On the 5 October 2023, just after the deadline for registering higher-risk buildings (HRBs) in accordance with the Building Safety Act 2022 (the BSA), we published an article that considered the extent to which property managers could have direct responsibilities under the BSA.

In this article, we explore how the impact that has had on the role of property managers and how expectations of property managers have changed over the last two years as a result of the BSA and considers what we might expect to see around this area of compliance moving forwards.

How likely is it that property managers will be the "principal accountable person" or an "accountable person" for a higher-risk building?

Under the BSA, the responsibility for keeping the building safe during the occupation phase falls to the "accountable person" or, if there is more than one accountable person, to the "principal accountable person". Working out who falls into these roles can be complicated as it will often require a detailed analysis of how the relevant building is owned, especially if that ownership structure is multi layered.

Two years down the track, it is now largely accepted that a property manager is unlikely to fit that criteria and that it is rare for a property manager to have direct responsibilities under the BSA (noting there can, of course, be exceptions especially for asset classes such as student housing where property managers are more likely to take on a lease).

In a typical property management agreement, where the property manager is appointed as agent for the freehold owner or the head tenant, the property manager will not usually have sufficient responsibility for repairs and as such will not usually be an accountable person. The property manager is typically managing the repairs on behalf of the landlord, and therefore the landlord retains the ultimate responsibility for the repair.

Why the Building Safety Act still matters for property managers

As we anticipated, owners and investors that are principal accountable persons or accountable persons for HRBs are increasingly seeking support with compliance with their occupation regime duties and that usually starts with a call to their property manager.

Property managers already support with identifying risks such as health and safety, overseeing and managing repairs and maintenance, operating the service charge, carrying out (or appointing third party specialists to carry out) various surveys, keeping records and generally supporting the owner in fulfilling its leasehold and legislative commitments. As such, many owners are expecting their property manager to assist with building safety.

Whilst there is still no firm market position yet, there have been a significant shift and steps towards providing varying levels of support by property managers (especially those within the Build to Rent sector).

Most property managers have recognised that, in order to remain competitive, it is important to be able to offer at least some level of assistance.

What can owners expect to see?

Variety!

Whilst some property managers will now be comfortable with supporting with all (or the majority of) the occupation regime requirements, others will only be comfortable providing limited support, e.g. a draft resident engagement strategy or supporting with the appointment of a specialist to prepare or review a safety case report.

Fees for that support will also vary – for new management agreements it might be included within a wider management fee or there might be a specific fee. As always it will be important to think about what the fee covers (and to have eyes open to third party costs as well as costs imposed by the Building Safety Regulator itself).

Implications for property managers

Property managers will find it increasingly difficult to resist supporting with building safety compliance. Looking ahead they can expect to see:

  • continued requests from clients to support with building safety requirements;
  • increased client understanding of building safety – property managers should prepare and be ready to answer detailed questions about what they will and won't support with as clients gain greater understanding of what they need to do to manage their responsibilities in this space. It is less likely that vague service wording will be proposed or accepted than when the BSA was first introduced;
  • growing pressure to provide evidence of their competency to provide the services that they are offering to provide and to explain how they select and confirm the competency of third parties that they appoint on their clients behalf;
  • increased focus on the interplay between liability limitations in their management agreements and building safety support;
  • continued requests to vary and update existing management agreements;
  • a range of requirements and expectations when it comes to reporting on building safety services - larger investors in particular are seeking enhanced reporting and/or attestations in order to show continued assessment of risks and compliance; and
  • more focus on record keeping and document management with many clients pushing more for aligned systems and/or clearer access rights to third party hosted systems.

Key points for property managers to keep in mind:

  1. Pay attention to the scope of definitions and service commitments! Building safety requirements may differ depending on location. For example, those operating in both England and Wales should note key differences between the regimes.
  2. Building safety can apply to a wide range of assets. In our recent Legal Considerations for Hotels video series, we explore the challenges of navigating compliance for hotels. It is also important to keep in mind the impact of changes to the scope of a management agreement – could a property added later be a higher risk building? If additional services will be required, is it clear that additional fees can be charged?
  3. Competency is key. Are you sure that the third parties you are recommending to your clients are competent and have you considered how their appointment terms fit with your management appointment? Consideration should be given to the amount of risk you are offering to take on and how that is controlled within your management agreement.
  4. Service scope in this area is likely to continue to evolve. Property managers will need to ensure that they keep pricing under review as demands from clients increase.
  5. Liability! Watch out for indemnities and specific commitments around provision of building safety services. Is the risk worth the reward?

If you have any questions about this article, please get in touch with Danielle Klepping, Gemma Whittaker or David Lowe.