Coronavirus Hygiene Protocols Come at a Cost: Impact on Property Management

Posted by LDG - The Creative Property Agency on 7th June 2020 -

Property managers have been unsung heroes of coronavirus and whilst they may not as “key” as other workers who deserve a clap and a clang on a Thursday night, they certainly deserve recognition for keeping up with their management duties, despite often being restricted from undertaking site attendances, less contractors around and likely managing increased correspondence with their tenants.

I reached out to a client, Simon Long, who heads the property management of the Estates and Agency Group, a privately owned property firm, which keep their management in-house to regulate and control the best service for their tenants. Having worked both on behalf of clients, as well as “client-side”, he has a broadened outlook on the impacts for Landlords, property management, and of course their tenants, when changes such as Coronavirus occur.

Harrison – The cost of service charges is always scrutinised by potential occupiers, and of course existing tenants, but we’re now entering a new world, with higher expectations and pressure for procedures. Surely the cost will increase for tenants?

Simon – In my opinion costs are undoubtably going to increase, but not ridiculously so. I would imagine, like ourselves, most Landlords have scaled back services wherever possible during the lockdown, which would have produced some savings for the service charges and assist towards the additional costs incurred during the “returning to the office” stages.  Landlords can’t stop all services however, for example compliance based services need to continue regardless of current circumstances.

Harrison – What are your expectations for the returning stage?

Simon – First and foremost, there is going to be expectations for a higher frequency, and more thoroughly cleaning of common parts. This takes longer, therefore there will be additional charges from cleaners. There will also be costs associated with installing and upkeeping new sanitising units, together with new signage and the regular purchasing of sanitising products. We may have also commissioned specialist risk assessments on our buildings so that we are confident (and the tenants are comfortable) with the precautions we are taking.

Harrison – I guess contractors themselves will also impact this?

Simon – Definitely, they will also have to work differently, and have their own compliant procedures to adopt to ensure their working methods comply, which may cost more.

Harrison – At a time when occupiers will be looking to cost-save, this is perhaps not what they will want to hear?

Simon – Landlords have to strike a difficult balance between keeping occupants safe, and staying legally compliant, whilst also keeping costs at a reasonable level. In some respects, this hasn’t changed, just the parameters have given the circumstances. If Landlords have built up a positive record of keeping service charges fair and reasonable, without affecting the quality of maintenance and service, I would hope there would most tenants would be understanding. After all, it is also in their best interests to keep commercial buildings open so they can work, or keep safe where they live.

Harrison – Do tenants have any protection from this?

Simon – Tenants with fixed or capped service will benefit from knowing their service charge costs, or at least the limit it could increase to. In these circumstances, the Landlord would pay the deficit in the usual manner. I also expect it is not widely recognised that payments won’t reduce, just because buildings haven’t been running as normal during a lockdown. Nearly all service charges were drawn up prior to Covid-19, without allowances for potential cost increases. Tenants, in most cases will continue to pay the agreed ‘on-account’ service charges (based on the annual budget), and therefore could see balancing charges at the end of the year to cover the increased costs.

Harrison – What about expected works that would have been outlined at the start of the service charge year?

Simon – Essential works will likely still need to happen, but non-essential, so-called “nice to have” works might be put on hold, in order to keep costs at a reasonable level, while there is uncertainty of the length and depth of the crisis. This will help maintain the service charge costs.

Harrison – Is there anything else a tenant should take into consideration?

Simon – I think it’s important to reiterate that Landlords and property managers cannot police corridors, stairwells and lifts – it’s simply impractical. Our job will be to provide guidance and a safe regime – it will then be down to the users to apply the guidance and common sense for their own safety. This is especially important within their own demised areas, as it is their responsibility for safety within those realms. We can (and want to) help where we can, and no doubt our own guidance will be applied by tenants themselves, but Landlords are not responsible once you enter into your own space. To end, whilst it might sound obstinate at the moment, I think, especially for commercial occupants, once we all start settling into a normal-ish routine again, it will be easier for tenants to understand why increasing costs happen.

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 Thank you Simon for your time. We’re looking forward to properly catching up with you in-person, once London’s restaurants and bars permit.

My “property is in his blood” Father always told me property management is one of those few careers, where people often only call you when something is going wrong, or service charges seem too expensive, and rarely / never considered or thanked when things are running smoothly. Stick to transactions he would say, and stick to commercial property. I guess I was a dutiful son. In any case, like a lot of these so called thankless key jobs, I hope there is more recognition for those who’ve continued looking after the places we live and work, not just the property managers, but the cleaners, caretakers and maintenance people, and a few less grumbles towards them too.

 

Harrison Eagles

Harrison is considered a specialist in the London office and retail agency industry offering professional and strategic consultancy to a range of Landlord and Occupier clients, with an emphasis on advising the Media, Tech and Creative industries. Telephone: 020 7290 0599. Email : [email protected].