Property Factors (Scotland) Bill: Stage 1
The next item of business is a debate on motion S3M-7531, in the name of Patricia Ferguson, on the Property Factors (Scotland) Bill. Time is fairly tight for this debate, so members should stick to the indicated time limits. Patricia Ferguson has 11 minutes to speak to and move the motion.
15:35
I am pleased that we are debating the Local Government and Communities Committee’s stage 1 report on the Property Factors (Scotland) Bill, and I would like to thank the committee for its careful consideration of the bill. I also thank the committee clerks and the staff of the Scottish Parliament’s non-Executive bills unit for their professionalism and sage advice; my constituency office staff, who have all developed a fair degree of expertise on the issue over the past few years; Mike Dailly of Govan Law Centre, not only for his help in getting us to this point but for championing in the courts those who have found themselves at the mercy of unscrupulous property factors; and the Evening Times and The Herald, whose campaigning work on the issue has given many people the courage to challenge bad factors and offer their experiences as evidence of the need for legislation.
I will spend most of my time addressing issues that were raised by the committee in its report. Before I do that, however, it is right to reflect on the reasons why legislation is necessary. On previous occasions, I have highlighted the situations that have been faced by my constituents, but I make no apology for doing so again, because the situation has not changed and will not change until the Parliament passes legislation that prevents rogue factors from operating as they currently do.
I have spoken before of Mr and Mrs A, who were being sued by their factor, and of Mr B, whose initial debt was grossly inflated by the addition of administration fees and charges for letters that were sent to him regarding his debt. Today, I will tell members about a constituent of mine who has had major problems with their factor, whose name, for the record, is Walker Sandford Property Management.
Walker Sandford wrote off £10,760 in charges, consisting of monthly compound interest, weekly reminder letters costing £15 plus VAT, and an assortment of legal fees. The original bill was for £536, but the sum quickly mushroomed to several thousand pounds. Walker Sandford commenced an action for payment of the debt at Glasgow sheriff court. The action was defended by Govan Law Centre on behalf of my constituent, and the action was dropped when Walker Sandford agreed that the actual debt was only £536. However, after dismissal of the action, Walker Sandford continued to add compound interest and charges to the earlier disputed bill. Interest charges in excess of £300 were added to the bill every month. Govan Law Centre applied for civil legal aid to enable my constituent to bring an action for declarator and interdict in the Court of Session. However, before that could be completed, Walker Sandford wrote off the entire bill of £10,760.
That is just one case, and one particularly bad factor, but there are many more cases. Only last week, a constituent came to see me on behalf of the residents of the development in which she lives. Two years after changing factor because of problems with the original one, they find that the problems are even greater than they were.
I know, too, from inquiries that I have received, that this is not just a Glasgow or west of Scotland problem and that there are difficulties across the country. People are looking to us to do what Parliaments do and provide them with legislation that will provide a remedy and safeguards.
I sincerely believe that we need to have an accreditation scheme that is underpinned by legislation, and I am pleased that the committee has agreed that a voluntary scheme will not work. That concept underpins everything else that the bill aims to do, so it is important that we establish that principle.
Members of the committee were rightly concerned that we should be clear about who will be covered by the bill, so I emphasise that land maintenance companies are covered. I deliberately worded the bill to say that the definition includes
“a person who owns and manages or maintains land which is available for use by the owners of any adjoining or neighbouring residential properties (but only where the owners of those properties are required by the terms of the title deeds relating to the properties to pay for the cost of the management or maintenance of that land).”
That makes it very clear who is covered.
On the point about the information that property managers are to supply for the purposes of registration, I understand the committee’s concerns about the disclosure of a company’s property portfolio. The point of that requirement is to ensure that those who are factored by a company can be notified that their factor has been deregistered in the unlikely event that that occurs. If we do not include that provision, they may be left in the dark and unable to make alternative arrangements. However, the committee is right to suggest that the database should be updated only on a yearly basis, rather than immediately a change occurs. I will seek to clarify that provision at stage 2. I propose that the information should remain confidential and should not be published.
One of the most debated points in the committee’s report is deregistration, which I accept is the thorniest issue that we must grapple with. Deregistration must be the ultimate sanction and, given the other provisions in the bill, I view it as a last resort. The measure will be used only when a property factor exhibits a sustained failure to provide an appropriate service, when the home owner housing committee recommends to ministers that deregistration is justified and after the factor has been afforded the opportunity to make representations. I recognise that factors are concerned that the provision might prevent them from recouping moneys that are fairly due to them. That is certainly not my intention, and I will review and amend the provision if necessary.
