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Mental Block

During the toughest of times of your career in property management, you may reflect on how and why you became a property manager in the first place. In our experience, most property managers fell into their first PM role rather than studying Real Estate at the University of Reading and discovering their block management calling.

Written by Rhys Townsend

31st Mar '20

WFH.

An alien concept 15 years ago, ‘working from home’ has gone from a euphemism for watching Holly & Phil to a productive and (sometimes) encouraged practice. Indeed, some of our managing agent clients have created new business models around homeworking and working from the sites they manage, but most of us commute to the office

Build-to-rent management vs block management

Head-to-head

	Applies to Block Management	Applies to Build-to-rent	Relevant to both
Experience and background required	Long leasehold background favoured by managing agents who need a ‘hit-the-ground-running’ property manager. Evidence of first-class customer service skills sought for the higher-end schemes.	High-end hotel/hospitality style management expected; student accommodation experience helpful. The more experience of face-to-face customer interaction the better. Commission-driven property managers favoured. Lettings negotiator skills required – viewings, tenancies, renewals, references, credit checks, familiarity with TDS/DPS, sections 8/21, inventories, familiarity with the local area, moving-in duties.	A track of record of being organised under pressure, a completer-finisher who is driven to reach resolutions and a multi-tasker will do well in either sector. Top customer skills essential. Ability to remain professional and composed at all times.
Qualifications	AIRPM, MIRPM (for long leasehold management). Hospitality qualifications would be welcomed by some agents.	MIRPM (for build to rent management). ARLA qualification. Hospitality and event organisation qualifications welcomed.
What does the role look like?	Typically, more office based and often not enough time spent on site meeting customers. Reactive day-to-day tasks can prevent proactive thinking. The best organisers will make time - and thrive. Spinning many plates at once a requirement. Focus on the fabric of the building and the common areas. Unstaffed buildings/developments common so often there are challenges associated with reporting problems and arranging access. Often many touch-points to resolve simple issues, e.g. on-site manager rings PM, PM rings contractor, contractor liaises with on-site staff, both/either report back to the PM.	More likely to be a client facing role, based on-site, meeting customers, tending to their needs. Build to rent property management roles tend to be more segregated. But more senior (and hands-on) roles will require a deep understanding of customer engagement, lettings, cost control, maintenance, and even event management duties where being front-and-centre outside of office hours is necessary. Build to rent sites virtually all staffed with concierge and other on-site personnel. Duties may be divided. PM doing property management duties and client/investor undertaking lettings in-house. One or other collecting rents. Larger schemes would be under your control and fewer of them compared to block management. Less variety as BTR blocks are likely to be new builds or entirely refurbished “permitted development” office blocks. Responsibility for the common areas/amenities, PLUS every apartment too. More achieved directly on site – “one touch” solution, so less interaction with the office needed.	Use of proptech vital to ensure cloud-based information always available to the property manager and they have the ability to be productive wherever they are located on a particular day. Both roles could involve management of/contribution to social media accounts.
How am I remunerated as a property manager and how does my company earn its fees?	Competitive basic salaries. Bonuses tend to be discretionary but increasingly performance related. The traditional managing agent still charges in a very traditional manner: on the basis of per unit management fee. It is rare that a block managing agent will charge a fee that is calculated from a percentage of the expenditure for running the building. Additional fees for additional services are, often, charged on a percentage, fixed fee or hourly basis. The managing agent tends to rely on these additional services to make a profit as per unit management fees are typically too low. Managing agents have historically looked to insurance commissions to make ends meet, often without declaring this income to the service charge payers. Ground rent often collected on a percentage basis though. Although becoming less prevalent, many developments/buildings are managed without an up-to-date management agreement being in place between client and agent.	More likely to suit property managers used to working hard to eke out extra fees and therefore earn commission. Build to rent managers will look to charge a percentage fee based on rental income or net operating income. This agreed fee will vary, depending on the scope of responsibility. Collecting rent as well as managing the communal areas and the interior of each apartment (including organisation of furniture packs, white goods), will mean a higher fee.
