As experts in the UK property market, it’s our job to keep an eye on housing trends and to watch as the tides change in the rented sector. The popularity of rented housing has seen its fair share of peaks and ebbs over the years, though at this point in 2014 it seems to be going from strength to strength.
The UK faces a growing housing shortage resulting from our steadily rising population and an increase in immigration, especially from within the EU, in the past decade. This housing shortage is putting pressure on house prices across the country, particularly in urban areas and cities. While homeowners may be jumping for joy, many younger people are beginning to find themselves priced out of the housing market by this bubble. For these people, or ‘rentysomethings’ as they’re being called in the media, affordable rented property is nothing to be sniffed at.
Renting boasts a number of advantages over buying, and it’s these unique benefits that our generation of rentysomethings value. Renting is, above all, far more flexible than owning. Owning a house comes with added financial responsibilities in order to maintain the property, and buying a house or a flat is essentially making a commitment to live in the same place for, generally, the next five to ten years. Renting, on the other hand, comes with no such baggage.
Rented property is no longer being seen as simply a ‘stop gap’ by younger generations; renters are increasingly looking to rent properties that they can really love and enjoy. We’ve certainly seen a growing demand for high-quality rental units in the past few years as people seek to find a home to call their own, even if it is not, exactly, their own. Rentals boasting added services, such as a 24/7 concierge, parcel collection and included broadband are rising in popularity, and are no doubt helping to disprove the myth that all rented property is cheap or shabby.
Our rentysomethings are by now well aware of the fact that they may indeed spend the majority of their twenties and thirties in rented accommodation – so why slum it? Living in a shoebox is fine for a few years, but now that renting is most young people’s reality for a decade or more, it becomes important to make roots in rented properties, too. This has given rise to longer term tenancy agreements, which were once highly uncommon. While a longer term tenant may lose a little of the flexibility gained from renting, the added security is usually worth it for those who have no plans to move.
The UK housing market has changed considerably in the past few decades, and no doubt will in the next few. Perhaps the biggest changes we’ve seen have been in the private rented sector, where the perspective has changed entirely. No longer are rented properties seen as a ‘last resort’ option; on the contrary, there is perhaps nothing the average rentysomething desires more than a flexible, affordable tenancy agreement on a luxury rented property in an area that they would otherwise find themselves completely priced out of.
CMA adopts study into property management service providers
Later in 2014, the Competition and Markets Authority (CMA) will publish the results of the study it is currently conducting into the residential property management industry in England and Wales. The study was initiated in March 2014 by the Office of Fair Trading (OFT), but the work is now being continued and completed by the CMA, who have since assumed some of the responsibilities previously under OFT ownership.
Notable exclusions from the study are property management services in Scotland and Northern Ireland, and services for commercial properties. Services provided by letting agents will not be examined under this study. Originally local authorities and housing associations were beyond the scope of the study, but they have now been added to the remit.
Reasons for the study
The key purpose of the study is to assess the adequacy of services currently provided by property management companies, and whether they are offering value for money. There will be particular focus on the following areas:
• Whether cost effectiveness is a priority for property management companies as well as for leaseholders
• Leaseholder involvement in decision making
• Whether there is a need for more competition within the industry
• How subcontracted work is awarded and whether this is done without bias
• The effectiveness of leaseholders managing properties for themselves where this occurs
Companies managing retirement properties will come under particularly close scrutiny because this is an area where many concerns have been voiced. Any evidence of a two tier service, with an inferior service offered to more vulnerable customer such as the elderly, will be heavily criticised.
The findings of the report won’t be known until it is published later in the year, but it is possible that recommendations could include:
• Increased transparency for the customer on how service charges are set
• Greater leaseholder involvement in decision making,
• Competitive tendering requirements tightened for subcontracted services
• Tighter controls over vertical integration and consolidation within the property management industry
• A requirement for improved training and qualifications for property management
What could this mean for residential property management companies? Of course, it all depends on the results of the study, but it could well mean more paperwork and more meetings, for instance if the report includes recommendations to give leaseholders greater involvement. There may be quicker escalation of issues externally if tighter regulation and more scope for redress are introduced. There could be more restrictions around mergers and partnerships within the industry to promote greater competition and customer choice.
On a positive note, it could have its benefits. For example, the industry as a whole may be forced to become more professional, which could eliminate the “cowboy” companies whose poor service can damage the reputation of all property management companies. Leaseholders complain that service charges are high, but increased transparency around costs would help them to understand that good quality services cannot be provided cheaply.
