A Model For Regulation? 

The Act has three distinct elements to try to set professional standards, and these involve the setting up of a compulsory register for all property factors; the introduction of a statutory Code of Conduct which all registered property factors must comply with; and the setting up of an independent tribunal to deal with homeowner complaints, called the Homeowner Housing Panel, or as we have shortened it to hohp.

Each of the elements in the Act will set standards.

The first requirement provides that a register of all property factors operating in Scotland be set up. That register is maintained by the Scottish Ministers and they have delegated their powers to a unit to administer the register, called the Scottish Property Factor Registration Team. It was made a requirement of the Act that all property factors as defined in the Act, must apply for registration before 1 October 2012. After that date to operate as a property factor without being registered is a criminal offence.  The criminal sanction for operating as a property factor without being registered (or without having an application for registration pending) is a fine of up to £5000 and/or imprisonment for a term not exceeding 6 months. The offence can be committed by the factoring business but there is also provision for managers, directors or officers of the business to be found guilty of the offence, if it is proved that it was committed with their consent, or connivance, or is attributable to any neglect on their part.

The process of registration involves completing an on-line application form and paying a fee. There is a requirement to list in the application the full land and property portfolio managed by the property factor, and there is also, a duty on the property factor to update the portfolio held by the Register annually.

The prescribed fee to be paid at application is £100 for a portfolio of up to 100 properties and that increases to £370 if more than 100 properties. The Register is a public document, and any member of the public can access details of who the property factor is for a particular property. Registration requires to be renewed every 3 years.

As part of the registration and re-registration process the Registration Team consider whether the applicant, and if a business, that includes those persons in control of the business, are fit and proper persons, and consideration will be given to any convictions. The Registration Team will also consider whether the property factor has complied with the requirements of the Property Factor’s Act and the statutory Code of Conduct, and they will consider whether the property factor has complied with any Orders issued by the Homeowner Housing Panel. If complaints are received after the property factor is registered, then consideration can be given as to whether there is a requirement to remove the property factor from the register. If a property factor is so removed, the property factor cannot operate and there are restrictions on the ability of the property factor to charge or recover costs. On registration, property factors are issued with a registration number and that number must thereafter appear on documentation sent to homeowners.

The Second element of the Act, relates to the Code of Conduct which sets minimum standards of practice which all registered property factors must comply with. The contents of the Code were the subject of consultation with the industry and the public, and the final version was approved by the Scottish Parliament.

There are 7 sections of the Code and a full version of the Code, along with the legislation, can be accessed from the Homeowner Housing Panel website hohp.scotland.gov.uk/

The first requirement of the Code states that a property factor is to provide each homeowner, who receives factoring services, with a written statement of services. It is expected that this will narrate in a simple and transparent way, the core services and additional services provided by the property factor, the service delivery standards, such as frequency of inspections, and target times for actions, so that homeowners know what services they will receive, to what level they will receive them, and they then will have a better understanding of what they are paying for and will be able to measure performance.

There are timescales in the Code for the issuing of this written statement of services but, broadly speaking, all homeowners should receive this written statement within a year of the date of registration of their property factor. Homeowners do not need to wait until the issue of the written statement of services, and after the property factor is registered, a homeowners can request the written statement, and if they do so, then it must be provided by the property factor within 4 weeks of the request.

The statement must provide certain details prescribed by the Code, such as in the case of financial details - whether the homeowner will be charged a flat fee, or if a percentage or fraction of a charge, what that proportion is; the billing frequency must be detailed; any arrangements for taking a float must be provided; how late payment charges will be calculated; debt collection arrangements, levels of delegated authority, all matters to be included in the statement.

Other requirements of the written statement relate to communication arrangements such as the timescales for responding to communications (such as telephone calls, e-mails, letters); information on the in house complaint handling procedure; a declaration by the property factor of any financial or other interest in the land to be managed must also be included; and how to end the factoring arrangement.