The Lease	The long lease governs the dos and don’ts for the freeholder and the leaseholders. Unless the terms of the leases are relaxed by the freeholder or ignored (risky), the lease terms MUST be adhered to. That may mean a leaseholder can never keep a dog or cat in the property, or rent the rooms in their flat individually. Just about everything the property manager does goes back to the lease. The client/freeholder is often at arm’s length so the property manager is upholding the terms of the lease with minimal interaction with the freeholder. With RMCs/RTMs, the directors are the client whilst they are also leaseholders. Discussions about the leases can get emotive, especially regarding pets, noise, alterations and more.	There are no long leases – just tenancies, typically between one and three years in length. The tenants (sorry, residents) are of course restricted in what they can do within the apartment they are occupying but one major aim of build to rent is to provide apartments that are perfect for the renter – super modern with hard flooring, easy to maintain, open plan designed, and often pet friendly. Terms of tenancies tend to be agreed in a more objective manner – more akin to business-to-business agreements with similarities to commercial office management.	There are always rules and regulations for communal living. Property managers need to know these backwards and how/when/if they can be amended.
What do you call the people who live in the building?	Clients and Leaseholders!	Customers or residents (not tenants, even though that’s what they are!) but occasionally you are allowed to refer to them as renters!	Anyone living in a block of flats is a customer.
Running costs – who ultimately pays?	All running costs of the building are typically recharged to the leaseholders through the service charge.	All running costs of the building are paid for by the freeholder and are not passed onto the tenants. That said, the more prestigious the building with more inclusive amenities, the higher the rent will be to cover the cost of the amenities/attentive service.
Should I run the building like a business?	No. It’s not about maximising income and minimising costs. It’s about adhering to the lease and achieving value for money for the service charge payers. Ultimately, they want a pleasant, clean, safe place to live and are usually willing to pay for that. Leaseholders are content with a balancing charge if it is justifiable and they continue to see their asset grow in value, everything else remaining equal. However, if the leaseholder rents out their flat, they want to see the rents remain buoyant and service charge costs as low as possible. In common, all want to see the building managed to eventually enable them to realise an increase in value of the flat. KPIs imposed on managing agents (or volunteered by them) are generally used to measure timeliness of responses/actions. With brand new built for sale long leasehold buildings, developers apply pressure to the property manager to keep the service charge below a certain perceived maximum service charge £ per sq ft level.	Pressure to keep income up and costs low – much more of a commercial focus on the building’s P&L. Tight control of operating budgets needed. Focus on the net operating income (NOI) to keep a close eye on the building’s profitability (NOI = all revenue from the building minus its operating expenses). The BTR Investor sees any overspend as cutting in to the Net Operating Income. Performance management used to measure the financial rate of return, much more so compared to private leasehold block management. Financial modelling is being constantly developed – there aren’t a huge number of completed schemes so the models will get increasingly better.
Upselling scope	Depending on the scope of the property manager’s role (and how well they are incentivised) there are numerous ways for a property manager to generate more income from their portfolio - including insurance commissions, company secretarial fees, major works administration fees, completing LPE1 forms – and increasingly through software platforms, selling services behind the front door (e.g. cleaning or handyman services).	There are amenities in the building to maximise use from e.g. cinema. Parking charges. Contents insurance. Vending machines. Utilities’ organisation. Upselling in the USA is an increasingly important part of driving income. The same drive is evident here from build to rent investors in the UK, albeit tailored to UK tenants’ needs.	There is scope to sell additional services to top-up core income. Smarter block managing agents will incentivise their staff to upsell. BTR’s lettings background means commission high on the agenda anyway.
Building types	Can be a wide variety of building types/ages under management by one property manager.	Tends to be new build, high volume. Needs scale and needs to be purpose built for the BTR market. More robust fixtures and fittings with lower recurring maintenance costs which can increase the net operating income/bottom line.
What do the common parts comprise and what are you responsible for?	Often simple common parts, used merely to get from the entrance of the block to the flat. This is changing though in larger schemes, encouraging more communal use of the communal areas! Communal facilities such as gyms were historically used as a sales tool however these often became white elephants.	More complex common areas, including amenities such as residents’ lounges, cinema, gym, games room, areas for residents’ events, work areas with superfast broadband, communal roof terraces… With cost control being vital, the cost of creating and maintaining amenities are considered with much more thought. More market research is analysed to make sure it’s what renters want and is affordable to the build to rent developer. A costly amenity that doesn’t attract a higher rent or upselling opportunities would reduce margins. Tie-ups with commercial gyms are considered by build to rent developers, to mitigate the risk of high costs of creating them in the first place – and the cost of running then.
What do the on-site staff look like?	Long established, long leasehold blocks are governed by the terms of leases unchanged for decades, meaning porters, caretakers and concierge have defined roles. By and large these roles are to man a front desk, liaise with contractors and are generally restricted to the common parts. Modern, sprawling blocks with on-site staff often need a large team of estate managers, porters, concierge and maintenance managers, depending on complexity and how the leases have been drafted. Whilst higher-end blocks may benefit from 24/7 staffing, most blocks do not; residents need to fend for themselves outside of those core hours.	Build to rent blocks also rely on a team of on-site staff and often the property manager is also based on site. You might have a customer relationship manager too, a lettings manager, an asset manager, a health & safety coordinator, as well as concierge staff. Build to rent blocks need to keep standards high and costs low to deliver that net operating income that incentivises all involved. So the build to rent operator is unlikely to have any on-site staff who aren’t always busy!
