Local Government and Communities Committee

Meeting date: Wednesday, September 29, 2010

Official Report 469KB pdf

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Property Factors (Scotland) Bill: Stage 1

Item 3 is oral evidence on the Property Factors (Scotland) Bill. I welcome our witnesses: Patricia Ferguson MSP, who is not unknown to us; and Mike Dailly, who is principal solicitor at Govan Law Centre. I invite the witnesses to make introductory remarks before we move to questions.

Thank you for the invitation to discuss the bill, which would regulate property factors. The committee has taken quite a lot of evidence on the bill, to which I have listened with great interest. It is a wee while since I sat in the witness seats at a committee table, but it is good to be here to discuss a member’s bill.

It is fair to say that, among those who have given evidence so far, and more generally in the country, a consensus is emerging that action is required. We suspect that property factoring is one of the last industries in Scotland to be unregulated in any way. Given the level of complaints, which is borne witness to in an Office of Fair Trading report, and given the number of complaints that, I am sure, are presented to many constituency members daily, it seems appropriate that action should be taken.

The bill seeks to provide a preventive element that will provide more transparency and more accountability to home owners. It also seeks to provide a remedy when issues and problems occur. It reserves the right to exercise an ultimate sanction against those who fail home owners. I stress that that would be an ultimate sanction. I believe that the bill will do all three of those things. I look forward to answering the committee’s questions.

Mr Dailly, do you have anything to add?

I am happy to move to questions.

That is helpful, given the time. I will go directly to Malcolm Chisholm.

I have a question on part 2 of the bill. Obviously, there are many issues on part 1, but we have spent less time on part 2 in our evidence taking. I am interested in dispute resolution procedures. There is a tension between two suggestions—the suggestion in the bill and the idea of an ombudsman service. What problems do you see with an ombudsman service? More fundamentally, I am interested to know a bit more about how you envisage the model that you propose working in practice.

The nature of factoring disputes is that there are technical issues about the state of the premises, factually complex issues to resolve and complicated issues of contract law. Given that nature, such disputes lend themselves more to being determined by a quasi-judicial forum such as that proposed in the bill. An ombudsman scheme is not designed for that type of dispute resolution.

As members will know, the bill reflects and builds on the existing structure of the private rented housing panel, which has been fairly successful. I have a summary by Professor Pete Robson of the University of Strathclyde of the operation of the private rented housing panel in the past couple of years, which I can give to the committee clerk. Between September 2007 and April 2009, the panel dealt with in the order of 175 applications. Professor Robson concludes that, on the face of it, there is a high level of success for tenants, with 45 per cent of cases being withdrawn. The reason why they are withdrawn is because the sanction, or statutory remedy, that is available to tenants is basically knocking heads together. Because the panel that part 2 proposes would underpin the system and would have enough oomph and powers to back it up, the bill would not result in lots and lots of cases; instead, it would result in lots of resolutions.

Will you say a bit more about how that structure would work and who would be on it? Would there be lots of bodies or one for the whole of Scotland?

The private rented housing panel is in effect built on the old rent assessment panel for Scotland, which is still operational but which I suppose is dying out as time goes by. The infrastructure of the rent assessment panel has been around for a long time, and the Housing (Scotland) Act 2006 introduced the private rented housing panel and committees based on that infrastructure. Part 2 of the bill suggests that we could use that existing infrastructure in Scotland—staff and people have already been appointed. Sure, there would be training issues and we might have to recruit additional chairpersons, for example, but I do not think that it would cost much money to use a structure that we already have to provide a real solution for home owners. That is why it was decided that the panel was the best forum to use in part 2.

12:00

That is helpful. I will ask one more question, just in case I do not get in again.

Setting aside part 1, which I support, the other big issue is switching and the difficulties of doing that. It has not been dealt with in the bill, but we have heard a lot of evidence about it. Indeed, I have dealt with a lot of cases related to it in my constituency. Although switching is not dealt with in the bill, could amendments on switching be lodged? In view of the evidence that has been presented, would you be minded to lodge them?

I will begin, and Mr Dailly can add to what I say.

