Residential Block Management Legislation | Property Management Statute and Regulation
The Construction (Design and Management) Regulations (CDM 2015)
On 6 April 2015, a new version of the Construction (Design and Management) Regulations (CDM 2015) was introduced.
This update was partly prompted by the HSE which felt that instances of unacceptable standards were persisting, particularly on smaller sites. CDM 2015 therefore increases attention on smaller projects placing new obligations on clients and managers which have an impact on works being arranged by property management companies, leaseholders and freeholders in blocks of flats.
Important changes introduced can be summarised including :-
Removal of the CDM Co-ordinator
Principal Designer is introduced
Principal Designer and Principal Contractor appointments are required on “notifiable projects” or on schemes employing two or more contractors on site. It should be noted that this is likely to include an increased number of smaller projects.
The notifiable project notification threshold is revised.
CDM scope now includes domestic clients
The Client’s Role
Following the removal of the CDM Co-ordinator role any building client must now make suitable arrangements for managing a project under the new regulations.
Freeholders and property management companies are affected as building Clients’ whose key responsibilities include:
To notifying the HSE of project details confirming that the project team are aware of their duties
To ensure all duty holders comply with their duties
Provision of pre-construction information including asbestos surveys, existing health and safety files and structural drawings.
To ensure that minimum health and safety standards are maintained on site
To ensure that the construction phase health and safety plan is drawn up by the principal contractor
To ensure that a health and safety file is produced by the principal designer.
To appoint a principal designer and principal contractor when mandatory “as soon as practicable”
Where these key appointments are not made, their duties transfer automatically to the property management company, freeholder or client.
For further information please get in touch with one of the property management team at VFM.
The Court of Appeal has this morning, 31 October 2014, handed down their judgment in the long-awaited Phillips v Francis appeal.
It appears that common sense has prevailed in delivering a judgement that is good news for property management companies, block managers, managing agents and all professionals involved in freehold and leasehold property.
The Court of Appeal has now ruled that the earlier decision of the High Court, which favoured the "aggregating approach", was "not a sensible approach", clarifying that it gave "rise to serious practical problems".
The Court found in favour of a "sets" approach to qualifying works, this being the approach adopted until the recent High Court Phillips v Francis decision. It was also agreed that the incorporation of an annual limit was incorrect.
Property managing agents and freeholders can now go about their business with some certainty and clarity.
Current Legislation for ARMA Property Managing Agents Regulated by RICS
The principal Acts of Parliament that are relevant to RICS and ARMA registered estate property block management companies for residential leasehold property management are listed as follows :-
- Landlord and Tenant Act 1985
- Landlord and Tenant Act 1987
- Leasehold Reform, Housing and Urban Development Act 1993
- Health and Safety at Work Act 1998
- Control of Asbestos at Work Regulations 2002
- Commonhold and Leasehold Reform Act 2002
- Regulatory Reform (Fire Safety) Order 2005
Important, new legislation which was more recently brought into force has had a dramatic impact on how property management agents and estate managers go about their business. Some of these issues are briefly summarized and considered below as a reference to help guide property management companies and landlords :-
This legislation supports leaseholders‘ involvement in their block management, largely through new Right to Manage (RTM) and Enfranchisement arrangements. Subject to certain qualifying criteria, statute allows leaseholders to set up their own property management company to take over management responsibility and to appoint their own property management agents.
Through their right to manage, or alternatively by owning a share in the freehold, many leaseholders or freeholders, are now able to influence how their residential property management services are carried out.
In order that leaseholders, freeholders and landlords can take full advantage of these changes, good property management agents who are able to deliver services to a high standard are very much in demand. Indeed our property services are more essential than ever in helping secure professional, high end, regulated standards for the benefit of our customers.
Commonhold and Leasehold Reform Act 2002
The provisions of The Commonhold and Leasehold Reform Act 2002 has brought into force many significant changes including :-
The introduction of a new Right to Manage, or RTM, which enables leaseholders of blocks of flats, subject to qualifying rules, to collectively take over the leasehold property management duties of the building or estate without having to prove fault on the part of the freeholder or pay any compensation. This allows leaseholders to have a greater degree of control over the level of property service charges set, and the option to appoint their own block managing agents and select insurers.
The major works consultation procedures which were previously covered under Section 20 of the Landlord and Tenant Act 1985 are now revised under the Commonhold and Leasehold Reform Act 2002. Also known as Section 20 under the new Act, or S20, it is still necessary to consult leaseholders when expenditure on specific proposed items will be higher than the statutory limits.
