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Honestly, more regulation is a good idea.

The Government’s plans to regulate will restore faith in the industry, argues Nick Faulkner at SDL Estate Management.

Nick Faulkner

Leasehold flats imageThe property sector has recently been the subject of some negative media attention, and now the Government is set to get tough on unscrupulous managing agents. However, far from complaining, we welcome the approach and believe that it is a positive step forward.

Nick Faulkner image

Nick Faulkner

Some people in business view increased regulation with suspicion – but I firmly believe that any professional property management firm should welcome new proposals from Communities Secretary Sajid Javid. Announced in October, the Government has shown that it’s serious about cracking down on managing agents who charge high fees yet fail to deliver a decent service.


Government figures indicate that service charges on leasehold homes alone generate as much as £3.5billion per year, so it’s easy to see why so many firms want to tap into this lucrative market. These companies range from large-scale estate management specialists covering multiple sites, to ones with just one or two staff – and currently, the standard of service can vary dramatically. In the worst cases, managing agents do not carry out basic safety checks or leave tenants waiting months for repairs.

Service charges on leasehold homes generate as much as £3.5billion per year.

When you think that there are 80 pieces of legislation governing a standard block of flats, it seems highly improbable that some small companies could ever come close to being fully compliant, while still generating a profit.

At the other end of the scale, a national management agent might have 30,000 flats in its portfolio, with each block generating 100 invoices in a year. A team of people must then scan and upload 100,000 documents to a portal where tenants can view them – amounting to roughly 25,000 working hours per year. When you factor in employee wages, along with National Insurance contributions, plus the cost of IT infrastructure and the building, the costs can be enormous.

Tenants increasingly expect greater transparency; they want to see where their cash is being spent and that fire and gas safety certifications are up to date. Small agents simply do not have the resources to upload every document and even if they tried to, the business would quickly become unsustainable.


There is no getting away from the fact that the new regulations would push up the average service charge across the industry, since the agents charging a pittance will simply drop out of the market. But, in my view, that’s no bad thing. In return for their fee, tenants receive an assurance that their property is being properly-managed and legally compliant. No doubt we will need to educate people, so they see the value-for-money a professional agent offers.

It should be stressed that these changes do not mean that independent high street agents, who have built strong relationships with their tenants over the years, and enterprising start-ups will have to shut up shop. It’s very much the opposite – harnessing these relationships will be key as the UK heads towards a period of political uncertainty.

In fact, the most forward-thinking and ambitious now have an opportunity to combine their local expertise with a greater level of professionalism to ensure people receive good quality service. It is one of the reasons why we recently launched SDL Property Partners, the franchise scheme for property management, which provides the resources, expertise and support from an established brand.


The government’s proposals signal the start of what could be a dramatic change in the market, though it is one that is long over-due. The government has identified more than four million leasehold properties across the UK and, of those, I estimate that at least half have incorrect service charges. These fees will, in many cases, go up – however, tenants will only benefit in the long-term.

There’s also the ongoing issue of Brexit to contend with. However, until this becomes a reality, we simply cannot predict how the UK housing sector will fare during this potentially difficult time. As no other country has previously left the EU, it is impossible to foresee what impact this may have, but we must be reassured that the market is starting from a strong position.

Past experience has told us that property agents are innovative and forward thinking, even through times of uncertainty. By having a further arsenal of services, they have a much better chance of weathering the storm and standing in a stronger position once the economy and political landscape stabilises.

For more information on SDL Property Partners, visit www.sdlpropertypartners.co.uk

January 17, 2018

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