It is fair to say that we hope that registration will help to ensure that there are fewer instances of people reaching the stage at which they feel that switching is the best option for them. People often want to switch because they have had an unsatisfactory experience with their factor, and sometimes, if you probe more deeply into the case, you find that it is over a relatively small issue, such as work being done badly or bills not being transparent. Problems of that nature can be addressed by the registration element of the bill. Switching is not necessarily the be-all and end-all, because people would have to ensure that they were switching to a factor who would do a better job. Registration would also be important in that situation.

It is important to note that the service offered by a factor is not like a utility. If someone’s telephone or power provider is not good, they will look around and take the opportunity to switch, but with a factor, someone’s action is consequential on a lot of other people. They do not act as an individual; they act as part of a group. The opportunity to persuade the group that there is an issue can be limited and difficult.

Switching is not the be-all and end-all, and other things can be done to tackle the problems. However, I am happy to look at switching if colleagues feel that it is important.

I will be candid and say that whenever a member’s bill is being drafted—by what is a very small team—we try to keep it as focused and robust as possible. There will always be other issues that could be improved on, such as switching in this case, so there could be scope for improvements. We were conscious not to get down into title deeds and real burdens, which is another area of Scots law.

My final point on switching is that it is a powerful market solution. To varying degrees, it works for financial services and utilities—people switch their gas and electricity. As Patricia said, the difficulty with the property factors market in Scotland is that consumers are not individuals. The situation is much more complicated: we are talking about four, six or even more consumers acting together. If we are thinking of switching as a solution, there will always be an inherent difficulty, because of the nature of the beast.

That is why the bill looks at a two-part solution. The first is saying that we should raise the standards in Scotland, which will help consumers in general. The second is saying that there will always be individual consumers who are not happy and who cannot persuade their neighbours to switch, so for them we will provide an accessible remedy. They will not need a lawyer or legal aid or to worry about expenses; the process will be inquisitorial.

Like my colleague Malcolm Chisholm, I am interested in dispute resolution, so let me ask a couple of questions about the private rented housing panel. The first is about its operation and how often you think it would need to meet. What would the practical arrangements be? The second question is on the financial provision. Is there sufficient provision in the financial memorandum?

If I am perfectly honest, it is hard to predict how often the panel would have to meet, but I suspect that it would have to be as often as workload demanded. The panel might begin by meeting infrequently and then have to increase its operation. The current panel on which we have based the proposal has a budget of about £400,000 a year. Albeit that it is in the early stages of its operation, it has never reached its maximum; it has always had spare capacity. Our view is that the cost of the panel will not be particularly onerous. The overall budget will be manageable. That aspect is not of particular concern to us.

I think that there would be a good take-up from the advice sector in Scotland, whether that is law centres, citizens advice bureaux, money advice centres or solicitors. I think that they view part 2 of the bill as a useful remedy. Earlier, I cited the number of cases before the private rented housing panel that are resolved without going the distance, which offers quite an encouraging sign. Once people can apply to the proposed home owner housing committee, cases could be resolved without having to proceed much further. Obviously, that means that the overall cost would be reduced.

That is helpful in relation to disputes. I have a more general question on the size of the problem. Many members have given examples from their case loads, including in a chamber debate, of how often problems arise. It would be interesting to know what encouraged you to draft the bill. How big are the problems? What are the impacts?

Govan Law Centre first got involved because we could see what was happening day in, day out during the previous parliamentary session. If you look at our small claims courts—what we call our debtor courts—you will see that they are swamped by property factors raising actions for payment. Some of the actions are legitimate, but others involve the addition of all sorts of costs, and there are issues with overcharging.

Property factors are getting not only decrees but exceptional attachments—the old warrant sales. I have had many cases of people being sequestrated because of factors. There was a case in the press just last week of a woman who had not paid a factor’s bill of a few hundred pounds and who ended up with a bill for a million pounds. The case ended in bankruptcy. She lost her legal aid and the whole situation exploded.

I ask you to think about the fact that small claims courts up and down Scotland are dominated by cases involving property factors. There are some good factors out there, but I would go as far as saying that some factors are engaged in what I describe as debt farming. When clients get into arrears, those factors exploit the situation by adding all sorts of charges and repeatedly taking the client to court. That is one of the biggest areas of consumer detriment in Scotland.