I would expect that ministers would serve notice of their intention to deregister a factor in order to provide home owners with the opportunity to select a new factor prior to the deregistration taking effect.
I accept, and am acutely aware, that land maintenance companies are an added complication in that regard. Members will be aware that work has been on-going in that area, not least among some of the organisations that have lobbied us and given evidence to the committee. I am planning—and have started—to work with those organisations to lodge amendments at stage 2 that I hope will address what is a particularly difficult but very interesting and concerning element of the property factor system.
On enforcement, I expect that, as with any criminal activity, non-compliance could be reported to the police and action could be taken in the usual way. Again, I will review that element of the bill and amend it if necessary.
In order to make the system as transparent as possible, I intend to lodge an amendment that will replicate the system that the Government proposes for landlord registration, whereby a registration number or symbol—I tell the Minister for Housing and Communities that we can have that debate any time he likes—is used to identify those companies that have successfully registered.
The committee report seeks more detail on the code of conduct. I emphasise that I do not intend to reinvent the wheel in that regard. Since March 2009, the Scottish Government has been working in partnership with the property management industry and other key stakeholders through its working group. The working group has developed and consulted on core standards for a voluntary accreditation scheme. Those standards cover issues such as communication and consultation, financial obligations, debt recovery and insurance, contractors and repairs and complaints resolution.
Many positive responses and suggestions came from the recent consultation, not least one of the most common suggestions, which is that accreditation should be compulsory. I believe that that body of work ensures that the Government is well placed to fulfil the requirements of my bill and that it can prepare a code of conduct for introduction when statutory regulation comes into force.
There has also been discussion about the mechanism for dispute resolution. We all agree that there needs to be such a mechanism. Where I differ from the minister and the Property Managers Association Scotland is on what that mechanism should be. I believe that the existing home owner housing panel is best placed to deal with the complexity of the cases that will arise. I have provided the Presiding Officer with a detailed account of the likely costs, which I am pleased he has accepted and which I am sure can be shared with the committee.
I hope that I have addressed most of the issues that are raised in the committee’s report. If I have missed any, I will try to address them in my closing speech.
I move,
That the Parliament agrees to the general principles of the Property Factors (Scotland) Bill.
15:45
I am pleased to be taking part in the debate as convener of the Local Government and Communities Committee. We were the lead committee that looked at Patricia Ferguson’s bill. I thank all the witnesses who provided the committee with evidence and I express my thanks to my colleagues on the committee for their input. I also thank our hard-working clerks and researchers. I pay tribute to Patricia Ferguson for her work in bringing the bill to the Parliament.
As we all know from our constituency case load, problems with property factors are on the increase, and one of the problems is that the sector remains unregulated. The subject of the disputes that can arise between factors and their clients include the lack of financial transparency, hidden commissions and the unspecified charges to which Patricia Ferguson alluded. We have all heard of the £30 replacement light bulb and other such charges. However, property factors face a different set of problems, such as non-paying residents, absentee landlords who have little interest in their properties, and poor maintenance of common areas. Disputes can arise over relatively small matters, but they can escalate, occasionally as far as court proceedings.
One of the main proposals in the bill is that property factors will have to be registered. That will put them on the same footing as landlords in both the private and social rented sectors, who are subject to a statutory registration scheme. During its stage 1 consideration of the bill, the committee acknowledged the work that the Scottish Government and a stakeholder working group are doing to consider a national voluntary accreditation scheme for property factors. The stakeholder group believes that the voluntary scheme is so far forward in its development that it should be introduced, with a statutory scheme being delayed and implemented only if the voluntary scheme is unsuccessful. The counter-argument is that, unless a statutory scheme is introduced, factors who provide a poor service, who are the least likely to register, will continue to operate and provide an inadequate service to consumers, as no sanctions or standards of service will be set for unregistered property factors.
On the balance of the evidence, the committee agreed with the view that a voluntary accreditation scheme would ultimately be unsuccessful in dealing with the problem of so-called rogue factors. The committee therefore supports the introduction of a statutory framework as proposed in the bill.