Major works	Major works to exterior fabric, plant and internal common parts are organised in accordance with lease, e.g. every 5 or 7 years for cyclical redecorations. Close communication with leaseholders is important to plan for large programmes of expenditure, often a year in advance. There is a legal requirement to serve ‘section 20’ notices if any single leaseholder is required to contribute £250 or more.	One landlord entity/investor pays all of the costs. Major works more likely to be carried out piecemeal, to minimise disruption to residents. They are carried out in accordance with the need to maintain high standards to attract highest rent possible, but costs kept to a minimum without compromising quality. All parts of the buildings need periodic refreshing/refurbishment, not just exterior fabric and internal common parts. Flats are renovated when they are between tenancies. Close liaison with the freeholder’s representations to plan meticulously for works timed to minimise loss of rent/use of amenities.	Important to look significantly far ahead to plan for major capital expenditure. Planned maintenance programmes are essential for most buildings.
How important is L&T legislation?	In-depth knowledge required of landlord and tenant legislation regarding long leases and service charges. Consequences of non-compliance are potentially disastrous for the managing agent and their freeholder client.	Knowledge of Section 21 of the Housing Act 1988 important.
Communications with customers	Customers encouraged to be self-sufficient using portals, otherwise phone and email far more likely than face to face contact. The traditional, feudal landlord and tenant relationship encourages “them” and “us” adversarial attitudes.	Likely to be far more face to face contact with customers. See/meet with many residents daily. Immediate resolution to issues expected. More community led events where you can informally gauge the temperature of your customers’ happiness.
Software/Proptech	More likely to use Qube, PropMan, Dwellant, Blockman, Resident or Locale.	More likely to use Yardi, District Technologies, and Spike Global although more traditional commercial and block management software providers are developing their own modules. There is arguably a greater need for technology to support on-site staff, as there is more to do.
Dress to impress?	Relaxed/smart-casual attire more and more common.	Very smart attire expected on site, akin to high end hotel dress.
What about contractors and other suppliers?	Relationships with contractors on site tend to be at arm’s length. Face to face interaction with contractors help if they have to pick up keys from your office! Good suppliers will ensure they get to know you. Don't forget about 'section 20' for qualifying works and qualifying long term agreements.	Closer relationships with suppliers and dedicated site staff. Less margin for error. Swift resolutions to maintenance problems are necessary. Build to rent PMs are more likely to lead on this as procurement and contract costs need to be forecasted very accurately. More likely to use fewer contractors and have the costs forecasted over a number of years. No statutory restrictions on expenditure.	Effective relationships with suppliers are crucial to give you the ability to do your job as a PM effectively.
Accounting considerations	Transparency, timing, quantum and reasonableness of charging is governed by statute and bodies like ARMA and RICS. The managing agent’s failure to account properly may mean the freeholder is unable to recover costs – costs that he will look to recover from the managing agent!	Accountability solely to the freeholder. Residents of a build to rent building aren’t interesting in its running costs; they are only interested in how much the rent and fees they are paying. Business to Business relationships are evident with strict monthly accounting (including pre-payments and accruals) in order to curb costs and prevent overspending against the budget.
Brand/reputational considerations	Managing agents tend not to worry too much about their own brand at individual buildings. There have been some high profile examples of how the actions of a managing agent can be very harmful to the client’s reputation. Whether the agent acted correctly or otherwise, leasehold is in the spotlight and a ‘mistake’ could find its way onto Twitter and go viral.	Build to rent buildings are either branded individually, are branded as the client (or sub-brand of the client) or are branded by the managing agent. The client’s brand is of course precious and must be protected. It’s a long term investment for them, not a get-rich-quick enterprise. Every communication needs to be on point and carefully considered. Build to rent schemes are aiming to create a sense of place – otherwise known as ‘placemaking’. Attracting and retaining residents who aspire to live a certain lifestyle is important to the success/profitability of the scheme. Residents buy in to the lifestyle and pay accordingly.
How important is health & safety?	Very. Block managers are far more likely to be dealing with asbestos (all forms banned only in 2000) by virtue of the age of the buildings they manage.	Build to rent freeholders have more to lose in the event of a health and safety breach. Damage to reputation and brand will ensure an even keener eye on the multitude of health and safety and compliance tasks, actions and events.	The same health & safety laws, regulations and best practice apply to all residential properties with communal areas effectively open to the public (visitors, contractors etc), whether they are long leaseholder, council or housing association run, or built to rent. Terrific health & safety risk management software is available to both types of property/tenure. There are no excuses in 2019 for hoping for the best and fearing the worst when it comes to H&S.
