A new lease of life: - CentreForum

A New Lease of LifeLack of regulatory regimeRegulation can be introduced for a variety of reasons, such as toaddress market failures, prevent power or information asymmetriesand to promote professional conduct. All of these apply to leasehold.First, leasehold management is not a free market becausemanagement is appointed by a generally indifferent freeholderwhich creates a disjoint in the relationship between the providerof the service and those paying for it. To expose managers tomarket competition, lessees must go to a tribunal or use the RTMprocess (which itself requires an LVT if a freeholder rejects a claim).This is unlikely if they are unable, or do not know how, to enforcetheir rights. The significant obstacles to leaseholders changingmanaging agents mean that the industry, like other sectors withouteffective competition, such as water supply, requires some form ofregulation to ensure that firms offer a high quality service at a fairprice. 63Second, there can be significant power asymmetries betweenleaseholders and large investor freeholders, particularly around thetribunal process. As discussed in the LVT section, tribunals can beparticularly intimidating for the most vulnerable leaseholders whomay lack resources to make a strong case and may be intimidatedby a court setting. Notwithstanding this, leaseholders can havelarge quantities of information given to them only at the lastminute before a tribunal. Instead, an ombudsman service is free forleaseholders and takes cases in writing, making it a more accessibleforum for redress.Third, high standards of competence are necessary not onlybecause of the importance and complexity of housing, but alsobecause of the money involved. Management of large blocksof flats or a housing estate has become a complex business,particularly with contemporary health and safety regulations- to run a block effectively, managers must have skill in areas asdiverse as law, accountancy, surveying, building and engineering.The central importance of housing to people’s lives means thatthose managing it should have professional standards and thatincompetent managers cannot continue to operate. A licensing63 The OFT has reported that for leasehold management in Scotland, it found a“very low level of switching in this market…In part this is due the difficulties ofcoordinating the individual owners in a tenement block or property developmentto facilitate a switch, but it is also due to the problems these consumers havein understanding the processes involved in switching to another propertymanager.” OFT, ‘Property managers in Scotland: A market study’, February 2009.37