It is also conceivable that there will be little change arising from the CMA study. When a similar review was conducted by the OFT in 2009, the recommendation was for self-regulation by the industry, despite the fact that the conclusion from the study was that the industry was “not working well for consumers”.
For now it is just a matter of waiting for the study to be completed and for its conclusions and recommendations to be published. Ultimately there should be no real cause for concern for property management companies who are already providing a good quality cost effective service to their customers.
Today’s modern buildings often have a complex and multipurpose structure, taking into account such compound factors as variegated mechanical and engineering systems, which cover such things as security, parking, heating, cooling, lighting, etc. This often leads to buildings being developed with extremely complicated CHP plants, comfort cooling systems, smoke and waste extraction systems, lifts, etc. These things don’t come cheap, and if any fail then of course, there is a high cost of replacement involved.
Therefore, it is very important to have a properly thought out and laid out long-term capital expenditure plan and of course, a proper asset management plan too. When putting together the plans an effective block manager will take into account such things as the life-cycle replacement and continuous maintenance of the mechanical and engineering systems, and ensure the continuance compliance of such systems too. A competent capital expenditure management plan will consist of a review of the developments needs and the long-term business requirements of the development owner. Mainstay Residential believe in reviewing the fixed asset needs of a development on a regular basis to ensure the development has adequate resources to thrive and stay ahead of rival developments.
Asset management is, of course, very important too. This covers such specifics as activities and resources, responsibilities and timescales for implementing the long-term approach to the management of the development’s assets in order to achieve the agreed level of service. This can be difficult to develop within today’s leasing environment, which tends to operate on a one-year basis. The knowledge needed to put together such plans, including such skills as pricing for the life-cycle replacement, and pricing for the continuous maintenance and compliance of such complicated plants.
Further complications are also added to the plans, when you think about the fact that developers of modern buildings tend to be involved in the scheme longer than they think, due to the fact that schemes these days are taking so much longer to sell. This can mean that in a lot of cases, developers are now effectively becoming landlords too – with the associated complex responsibilities associated with that.
All these matters can be effectively dealt with by effective block management which will ensure that not only is a long-term planning solution and effective maintenance solution put in place to ensure a best value approach, but will also offer a USP to developers who are attempting to cope with the multiple skills required to manage a building properly. This will enable an effective strategy to be built on to ensure that the building is effectively managed – a selling point which will attract potential purchasers.
The rise in popularity in recent years of mixed used developments, with their complex legal and corporate structures paired with the complex building construction used; including various mechanical and engineering systems (such as security, parking, heating, lighting, etc.) – means that a wide range of skills are required in order to manage them effectively. Many mixed use schemes tend to require property management solutions which are driven by regulations and the desire for reduced energy usage, as well as trying to offer a point of differentiation to other developments in the same marketplace, in order to attract buyers.
Having a development with a variety of tenure types would also strongly indicate that the management of that development needs to take into account the differing requirements and needs of each of the group’s resident within the development. Residential owners will have different needs and desires than commercial tenants, and both tenant types have their own statutory regulations, which need to be followed and adhered too.
Some developments have tackled the complex issues thrown up by mixed usage by separating the management functions completely, but the Mainstay Group have found that the best value option would be to continue with a single management solution. If there are multiple agents managing one development, the tendency can be for disputes over who is responsible for what to emerge – an annoyance which will be done away with, with the use of a single management solution.
Another issue for developers to be aware of is the length of time that a mixed use development may take to sell. Developers are all too often now becoming landlords – and this brings new and complex responsibilities too. Understanding the complex issues brought about by having both residential and commercial tenants – including relevant legislation, is a very important skill for a successful building manager to hold, especially in the light of the importance of total transparency in all aspects of management which is so important to a lot of today’s tenants.
Mainstay Residential know that in order for any development to be a success it is very important to get the long-term management strategy to be right. It is vitally important then, that a clear plan is agreed on as early in the development as possible – ideally before the first brick is even laid. These plans must take into account the understanding that the period of ownership of a mixed use building is likely to get longer for the residential part, whilst commercial leases will get shorter. So, a five-year or ten-year plan which presents the evidence of value for money, is a great way to show how well the building is managed, and, therefore, leave you in a better position to find buyers for any empty units within the building.
Engage Liverpool is a resident-led organisation that brings together approximately 25,000 leaseholders and residents from Liverpool Waterfront and City Centre apartments.
