Managing Agents Can Salvage Their Reputation in the Leasehold Property Sector with Technology
The leasehold property sector is routinely under the spotlight with intense scrutiny into its complicated, costly and confusing working practices.
As the government looks to enforce reforms to assuage the plight of leaseholders, there is much that can be done from within the world of Landlords and their agents to ease the situation. Stories of leasehold home buyers blighted with escalating rents, liabilities that they don’t understand, unfair fees, managing agents that haven’t delivered expected services and so on, regularly make the headlines. The impact of COVID-19 is now putting even greater pressure on the managing agent/landlord and tenant relationship with people locked in an isolation bubble.
To crack down on bad and poor practices from managing agents, the government’s Leasehold Reforms, aim to establish simpler, professional, transparent, consistent, and cost-effective working practices for all associated parties in the sector. These reforms present an excellent opportunity for the upstanding managing agents (who are in the majority but tarnished by a few less upstanding colleagues!) to enhance the reputation of their profession as well as that of the wider sector.
In the meantime and indeed for the future, technology can make a material difference to the sector’s operation by facilitating the adoption of best practice processes that will help managing agents to deliver a timely and superior quality of service, whilst meeting expected standards.
Lack of transparency a genuine challenge
The number one challenge for managing agents is demonstrating transparency and providing visibility of the work they do. Leasehold by its very nature is a complex transaction type and difficult to understand for leasehold property buyers. By virtue of the shared responsibilities and liabilities of a leasehold transaction, there are several complexities that can be befuddling to the uninitiated home buyer. These include things like ground rent (and its escalation), service charge liabilities, insurance contributions, the multiple parties involved such as Landlord, Landlords Agent, Residents Association, Management Company), communal spaces and their use, and apportionment of costs on completion – all of which often sound alien to property purchasers. Much of this information is drip fed by the managing agents/landlords/managements companies to buyers through trial and error as to who to ask what of. Furthermore, there is practically no control over the timescale when they might be able to present the information to the buyers. Frequently, the length of the transaction doubles if timely replies from the various sources aren’t forthcoming.
From the perspective of a property lawyer, leasehold transactions can be highly unprofitable because the fixed fee quoted doesn’t always accurately represent the amount of chasing and searching for information amongst the numerous parties involved – landlord, the landlord’s agent, a managing company and so on. One party may be covering the ground rent, while another may be collecting the service fees. This can also lead to mistakes by the lawyer if outstanding queries get missed.
Buyers want complete and instant clarity on what they are buying, what it costs, when they can take possession of the property, are there any pending payments related to the asset, are there any critical issues they should about (e.g. security of the structure), and such.
As a result, there’s a major gap between managing agent deliverables and buyer expectations causing great frustration to the latter. Managing agents undertake a lot of the work manually and in a traditional fashion, which contributes to a costly service for buyers, in terms of both time and fees. This then is misconstrued by purchasers as managing agents unethically and unreasonably profiteering from the transactions when it may simply be a set of inefficiencies and complexities causing cost and delay.
Technology adoption is a no brainer
Technology already exists that can address many of these issues and challenges. Other sectors including conveyancing, personal injury, claims management– to name but a few – have benefited from the approach and are good examples to follow.
Some areas that managing agents should consider:
- Digitisation of records – There is a good variety of software available that managing agents can use to convert physical records into a digital format, complete with OCR capability. Rather than embarking on digitising every single record, a better approach would be to immediately digitise the open transactions. This will greatly help with business continuity in these uncertain times as managing agents will be able to effectively work from anywhere.
- Systemisation of data – Create a dataset, based on the areas that form part of leasehold transactions, and then actively manage them to ensure accuracy and integrity of the information held. For example, record fields can be created within a case and matter management system to capture information.
- Automation – With digitised records and a standardised dataset, automate processes to make transactions quick and efficient. For instance, alerts can be set up during critical stages of the transaction to impart timely information and updates to buyers.
- Web portal – This will facilitate self-service. Agents, for instance, would be able to make timely payments in a transaction’s lifecycle. Being able to retrieve the information for themselves, lawyers would be able to focus on the exceptions rather than the rules and better advise their clients.
- Value add – As technology adoption matures, managing agents will then be able to provide additional services to their clients. For instance, they could make available customer packs including all the necessary information –insurance liabilities, current bills, service charges and so on – to give clients a complete view of the property and in doing so provide the much desired visibility that customers crave.
COVID-19 has made it abundantly clear that access to the physical office is no longer a given, so having to search filing cabinets, index cards, multiple office-based computer records and such becomes a significant business risk. In preparation for the UK property sector recovering from the impact of COVID-19 in the coming months, this a good time to start spring cleaning and planning for a more digitised and efficient future.
More importantly, this approach presents an opportunity to change perception. When buyers can’t see behind the iron curtain, the natural tendency is to presume that the actions are driven by self-interest. By pulling down the curtain, modernising and embracing technology that others take for granted, they can provide visibility of the kind of leg work that potentially goes into a property transaction of this type. There will be a better understanding of the effort put in by managing agents to deliver to clients – and even sympathy for them, if they can be seen to work for the interests of the home buyer and the industry.
Written by Simon Farthing, Commercial and Marketing Director, LexisNexis Enterprise Solutions
Kindly shared by LexisNexis