My interest arose as a result of constituents telling me of such issues, as a result of which I contacted Mike Dailly for advice. Since I have put my head above the parapet, not a day has gone by without someone from somewhere in Scotland contacting me to seek advice. As the constituency member for a Glasgow constituency, there is a limit to the advice that I can offer to people around Scotland. Usually, I give people some general advice, but I then have to pass on enquiries to colleagues who represent other areas of Scotland. If someone contacts me when their situation has been raised in the print or other media, I find that I can spend a considerable part of my day trying to deal with their case.

Mike Dailly has spoken clearly of the situation in our small claims courts. We also know of property factors who threaten court action. They go as far as lodging the action but never take it to court. They say to the debtor—that is how they view the person—“I will not take you to court. I will carry on discussing this with you. By the way, your charges are still the same, except my fees for the court action are added on to what you already owe me.” I know of a case in which that has happened on six occasions and the owner-occupier has had to negotiate with the factor on that basis. That is not acceptable in this day and age.

Thank you. That sets a useful context for us.

You will recall that when we considered the Disabled Persons’ Parking Places (Scotland) Bill, I strongly queried the costs. Similarly, I seek your assurance that the costs and financial impact of your bill will not be significant. You claim that the provision will be largely cost neutral; indeed, in paragraph 103 of the financial memorandum, you say:

“It is anticipated that the register would be operated by a small staff located, for example, within the Scottish Government’s Housing and Regeneration Directorate or”

other

“such body”.

I find that quite unusual. How do you respond to concerns that the financial memorandum does not provide a robust assessment of the bill’s likely cost implications?

Mike Dailly will answer that question, as he has the figures.

I drafted the financial memorandum. As we have said, the process has been difficult, but I drew some comfort from the Scottish Government’s stakeholder working group on a proposed accreditation scheme for property managers. For example, the £750 to £1,000 that we have proposed as the cost of registration per factor came from that group, which had suggested those as rough figures for the cost of an accreditation scheme.

Such schemes are not cheap and, as you will see, the bill contains provision for the Scottish Government to delegate the running of the register to a third party. One might argue that it might be cheaper to make it one of the Scottish Housing Regulator’s functions, because the infrastructure costs have already been covered and all that would be required would be the hiring of some staff. That would keep the costs manageable. As for the home owner housing committee, it would all be down to take-up, but I think that the costs would be very efficient, given the use of existing infrastructure that Patricia Ferguson alluded to with regard to the private rented housing panel.

The Scottish Government’s own stakeholder working group even discussed, at a meeting on 18 June 2009, the costs of mediation. I am a fan of mediation, but it is not necessarily suitable where there is inequality of arms between the parties and issues of fact and law are in dispute. Through the working group, the Scottish Government noted that a mediation service would cost something like £35,000 to set up and £1,000 for each case, which means that the cost of dealing with a couple of hundred cases would be £235,000. As mediation is nowhere near as effective as the proposals in part 2 of the bill, I think that our approach represents fantastic value.

A lot of that depends on the finances being raised and on people paying the fees. First, many factoring companies are quite small, and a sum of £750 to £1,000 could be significant, so how are you proposing to help in that respect? Secondly, the SFHA and others have argued that housing associations should not have to pay registration fees or indeed should not be included under the bill’s auspices for the factoring that they effectively carry out. If it turned out that RSLs were effectively exempt from the bill, would that severely affect the bill’s financial planning?

I do not think so, because the decision whether RSLs would be subject to a fee would be at ministers’ discretion, and I imagine that, in arriving at a conclusion, any minister would consider the overall package of costs, expenditure and income. The fact that fees are on a sliding scale would help smaller factors who might not have the same income as larger ones.

12:15

Sections 3(4) and 7(4) would give the Scottish ministers quite a lot of discretion on the level of fees and on how fees are arrived at. They would also give the Scottish ministers the ability to decide whether some people should not have to pay fees. It would be up to the Scottish ministers to decide on fees—I suppose that that is passing the buck. They might decide—I am sure that they would—that a small factor should pay pro rata, perhaps in relation to the number of houses. That would be fair. Ultimately, the decision would be for the Scottish ministers.