As part of their training and development plan they have designed an informal three part course, looking into the finer details of Block Management, where residents can discuss and share issues with industry experts.
The course is the first of its type in the country, and according to research by Engage; no free public training on the subject of leasehold management at this level has ever taken place outside London before.
As one of the leading block management specialists in the country, Mainstay Residential is delighted to be involved, and has been invited to participate and sponsor the training course alongside other industry representatives.
The first seminar took place on Saturday 25th February 2012 and the remaining two sessions of the course will take place on the 31st March and 28th April 2012 at Liverpool’s impressive Women’s Institute Building off St James Street, and the delegates that attend all three sessions will be presented with a Certificate of Residential Management Accreditation.
The seminars are already attracting residents and representatives from all over the city, including residents from some of Liverpool’s most prominent buildings.
For further details please visit http://www.engageliverpool.com/engage-events-a4/#content
Mainstay Group is a property, estates and facilities management group with more than 35,000 residential and business units, distributed nationwide across 350 sites. The company is accredited by the Association of Residential Management Agents and the Royal Institute of Chartered Surveyors and was the winner of the Property Management Awards 2009.
Founded twelve years ago, the company has grown organically and four years ago it expanded its services into facilities management, concierge services and energy management. Mainstay Group has a clear business development and improvement strategy that covers human resources, IT infrastructure and the reduction of its environmental impact.
Supporting business growth through virtualisation
Mainstay recently gained the Investor in People accreditation and is committed to developing its staff. As part of the ongoing investment in its 500 employees, the company planned to upgrade its HR and payroll software for the start of the financial year. However, this would have required the installation of two dedicated hardware servers to manage the complex applications.
The addition of physical servers to support the new applications would have brought the total number up to fourteen, increasing the company’s energy consumption and carbon footprint. Mainstay decided instead to bring forward its migration to a virtualised server infrastructure by twelve months.
In addition, Mainstay’s existing Storage Area Network (SAN) was unable to support VMware and so the decision was made to look for a technology partner to assist with the complete migration to virtualised servers.
Head of IT and Corporate Projects, Phil Johns, takes up the story: “Virtualisation was always part of our plan, because it provides us with the flexibility to support Mainstay’s expansion, without being tied to budgeting for, installing and maintaining physical servers. After a recommendation from one of our outsourced suppliers, we selected Atlanta Technology to help us to set up and manage the migration to virtualised servers.”
Atlanta Technology is an IT services consultancy founded in 1996 to provide organisations with technology that facilitates growth. One of its key areas of specialism is in supporting organisations to move to virtualised environments and so it was well placed to support Mainstay through the process.
Working in partnership to meet business objectives:
Mainstay Group reports that Atlanta Technology was fundamental to the timely migration to the virtualised servers and SAN. This allowed the new HR software to be deployed within the twelve week timeframe.
Confirms Phil Johns; “The team at Atlanta worked closely to understand exactly what our immediate needs were. These included the installation of the new HR and payroll system plus the migration to a new SAN. Atlanta’s account management team also explored the longer-term objectives of the business and advised us on the best solution to meet those requirements.”
Then, working closely with Mainstay’s chief engineer, lead engineer and project manager, the engineering team at Atlanta successfully managed the roll-out of the datacentre and SAN migration within the designated three month period.
“Atlanta are experts in their own field and are also very good at understanding our business requirements and the sector that we operate in. Rather than waiting for us to brief them, Atlanta helped us with our planning for the current implementation and also made sound recommendations to support our future business requirements. Where extra work was needed, they were always happy to help,” reports Johns.
“From scoping to completing the migration, took about three months. Atlanta did a great job and its technical team was excellent at specifying the infrastructure that best suited our current and future needs. We’re delighted with the results”, enthuses Johns.
Increased storage, flexibility and reliability with one sixth of the hardware:
The results and benefits are immediate for Mainstay. In total, Mainstay has migrated from twelve physical servers to fourteen virtual servers, hosted on just two physical servers. The VMware-based infrastructure also incorporates a new virtualised Storage Area Network, which offers nine Terabytes of storage that can quickly be expanded as the company grows.
“With this new virtualised environment, we can scale up the storage and IT infrastructure as we need to. Mainstay has proved that it’s open to introducing new services, so we need our IT to be flexible enough to respond as the company expands and develops,” explains Johns. “Prior to virtualisation, we would have had to allow time for planning and purchasing new hardware to cope with each new service, and not to mention the procurement costs. Now I can bring a new server online within 15 minutes.”
