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1. Property Factors (Scotland) Act 2011 Grant Hunter 21 March 2013 www.bto.co.uk

2. Property Factors (Scotland) Act 2011 Overview • Established a compulsory public register of property factors in Scotland ( maintained by the Scottish Ministers) • Required the Scottish Ministers to develop a Code of Conduct with minimum standards of practice for registered property factors • Introduced a dispute resolution procedure for homeowners who feel that a property factor has failed to carry out its duties or to comply with the Code of Conduct • Introduced offences for non-compliance with the Act

3. The Public Register All persons or organisations that were, or intended to be, a “property factor” had to apply to the Scottish Ministers for entry into the register by 1 October 2012. Operating as a property factor without registration is made an offence No grace period was allowed for failure to register. The Register is now up and running. http://sedsh119.sedsh.gov.uk/propertyfactorregister

4. The Public Register Test for applicants - to be “a fit and proper person” This excluded those who have : a) criminal convictions involving dishonesty, violence and/or drugs b) been found to practice unlawful discrimination of any protected characteristics of the Equality Act 2010 c) contravened any provision of the law relating to tenements, property or debt

5. The Public Register A registered number was issued to all factors on the Register ( eg.PF000203) Factors are now obliged to submit an Annual Return to the Scottish Ministers of properties factored during the year, or confirmation of no change since the last return ( to be completed within 3 months of financial year end) Registration lasts for 3 years following which re-application is mandatory

6. Who is a “property factor” ? Persons, (individuals, sole traders, partnerships, companies) who in the course of their business and local authorities and housing associations which: • Manage the common parts of land used to any extent for residential purposes and owned - • by two or more other persons, or • by the local authority or housing association and one or more other person

7. Who is a “property factor” ? Or manage or maintain land which is available for use by – the owners of any two or more adjoining or neighbouring residential properties, or (ii) the local authority or housing association and the owners of any one or more such properties but only where the owners of those properties are required by the terms of the title deeds to pay for the cost of the management or maintenance of that land.

8. Code of Conduct http://www.scotland.gov.uk/Resource/0039/00397542.pdf The Code sets out minimum standards of practice for registered property factors: Written Statement of Services to be issued to homeowners Communication and consultation obligations with homeowners Financial obligations of factors to be set out A written debt recovery procedure to be issued Maintenance of insurance (professional indemnity and buildings/contents) is to be explained Repairs and Maintenance arrangements to be stated A complaints resolution procedure to be issued

9. Code – Written Statement of Services • Explains the responsibilities of the property factor and sets out their authority to act (eg. named in the Title Deeds as the property factor, appointed by a decision of a majority of homeowners on a given date, operating by custom and practice if no formal appointment exists). • To be issued to • existing homeowners ( by 1 October 2013) • any new homeowners when factors agree to provide services to them • at change of ownership of a property which factors already manage • if there are any changes to the terms of the written statement

10. Code – Statement of Services Must include : Terms and conditions and service delivery standards The services that the factor will provide, target times for repairs, frequency of property inspections Cost of those services Monetary arrangements, frequency of billing, any joint and several liability, late payment charges The management fee charged and processes for reviewing the fee Details of how to end the arrangement with homeowners

11. Code - Communication Obliges factors : not to provide misleading or false information to set a procedure to consult with homeowners to obtain written authority prior to carrying out certain works in addition to core services to establish delegated authority for works up to an agreed threshold to provide contact details including out of hours contacts to provide contact details for homeowners to seek financial advice to provide a route for feedback on services

12. Code – Financial Obligations Separation between bank accounts between the property factors' bank account and the account holding funds belonging to the homeowner Procedures for dealing with payments made in advance On termination, the Factor is to provide all financial information that relates to the person’s account Annual financial breakdown issued to owners plus vouching if requested

13. Code – Debt Recovery A clear written procedure is to be put in place. Highlights include : Late payment charges to be explained Detailed explanation of how services and charges will be affected if another homeowner does not pay Procedures for monitoring payments and issuing timely reminders Requirement to keep other homeowners who are jointly liable for co-owners informed Provision that no legal action will be commenced without giving notice of intention to do so

14. Code - Insurance • Factor to maintain adequate professional indemnity insurance. • For buildings and/or contents insurance ( only if the factor agrees to arrange these) • Clear information to be given to homeowners including premiums, administration fees and commissions and excesses • Procedure outlined for submitting homeowner claims. • Keep homeowners informed of progress of the claim

15. Code – Repairs/Maintenance Obligations Procedures in place for homeowners to report repairs Keep homeowners informed of progress of repairs, estimated timescales, etc Detail out of hours emergency procedures Be able to justify the contractors’ appointment Programme of works for annual inspections Contractors to have public liability insurance Factor to disclose any financial interest with contractors Factor to pursue contractor to remedy any defect for inadequate work or service

16. Code - Complaints Factors’ complaints procedure to be included in the written statement of services Factor must notify the homeowner of availability of the Homeowner Housing Panel (HHP) Factor must not charge for handling complaints unless in Title Deeds or other contract Factor must maintain record of all complaints for up to 3 years Factor must comply with any requests from HHP

17. Dispute Resolution • A homeowner may apply to the Homeowner Housing Panel (HHP) for a determination that the property factor has failed to: • Carry out their duties • To ensure compliance with the Code of Conduct • Homeowner to set out reasons for application. • Application only possible after Factor is notified in writing and Factor has refused to resolve (or unreasonably delayed in resolving).