As for RSLs and councils, one argument is that everybody should pay into the pot, but the arrangements would be up to the Scottish ministers.

I understand that the stakeholder working group on accreditation that the minister established felt that some payment was needed, so making the property manager part of the structure had a value. The payment of a fee is important.

I, too, will focus on the bill’s costs, but I would like you to take that as a compliment, because I feel no need to take evidence from you on the general principles. In this series of evidence sessions, the need has been established—the principles sit there—but I am genuinely worried about the cost implications. If I as a home owner had an issue with my factor that I could not resolve internally with them, what would be my first port of call under the bill?

Do you mean as an individual consumer?

Yes.

You would complain to your factor and say, “I’m not happy about this,” and you would hope that your factor took that on board and resolved the situation. As the committee has heard in evidence, would that that were so—the process does not happen in that way in most cases, unfortunately. The bill would require the customer to exhaust the complaints process, or at least to use it until no scope for consensus with the factor existed. After that, a home owner would be entitled to apply to the home owner housing panel.

Who would inform me of that process? I want to pick through the different financial costs. Would the factor have a statutory obligation to inform me that that was my next recourse, should I choose to take it?

The beauty of the code of conduct in part 1 is that a property factor would have to meet agreed standards. The Scottish Government’s working group has done a huge amount of work on what those standards could be. The code of conduct could include requirements to do X, Y and Z.

Scotland is fortunate to have a fairly robust network of advice agencies—we have CABx, money advice agencies, law centres and 10,500 solicitors. The ability to use the bill could be disseminated through the existing network. When people said, “Look, I’m not happy,” they would be advised of the remedy.

I am trying to get at whether people would seek advertising budgets across Scotland to promote the consumer rights under the bill. Would the advice sector seek funding to build capacity in its sector for taking people through the process?

The answer is no.

To both points?

The answer is no because all that has been described is happening right now. All the misery from people trying to sort out disputes with factors happens now. People go to law centres, CABx, local agencies—

Or MSPs.

Or MSPs. People say, “Look, I’m trying to get some resolution here.”

I am enthusiastic about the bill. If it were passed, I think that people would sing out loud that at last we have a remedy that ordinary people can use. People would not have to instruct a lawyer or be intimidated by the courts, as happens at the moment. If a person goes up against a factor in a sheriff court, they might be lucky to have legal aid, but that involves complications, too. People can be hammered for court expenses. The system in the bill is simple and inquisitorial, not adversarial. I genuinely believe that people would use the system.

Finally, on demand, which feeds into costs as well, I have no doubt that Patricia Ferguson is inundated with work every time there is publicity about the bill. She is the person to whom people throughout Scotland go to find out more about the bill. There would be an influx of inquiries. As a back-bench MSP for the Glasgow region, I am not short of cases involving factoring disputes; indeed, I receive them on a weekly basis. Have you estimated the demand on the home owner housing panel in year 1? I suspect that it would be substantial.

The point is that the registration scheme would obviate the necessity for many people to take matters to the second stage. I hope that it would have that effect. That is why I spoke at the beginning about there being a preventive element to the bill. At this point, it is impossible to pin down the number of people who would go to the second stage having exhausted the first stage, but I suspect that there would be a flurry in the first year or so and that things would die down to a level that could be planned for year on year. In particular, if factors found that they were coming up against the panel and adjudications were being made against them, they would get their house in order if that were not already the case. Therefore, the proposals would help to weed out many problems in the longer term. That was part of the plan in laying out the bill in the way in which it is laid out.

If a lot of that work is taken out of the sheriff courts, for example, the wheels of the rest of the judicial system will be oiled. It is not a bad thing to think about that.

I do not want to detract from the focus of the bill, but I want to get my head around something. I will not ask how many staff there would be, where they would be located and whether they would move around the country. However, have you thought about piloting the home owner housing panel in one area of the country first, to see how matters progress and to determine the budgetary constraints around it, before expanding its coverage?

I am getting visions of long grass.

Not at all. That is a genuine question.

Visions of certain parts of Glasgow.

