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

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.

Question 15: In addition to the Code, do you think the wider requirements of the Property Factors (Scotland) Act 2011 (2011 Act) has led to improvements in the regulation of property factors? 

As illustrated in Figure 17 below, 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. 

Figure 17: Responses to Question 15. Also see Table 18 (Annex 2: Quantitative Analysis).

Further comments made at Question 18 tended to reflect answers given at Question 1.

Improvements identified

Respondents who identified improvements often pointed to the Act and Code as having set a framework and minimum standards for the factoring industry and having created greater clarity or transparency. It was also suggested that there has been improvement in delivery of services and better communication with homeowners, who are more aware of their rights.

Several respondents suggested improvements may have been greatest amongst private factors while RSLs and local authorities, which were already heavily regulated, may have seen less of an effect.

The individual elements highlighted most frequently were:

• Property factor registration and re-registration. Benefits identified as resulting from the registration of factors included improved confidence, the ability to quantify the number of factors and factored properties, and the ability to trace the factor of a specific property.
• Enforcement of standards by the FTT. It was suggested that the process of making an application is relatively straightforward, and that the FTT provides a mechanism by which homeowners can hold their factor to account.

Other benefits reported included allowing local authorities to take responsibility for dealing with maintenance issues in shared properties.

On-going problems

A small number of respondents gave examples of issues which they felt have not been resolved by the Act including that: 

• It has not increased knowledge of the nature of the factoring process among homeowners considering entering into a factoring relationship, and that buyers often do not understand the nature of their liability to pay for common works. 
• Repairs to common areas in developments without a property factor were not addressed and remain a problem. 
• While standards have improved, the 2011 Act has not encouraged excellence, innovation or open competition in the factoring marketplace. 
• Factors who have not registered are still operating and some registered factors do not fulfil the terms of the Code. 
• The legislation does not include provision for enforcement of obligations against factors or for enforcement action to be taken by a majority of homeowners. 

Problems identified as having stemmed from the 2011 Act were:

• Some factors have interpreted the Act to their own advantage and can avoid dealing with complaints.
• The FTT procedure is too complicated and discourages homeowners from making a complaint. 
• Factors may be targeted by malicious or vexatious complaints from homeowners. 
• The cost of compliance is ultimately passed on to homeowners, with the most serious consequences being for those on low incomes. 

Further actions suggested

It was suggested that more action needs to be taken against deregistered factors and those who fail to comply with the legislation. To fail to take such action was seen as unfair to those factors who have invested in their businesses and complied with the legislation. It was also suggested the ‘Fit and Proper Person’ test should be made more robust and the checks that are carried out should be clarified. 

The need to make buyers fully aware of the implication of factoring arrangements in advance of purchasing a property was also highlighted. Specific suggestions included that:

• Conveyancing solicitors should be required to check the register to confirm whether a property is factored. 
• A guide to managing the factor on a particular development should be produced whenever a property is sold, and conveyancing solicitors should be required to ensure it is understood by the potential purchaser.

Several suggestions were made with respect to applications to the FTT, including that:

• The homeowner should have a right of appeal. 
• The factor should have an automatic right of appeal, not just on a point of law and with permission from the FTT. 
• The FTT should have the power to make an order against the applicant, particularly in cases concerning liability for disputed debt, but also in relation to costs.
• The Chamber President should exercise powers under the 2017 Regulations to reject applications that are insufficiently clear as to the homeowner’s complaint. FTT administrative staff could work with an applicant to format the application correctly prior to the assessment of whether it is to be the subject of a hearing.
• When an application is made to the FTT, information should be sourced from the factor during the sifting process, to give a balanced view of the dispute. 

Promotion of Alternative Dispute Resolution was also suggested as providing a more effective outcome, both financially and in the context of the on-going relationship between the factor and homeowners.

Other suggestions made at Question 15, in each case raised by only one or a small number of respondents, included:

• Introduction of a duty on homeowners to carry out a five-yearly inspection of common property condition. 
• Repeal of the clause on exemptions for individuals to take out common property insurance currently in Section 18(4) of the Tenements (Scotland) Act 2004. 
• Amendment of the 2011 Act to reflect the criteria for rejection of applications as per The First-tier Tribunal for Scotland Housing and Property Chamber (Procedure) Regulations 2017.