Recent Market Research by leading London Managing Agents the Ringley Group into ownership, services, management and running costs of apartment buildings, has identified that between 50-60% of all inner London apartments are sublet, rising to an estimated 70+% for the newer blocks constructed since 2005, underpinning the strength of the buy-to-let sector during the property boom. However when it comes to controlling service charges just 9.5% of tenants have any control over their own building management costs and, as a result, many are receiving excessive bills, unnecessary services or obtaining limited benefits.
“In the current economy, we expect service charge breakdowns in 2012 to come under heavier scrutiny from leaseholders and predict that recent legislation will encourage many to move towards resident-led management structures,” explained Mary-Anne Bowring, MD of the Ringley Group. “It is extraordinary that the numbers of London leaseholders that currently have control over the destiny, costs and services in their buildings are so low. Furthermore, it is disturbing that the number of wealthy institutional, overseas and famous estate freeholders that are making big profits by charging a premium for management services is so high. This scenario includes undertaking all too frequent upgrades to common facilities and ‘marking up’ costs such as buildings insurance. There are many such Tribunal cases on insurance but all too often these cases are settled out of court, as Landlords don’t want a blot on their public record.”
The Ringley Group market research found that many individual flat owners often don’t receive the value they deserve. Many could save thousands of pounds a year simply by increasing their involvement in the management of their building – yet only 9.5% in Central London appear to be doing so.
The research document also identified that there are currently 1,252 large apartment buildings across inner London containing 30+ dwellings, 60% of which are concentrated in Zone 1 and the Docklands and constructed during the last property boom. The balance comprises 2,123 smaller apartment buildings with up to 29 dwellings and commercial premises.
Service charges for prestigious Knightsbridge and Mayfair residences over 4,500sqft in size can be in excess of £25,000 per annum but do enjoy a high level of facilities and services. Annual service charges for the more typical two bedroom apartments vary hugely by postcode, with areas like SW3 (Chelsea) and Canary Wharf typically commanding £2,600 to £6,000 per annum while in SW17 (Tooting) the equivalent costs are just £800 to £950 per annum – but they also often receive an inferior level of service and have fewer facilities like gyms, pools, increased security or a concierge.
The lack of control that residents in the capital have over the management of their building suggests that leaseholders are either apathetic, unaware of other cost effective alternatives, or lack the support and momentum required to initiate a change. Worse still, it indicates that leaseholders are unaware that if they cannot afford to buy their freehold that they can still take control of the management of their building by exercising their right to manage and that since 2002 there is no need to prove that the freeholder is at fault or provides a poor service.
Ringley has long campaigned for leaseholders to take a more active role in block management and offers advice and support to forward looking or disgruntled leaseholders interested in taking the next step, whether it’s through Right to Manage or by collaborating together with other owners to purchase the freehold. Ringley has also recently packaged its advice into 5 easy to understand ‘BlockCare’ product modules. ‘BlockCare 100’ is a free to download methodology that includes all the knowledge and tools you need plus ‘no win no fee’ help with service charge arrears. ‘BlockCare 200’ is a sophisticated online block administration system that helps residents of smaller blocks manage their buildings once they have control. Available in five different block management packages, BlockCare enables leaseholders to set their own service charges in order to save money and improve the overall management of their apartments.
The survey data was collected during 2011 by a combination of door-to-door surveys, interviews, map references and checks at the Royal Mail and Land Registry across 15 inner London postcodes from Vauxhall in the south to Hampstead in the north, Maida Vale in the west to the Docklands in the east.