I might have suggested Glasgow as an ideal place for a pilot.

Obviously, there are examples from the past of ministers and the Parliament deciding that it was a good idea to test something out. I respect that approach, but we have overwhelming evidence. According to last year’s OFT market study, a third of the customer base is not happy, and two thirds of people who complain remain unhappy. I cannot think of any other sector in which people are so unhappy.

I do not think that we necessarily have to go down the road of piloting, because we have already had the private rented housing panel, and that has had success. It has not cost a fortune; rather, its cost has been reasonable. People in Scotland are suffering huge consumer detriment. I have talked about people who have been made bankrupt. Members might want to think about a health warning for some factors; they might want to think about saying, “Watch out. You could lose your home with this factor.” People can lose their homes with factors—admittedly, a minority of factors. The issue is so serious that people need a solution from their Parliament.

You may have heard the enunciation of the Neil doctrine last week; that regulated people should not pay fees to their regulators. That was in the context of the Scottish Housing Regulator. I think that there was a degree of backtracking on that doctrine by the time we got to property factoring.

I want to clarify your intentions. Do you take the view that the overall objective of the registration fee level, however it should be scaled with reference to the size of factors, should be to have full cost recovery so that the registration scheme can be effectively self-financing? Is that your basic proposition?

In the case of financial services in the UK, for example, the Financial Services Authority is funded by the financial services industry. The proposition that businesses should fund the regulator is good.

The difficulty with property factors is that we need to take cognisance of the fact that housing associations and councils are public bodies, so there is an issue around whether we expect them to pay for a regulator as well. However, as a proposition, that kind of full cost recovery is a sound principle.

I can see an argument that there should not be a registration scheme for a housing association that is managing the stock of which it is the landlord, but a number of housing associations work through subsidiaries—my son works for one of them—so they are effectively actively engaged in the market and looking to turn their skills in factoring and property management to managing and factoring properties other than those which they own. In that situation, it would seem to be equitable for housing associations to be registered, to level the playing field for everyone else in the market.

You make a fair proposition. At Govan Law Centre, we are solicitors working for a charity and we have to pay the same levy to the Law Society of Scotland and the Scottish Legal Complaints Commission as other lawyers. I suppose we are a social enterprise and running a business. Your point is good: if RSLs are running a business, the cost of paying for the registration scheme is part of the cost of that business, and it could be factored in.

The overall figures that we are talking about for registration are reasonably modest. If we consider the number of property factors and the number of housing associations and councils, the more people contribute to the scheme, the more sustainable and viable it will be.

Thank you for that.

The bill would give ministers the power to deregister property factors. What is the process leading to deregistration? How is any hearing or adjudication on deregistration, which is a significant sanction, to be conducted before the minister makes up their mind? Are we satisfied that that process is relatively fireproof, or will people be rushing off to the Court of Session to seek judicial reviews of ministerial decisions to strike them off registers?

12:30

I believe that the proposed process is robust. It is in section 8, which says

“Scottish Ministers may remove a property factor”.

It is important to remember that the power is discretionary. As I am sure the committee has heard, it is anticipated that deregistration would be a last resort.

If the Scottish ministers believed that a property factor was no longer a “fit and proper person” or since registration had

“failed to demonstrate reasonable compliance with—

(i) the code of conduct”

or had, for example, ignored an order of the homeowner housing committee, the minister would be empowered to removed that property factor from the register.

There is an in-built piece of protection, in section 8(4), which covers the human rights points related to article 8 and article 1 of the first protocol of schedule 1 to the Human Rights Act 1998. Section 8(4) states:

“Before removing a property factor ... the Scottish Ministers must––

(a) give notice to the responsible person”

in that property factor unit that that

“is under consideration”,

so that they know that their jaicket is on a shoogly nail. The property factor then has an opportunity to make representations. It is therefore almost a belt-and-braces approach. Even when a factor has failed to operate as a fit and proper person, there is still that last opportunity to say, “We have now put in place solutions.” I think that the ethos of the bill is not to look to deregister any business; it is saying, “You will get all the opportunities that are fair and reasonable to try to get you to comply with what we”—if the Scottish Parliament passes the bill—“think is fair and reasonable.”