We heard arguments that local authorities and registered social landlords should be exempt from paying a registration fee, but we recognise that, if those groups were exempt, more of a burden would fall on the remaining property factors. We also heard in evidence that RSLs are already subject to high levels of regulation and that the provisions in the bill would just add another layer of regulation. The committee took the view that, despite the continuing efforts to address the shortcomings in factoring services, tenants who live in social housing still have problems with RSLs and local authorities that provide such services, so they should be included in the definition of “property factor” in the bill. The committee also recognised that it is important that land maintenance companies are included in the definition. Although such companies manage, own and maintain land, the bottom line is that they are also property factors and have to be included.
The final sanction for property factors who continually fail to come up to scratch would be to take them off the register. However, the committee thought that that might lead to problems. Although we recognised that such a move would be a last resort, we felt that issues arose with regard to the area where a factor was deregistered. After all, a factor might have a number of clients over a wide geographical area and might be in serious dispute with a client group in one area but not in another. In evidence to the committee, the Minister for Housing and Communities summed up the difficulty when he said:
“if you deregister a local authority, which is quite possible under the bill, what happens? There is no answer.”—[Official Report, Local Government and Communities Committee, 22 September 2010; c 3470.]
Moreover, deregistration poses a number of complex legal issues with regard to maintenance companies that own the land and can be responsible for providing factoring services for woodland areas, sustainable drainage systems and other items of infrastructure. As a result, we felt that the bill had to be sufficiently clear to ensure that there were no unintended consequences, such as home owners being left without a factor or issues arising from deregistering a land-owning maintenance company. Indeed, as we know from our case load, those who do not have a factoring contract also look to us to help them to resolve some of these issues.
We know that the bill gives Scottish ministers the power to set the time and date for a factor to be taken off the register. However, although we acknowledge Patricia Ferguson’s argument that a date could be set that would give people enough time to make other arrangements to ensure they were not left without a factor and would allow anyone removed from the register to appeal the decision, we think that that might not be enough. As a result, we suggest that the member look at other solutions such as giving ministers the power to remove someone only when they are satisfied that transitional arrangements have been put in place. We look forward to representations being made and these issues being clarified by the member at stage 2.
A code of conduct will be key to improving property factors’ performance and, under the bill, ministers will be able to prepare such a code to set out the standards that are expected of the industry. That will definitely serve a useful role and help to drive up standards. However, because the code will be introduced through secondary legislation, the bill contains nothing that witnesses could comment on, and we support the requirement for ministers to consult on a code before it is laid before Parliament.
The failure to resolve disputes has been one of the biggest problems between factors and their clients. The committee heard about factors not responding to letters or phone calls, unitemised billing, unexplained charges and high insurance charges. Consumers are frustrated and feel that, unless they resort to court action, which as we know is unpredictable, very expensive and not very satisfactory, they are powerless. Property factors themselves feel similarly frustrated and, to break the cycle, the bill proposes a dispute resolution procedure through the creation of a home owner housing panel and home owner housing committee, which will be similar to the existing private rented housing panel and private rented housing committees. The minister said that he would prefer an ombudsman system to what is proposed in the bill.
There is clearly a need for some kind of dispute resolution procedure. However, in the current financial climate, we have to be aware of the costs to the public purse. Because the panel will be demand led, working out how much it will cost to set up has been problematic. That said, the same can be said of the ombudsman option and we have called on both the member and the minister to provide further information on both options.
Overall, we recognise that the bill’s main purpose is to create a statutory framework to protect the interests of home owners contracted to property factors and agree with the member that legislation is needed for such a scheme to work. Although we have highlighted a number of areas that need further consideration or amendment, we recommend that the bill’s general principles be agreed.
15:55
I welcome the opportunity to debate the Property Factors (Scotland) Bill, which was introduced to the Parliament by Patricia Ferguson. The Government recognises the need for action to improve standards in residential property management, or factoring services, in Scotland. Improving the condition of the common parts of housing in the private sector is one of our key priorities, and it is clear that property managers have a crucial role to play in that.
The quality of service that some residential property managers provide is a matter of concern to the Parliament and the Government. Duncan McNeil and Patricia Ferguson have already expressed concern about that quality, and I know that previous Administrations over the past seven years felt that that was a problem.
