'Leasholders ripped off by block managing agents' claim

Thursday 3rd March 2011

Malpractice and cheating are rife in the block management industry, a block management firm claims.

Urban Owners has now launched a campaign calling for the Government to protect leaseholders from excessive block service charges.

It says lack of transparency means that service charges payable to managing agents or freeholders run into hundreds of pounds a year – approximately £700m in total.

Urban Owners claims that malpractice has spread through the property management industry, with excess charges mostly due to agents demanding hidden sales commissions on buildings insurance.

On average, leaseholders are paying 42% more than the published management fee.

Urban Owners is calling for a simple change to existing legislation to ensure transparency over property service charges.

It says this would help leaseholders to understand where their service charges are being spent and enable them to challenge unfair or elevated fees, almost certainly saving them money as a result.

It specifically wants Section 21 of the Landlord and Tenant Act 1985 to be amended, forcing managing agents or freeholders to add a note to the annual service charge accounts, disclosing commissions taken, details of work contracted out to associate companies, and the date on which the block’s insurance policy was last examined.

Steve Wylie, director at Urban Owners, said: “With hundreds of thousands of leaseholders paying hundreds of pounds a year in unjust and unnecessary charges, the status quo in the leasehold property management industry cannot continue.

“Transparency is needed and the Government must act to stop dishonest practice among managing agents, which frequently sees extortionate hidden sales commissions added to a block’s annual service charges.

“While recommendations around service charge transparency already exist in the RICS code of practice, these are largely ignored, and more needs to be done.

“We believe that a change to existing legislation is the only way forward.”