Tenants (Both leaseholders and Council tenants
are considered tenants) in an estate could use the Right to Manage regulations
2012 http://www.legislation.gov.uk/uksi/2012/1821/contents/made
to set up their own TMO to manage their own estate or part of their estate (as
long as that part is clearly identifiable), or a number of estates could get
together to set up a TMO which would manage their estates.
1.
Advantages:
1.
Day to day minor repairs: These
will take a much shorter time and could be done with a higher quality.
2.
Major repairs: Costs would be
controlled ad most probably reduced.
3.
Improvement to the estate: By
reducing the costs of repairs, money could be allocated to improvement of the
estate, whereas an in-house Council management department might only deal with
repairs, but then again they might not if they are a Council with liberal
views.
4.
There is a lesser chance of
corruption with a small tenant led TMO than what we have witnessed both in
KCTMO and RBKC which resulted in increased costs of maintenance of the estate.
2.
Difficulties:
2.1- It requires a
committed group of tenants with a clear idea how to manage the property.
2.2- It requires the
engagement and support of both Council tenants and leaseholders.
2.3- It is a time
consuming process, and if the Council is not supportive, it could take up to 3.8 years or more, but if the
tenants get organised almost professionally and the Council cooperates, it
could take one and half years. And right now, the Council seem to be
supportive.
A constituted borough wide association could
help reduce the above disadvantages to a great degree, by pooling resources,
experience and by sharing costs amongst its members, costs that otherwise could
be much higher. I will come back to this subject a bit later.
Such a TMO is not the right
solution for every community. Success is more likely where there is a committed
tenant group with a clear sense of what they want to do and strong links with
the community they represent. I would add that both leaseholders and Council
tenants need to be very engaged with their RA, as later in the day there would
be separate ballots for leaseholders and Council tenants which need a simple
majority in favour of forming a TMO.
So the tenant group, before even
applying to the Council for Right to Manage, should establish first if there is
support within their community for a TMO. To do that they would need to engage
the tenants (more easily said than done), debate the issues that they have with
the management of KCTMO, and at the end of this consultation process, they
should conduct a secret ballot.
But before they do that, the
tenant group needs to have a clear idea of how they would manage their estate
as opposed to and better than KCTMO. To do that it would be essential to go
over a few things. First, KCTMO results for attending to repairs and the quality
of those repairs; second KCTMO health and safety records; and third, KCTMO
expenditure for their estate. It would not be too difficult to cut down the
quality of repairs and the timing of it compared to KCTMO. A handyman (men,
depending on the size of the estate) housed in the estate could deal with 75%
of day to day repairs. For more major repairs, the RA could through a process
of due diligence source, interview and choose contractors such as electricians,
plumbers, roofers, lift service companies, damp proof specialist, drainage
specialist, heating specialists, gardeners and so on. They would need the
services of a surveyor to manage these contractors. As to the Health and
safety, the tenants are the people most concerned about this issue so it would
stand to reason that they would take care of health and safety problems
urgently. As to the expenditure, the tenants would need the help of a qualified
surveyor (not necessarily but this is my suggestion), to identify where KCTMO
has been overcharging and if the tenant group could bring down that expenditure
substantially and allocate the savings towards improving and enhancing the
quality of their estate. Armed with this clear view of the management of the
estate and how their estate could be improved both from a health and safety
angle and making their estate more desirable, the tenant group could deal with
the process of consultation with and balloting the residents.
The tenants group need to quantify
the man-hour required to go through these first steps of the right to manage
process and quantify the cost of a surveyor. I would suggest that the man hours
required would be as follows:
1.
Developing
a clear idea of how to manage and improve their estate
1.
Through a
process of due diligence, choose contractors and a surveyor for the management
of the estate and agree prices and repair quality and timing targets with them.
This I would suggest would require 16 hours for developing a due diligence
process (Please find attached such a process that I developed for choosing an
independent tenants and leaseholders advisor, ITLA) for choice of contractors,
3 hours of research per contractor group and a surveyor so about 33 hours,
arranging interviews with three companies for each contractor and interviewing
them and choosing one, 43 hours.
2.
The same
surveyor that you choose to run the management of your estate could be
instructed to do a report on the three previous years expenditure of your
estate, and with the prices that you have agreed with contractors, identify if
there could be a substantial reduction of expenses and where the subsequent
savings could be invested to improve the estate. This would usually cost £3,000
(we already have a quotation for £2,500 for a review of our service charged at
Warwick Road Estate, and I have added £500 for a draft business plan), and the
surveyor could even prepare a draft business plan. Of course the surveyor might
give you a discount or do it for free if you promise him the management of the
estate. You would need to raise that fund (RBKC might pay that, as they would
be willing between £20K to £30K for an ITLA). For that the tenant group would
need to allocate 40 hours, that is for raising funds, studying the surveyor’s
report, questioning the report, and finalising the report. This surveyor’s
final report is a formulation of your clear idea on how to better manage your
estate.
