Save Money But Avoid The ‘No Frills’ Business Model

Thursday May 8, 2014

Our new block management company setup to get the best deal and service for leaseholders continues to gather momentum. I would like to thank Northumbria University for helping us recruit and train our team of Estate Management graduates over recent years. This is the team who operate our ‘Lease Check’ service and they are now adept in spotting errors then making recommendations to tenants and landlords in order to get maximum value for money.

A recent discussion in the office came about when the team spotted the fact that a Tyneside Council had failed to undertake the statutory Consultation with leaseholders over a new three year insurance policy. As a result all policies have been capped at £100 per year for the next three years, representing a considerable saving for some leaseholders.

It is not only leaseholders of flats that our team is working with. Although flats represent the majority of leasehold properties in the north east, we are working with landlords of leasehold houses on a development in Newcastle. These substantial properties were bought leasehold from the developers and under the leasehold model they will revert to the freeholder in around 100 years time, when they can ‘sell’ them all over again. We estimate the cost of buying the freehold to be between £3,000 and £5,000 per house. A substantial sum but it means the ‘owner’ really does now own their property.

While we are always delighted to advise our landlords and tenants of cost savings or unreasonable behaviour on the part of freeholders, block management is no place for the budget airline business model. Blocks of apartments require administration, maintenance, insurance and legal fees in order to ensure aesthetic and legal standards are met. While we can ensure these charges are reasonable and transparent, we cannot make them vanish.

A common complaint is of freeholders charging for permission to keep a pet. An administration fee of £65 would not be unreasonable for this permission since someone at the management company must check the freeholders position on pets then issue the permission if it is possible. “But why do I need permission to keep a cat?” is a popular question. The answer is, permission may well be reasonable for a cat, but how would you feel if a neighbour decided to keep venomous snakes, a shrieking Cockatoo or a crocodile?

Another area that can raise hackles is the charging (or receiving) of additional commission by block management companies for arranging block insurance. So long as there is transparency and this commission is declared to all leaseholders. It should also be a reasonable charge. Block managers must get competitive quotes, go through the fine detail of contracts then negotiate any changes required. This task falls to qualified professionals who understand insurance, property law and the needs of both leaseholders and freeholders. No job for the gifted amateur.

While we are quite prepared to go toe-to-toe with freeholders and leaseholders if the situation demands, the best deal is where all parties walk away happy. With a little planning, diligence and fairness this is our aim because happy landlords, tenants and freeholders make for a happy office team and thus a smooth running business.