Johns explains that the new virtualised servers also contribute to Mainstay Group’s focus on carbon reduction targets. The company is aiming to achieve the international environmental management standard: ISO 14001. Reduction from 12 to 2 physical servers has the obvious benefit of reducing power consumption and associated CO2 and heat emissions.
The migration from 14 servers to 2 has delivered immediate time and cost savings to Mainstay’s business, while also improving storage efficiency. In addition, the reduced requirement to power and cool a cluster of 14 servers has lowered the firm’s energy consumption and emissions. Phil Johns also points out the increased resilience of the virtualised system:
“Now we’re managing two pieces of hardware instead of fourteen, so we’ve saved a lot of time on server administration. There are also fewer points of failure, which makes for a more robust IT system, with the flexibility to expand as and when required. Using the virtualised infrastructure, we can implement new services very quickly and this helps to keep Mainstay ahead of the game,” asserts Johns.
Mainstay Group is delighted to announce that as part of a wider business improvement strategy they have been recognised as meeting the high standards of organisational excellence defined by the Investors in People (IIP) framework.
The IIP accreditation is a national quality standard designed to help companies improve their business performance through their people. In achieving the award Mainstay have demonstrated their continued commitment to empowering their employees, supporting a company-wide culture of learning and creating a high-performance environment that delivers the ultimate value to its customers.
Paul Crook, Managing Director for Mainstay, said: “Our ability to provide the highest standard of service to our customers is built on the skills and attitude of our employees, who are our greatest asset. We know that it’s the skill and professionalism of our people that makes us so successful and it’s great that this has been recognised in an official capacity. This award provides clear and independent evidence that we are committed to attracting, supporting, developing and engaging with our staff. We look forward to building on this success going forward.”
Property Management Company Mainstay is on a mission to continue its rapid growth over the next five years. The executive team have placed customer service firmly at the heart of Mainstay’s strategy and know that if they are to be successful, they need to be hiring great people who support the strategy and have the right skills and values.
In an effort to reduce the risk of making costly recruitment errors, Mainstay has engaged with Midlands-based firm Williams – the people experts. Williams have worked with Mainstay to develop a bespoke, efficient recruitment process that allows the management team to identify and assess the key behaviours they are looking for.
The process has already proved to be a great success and great people are being recruited into the organisation.
“The people experts gave us the tools we needed to really get under the skin of the people we were interviewing. Some of their techniques were innovative and we were initially sceptical but, having gone through the process several times, the value is clear and now we wouldn’t recruit any other way.” said Paul Crook, Mainstay’s Managing Director.
Adam Laidler, Director at Williams – the people experts, is clear, “an ineffective recruitment process usually leads to ineffective hiring decisions. It’s important to ensure every part of the process adds value and that you are certain on what you expect to see from an ideal candidate. Once you know this, you can set about developing a process that allows candidates to demonstrate their skills to you in a more natural way. A simple question and answer interview won’t help you find ‘A Players’.”
Now that Mainstay have a system in place for finding great people, it means they can turn their attention to winning more business and building upon their commitment to being the most customer focused Property Management Company in the UK.
Mainstay are an award winning national property and facilities company with 35,000 units in management for developers, investors, and residents, operating in the residential, student, retirement and commercial sectors.
Tel: 01905 364007
Williams – the people experts are a people consultancy based in Worcester who has developed a number of systems and processes that help businesses get more from their people. Incorporated in 2007, the consultancy employs experts in selection and assessment, HR advice and management development.
0845 474 0234
By David Clark of Mainstay Group
If I was asked, ‘what has changed the most in residential management in recent years?’ I would have to say it was the level of complexity that we now see in building construction and mechanical & engineering systems. These systems are utilised in the delivery of efficient, modern buildings that are able to deal with security, safety, parking, cooling, heating, lighting and green issues amongst other things.
Larger schemes built in urban environments, often with an element of mixed tenure, need to deliver a whole raft of complex solutions that are driven not only by regulation and the quest for reduced energy use, but also by the need to provide something different that attracts purchasers. The consequence of this has been a huge increase in the level of practical skills and expertise required to undertake management effectively.