3.
So
altogether, to achieve a clear idea of how your estate should be managed, you
need to spend 132 man hours for 100 properties (you need to add 10 man hours per
100 extra property), or 16.5 working days. If there are 3 of you, the whole
process could be done in one and a half months at most, allowing for advance
notices for interviews. Of course if there is a constituted borough wide
association, it could produce all the due diligence guide lines for choice of
contractors, it could source contractors and handymen and surveyors, raise
funds, thereby reducing substantially the man hour time above.
2.
To engage
and consult the tenants on the clear idea that the tenant group have formulated
through the process above.
2.1- distributing the surveyor’s final report by e-mail and
physically. This would cost about £100 per 100 properties and would take 10
hours for the same number of properties.
2.2- I suggest three consultation meetings of three hours each are
required in the space of a month and a half, in which guest speakers could be
invited as well a RBKC Councillors. The preparation as well as the meetings
would take about 40 hours.
2.3- I would strongly suggest a door knocking exercise to explain to
the tenants the finalised surveyor’s report and to encourage them to
participate in consultation. For 10O properties this would take 25 hours.
2.4- As well as the consultation meetings, e-mail and social media
should be used to encourage tenants to participate in a debate about the
surveyor’s final report, This could take 40 hours.
2.5- A secret ballot should take no more than one week and cost about
£100 per 100 properties and take about 15 hours for the same number of
properties (again you need to add 10 hours and £100 pounds per extra property)
2.6- All in all the process of consultation requires 130 man hours,
or 16.5 days and £200(again you need to add 20 hours and £200 pounds per extra
100 properties) , and should take about 2 months.
3- together
with the surveyor, they should develop a system for supervising and reporting
by the surveyor who will manage the estate, as well as agreeing the number of
meetings. Usually four meeting per year would suffice and time needs to be
allocated for studying the quarterly report from the surveyor. I would say
ordinarily 25 man hours per annum is required for that and another 50 man hours
per annum for consultation with members should improvements be required.
Whilst some of the above steps
could be taken at later stages, I strongly advise that they should be taken
before a notice of the intention to form a TMO is served to the Council. For
one it is very important that the tenant group has a clear and detailed idea of
how to manage the estate, for two it would make engaging tenants easier, and
for three it would probably make the Right to Manage process shorter. So all in
all the tenant group need to spend 262 man hours in the space of three and a
half months and about 75 man hour per annum for supervising the management. If
they could not allocate this man hour time, there is no point in going ahead.
It would help if amongst them there would be professionals such as surveyors,
architects, lawyers and property managers.
Funding of the TMO to manage your
estate(s) could be done in two ways, depending on the management agreement.
Either RBKC could give the same funding that they were giving to KCTMO to
manage your estate, lets call this option 1, or they can allow you to collect
service charges and rents, the same way that KCTMO is operating now (option 2).
Each option has its advantages and disadvantages. The advantage of option 1 is
that the TMO would not have to serve demands for service charges and rents,
chasing service charges and rents, and in case of non-compliance taking action
to evict the occupier, in other words it would not need to allocate time for
those administrative tasks. The disadvantage is that If there is funding
required for a substantial repair/improvement project, and RBKC refuse to
provide that funding, or even delays substantially the funding, matters could
go pear shaped. Option 2 has the advantage of removing the latter risk, but
adds the administrative burden of collecting service charges and rents and so
on. Although this burden could be subcontracted to a private firm for a fee, if
the TMO budget allows it.
So all in all I would suggest that
three and half months of what I call overall due diligence process is required
before the committed tenants group decide to go ahead with serving a notice to
the Council. Then the timeline is as follows;
1.
