The Office of Fair Trading (OFT) has launched a market study into the provision of residential property management services to leaseholders in England and Wales.

The scope of the investigation will include residential property management services for properties where local authorities and housing associations are the freeholders, as well as those with private sector freeholders.

Estimates vary but there may be as many as five million leaseholders in England and Wales. The OFT will look at whether the residential property management services market is working well for leaseholders and freeholders, including: 

• whether managing agents and freeholders have the same interests as leaseholders in, for example, keeping down costs for maintenance work or building insurance;
• whether leaseholders have sufficient influence on decisions taken by freeholders or others on the appointment of managing agents and the supply of residential property management services ;
• whether there are barriers to switching and whether competition between property managers more generally is working well;
• whether managing agents' and freeholders' choice of contractors and services may be influenced by links with associated companies and the availability of financial commissions; and
• whether it works well in practice when leaseholders exercise their right to manage their own properties. 

Leaseholders typically pay a service charge to cover costs for the maintenance and management of their shared building. Regular instalments into a 'sinking fund' may also cover other significant expenses, such as roof maintenance. A property management company is often used to provide maintenance, cleaning or building work. Property management companies may provide the services themselves or through contractors. In some cases, such as where right-to-manage powers have been exercised, responsibility rests with the leaseholders and they may appoint a property management company to organise these services.

The final report is due to be published before the end of the year.

According to Julie Tomasik, head of residential conveyancing at Ansons Solicitors, the OFT will be concerned that management agents and freeholders may not have an incentive to keep maintenance costs down and that leaseholders may not receive value for money.

“In our experience there are varying degrees of management services being delivered which is only to be expected. However, the extremes from excellent to extremely poor should not be so far apart. Certain companies charge what I consider to being excessive charges for supplying consents, supplying information, acknowledging notices of transfer etc. One client recently had to pay over £500 in fees to the managing agents on completion of his purchase, which I consider excessive.”

The amount of fees and services to be provided is something a prudent Buyer should be made aware of at an early stage when considering the purchase of a Leasehold property.

For further advice, please contact Julie Tomasik in the residential conveyancing team, on 01543 267 988 or email jtomasik@ansonsllp.com. Ansons Solicitors has offices in Cannock and Lichfield, Staffordshire.