A new lease of life: - CentreForum

A New Lease of Lifecommission should be declared when requested by primary clients,who could be freeholders, RTM companies or RMCs. But managingagents are not compelled to do so and when the primary client isthe freeholder they have no obligation to disclose commission tothe leaseholders (consumer clients). Indeed, this was recognised byRICS as a problem in a recent review which stated that:“there should be greater emphasis placed on makingsure clients, especially consumer clients, are madeaware of the relevant remuneration, commissionand any other payments paid through purchasinginsurance.” 52Alarmingly, the wording of the RICS code of conduct only relatesto profit on commission made by the managing agent – if an agentis connected to either a freeholder or an insurance broker they candirect commission to them without needing to declare anything.Case Study 2 shows that even if companies are not connected,there is a lack of incentive for the manager to get a good price forthe leaseholders who ultimately pay for insurance. As much asanything else, suspicion of commissions in service charges reducestrust and increases conflict between leaseholders and propertymanagers.Case Study 2: InsuranceIn February 2012, the London Rent Assessment Panel hearda case made by a resident of Mill Hill against his freeholder,represented by the managing agent Symon Smith &Partners. Insurance costs increased from £6,700 in 2009 to£7,700 and £8,200 in 2010 and 2011 respectively, despite thefact that no claims had been made since 2006.The leaseholder conducted his own market exercise, inwhich he sought quotes to insure the property with its recentclaims history under his name. These were consistentlyclose to an average price of £2,350.The LVT recognised that a landlord is not required to seekthe lowest insurance premium, but must act reasonably.The insurance broker had only obtained one quote eachyear which was from the same insurance company. Thetribunal ruled that:52 RICS, Transparency in professional fees: www.rics.org/site/download_feed.aspx?fileID=5978&fileExtension=PDF.31