The other six requirements of the Code deal with the minimum standards which all registered property factors must comply with and these sections encompass standards of:

• Communication and Consultation;
• Financial obligations and these standards reflect the overriding objectives of protecting homeowner’s funds; clarity and transparency in all accounting procedures; and the requirement to make clear distinction between homeowners’ funds and property factor’s funds;
• Debt Recovery procedures;
• Insurance – providing standards in relation to professional indemnity insurance; service standards if arranging other types of insurance such as building insurance; and on request, a property factor must justify the selection of provider;
• Requirements apply to Carrying out Repairs and Maintenance whether using in-house or external contractors, such as on request being able to justify their appointment; allowing inspection of tendering documentation; having procedures for pursuing contractors to remedy defects;.
• Lastly, there must be a clear Complaint Handling Procedure setting out a series of steps with reasonable timescales; and a requirement to keep written records of complaints for the past 3 years.

The Code is separate from, and additional to, other statutory  and voluntary requirements, covering issues such as data protection, consumer credit licenses, equalities legislation, title conditions, and other professional rules or codes of practice ( such as those of the RICS).

The third and final section of the Act provides for a Dispute Resolution Procedure in the event of the in-house complaints procedure not being followed, or not resolving the homeowner’s concerns. This allows an application to be made, free of cost, to the Homeowner Housing Panel which is a Scottish tribunal with judicial members.

After an initial sift process which is conducted by the President, applications are referred to a Homeowner Housing Committee for a determination of the application. The members of the Committee are drawn from a Panel membership which has solicitors, advocates (equivalent of barristers), chartered surveyors and housing specialists. There are 2 grounds for a homeowner bringing an application. Either a complaint that the property factor has failed to carry out factoring duties in relation to the management or maintenance of land, or a complaint that  the property factor has failed to comply with the Code of Conduct.

The Committee consider evidence at a hearing, and if the Committee determine the application in favour of the homeowner, then a Property Factor Enforcement Order is made specifying the actions which the property factor must undertake, and any payment which has to be made to the homeowner. There is no legislative limit to the amount of such payment. It is a criminal offence not to comply with this Order without reasonable excuse. The Registration Team is advised of the failure to comply with the Order. The Registration Team must then consider if the failure to comply, raises questions about the suitability of the property factor to remain on the register. The decision of a committee can be the subject of appeal to the courts.

The hearings before Homeowner Housing Committees are open to the public, and hearing lists of future hearings appear on the Panel website. The decisions of the Committees are public decisions and are published on the hohp website. The role of the Homeowner Housing Panel is not per se to set standards but to resolve disputes, although it would be naïve to think that the decisions of Committees will not have an impact on service delivery standards of property factors. I expect most factors will be reading these decisions and trying to adapt their service delivery standards to ensure that they are likely to meet the expectations of the Homeowner Housing Committees.

The best approach that property factors can take is to try to ensure that they meet the required standards so that customers do not bring complaints and, if there are concerns, then these are addressed at an early stage and resolved, where possible without the involvement of the Panel. Inevitably there will be some cases which cannot be resolved, but being focussed on the standards laid down in the Code will help any property factor to demonstrate to a Committee that they have discharged their duties to an acceptable standard. The ideal situation is for the Panel to have no cases, because disputes are resolved between the homeowner and the property factor.

At the Panel, we certainly have already encountered a number of cases where customers have withdrawn applications before they have reached a Committee hearing, because the property factor and homeowner have negotiated an acceptable compromise.

Time will tell if customers’ perception of the factoring profession in Scotland improves. Hopefully as customers’ receive the written statement of services, they will be better informed and have more realistic expectations as to the services property managers can, and sometimes cannot deliver, and the standards which are acceptable.

Since 1 October 2012 the Panel have received about 80 applications and so the figures for complaints to the Panel are not high. The types of complaints are wide ranging and cover all aspects of the Code but a significant proportion of applications received to date include some type of communication complaint such as alleged failures to respond within reasonable timescales to telephone calls and correspondence, and complaints concerning not providing information requested, or not following the property factors’ own written complaints resolution procedures. These types of complaints emphasise the importance of good communication as a foundation for building positive customer/factor relationships.  It is hoped that over time this new legislation will lead to fewer disputes, and an improved customer and public perception of the factoring profession in Scotland. 

Aileen Devanny is President of the Homeowner Housing Panel in Scotland.