Subject to these specific expenditure limits, S20 consultation in the new prescribed form applies to such 'qualifying works' and also to 'qualifying long-term agreements' which are to last longer than 12 months.
There are a number of different stages and consultation periods involved in the Section 20 process, all being subject to specific and varying requirements.
The first stage requires that the landlord issues a 'Notice of Intention'. Following a consultation period, a 'paragraph B statement' must then be issued for qualifying works setting out the estimated costs, again subject to specific details. A further notice must accompany this statement inviting observations from leaseholders.
Long term agreements of more than a year are subject to further and more detailed proposals. Under specific circumstances the landlord must subsequently notify leaseholders once a decision is reached. Such notice being required within a 21 day period giving reasons and responses to observations which have been made.
The Act also brings in to effect increased powers to the Leasehold Valuation Tribunal, or LVT, in its interpretation. The LVT now deals with the vast majority of service charge and consultation issues and other disputes involving residential leasehold estate property management including :-
Variation of leases
Reasonableness of administration charges
Residential service charges or service charges in estate management schemes
All issues in connection with Right to Manage or RTM
Recent case law from the High Court has focussed attention on the application of S20
The High Court decision in Phillips & Goddard v Francis has the potential to throw the currently accepted principals of of S20 on its head however how this should be treated by managing agents is not definitive at present. (17 Jan 2013)
Another landmark Court of Appeal decision was reported under Daejan v Benson only weeks later.
On 28th January 2011 the Court of Appeal delivered judgment in Daejan Investments Ltd v Benson and others. In dismissing the appeal the Court considered how a Leasehold Valuation Tribunal should approach an application to dispense with statutory consultation under the Landlord and Tenant Act 1985 and provided important guidance.
Both the Phillips & Goddard v Francis and Daejan v Benson decisions are likely to have a significant impact on how S20 is treated however more time is needed to fully realise the implications of both of the above cases.
Regulatory Reform (Fire Safety) Order 2005
New fire safety rules affecting all non-domestic premises in England and Wales came into force on 1 October 2006, in accordance with the 'Regulatory Reform (Fire Safety) Order 2005' (S.I. 2005/1541, ISBN 0110729455), The new law:
Emphasises preventing fires and reducing risk
Makes it your responsibility to ensure the safety of everyone who uses your premises and all those in the immediate vicinity
Does away with the need for fire certificates
Fire risk assessments are now a requirement covering the common areas within any block of flats and including the external areas and grounds forming the freehold of the property
Control of Asbestos at Work Regulations 2002
Under the Control of Asbestos at Work Regulations 2002 employer, the self-employed and those in control of premises all have a duty to prevent exposure to asbestos. Where this is not reasonably practicable, then they must make sure this it is kept as low as reasonably practicable, and in any case below the specific control limit.
Persons who own or who are responsible for premises must have identified where if any, the asbestos is located in the premises they are responsible for and must have recorded its locations and drawn up a strategy or Action Plan for dealing with it. In many cases, the 'dutyholder' is the person or organisation that has clear responsibility for the maintenance or repair of non-domestic premises through an explicit agreement such as a tenancy agreement or contract.
The duty to manage covers all non-domestic premises. Such premises include all industrial, commercial or public buildings such as factories, warehouses, offices, shops, hospitals and schools.
Non-domestic premises also include those 'common' areas of certain domestic premises: purpose-built flats or houses converted into flats. The common areas of such domestic premises might include foyers, corridors, lifts and lift-shafts, staircases, roof spaces, gardens, yards, outhouses and garages but would not include the flat itself. Such common areas would not include rooms within a private residence that are shared by more than one household such as bathrooms, kitchens etc in shared houses and communal dining rooms and lounges in sheltered accommodation.
Further detail is set out in a chart of premises on the HSE website and includes the types of properties which are likely to be classified as domestic or non-domestic for the purposes of the duty to manage.
There are three essential steps duty holders need take:
- Find out whether the premises contains asbestos, and, if so, where it is and what condition it is in. If in doubt, materials must be presumed to contain asbestos;
- Assess the risk ; and
- Make a plan to manage that risk and act on it.
The duty to manage is all about putting in place the practical steps necessary to protect maintenance workers, residents and others from the risk of exposure to asbestos fibres. It is not about removing asbestos.
To find out more click what is leasehold.
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