Tech-no!
This article was recently published in the February 2020 IRPM Technical Update:
How legislation is holding back tech solutions
David Goldberg is an enthusiastic cheerleader for proptech and fintech. However, he believes efforts by property managers to enhance the customer experience are being thwarted by the unforeseen consequences of consumer legislation:
It’s all very well that we find new ways to innovate property management, provide smart homes, address the build to rent platforms and so on but 20% of the property market is leasehold. That’s around 4.5m homes (with 40% of that used for PRS) and a small number of BTR schemes, yet there are fundamental flaws in the system where existing technology could assist but is restricted by archaic legislation prohibiting its use.
When the government updated the Consumer Rights regulations in 2018, to prohibit charging customers more for using a credit card , there was a knock on effect for the residential block management sector. We are unable to pass the costs of taking credit card payments for service charges back to the consumer.
I see this as a massive stumbling block to growth in our industry. As we all know, the rules around service charges are such that monies are collected in trust and one needs to collect the exact amount of monies expended in running the building. So, if we can’t recover the cost of using credit cards, there would be a shortfall to the service charge and no means to recover it. As a result, we find ourselves being left with two choices. We either accept that we, the managing agent, will absorb the cost of card payments which could run quite easily in to six figures at an average sized firm, never again to be recovered from our clients (and our fees certainly do not cover that overhead); or We only allow BACS or cheque payments and accept the fact that we will need to employ several staff to reconcile the receipts on a daily basis. How draconian is that!!
You may argue that either option will end up costing you the same, so what’s the issue? But that is short sighted. We can solve far more by removing this hurdle and engaging with technology to improve service, save money, allow reinvestment elsewhere and make the customer journey simpler!
For example, if we could take credit cards knowing we could pass the fees on to the consumer, the service charge would not lose out. That money could be reinvested into front line services such as better communication or hiring experts in increasingly complex arena of fire safety.
Perhaps more important, we could employ intelligent payment providers that would allow auto- reconciliation of payments (check out Stripe), meaning balances are updated instantaneously, given we will know exactly who is paying and what they are paying for. There would be no need for them to call us up to check we have received their payment, they could pay with ‘one click’ and we could avoid the need to be FCA regulated to accept Direct Debit payments as you could employ subscription services instead (check out GoCardless) and spread the annual service charge costs. We would also have a far more effective way to drive customers to our often unused portals that, in turn, can deliver enhanced services.
As we stand right now, what use is my portal other than reporting an issue or downloading a document? Boring. I’d rather invest the money I’ve saved on fees to buy-in value added services for my customers, so that they really enjoy living in a property managed by us.
When you consider that today’s consumers expect to be able to pay online, why is it that we are accepting a prohibitive framework and why are we are not lobbying the government to change the rules for residential service charges? PropTech and FinTech solutions can solve so many of the problems we face but they are no good if the lease or legislation prevents us finding solutions. As an industry, it’s time we got together to solve these problems.
David Goldberg is MD of POD Management.