ARMA becomes a lobbyist for freeholders

The Association of Residential Managing Agents (ARMA) is boasting on social media of signing up freehold investors as a new membership category and is lobbying for their interests.

It is no longer a neutral trade body, whose members can as easily serve a leaseholder controlled enfranchised site as one owned by a large freehold owning fund.

This is a huge step backwards for the trade body which over the past eight years did seriously engage with improving standards in property management and made some effort to steer a middle course between the competing interests of leaseholders and freeholders.

Just at the point where there is a growing consensus that the leasehold sector must be substantively reformed, ARMA has nailed its flag to the interests of speculators in the income streams of residential buildings.

ARMA has already expressed its disapprobation at LKP’s report of the Building Safety Bill before the Communities Select Committee earlier this week. We questioned the enthusiasm with which freehold owners, who have a vested interest in blocks, in urging the spending of public money on cladding remediation.

If leases in cladding sites are valueless, so are the freeholds, and why should taxpayers inadvertently pay to shore up an income stream heading to some anonymous, offshore freehold owner?

Self-interested freeholders and property managers chorus: ‘taxpayer must pay over cladding’ … which, as it happens, leaves their income streams untouched

For two years, ministers appealed to freeholders to pay out to remediate their buildings; not one did so. (Legal and General did at the Blenheim Centre / Reflexion site in Hounslow, but it owned the shopping centre below and was in for a big bill anyway. Nor can Legal and General be described as a speculator in residential freeholds.)

In the absence of anyone being held accountable for the cladding scandal, public money is self-evidently needed and more than has been promised.

But LKP feels queasy that freeholders are joining this chorus, especially while their lobbyists emphasise their virtues as “long-term professional custodians”. We felt even greener after freeholders’ incomes were vastly augmented by the government’s two-storey planning give-away, as here at a cladding site in North London:

Freeholder Andrew Craige Curtis to use two-storey planning give-away at a north London cladding site while leaseholders ruined with remediation bills

• Is ARMA’s lobbying for freeholders going to include arguing against:

• the government’s pledge to set new ground rents to zero;
• the Law Commission efforts to make enfranchisement cheaper for leaseholders;
• the Law Commission’s reform of right to manage;
• the Law Commission – and others – promotion of commonhold as an alternative to leasehold;
• the reform of forfeiture, although no one in the sector publicly defends the windfall to landlords of present forfeiture arrangements.

In the past, lobbying for freeholder interests has been left to the British Property Federation – where Will Astor’s £1.8 billion Long Harbour is a member – and lobbying companies such as Pagefield and PR firms such Sir Lynton Crosby’s Crosby Textor.

The results have been so-so, and here is an example of their handiwork:

Kate Osamor MP asks parliamentary questions for Long Harbour on ground rents, says Daily Telegraph

But now developers and corporate landlords can also join ARMA Network, the term used to describe the lobby, as can local authorities and housing associations, although we have no evidence that any has done so.

ARMA claims it has more than 300 residential managing agent members, who manage more than 1.2 million homes, and 120 “partners”, who provide specialist products and services.

The main declared benefit of ARMA Network for freeholders is given as access to the trade body’s highly regarded technical expertise and “and insight on leasehold matters, engage with specialist suppliers, and stay up-to-date on legislative and technical changes”.

Freeholders – including those that are anonymous or offshore in various funds – will “gain recognition by aligning with ARMA’s objectives to raise standards in the industry and adapting to the changing leasehold landscape”.

Translated, that might be taken to mean: this will make punters in the incomes of residential buildings respectable. Overwhelmingly, these are private equity investors rather than pension funds.

It is unknown whether any freeholder, no matter how controversial, will be excluded from membership of ARMA Network.

LKP has pointed out that ARMA managing agents include many of the larger firms – although not all: Countrywide and Gateway are not members, for example. None of these firms are large through consumer choice: they have grown large through appointment by large freehold groups and acquisitions.

It is also the case that ARMA includes the ground rent managers and administrators of large ground rent organisations: Estates and Management, for example, which is part of Vincent Tchenguiz’s concerns.

In the past, LKP has praised current ARMA CEO Nigel Glen for his “commendably balanced analysis of the pros and cons of residential property tenures” including commonhold before the Communities Select Committee in November 2019.

Anonymous freeholders are the reliable long-term custodians of blocks of flats, Select Committee is told

However, Mr Glen was much more critical of commonhold at the Westminster Forum meeting in March 2020, just before ARMA announced that it would admit freeholders and developers to ARMA Network in April.

ARMA on commonhold: Falling leasehold values. Zombie apartment blocks. Plenty of scrapping. Lack of interest. But good business for professional managers …

He said of the Law Commission report on commonhold:

“One of the things in Nick Hopkins’ paper is that if we have the commonhold statement [setting out the rules for apartment schemes], people would understand it better, wouldn’t that be lovely?

“When I said that in Australia, everybody burst out laughing …

“What it boils down to is that people don’t like living under somebody else’s rules – it doesn’t matter whose rules they are – be it a landlord or a commonhold association.”

Can we anticipate further ARMA criticisms of commonhold and, indeed, other reforms of leasehold as they become more serious?

Mr Glen habitually prefaces his discussion of commonhold by saying that ARMA has no “skin in the game” when it comes to property tenure.

Well, ARMA most certainly does now.