Why it’s Never Been More Important to Choose an Ethical Property Management Company that Prioritises Leaseholders

Insurance commissions and leasehold reform has been a hot topic recently, following a class action over hidden commissions which people have allegedly been paying for years without any prior knowledge. This was also something that was covered by the TPI (The Property Institute) at their Annual Conference last month.

As an ethical managing agent and freeholder that has been operating successfully for over 50 years without charging any commission for any services, we’re outraged to see, time and time again, how the actions of unscrupulous managing agents are tarnishing the industry and ruining it for those who are operating professionally and transparently, and in the best interest of leaseholders.

Insurance premium fees are always communicated to our leaseholders, and they are always informed that our broker’s commission (earned at a rate of 12.5% of the premium) is included as part of their fee without any fees or commission payable to us, ever.

The insurance of managed and owned property is one of the largest projects we undertake on behalf of leaseholders and owners each year, and we conduct all the work in-house within the cost of our management fee. With the process taking several months to complete, we work alongside our broker to secure the most appropriate and cost-effective cover for our customers in challenging market conditions and we aim to keep any increases to an absolute minimum. This is a huge annual undertaking and takes several members of our team extensive time prior to agreeing any policy renewal. And we do not ask for, receive, or apply any extra costs or commissions to cover the work entailed.

We work hard to obtain policies with good cover that provide peace of mind and offer good value. During each renewal process, we seek out the best, most cost-effective options for customers whilst making every effort to keep any increases to an absolute minimum.

Rather than setting low fees to attract business, we look to charge landlords and freeholders fair management fees which reasonably reflect our extensive in-house processes which help ensure best possible value for leaseholders and a strong overall service to the landlord/freeholder. In turn, this enables us to maintain a healthy and transparent business model which does not rely on making commissions and charging extra costs.

In addition to the above, many of the services we offer go beyond the requirements set under the terms of the lease and are covered by our single management fee. Services include comprehensive management to Section 20 Consultations which saw us carry out 57 consultations for major works across our estates fee-free in 2023. For our leaseholders, this means they can have complete peace of mind that they’re not going to be subject to unforeseen costs when major works are required, and they are only paying for what they need.

Sadly, not every organisation operates as we do so we continuously advocate for greater transparency, regulation and penalties for malpractice. To highlight how we think organisations are getting this so wrong, we responded to the FCA’s Consultation on multi-occupancy leasehold insurance reform which proposed clamping down on high insurance costs for leaseholders and urged brokers to stop paying commissions to third parties (including property managing agents and freeholders). By setting out how our ethical practices have enabled us to maintain a healthy business model without taking excessive commissions or applying hidden costs which are detrimental to leaseholders, we hope to demonstrate a way forward for better practice for all within the industry.

In the meantime, we strongly urge leaseholders and landlords to carefully research their potential managing agent and ensure they operate transparently and in the best interest of their customers. Always ask whether they charge commissions or apply extra charges on top of service charge costs for things like insurance claims, approving contractors or charging administration fees for meetings and letters.

Please contact us at enquiries@elmgroup.org.uk if you would like to find out more about our transparent and ethical estate management services or visit www.elmgroup.org.uk/aboutus.