OFT launches a market study into residential property management services to leaseholders in England and Wales

OFT launches a market study into residential property management services to leaseholders in England and Wales

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Author: Alexandra Brown

On 4 March 2014 the OFT launched a market study into residential property management services. It intends to look at how this market is working for leaseholders and freeholders in England and Wales. Scotland and Northern Ireland are outside the scope.

This announcement follows the OFT's call for views in December 2013 on the scope of a proposed study. Off the back of the responses it received, the OFT has widened its investigation to include residential property management services for properties where local authorities and housing associations are the freeholders, as well as those with private sector freeholders.

The OFT has identified the following which it considers may raise issues in relation to the proper functioning of the market:

  • whether managing agents and freeholders have the same interests as leaseholders in, for example, keeping down costs for maintenance work or buildings insurance
  • whether leaseholders have sufficient influence on decisions taken by freeholders or others on the appointment of managing agents and the supply of residential property management services
  • whether there are barriers to switching and whether competition between property managers more generally is working well
  • whether managing agents' and freeholders' choice of contractors and services may be influenced by links with associated companies and the availability of financial commissions
  • whether it works well in practice when leaseholders exercise their right to manage their own properties

In particular, the OFT has voiced its concerns regarding the management of retirement properties and whether residents of such properties, some of whom may be in a particularly vulnerable position, are getting a fair deal.

The OFT will be contacting key parties directly during the course of the study to seek information. However, the OFT has said it is particularly interested to hear from leaseholders who have exercised their right to manage and use the services of a property manager. The OFT has published a public request for information to encourage responses. This can be found at http://www.oft.gov.uk/OFTwork/markets-work/residential-property-management/.

On 1 April 2014, the Competition and Markets Authority (the "CMA") will take over from the OFT and become the UK's lead competition and consumer body, and the OFT will be abolished. When this happens, the market study will transfer from the OFT to the CMA. The OFT has said that the CMA will publish its final report before the end of the year.

When the CMA publishes its report, there are a range of possible outcomes. These range from the CMA declaring a clean bill of health, to the CMA making a market investigation reference. If a market investigation reference is made, this would involve a further 18 months' inquiry.

About the author

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Alexandra Brown

Associate

03700 86 8927

Alex is an associate in our specialist EU and competition law team. Alex is experienced in providing a wide range of competition law advice, focusing primarily on EU, competition and antitrust issues and merger control. She has also been involved setting up and running competition training programmes, in particular in relation to dawn raids.

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