The Office of Fair Trading has begun a market study into the provision of residential property management services to leaseholders in England and Wales.
The research will 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 decided to include them after respondents of a previous study expressed similar concerns in relation to the provision of property management services to former local authority properties.
Estimates vary but there may be as many as five million leaseholders in England and Wales.
The study will look at a different factors that affect whether the residential property management services market works well for leaseholders and freeholders.
One of these factors is whether managing agents and freeholders work together for the same interests, such as keeping maintenance or building insurance costs low, while another area they will look at is the influence that leaseholders have on decisions made by freeholders about choosing managing agents and residential property management services.
The study will also take into account what barriers there may be to switching and whether the competition between property managers works well or not. Another important area they will explore is whether managing agents and freeholders are influenced by links with associated companies and the possibility of financial commissions in their choice of contractors and services.
The OFT will also look at whether it works well in practice when leaseholders exercise their right to manage their own properties.
Rachel Merelie, Senior Responsible Officer for the study, said: ‘Service charges for the maintenance of a building can be substantial and we want to make sure that leaseholders are getting a fair deal.
‘We are concerned that management agents and freeholders may not be incentivised to keep maintenance costs down and that leaseholders may not receive value for money.
‘We will look at whether there is sufficient competition in the market generally as well as taking a close look at specific areas which have been brought to our attention, including services provided to retirement properties.’
The Competition and Markets Authority (SMA) will take on some consumer protection functions of the OFT in April 2014 and will publish the final report before the end of the year.