But that mechanism does not seem to me to involve, shall we say, a very strong interrogation and assessment of the claims and counter-claims that may be being made about the suitability or performance of the factor. I presume that a minister would not make this kind of provisional decision unless various complaints have flooded into his office from a number of tenants. Is it really satisfactory to say, “Well, the answer to that is that the minister makes up his mind on the basis of the complaints,”—which are not tested—“sends a notice out to the factor and says, ‘Let me know what you think of this’” and someone can effectively have their business ended on that basis?

To be fair, there is also provision in the bill for the homeowner housing committee to recommend that deregistration be considered and there is scope in section 8(4) for the factor to make oral representations. There is provision to ensure that deregistration is not something that would be done on a nod. You would have to have pretty solid evidence that there had been not only one failure to comply, because obviously mistakes happen, but, I suspect—remember that there is discretion on the part of the ministers—that operating the system reasonably ministers would look for a course of conduct in a number of examples. Even then, they would say, “Look, please get your act together.” If that did not happen, there would then be a body of evidence. That is how we see the system working.

Deregistration would require sustained failure across the organisation; it would not happen as a result of one individual being concerned or complaining.

As I understand it, there are major differences between what is happening currently with property factors in tenemental blocks and flats and what we are now picking up and picked up in evidence from Greenbelt Group Action in relation to residential areas where there are burdens.

I am interested in Mr Dailly’s comment about not going into the issue of title deeds and burdens that are placed upon residents. What I picked up in discussions with various individuals after the evidence session with Greenbelt Group Action is that the burdens that may be applied to some residents in residential estates are increasing as time goes on. Their obligations under the title deeds and burdens are not being fully explained to them, particularly—in the examples that we have been given—in relation to woodland areas and sustainable urban drainage systems. We usually talk about general land maintenance, but when we are talking about SUDS and, potentially, roads responsibility landing on those residents, the cost could be great. I think Mr Dailly said that someone was being taken to court for recovery of £300; in some residential areas, we could be talking about costs of almost thousands of pounds. Has any consideration been given to the way some property developers are using the title deeds and burdens to offload some of their responsibilities for roads, SUDS, woodland areas and the like to individual residents?

You have raised a big issue. In some respects, the difficulty is that when someone buys a house they often focus on clinching the deal and getting the property; they do not necessarily look at all the detail and the issues that you talked about.

If the committee thinks that conveyancing solicitors need to do more to draw purchasers’ attention to such issues, I am sure that you could make a recommendation to the Law Society of Scotland, which can produce practice notes and make recommendations on such issues.

I am not sure that the matter comes within the remit of the bill. However, land management companies are included in the definition of “property factor” under section 2(1)(c), so there is no doubt that such companies would be covered by the bill. I heard the evidence from Greenbelt Group, which seemed to suggest that it would not necessarily be covered by the bill. I accept that there are particular complications in that regard, but nevertheless I suggest that the company absolutely would come within the ambit of the bill.

Perhaps I can help John Wilson. Currently, if a factor is in place for a property, the home report is required to say so, which is helpful. However, I am not convinced that enough information is provided about the extent of the factor’s responsibility or the costs that the home owner must take on.

I understand from what the Minister for Housing and Communities told the committee last week that a review of home reports is going on. I have written to the minister to suggest that the area be considered as part of the review, to ensure that home reports contain the broadest possible explanation of home owners’ rights and responsibilities in such situations. People currently take on responsibilities without understanding the full ramifications of doing so.

In my area, residents bought on to an estate where a land management company was operating at the behest of the developer—as we heard from Greenbelt Group, land management companies take ownership of the land from the developer and leave the residents to pay for the maintenance of the land. There is another debate to be had about who owns the land and who is responsible for maintaining it, because that responsibility can be transferred to residents.

In the estate in my area, the maintenance company is refusing to carry out work, because the residents are refusing to pay the factoring fees that have been charged. It has also emerged that because of the age of the estate the road that leads into and around it has not been adopted by the local authority. Because the property developer no longer exists, residents could be liable. That brings us back to Patricia Ferguson’s point about what home reports say about residents’ liabilities. In an estate in which no land management company operates, the roads have not been adopted and the SUDS system has not been adopted by Scottish Water or anyone else, people might be walking into enormous liabilities.