The tenant group need to serve a notice to
RBKC declaring their intention to use the Right to Manage and form a TMO. I
argue that it is much better to form the TMO first, in the shape of a Limited
Liability Company, with both Council tenants and leaseholders sitting on its
board (there is no requirement in the right to Manage Regulations 2012 for the
type of the tenant, ie leaseholders or Council tenants, sitting on the board of
the TMO, but Councils have used this excuse before to withhold funding to the
TMO in arbitration courts, although if the members of the bard are actually
residents with a surveying, property management, legal and
architectural/building background, I don’t see this as a problem). It costs
less than £100 to do this. I also suggest that it is wise to spend an initial
period of due diligence to establish the costs of the Right to Manage process,
which could run to a substantial sum, which would have to be paid by the
Council. So it is important that these costs are reasonable, to survive any
examination in any arbitration tribunal. For doing that the TMO needs
professional advice, which they could most probably get for free. If a number
of smaller estates come together for this purpose, it will reduce the cost per
estate. It will also reduce the Council’s cost as otherwise the Council would
have to fork out the same sum for those different estates. A borough wide association
could also be useful. Although each estate is different with subsequent
different management requirements, there would be a lot of similarities in the
costs of the Right to Mange process. Consequently, on those costs, the borough
wide federation could employ top firm of surveyors on behalf of its members,
thus reducing the cost per member. The consultant could also make sure that the
TMO is properly set up, that at the time of the service of notices the requirements
of the regulations are fully met
when serving
a Right to Manage notice. I estimate that this due diligence process could take
up to one month.
2.
The
Council has 28 days to accept or refuse the notice.
3.
if
accepted the TMO could ask the Council for financial support for the cost of
the Right to Manage process. This is where the benefit of a top surveyor who
costed this process professionally becomes apparent, as the Council could
dispute these costs if they are not reasonable.
4.
The
Council has 28 days to determine the support, that is to agree or disagree with
the costing submitted by the TMO.
5.
If the TMO find the support
suggested by the Council insufficient, the TMO could within 28 days refer the
matter to an arbitrator.
6.
Within 28 days of referral to
the arbitrator, he must determine the support from the Council.
7.
the TMO must within 3 months of
the acceptance date apply to the approved assessor service to appoint an
approved assessor to report on the competence of the TMO to exercise the
management functions set out in the proposal.
8.
The approved assessor must, within
15 months of the acceptance date, complete the report and provide it to the
Council and the TMO.
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Within
these 15 months a number of important activities have to be completed
successfully. They are:-
Developing
skills and knowledge
The TMO
committee must develop their
skills and knowledge so
that, in the view of an external assessor, the TMO is competent to manage the
responsibilities it plans to take on.
They have to show that they have been trained in property management
if they do not already have these skilss.
A
management agreement
The TMO
will confirm which services it plans to run and will negotiate the main
elements of the proposed management
agreement with the Council.
A business
plan
The TMO
will develop a business plan
showing how it will
organise and pay for the services it plans to provide. Although as I have
suggested previously, I prefer this business plan to have been prepared
before the notice was served.
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Establishing good governance
The TMO will develop the rules,
policies and procedures needed for good governance –
ensuring that the TMO will be properly run.
Keeping in
touch with tenants
The TMO committee will keep in touch with tenants in their area. Making sure people are informed
about the TMO and listening to their views.
Apply for
funding and appoint advisors
To help plan and carry out these
tasks the TMO is likely to apply for some government grant funding and will almost certainly need to appoint suitable professional advisors.
9.
The Council and the TMO must
use all reasonable efforts to take the action suggested by the approved
assessor in accordance with paragraph (3)(b); and jointly agree an action plan
to enable them to do so.
10. The Council must notify the approved assessor within 7 days of the
action being completed.
11. The approved assessor must within 35 days of receipt of the Council’s notification
under paragraph (6) reassess whether or not the TMO is competent and notify the
Council and the TMO of his conclusion.
12. Where the approved assessor concludes under regulation 13 that
the TMO is competent, the Council must within 3 months of receiving
his conclusion, make to the tenants of each house identified in the proposal
notice, an offer containing—
(a)the offer notice;
(b)the conclusion of the
approved assessor; and
(c)information submitted
by the TMO concerning the proposal.
13. The Council must arrange for a ballot to be carried out within 3
months of making the offer, with a view to establishing whether the tenants referred
to in paragraph (1) wish to accept the offer.
14. The Council must within 14 days of carrying out the ballot notify
the TMO of whether a majority of the tenants who voted and a majority of the
secure tenants who voted accepted or refused the offer.
15. Subject to regulation 17, where a majority of the
tenants who voted in the ballot under regulation 15(2), and a majority of the
secure tenants who voted in that ballot, have accepted the offer, the Council
must within 9 months of the date of the Council’s notification
under regulation 15(3), enter into a TMO agreement with the TMO.
So all in all, it will take
3 years and 4 months maximum for the right to manage plus the intial 3.5 months
due diligence process, or 3 years and 7.5 months, that is if the Council would
not cooperate. But I anticipate if the Council cooperate, it would not take
more than 1.5 years.
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