Back in 2003, the housing improvement task force recommended that a national voluntary accreditation scheme for property managers should be set up. More recently, in 2009, the Office of Fair Trading published a report that concluded that some form of self-regulation of the industry should be introduced in order to improve the quality of services that are available to home owners. As members will be aware, the Scottish Government has acted on those recommendations to develop a voluntary accreditation scheme for property managers and land maintenance companies, but we now accept that a statutory approach is appropriate. As I have said to both Patricia Ferguson and the committee, we support the aims and general principles of the bill. Consensus is growing both within the chamber and outside it on a statutory approach to the regulation of the property management and land maintenance industry being required, and we are comfortable with that.
Although the Government, like the committee, supports the general principles of the bill, we believe that there are a number of issues that require greater clarity. Duncan McNeil made points about many of those issues on behalf of the committee. We believe that drafting improvements are required to make the bill more effective and to avoid unintended consequences, and that there are provisions in the bill that, if they are unaltered, are likely to be unworkable and run the risk of failing to live up to the consumer’s reasonable expectations for effective action.
Since the Government submitted its evidence to the committee in June, I have been consistent on the areas in the bill that require further consideration. Since then, I have set out in more detail to the committee and the member in charge of the bill the issues that require further consideration. I have already offered Patricia Ferguson the advice and support that my officials and I can provide to help her to make the bill as effective as possible and to achieve the aims that we all want to see achieved. A wide range of stakeholders have also offered their views and suggestions at stage 1 on how the bill could be improved. I am interested in hearing about the amendments that Patricia Ferguson proposes to lodge in light of all the input that she and the committee have received.
Amendments are required to a number of the bill’s provisions. The three principal challenges are: issues relating to the definition of “property factor”; the consequences of deregistration for both the factor and the consumer; and the means of dispute resolution, which Patricia Ferguson and Duncan McNeil have referred to.
We believe that the definition of “property factor” in the bill fails to cover all the organisations that it should cover. For example, the current definition does not cover cases in which land maintenance companies own the land but home owners are obliged to pay for its upkeep. During stage 1, there seemed to be almost complete consensus that the bill should cover those land maintenance models, but it appears that they are not covered in the current drafting.
If a factor or land maintenance company were removed from the register, unintended consequences would arise from section 9 in particular, if it stays as it is drafted. Some of the points are legal and some are practical. I know that many of the issues were raised in evidence to the committee, and Duncan McNeil mentioned some of them in his speech.
On the legal side, if a factor or land maintenance company were deregistered, there might still be obligations in the title deeds for residents to use and pay that factor. Surely the bill should say that any such obligations would cease to have effect. I have been advised that there are difficulties in the interactions between the bill and the terms of the Title Conditions (Scotland) Act 2003. I have written to Patricia Ferguson on that, and I hope that we can agree amendments at stage 2.
On the practical side, I will give one example of an issue that could arise if a factor were deregistered. If the body being deregistered were a land-owning land maintenance company, it is not clear what would happen to the ownership of the land and whether the residents would be entitled to appoint a new factor.
The third major issue about which we have concerns relates to dispute resolution. Many of the points have already been covered by Patricia Ferguson and Duncan McNeil. I will try to go into them in more detail in my wind-up speech but, generally speaking, we would prefer the adoption of an ombudsman system, such as the existing property ombudsman, rather than the proposal in the bill.
We are supportive of the bill in general terms. If the issues are addressed properly at stage 2, the bill can be improved dramatically and made much more effective. At the same time, we can proceed consensually with the aim of achieving the intended consequences of the provisions, rather than, as has happened too often in the past, unintended consequences that the Parliament subsequently has to correct. I agree with the committee that we should agree to the general principles of the bill, but let us work together to improve it substantially at stage 2.
16:01
I, too, am pleased to take part in the stage 1 debate on the Property Factors (Scotland) Bill. I congratulate Patricia Ferguson on getting the bill to this stage, and I thank Mike Dailly of the Govan Law Centre for his contribution and support. No MSP in the Parliament will not at some time have been contacted by a constituent who is having problems with their property factor. However, it was the experience of Mike Dailly and other legal colleagues that showed the need for a legislative solution to the problems. Since Patricia Ferguson led a debate in the Parliament on the issue earlier this year, the Local Government and Communities Committee has worked hard to examine the bill’s proposals. I think that all members are supportive of the policy intention but, as is often the case with proposed legislation, the detailed discussions have been about ensuring that parts of the bill deliver those intentions. I thank the witnesses who have helped the committee.