Home reports will give details of the condition of the house and say that there is a property factor, but the home owner’s liabilities might not be given in full. That might lead to problems for residents. For example, the residents who are represented by Greenbelt Group Action were hit with charges that they did not expect.

You are absolutely right. I wonder whether there is a more fundamental problem, which needs to be considered from a planning point of view. What are the relative responsibilities of developers in providing information to councils? What responsibilities do councils have in relation to on-going maintenance?

When we drafted the bill, we were conscious that there are big issues with people who live in homes that are affected by problems to do with woodland, SUDS or roads, and we thought that it would be iniquitous if the bill did not make any reference to them and provide at least some form of redress.

We accept that the bill cannot solve the underlying problem, but it at least allows people the same transparency, openness and level of information about their bills, and the same opportunity to make a complaint and seek redress if there is a problem.

The financial memorandum says that the cost is unlikely to exceed the current budget for the housing panel. Does that mean the same amount again, rather than the amount in the existing budget? It can be read as both.

It is roughly the same amount again.

How many cases do you think will arise in the first year, given what you have said about the number of people who contact you? I know that it will perhaps be front loaded, but have you any idea at all?

The private rented housing panel dealt with fewer than 100 cases per annum in its first one or two years of operation. We would expect to get more cases than that, if we consider the number of people in Scotland who might avail themselves of the legislation.

You told us that Govan sheriff court is always full of property factors; it sounds as though there is a lot of activity.

It is Glasgow sheriff court.

Of course; I am going back a bit.

You are going back to about 1912—feelings are strong in Govan.

You are right: the courts throughout Scotland are very busy with property factors. It is so inefficient. Take eviction cases, for example. Whenever a tenant is evicted for a few hundred pounds of rent arrears, the court expenses will be added on. We do not want that to happen to people who are in financial difficulties. It would be helpful to have a solution to avoid that.

In all honesty we cannot predict the precise number—it is difficult for obvious reasons—but we certainly expect it to be greater than 100 per annum: possibly 200, if not more.

We hope that if the rest of the bill is enforced—including the elements that are there to protect people and to prevent them from ever having to make a formal complaint to an external body—and if the standard of service provided by property managers improves over time, the number of people who have a complaint will gradually reduce.

We hope that that would happen, but we cannot predict how it would work in practice.

I understand that.

The second element under part 2, which would, I think, involve a cost on the Scottish Administration to some extent and for which you have not supplied any details, concerns the property factor enforcement orders, which would presumably lead to costs in running the law courts. Do you expect those orders to be used a lot?

Herein lies the beauty of the interaction between parts 1 and 2. As Patricia Ferguson said, we hope that a case would be settled before it came before the committee, as often happens at present with the private rented housing committee.

The beauty is that if a case went through and a homeowner housing committee made a property factor enforcement order that was subsequently not enforced, the bill provides for sanctions in relation to ultimately failing to comply with the order and for the committee to pass back that information under part 1, to ascertain whether someone is a fit and proper person to be a factor.

What I am driving at here is that there is a compulsion: if someone wants to be a fit and proper person, they must comply with the decisions of the homeowner housing committee.



12:45

Given the litigious nature of some property factors—although you said that some of them are willing to go to court but not necessarily to proceed with the case—I wonder how many enforcement order procedures there might be. At that stage, the registrar would have to hang back, as the matter would be sub judice because an enforcement order was going through the court. How many enforcement order procedures might there be?

I do not envisage the enforcement order under part 2 necessarily resulting in more cost. Section 23 states:

“A person who, without reasonable excuse, fails to comply with a property factor enforcement order commits an offence.”

It would be a criminal offence, so there are teeth. There are also teeth in the provision that information would be fed back to the Scottish ministers. That would build up information on a series of failures, which Patricia Ferguson talked about. Ultimately, there is provision in the bill for a property factor to appeal to the sheriff court, but that is restricted. The appeal can be only on a point of law, so there cannot be a rehearing of the facts of the case—it can be on only a fairly narrow point. The appeal must be made within 14 days of the decision being made. That is a fair and proportionate system.