Managers are being forced to look very closely at the qualification and background needed to undertake management of schemes where there may be massively complex CHP plants, comfort cooling systems, extraction, smoke vents, fire systems, lifts etc. etc. Pricing for the life cycle replacement and ongoing maintenance and compliance of such plant and the subsequent provision of an asset register may be beyond the capabilities of many managers and is scarcely covered within the available training options for property managers. However, these skills are undoubtedly essential if you are offering to maintain schemes to highest levels of safety and efficiency and in particular to maintain or enhance the overall asset value.
Herein lies the disconnect that all property managers must overcome – maintaining asset values means offering properly thought out strategies over the mid to long term – this is often at odds with operating in a one year contract environment and in an economy that demands cost-cutting for multiple customers as opposed to single business entities. It is possibly the reason that large FM providers do not currently directly service this sector.
It has never been more important to present evidence of value for money and this must be demonstrable around a 5 or 10 year plan and not just about immediate cost savings. After all, it is the very best managed buildings that are still able to find purchasers amongst the very small pool available. Long term planning and high quality maintenance solutions will prove best value in the long term and consideration of this strategy should be predicated on the understanding that ownership of flats is likely to be for somewhat longer than we have seen historically whilst commercial leases are getting shorter. The shift is already here and so the approach to management needs to be refined to suit.
By David Clark of Mainstay Group
I have always believed that you get what you pay for in life. This applies to property management and the management of your apartment development as much as it does anywhere else. In property management I have witnessed increasing pressure on price, both as a consequence of increased consumer involvement and of a growing number of new businesses who are prepared to buy opportunities. However, the practical outcomes of such activity need to be considered very carefully when dealing with customer’s homes and their well-being within those homes.
Many would argue that property management in the residential sector is long overdue a regulatory framework within which to operate and there are many good arguments to support this. But operating in this sector is not without regulation and I can think of few sectors that are required to act in accordance with so much legislation and regulation already – particularly relating to fiduciary duties and to health and safety. This in itself is part of the problem. If you choose to bypass sections of regulation that have cost implications, then you can. Until there is a resultant tragedy (or indeed a large number of people lose their money) no one sits up and takes any real notice.
Consequently today you can get quotations to manage a complex block of flats that range hugely in price for the overall service. The agent’s fee itself may vary even more widely. Why? Because you are not comparing like for like. I have turned down management opportunities where the customers do not accept that it is prudent to ensure that risk assessments are carried out periodically, where they do not accept it is important to revalue for insurance purposes and where significant payment to the residents’ management company directors is not seen as ‘unusual’. I have had to withdraw from advising a group of residents who wished to manage a major works project themselves and avoid all that nasty, costly consultation and supervision.
Statutory requirements and regulations do not exist to be bypassed – they are rarely advisory. They exist to protect us all from poor or criminal practice and improve our chances of survival. Seeking best value is one thing, cutting out costs altogether is another.
A ‘race to the bottom’ is normally defined as a competitive situation between countries or states that leads to dismantling of regulatory practice in order to seek ever better competitive advantage. We are seeing the same thing happen in property management and it is to the ultimate detriment of our client’s assets.
Of course, it is also to the detriment of the workforce and the customer who bear the brunt of such a race as standards and pay rates are eroded in order to ensure that more business is won. How this effects the standard of management can already be seen on schemes that have had little or no credit control activity, poor health and safety records and constant turnover of on site staff. It leads to a downhill spiral that normally takes two to three years to reveal itself. How do I know? Because we are in the process of rescuing a number of schemes that have chosen their managers entirely on price and are now trying desperately to collect outstanding sums, raise budgets and get their asset back on track.
Consumer pressure has good case to exist in the residential sector. Cases of mismanagement and overcharging are myriad. But beware! There are many who are now seeking to take advantage of such misfortune who have neither the track record nor the expertise to undertake what remains a highly skilled role.
Cheapness and good value are not the same thing. Get the best value by opting for those who can do a proper job at a fair price, check their qualifications and track record, ask for examples of similar properties and visit them and speak to customers. Who owns them, what are their unique aspects and what is their mission? Speak to the manager on the ground. Finally, compare them with others on a like for like basis. This may mean creating a unique tender document that all parties have to complete. The public sector gets this right with pre qualification questionnaires (are you qualified to put a price in?) and then a tender document that all successful applicants must complete. I have just seen the first one of these issued for a large resident controlled management – it is a wonderful thing!
Finally, I cannot stress enough that if you are seeking a new manager then protecting the value of your asset now and into the future is paramount. Saving money by cutting corners is just plain silly – we still have a long and difficult road to travel.