be able to improve on the suggestions i made. Often in politics, however, being heard above the noise is a good start.

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