I am concerned that costs might arise through the offence procedure, if an enforcement order is not complied with, or through appeals on a point of law. With due respect, that is why we have lawyers—so that they can make points of law where others might not see them.

You are right that there is scope for cost, but how many property factors will want to go down that road and end up being in that position? I suggest that not many would, and that the ones that ended up going down that road probably should not be property factors in the first place.

My final point relates back to part 1. You have alluded to the points that we have heard in evidence about the potential difficulties in the deregistration procedure in relation to consequences for tenants who find themselves without a factor because the factor has been deregistered. Obviously, there are particular difficulties with the land ownership model, but the problem would apply to all cases. You said that it was a last last resort, which I accept, but I wonder whether the complexities and difficulties of deregistration would make it a never-ever resort for the minister. That might take some of the sting out of the provision, because the rogue factors would say, “They’re not going to deregister us because it’s too complex.” Those factors could spin things out, which they are clearly very good at doing.

Let us think about how that last last resort could work in practice. If one particular factor was deregistered, a process would have been gone through over a number of months. Issues that might seem to be fairly complicated, such as what happens to buildings insurance, might not be. Generally, when factors take out insurance, they do so on behalf of the owners in a property. Remember we are talking mostly about tenements, with units of four or six in a block. There is no reason why the owners cannot decide to self-factor or to appoint another factor. There would be a register of factors in Scotland, which would be helpful, because one big problem is that people do not know who the good factors are. Currently, it is a word of mouth and trial and error process whereas, under the bill, owners could decide using the list of factors.

My understanding of Greenbelt Group’s evidence is that it has said, “You can’t get rid of us very easily.” Under the bill, if a land management company that owned land was deregistered, that company would have to appoint a third party to run the property factor services. I am not entirely sure that the problems that some folk have said are really complicated would be insurmountable in practice.

I do not want to spin this out, but you seem to have great faith in the legal system and in all the processes happening. My experience is that such things take for ever. You say that the company would have to appoint somebody. Legally, maybe it would have to do that, but how long would it take for the company to get round to it? For example, the company might have to appoint somebody else because it had an obligation to maintain an urban drainage system. Perhaps, when the matter was investigated, it would not be so clear that the company had that obligation, even though it certainly owned the land. That could become like Jarndyce and Jarndyce while, in the meantime, the amenities in the estate basically went all to hell.

We would be reluctant to have a gap in service to the home owner. We have deliberately worded parts of the bill, particularly section 8, to reflect that. For example, if a minister is considering deregistration, he must advise those who use the factor that that is the case. A period of notice is given so that alternative arrangements can be considered. It is possible to insert something in the bill so that a further period of notice should be given, after which the factor would cease to be the factor. That would allow the owner-occupiers to get together and decide who to appoint instead.

As Mike Dailly says, it would not be impossible to deregister a factor. It would not be easy, but the alternative would be for people to remain with a factor that might have been getting away with behaving appallingly for a number of years. In those situations, the provision will concentrate minds amazingly. People who were not keen to get rid of the factor because of the inconvenience to them would think, “Well, I have to go along to one meeting to choose a new factor” and it is likely that they would do that. My guess is that only one deregistration would need to happen for it never to happen again for 10 years.

Patricia Ferguson suggested how we could improve the bill to deal with Alasdair Morgan’s point. That could come after section 8(4), which deals with the part when the Scottish ministers are considering whether somebody might be deregistered. As I said, that is when the factor has a chance to make representations to ministers. After section 8(4), we could have a provision that the Scottish ministers may give public notice of the removal, to let home owners know that their factor might be deregistered. It is a good point that nothing should be sprung on them.

Section 8(1) gives the Scottish ministers the power to set the date when the factor is removed from the register. So if ministers decided that somebody had to be deregistered, they could set the date for that to happen prospectively, which would give people notice and give them time to make other arrangements. Mr Morgan makes a fair and practical point.

As there are no other questions, I thank the witnesses for attending and for their evidence, which I am sure will be useful to the committee in its deliberations.

12:53 Meeting continued in private until 12:57.