18. Dispute Resolution (cont.) • HHP – President to sift applications. • President can refer application to Homeowner Housing Committee (HHC) or reject the application. • Grounds for rejection • frivolous/vexatious; • Factor not afforded reasonable opportunity to resolve; • identical or substantially similar application recently made • dispute already resolved

19. Dispute Resolution (cont.) If rejected by President of HHP (application to be dealt with within 14 days) the President must give notice or rejection, give reasons for rejection and explain appeal procedures. If complaint referred to the Homeowner Housing Committee (HHC) it must decide on a failure to carry out duties. HHC may reject the complaint or issue a Property Factor Enforcement Order (“PFEO”). If so they must first give notice to the factor and allow parties an opportunity to make representations. Appeal on a point of law committee to a Sheriff within 21 days of the committee's decision.

20. Property Factor Enforcement Order (PFEO) • The factor is to execute such action as the Committee consider necessary. • If appropriate, factor to make payment to the homeowner as the Committee considers reasonable. • PFEO must specify a timescale for completion. • PFEO may specify particular steps to be taken. • Subject to any appeal the Court cannot adjudicate on any matter adjudicated upon by the HHC

21. Property Factor Enforcement Order (PFEO) Variation/ Revocation of PFEO: HHC can vary “in such manner as they consider reasonable” HHC can revoke it “where they consider the action...is no longer necessary.” HHC must vary the Order if satisfactory progress towards its compliance is made and a written Undertaking from the factor to complete by a satisfactory date is given.

22. Failure to Comply with PFEO • It is the HHC who decides whether a Factor has failed to comply with a PFEO and issues a Notice of Failure to the Scottish Ministers. • A determination of a failure to comply is not possible unless period specified for compliance has ended; or if HHC satisfied that failure to comply is due to a lack of necessary rights (of access etc), that the factor has taken reasonable steps to acquire access rights ; or any action is likely to endanger persons.

23. Dispute Resolution - Appeals Decision of the President of the HHP or the decision of the HHC appealable to the Sheriff. Appeal to be made within 21 days of the decision given. Appeal to the Sheriff is FINAL

24. Removal from the Register Power to remove a property factor from the Register lies with the Scottish Ministers Where they consider the factor; is no longer a fit and proper person; has failed to comply with s13(3) – ie. to include its registered number in any document sent to a homeowner or in any other specified document; has failed to demonstrate compliance with the Code of Conduct or any PFEO made against it

25. Removal from Register Prior to removal the Scottish Ministers must first give notice: a) that removal is under consideration ; b) allow the factor an opportunity to make representations to them. Scottish Ministers’ Notice must be accompanied by a written statement of the reasons for proposing to remove Scottish Ministers must not remove, after considering representations made to them, unless the criteria in the previous slide apply.

26. Effect of Removal from Register • On refusal of an application to register or on removal of the factor from the Register then after the relevant date : • No costs incurred by the factor instructed after the relevant date are recoverable. • No charge imposed relating to a period after the relevant date is recoverable • Homeowners may appoint new factors. • No NPLC can be lodged by the factor for works instructed after the relevant date

27. Appeals against Refusal to Register or Removal from Register Within 21 days after notice of refusal or removal an appeal lies to the Sheriff by Summary Application. Hearing fixed – Sheriff can then require the Scottish Ministers to enter the appellant into the Register Relevant considerations – a) the appellant is a “fit and proper person” ( where no previous registration has occurred) or b) the conditions in section 4 (4) (b) – ie compliance with the Code of Conduct, any PFEO issued and compliance with the registration number requirements.

28. Appeals against Refusal to Register or Removal from Register Sheriff to give written reasons for his/her decision. Appeal lies on a point of law to the Sheriff Principal. Appeal to be made within 21 days of the Sheriff’s decision. No appeal beyond Sheriff Principal to the Inner House of the Court of Session.

29. Offences Under the Act A person who specifies in the application for registration information which he knows to be false in a material particular or knowingly fails to specify information required for the registration is guilty of an offence. Penalty – a fine not exceeding level 3 on the standard scale (£1000)

30. Offences Under the Act A factor who, without reasonable excuse, fails to comply with a PFEO commits an offence. “Reasonable excuse” – Factor is unable to comply because of a lack of necessary rights ( of access or otherwise) despite having taken reasonable steps to acquire those rights or any action required by the Order is likely to endanger any person. Generality of “reasonable excuse” preservedas a defence.

31. Offences Under the Act Factor cannot be guilty of an offence unless the HHC issuing the PFEO have decided that there has been a failure to comply. Decision of HHC does not create the presumption that an offence has been committed. Summary conviction – fine not exceeding level 3 of the standard scale (£1000)

32. Offences Under the Act Factor commits an offence when operating whilst unregistered. Defence – a “reasonable excuse” exists for acting in the way charged. Sentence – a fine not exceeding level 5 or imprisonment up to six months or both. Who is fined or goes to prison ......?

33. Offences Under the Act If offence committed by a company , partnership or unincorporated body then if offence committed with the “consent or connivance of or was attributable to the neglect of a relevant individual or an individual purporting to act in that capacity then they are along with the company, partnership or unincorporated association guilty of the offence.

34. Offences Under the Act • “Relevant individual” • A director, manager, secretary of similar officer (if a company) • A partner ( if a partnership) • A person who is concerned with the management or control of the association ( if an unincorporated association)

35. Property Factors (Scotland) Act 2011 Grant Hunter 21 March 2013 www.bto.co.uk