Draft revised code of conduct for registered property factors: consultation analysis

Executive Summary

This summary presents key findings from the analysis of responses to a consultation on a draft revised Code of Conduct for registered property factors.

The consultation opened on 6 October 2017 and closed on 15 January 2018. In total, 102 responses were available for analysis, of which 73 were from groups or organisations and 29 from individual members of the public. The majority of responses (62 out of the 102 received) were group responses from organisations that act as a property factor. Of these, 33 respondents were Registered Social landlords (RSLs) including subsidiaries, 21 were private businesses and eight were local authorities.

Part 1 - The Impact of the original Code of Conduct for property factors

In Part 1, the consultation paper asked for views on the impact of the original Code of Conduct for property factors which has been in force since October 2012. Respondents were evenly divided as to whether the original Code has made significant improvements (35%) or has made some or slight improvements (36%) while 6% felt there has been no improvement.

Those who identified improvements most frequently suggested that the original Code has defined the minimum standards of service required of property factors or provided a legal/professional framework within which property factors now work.

The specific aspects of the Code most frequently suggested as having resulted in improved standards were the introduction of a Written Statement of Services (WSS), complaints resolution via an independent complaints body and communication and consultation having been improved. 

Respondents expressing a view that the original Code has made no improvements sometimes related personal experience of a poor service provided by one or more factors. Amongst other respondents identifying problems with the Code the most frequently made suggestion was that more robust enforcement is needed to deal with factors who do not comply.

Part 2 - Proposals on a draft ‘revised’ code of conduct for property factors

Questions 2 and 3 asked for the respondent’s views on the introductory text and the themes featured in the draft revised Code, as set out in the consultation paper. A significant majority of respondents (72%) thought that the introductory text does clearly explain its purpose, who it applies to, and the broader regulatory background. 

Respondents who agreed most frequently thought that the text is clear and easy to read and understand. Respondents who disagreed or were unsure sometimes suggested that the text is too long or repetitive.

In terms of what is not covered within the Code, the most frequent request was for greater clarity with respect to when a person is acting as a factor.

The consultation paper explained that there are currently seven themes featured in the Code: Written statement of services; Communication and consultation; Financial obligations; Debt recovery; Insurance; Carrying out repairs and maintenance; and Complaints resolution. Question 3 sought views on these themes, each of which is the subject of a separate section of the draft revised Code.

A significant majority of respondents - 67% - thought that the themes of the revised Code should be kept as drafted, 6% would change the wording of existing themes, and 14% proposed additional themes. No respondents thought any themes should be removed from the draft revised Code. Reasons given for keeping the themes as drafted included that they are comprehensive, clear and easy to understand and consistent with the previous Code.

Questions 4 – 10 on the consultation paper cover the seven individual sections of the draft revised Code.

Written Statement of Services 

A small majority of respondents - 52% - thought Section 1 of the revised Code should be changed, while 32% thought they should be kept as drafted.

Section 1.2 sets out five circumstances in which ‘a property factor must take all reasonable steps to ensure that a copy of the written statement of services is provided’. Several respondents suggested amendment of the first two of these circumstances, highlighting practical difficulties for factors including that they may not receive timely notification of a sale or that sales may fall through or be delayed. 

A majority of those commenting did not agree the requirement to provide a WSS on an annual basis. It was argued that to do so would be time consuming or expensive and that costs would ultimately be met by property owners via management fees. Instead it was proposed a WSS should be reissued only when there are relevant changes or when the resident requests a copy.

While 44% of respondents thought that the format and structure of the WSS should be standardised, 33% thought it should not. The points made most frequently by those favouring standardisation included that this would ensure consistency of approach and simplify matters for homeowners and enable them to more easily compare the services that different factors provide. 

However, it was also suggested that, while it would be useful to have a template available, its use should not be mandatory or that it should be possible to adapt any template to suit different circumstances. 

Arguments made against standardisation included that one size does not fit all as both properties and factors differ widely. It was also suggested that factors operate in a competitive market and should be allowed to produce their own documents. 

Communication and consultation

Section 2 of the draft revised Code proposes the minimum standards and requirements for how a property factor should communicate and consult with homeowners. While 45% of respondents thought that the requirements of Section 2 of the revised Code should be changed, 40% thought they should be kept as drafted. Further comments generally addressed very specific issues of wording or the detail of the requirements.

Financial obligations

Section 3 of the draft revised Code proposes the minimum standards and requirements for how a property factor should undertake any financial obligations it has with homeowners. While 47% of respondents thought that the requirements of Section 3 of the revised Code should be kept as drafted, 35% thought they should be changed.

Respondents who thought that Section 3 should be kept as drafted sometimes suggested this section is clear, strengthens the previous requirements and protects homeowners’ interests.

There were calls for greater clarity as to what is meant by a ‘detailed financial statement’ and several respondents raised issues concerning the potential suitability of factoring invoices. On the requirement to provide an outgoing homeowner with ‘all financial information that relates to their account’ prior to the date of the change of ownership, some respondents felt this would not be practical or possible.

Debt recovery

Section 4 of the draft revised Code proposes the minimum standards and requirements for a property factor to follow in circumstances where it is recovering debt from homeowners and/or informing other relevant homeowners of such action. A majority of respondents, 59%, thought that the requirements of Section 4 of the revised Code should be kept as drafted, while 24% thought they should be changed.

Respondents who thought that Section 4 should be kept as drafted often made few additional comments, although it was suggested that Section 4 is fair and strengthens the previous requirements.

