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Residential Property Management Services: Office of Fair Trading announces market study

Freeholders and property management companies that provide residential property management services (RPMS) to leaseholders will find their activities in the spotlight as the Office of Fair Trading (OFT) launches a market study into the sector.

The scope of the study, which was announced on 4 March, covers properties owned by local authorities and housing associations as well as private sector freeholders. The OFT is asking for information relevant to its study before 31 March 2014.

Does this mean that RPMS providers have broken the law?

Market studies are used by the OFT to carry out market-wide investigations of competition and consumer issues in a particular sector.

They are not an investigation into particular companies, but may result in a variety of outcomes including targeted enforcement action, further in-depth investigation and recommendations for legislative or industry change. Alternatively, a sector may be given a clean bill of health.

While the launch of a market study does not presuppose any of these outcomes, the OFT has stated that it has concerns the market for RPMS is not working well for consumers (leaseholders), businesses and the economy. In particular, leaseholders have expressed concerns to the OFT about high service charges, poor service provision and ineffective complaint handling.

What aspects of RPMS are the OFT most interested in at this stage?

Particular areas of interest for the OFT in this study include:

  • whether competition between property managers is working well;
  • whether freeholders and managing agents have the same incentives as leaseholders to keep the costs of maintenance down;
  • whether leaseholders are able to influence the freeholders’ choice of managing agents;
  • whether the selection of contractors is influenced by links between group companies and/ or the availability of financial commissions; and
  • dealings between providers of RPMS and leaseholders who have exercised their right to manage.

What happens next?

Between now and 31 March, certain organisations will be contacted directly by the OFT to provide evidence to the study, while others are invited to submit relevant views or evidence to the study team before that deadline.

From 1 April the study will be pursued by the Competition and Markets Authority (CMA) which takes over responsibility for competition and consumer law matters from the OFT on that date. The CMA plans to issue its report and recommendations before the end of the year.

How can I find out more?

For further information about the scope of the market study or the process that the OFT and CMA will follow, please contact Ward Hadaways’ specialist competition lawyers.

We can also advise you on the merits of making a submission to the OFT and in drafting such a submission if you decide to do so.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

This page may contain links that direct you to third party websites. We have no control over and are not responsible for the content, use by you or availability of those third party websites, for any products or services you buy through those sites or for the treatment of any personal information you provide to the third party.

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