UK: A New Dawn For Property Factors In Scotland

Last Updated: 31 May 2011
Article by Michael McGrane and Caroline Drummond

The Property Factors (Scotland) Bill was passed on 3 March 2011 by the Scottish Parliament. It is expected to come into force as The Property Factors (Scotland) Act ("the Act") on or before 1 October 2012.

When it becomes law, the Act will make it an offence to operate as a property factor unless you are registered with the Scottish Ministers. This registration requirement applies to both existing and new property factors. We highlight here what the new regime will mean in practice for property factors, old and new.

What will the Act do?

In short, the Act:-

  • Will provide for a public register of property factors to be set up and maintained by the Scottish Ministers. Operating as a property factor without registration will be an offence carrying a fine (level 5 - currently £5000) and/or imprisonment (maximum six months);
  • Will require the Scottish Ministers to prepare a code of conduct with which registered property factors must comply. The code will establish the minimum standards of practice expected of registered property factors. The code has not yet been published and we do not have a date for publication at the moment;
  • Will set up a disputes procedure for unhappy homeowners who feel that a property factor has failed to carry out its duties or to comply with the code of conduct.

This kind of regulation is new for property factors in Scotland. For many it will simply be a continuation of their current good practice. However, the legislation aims to protect homeowners by bringing those property factors currently providing sub-standard services into line.

Who will need to register?

  • A person (this includes an individual, sole trader, partnership or company) who in the course of their business, manages the common parts of land owned by two or more other persons and used to any extent for residential purposes e.g. the common parts in a tenement;
  • A local authority or housing association which manages the common parts of land used to any extent for residential purposes and owned by either two or more other persons or by the local authority or housing association and one or more other person;
  • A person who, in the course of that person's business manages or maintains land which is available for use (but not owned) by the owners of any two or more adjoining or neighbouring residential properties (this only applies where the title deeds oblige the owners to pay for the management or maintenance cost of that land); and
  • A local authority or housing association which manages or maintains land which is available for use (but not owned) by either the owners of any two or more adjoining or neighbouring residential properties, or the local authority or housing association and the owners of any one or more such properties (this only applies where the title deeds oblige the owners to pay for the management or maintenance cost of that land).

Some practical steps

Getting registered...

  • Applications for registration are to be made to the Scottish Ministers. The style of application form is still to be published but will include details of the properties factored by the applicant and details of the "responsible person" - the applicant in the case of a sole trader or in all other cases, the individual who holds the most senior position within the management structure of the partnership, company or body which is (or is to be) "directly concerned with the control" of the property factor;
  • A registration fee will be payable but the level is not known yet. However the scheme is to be self-financing, not profit making;
  • Successful applicants will be allocated a property factor registered number. The registered property factor must take all reasonable steps to include this registered number in any document sent to a homeowner (or any other documents as the Scottish Ministers may decide);
  • The Scottish Ministers can refuse an application on the basis that the applicant is not a fit and proper person to be a property factor (the Act will include guidelines for this).

After registration...

  • Registration is not for life and property factors will need to actively renew their registration every three years;
  • Registered property factors must (1) advise the Scottish Ministers if details change from the original application and (2) submit a "property return" to the Scottish Ministers three months after the end of each financial year, providing details of any properties factored during that financial year. If there has been no change in the position since the property factor's application/last return this also needs to be confirmed. The Scottish Ministers will be entitled to charge a fee for this (which is still to be set). Failure to comply could attract a fine (level 3 - currently £1,000);
  • Registered property factors must comply with the code of conduct;
  • The Scottish Ministers can remove a property factor from the register if (a) the Scottish Ministers think that the person is no longer a fit and proper person to be registered, (b) the factor has not included its property factor registered number on correspondence, (c) the factor has not complied with the code of conduct or (d) the factor has not complied with a property factor enforcement order made by a homeowner housing committee (see below).

What can an unhappy homeowner do?

The Act will set up a dispute resolution procedure for unhappy homeowners by creating a homeowner housing panel and homeowner housing committees similar to the private rented housing panel and private rented housing committees established by the Housing (Scotland) Act 2006.

Homeowners can apply to the homeowner housing panel if they think that a property factor has either failed to carry out its duties or failed to comply with the property factor code of conduct.

The president of the homeowner housing panel must then decide whether to reject the application or refer it to a homeowner housing committee. If the committee agrees with the homeowner, it can make a property factor enforcement order requiring the property factor either to take such action as the committee thinks necessary or make a payment to the homeowner. Failure to comply with a property enforcement order carries a fine and is a ground for removal from the register.

Conclusion

The Act will herald a new dawn for property factors and for homeowners whose properties are managed by property factors. From a practical perspective, there is a lot of detail still to be provided by the Scottish Ministers by October 2012 - not least the level of fees and the code of conduct. We will keep you advised.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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