There were some concerns that certain of the provisions could result in higher charges to other homeowners or that some homeowners might seek to delay payment of the whole balance of their account, rather just than the disputed portion, if their case has gone to the First-tier Tribunal for Scotland (Housing and Property Chamber) (FTT). It was argued that it should be made clear that only disputed debts are exempt from payment during the FTT process.

Insurance

Section 5 of the draft revised Code proposes the minimum standards and requirements for a property factor to follow in circumstances where it is required to hold insurance and/or arrange insurance on behalf of homeowners. A small majority of respondents, 51%, thought that the requirements of Section 5 of the revised Code should be kept as drafted, while 29% thought they should be changed.

Positive aspects identified included that this section is clear. Otherwise comments tended to focus on specific details. For example, the requirement to ‘notify homeowners annually in writing of the frequency with which property revaluations will be undertaken for the purposes of buildings insurance’ was suggested to be unnecessary.

Carrying out repairs and maintenance

Section 6 of the draft revised Code proposes the minimum standards and requirements for a property factor to follow in circumstances where it is arranging for repairs and maintenance to be undertaken. A majority of respondents, 60%, thought that the requirements of Section 6 of the revised Code should be kept as drafted, while 25% thought they should be changed. 

Further comments included that this section covers the important points and would help ensure homeowners receive sufficient information to hold their factor accountable. 

Complaints resolution

Section 7 of the draft revised Code proposes the minimum standards or requirements for a property factor to follow in circumstances where it is handling and/or resolving complaints from homeowners. While 46% of respondents thought that the requirements of Section 7 of the revised Code should be kept as drafted, while 38% thought they should be changed. 

Further comments included that it is not practical, reasonable or fair that an incoming factor should be held responsible for dealing with the failings of a previous factor, and also that the requirement to ‘set out any recourse to the complaints procedures of any professional or membership body that the property factor may belong to’ should be removed. 

While 44% of respondents thought that there should not be standardised procedures for handling complaints, 34% thought there should. Amongst respondents who thought that complaints handling should be standardised the reason cited most frequently was that it would bring consistency to the complaints process.

Several respondents who thought there should be a standardised procedure suggested that the Scottish Public Service Ombudsman (SPSO) complaints procedure should be used as a model and it was noted that many RSLs and local authorities already use this procedure.

A number of respondents who did not advocate a standardised approach also referred to the SPSO complaints procedure, noting that many RSLs and some local authorities already use and would wish to keep this. Other respondents who did not favour a standard procedure cited the need for flexibility to allow organisations to handle complaints in a way that is appropriate for them. 

Any other comments on the draft revised Code 

General comments welcoming the draft revised Code included that it is more detailed than the previous version and removes grey areas. The glossary was suggested to be a positive addition. Less favourable views included that it is too long and complex.

Part 3 - Proposed Modification Order

Part 3 of the consultation paper asked for views on modifying certain provisions of the Property Factors (Scotland) Act 2011 (the 2011 Act) with the purpose of giving further effect to the draft revised Code as published as part of this consultation.

A majority of respondents, 70%, thought a de-registered property factor should be required to comply with the Code despite removal from the register of property factors, while 7% thought they should not.

A majority, 55%, also thought a three-year time limit should be introduced for homeowner applications to be lodged initially with the FTT, while 19% thought it should not. Those who agreed with the proposal or were unsure most frequently suggested that the three-year time limit was reasonable or fair to both homeowners and Property Factors.

The most frequently made comment by those who disagreed or were unsure was that a three-year timeframe seems too long or excessive. The most frequently suggested alternative timeframe was one year.

Part 4 - Impact Assessments

Part 4 of the consultation paper noted that a Business and Regulatory Impact Assessment (BRIA) was prepared prior to the introduction of the original Code and that the Scottish Government is now looking to determine the impact of the draft proposals to revise the Code. Comments received will be used to inform a draft revised BRIA.

A small majority of respondents, 53%, thought that there were proposals in the consultation which have financial, regulatory or resource implications for themselves or their business, while 18% thought there were not. Comments tended to focus on the financial and resource implications, often seeing these two as being closely connected.

The specific proposal most frequently seen as having a resource implication was the requirement to issue an annual WSS and there was a concern that the additional administrative cost would have to be passed on to homeowners.

An Equality Impact Assessment (EQIA) was also prepared prior to the introduction of the current Code and again the Scottish Government is now looking to determine the impact of the draft proposals to revise the Code. Comments received will be used to inform a draft revised EQIA as well as a draft Children’s Rights and Wellbeing Impact Assessment.

A majority of respondents, 68%, did not think any of the proposals would have an impact on or have implications for ‘equality groups’, while 5% thought there would be an impact. There were relatively few further comments and most of these comments simply noted that they had no concerns or did not think there would be any impact or were any implications.

Part 5 - The Impact of the Property Factors (Scotland) Act 2011

The final part of the consultation paper asked for the respondent’s views on the impact of the requirements of the wider Property Factors (Scotland) Act 2011. Respondents were relatively evenly divided as to whether the 2011 Act has made significant improvements (35%) or has made some or slight improvements (32%) while 6% (all Individual respondents) felt there has been no improvement.

Respondents who identified improvements often pointed to the 2011 Act and Code as having set a framework and minimum standards for the factoring industry. The individual elements highlighted most frequently were property factor registration and enforcement of standards by the FTT.