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Edinburgh’s commercial property market is booming – but apathy over managing buildings will store up problems for the future

Posted: 4th November 2016

Jill Armstrong, Head of Commercial Management, Speirs Gumley

Edinburgh’s commercial property market is in resurgence. Demand is high and supply is low, especially in the city centre, which makes it a very attractive proposition for investors.

In fact, investment in the capital’s commercial property looks set to reach its highest point since 2006 – before the recession began. According to real estate firm Knight Frank, the total investment for 2016 is expected to reach £476m, compared to £331m last year.

Confidence in Edinburgh’s property market – both commercial and residential – is one of the main reasons Speirs Gumley decided to open an office in the capital in May this year. Since we’ve been in Edinburgh we’ve noticed that the property management landscape here is very different compared with Glasgow, where we’ve been established for many years.

The big difference is the way commercial properties with multiple owners are managed. In Glasgow, multi-occupied office or retail buildings which share common facilities and amenities are usually managed by a property manager, or factor. The property manager will take care of things like instructing communal maintenance and repairs, inspections, insurance and ensuring compliance with Health & Safety and other legislation. They can also provide financial services such as rent collection, debt recovery, invoices and supplier payments.

However, in Edinburgh, factoring of commercial properties – and residential ones – is far less common. The more usual situation with multi-owned properties in the capital is that the owners try to organise things themselves. If done correctly this can occasionally work, but more often than not it causes numerous problems like maintenance not being carried out, some owners ending up paying more than others for repairs, and builders being reluctant to carry out work as they fear they won’t get paid. If absentee owners are involved, it can be a near impossible task.

If multiple owners can’t agree on a repair and the situation deteriorates, it can eventually become a risk to public safety or health and in that case a statutory repair notice will be served by the council, who will then carry out work to remove the imminent danger. If this happens, owners must make immediate payment with no grace period, and the split of repair costs is not always in line with the title deeds. Notices served in an emergency apply to all owners, even if the shared parts are not mentioned in their title deeds.

The situation is likely to have originated from the City of Edinburgh Council’s old Statutory Notice system, which was designed to protect the huge number of listed buildings within the UNESCO World Heritage sites of the Old and New Towns. Right up until 2013, this gave the council statutory powers to intervene to organise repair work on private properties when the owners of shared buildings could not reach agreement. This system was a bit of a safety net for property owners to fall back on if things got too complicated, so many felt they didn’t really need a property manager. In the past few years this system has been scaled back and the Council will now only get involved when there’s a risk to health and safety – and has begun to advise building owners to consider using a factor.

Despite this advice, factored buildings are still a bit of a rarity in Edinburgh. Perhaps this is due to the fact that property managers have a bit of an image problem. In fact, when it comes to public perception, factors are probably competing with telemarketers and traffic wardens to see who ranks bottom of the popularity chart. However, a good property manager will make your life easier by providing technical expertise, organising work, dealing with billing and ironing out any problems between owners. Unlike in the bad old days, property factors in Scotland are now regulated by the Property Factors (Scotland) Act 2011 and must abide by the Code of Conduct for Property Factors, which has helped weed out the rogue operators. Don’t forget that you employ the factor, so if they are not doing a good job, you can change them to somebody who will.

We want all these investors who are flooding back to Edinburgh to know that factors aren’t the bad guys, and that rather than costing them more, the chances are they will save substantial sums of money, not to mention time, energy and aggravation, by using a property manager to look after their precious investment.

 

A good property manager will always work in your best interests and be able to use economies of scale to save money on repairs, and carry out planned, preventative, cost-effective maintenance that will hopefully save you a visit from council officials wielding a statutory repair notice.

 

ENDS
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