Is feedback encouraged and how are complaints dealt with?	Complaint processes tend to be more drawn out, with published timescales for investigation and resolution. If no resolution is reached in-house, the service charge payer has access to the agent’s Ombudsman who will help reach a settlement. The likelihood is that a serious complaint where both sides cannot reach an agreement will end up costing both considerable amounts of money. Leaseholders are unlikely to let a complaint affect their decision to remain in the building or sell-up and move on. Feedback is less likely to be sought voluntarily, compared to build to rent.	Complaints are handled fast – immediate resolutions are sought by the property manager, much like the hotel industry. Unresolved complaints are likely to lead to the resident wanting to rent elsewhere and complaining publicly on social media More likely to be asking for customer feedback informally and ad hoc, and through online surveys. More emphasis on placemarking and more organised events for residents help to promote the investor’s brand, but crucially gives the team on site and the property management team an opportunity to ask for feedback in what should be a relaxed and convivial setting.
Client reporting	Decided between the client and managing agents from the outset. Often quarterly for finances and operational matters.	Frequent and regular reporting (even weekly) to the freeholder – managing against operating budgets. A detailed process is likely to be set up in advance for staff to adhere to. More PropTech used to provide granular data.	Both are important for property manager and client to demonstrate to each other that the relationship is going well.
Insurance	Insurance expertise within the managing agent usually needed to procure insurance policies and manage claims. Managing agents need to be regulated to do this for their client, although many are not. Whether or not the managing agent receives commission, the chances are the client expects them to be suitably regulated and qualified to ensure they have the right insurance policies in place. Managing agents also need to stay on top of the rebuild cost of their buildings through reinstatement cost assessments, especially when their client is an RMC/RTM.	Insurance expertise unlikely to be needed as the freeholder investor will have a tight control to ensure high quality of cover (e.g. when it comes to loss of rent) and prevent excessive commissions and slow-moving claims. The freeholder will likely have a retained reinstatement cost assessor to stay on top of the changing rebuild cost of their valuable buildings. The consequences of underinsurance would fall to the landlord alone, potentially wiping out years of profitability. The on site team will often have a direct role in dealing with and completing claims to maintain a high level of satisfaction with residents and the client.	Whether property managers are involved in insurance matters or not, they need to have a good handle on the arrangements as inevitably they will become involved. Property managers should know what they (and their firms) can and cannot do depending on their level of regulation (or lack of it).
Plant and equipment	Often simple equipment and minimal communal plant is present by virtue of the block’s age and the requirements of sticking to the terms of the leases.	Build to rent blocks are new and contain state of the art plant that requires specialist upkeep. Robust software is needed to list/monitor all plant/assets and make sure everything is covered by warranty and maintenance contracts from the outset.	All residential buildings have an element of communal plant that is the property manager's responsibility to maintain on behalf of the client.
Keys and parcels	Blocks of flats without on-site staff cannot rely on a service to provide keys for contractors or visitors, or any sort of package/parcel receipt/storage service. Residents have to be at home to receive packages and property managers use key-safes or contractors to visit their offices to pick up keys. Even with on-site staff, older blocks are simply not equipped to take receipts of hundreds or even thousands of parcels per year. The same with relatively modern blocks… The Amazon effect has taken a lot of building managers by surprise. The right software and hardware can assist these blocks by taking receipt of packages which immediately notify the resident to collect!	Built to rent blocks (should) have been designed with enough storage to hold hundreds of packages at any one time. They are more likely to be appropriately resourced so the on-site staff can cope with the peaks of courier deliveries at various points during the day. A build to rent block is more likely to have the latest barcode scanning software, hardware and apps that encourage the residents to make full use of their Amazon Prime accounts. Delivery services will be invested in to take parcels and keys for onward transmission. Build to rent more likely to take advantage of parcels being delivered by drones in the not too distant future.
Sharing Information	In the traditional block management market, little by way of information is shared - everyone is competition.	As more purpose built, build to rent developments are “let up” it is common practice in USA (and beginning here in the UK too) for operators to share data on rent levels achieved, cost models etc. This information/data is normally in the hands of an impartial third party expert who crunches the numbers and provides up to date information to assist the build to rent developers/operators for a fee.

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