As we would expect of a bill from Patricia Ferguson, the bill is clear and logical in what it seeks to achieve. It seeks a statutory framework for property factors, registration of those property factors, a code of conduct, a framework for dispute resolution and an ability to deregister property factors that is linked to a power for people to switch factors. Before I turn to some of the key issues, I acknowledge the Scottish Government’s work in considering a voluntary accreditation scheme. It appears as though the Government was heading in the same direction as Patricia Ferguson’s bill. I suppose that the only surprise is that it has taken so long, although I appreciate the contribution that the minister has made to the debate.
The bill starts at part 1 with the provision of a register of property factors, which will be available for public inspection. At that early stage, the committee came across its first challenge, when some people questioned whether land-owning property factors should be part of the register. The previous speakers in the debate have referred to that issue. Given that the activities of land-owning property factors are similar to those of what we might call traditional property factors, it became clear to me early on that they should be included. My experience of property factors has very much been with those land-owning factors. In my constituency, I do not have the kind of traditional tenements that are found in Patricia Ferguson’s Maryhill constituency or here in central Edinburgh. In Linlithgow, property factors are in the new estates. They manage flatted properties, but they also manage open spaces, including play parks, wooded areas and drainage facilities and, in the majority of cases, they own that land. They fulfil their role in the same way as a traditional property factor. I agree with others that there is an unresolved issue to do with how a property factor could be switched if they own the land. I will come back to that. The committee is correct to say that all property factors should be included in the register, whether or not they own land.
I agree with Consumer Focus Scotland, which in its helpful briefing for the debate welcomed the definition of “property factor” in section 2. It recognised that there might need to be further amendments at stage 2 to fully encompass the land-owning property factors. I give this assurance to the chamber: should we not be able to resolve the issue through the amendments that Patricia Ferguson spoke about today, I pledge that Labour will introduce further measures to ensure that that group of property factors is included, should we be in a position to do so after the May election.
Another issue that arose was whether local authorities and housing associations that have a property factor function will need to register, given the other ways in which they are regulated. The committee is correct to say that, where local authorities and housing associations have that role, they should be registered in the same way as other property factors.
Time does not allow me to go into detail on issues such as dispute resolution, switching factors and the code of practice. I am sure that other speakers will cover many of those areas. Fortunately, or perhaps unfortunately for some, I will be closing the debate on behalf of the Labour Party so I will have an opportunity not just to respond to the debate but to pick up on any issues that I feel need further elaboration. However, at this stage, on behalf of the Labour Party, I am happy to support the general principles of the bill.
16:07
Like other members, I congratulate Patricia Ferguson, the bill’s sponsor, on her persistence and dedication in bringing this measure to Parliament and, I might also say, on her determination to make it through from Glasgow for this debate, notwithstanding the disruption to rail services.
The Parliament last debated the subject in March this year. At that time, I said that the Conservatives would give fair consideration to the bill and measure its proposals against the alternative of a voluntary accreditation scheme that the Scottish Government was pursuing with stakeholders in the sector in line with the recommendation made in the report of the Office of Fair Trading, which has been alluded to.
In that context, it is worth noting that the OFT report recommended that such a scheme should be up and running within 18 months and, should it not prove effective within two years, that the Parliament should legislate for a statutory scheme. Those of us who were prepared to give a fair wind to a voluntary accreditation scheme have been badly let down by both the Government and the sector. Despite the urgency of the OFT recommendation, we have seen a leisurely approach, suggesting a casual indifference to the problems that have been highlighted, or an inability in the sector to sort itself out. For example, for a group that was launched in May 2009 to take over a year to launch a public consultation on core standards for an accreditation scheme is clear evidence of procrastination.
Members will recall the minister’s rather defensive performance in our debate last March on the subject of timescales. Now we have learned from the minister, in evidence given to the committee, that the Government will devote no more resources to progressing the accreditation scheme while the bill is being considered by Parliament.
All that suggests that the Government has given up on voluntary accreditation, but we as a Parliament certainly cannot give up on the many people who receive a poor standard of factoring services or who—worse still—are victims of the appalling sharp practices that have been described graphically by Patricia Ferguson today and by other members in other parliamentary debates.
In evidence to the committee, Consumer Focus Scotland said:
“We are still hopeful that a scheme”—
the accreditation scheme—
“will be established soon, but it has been a long process to get here ... there seems to be a reluctance among those in the industry to take ownership of the scheme. So we are now of the mind that the consumer interest in the market would be best served by some form of statutory regulation.”—[Official Report, Local Government and Communities Committee, 15 September 2010; c 3415.]
That sums up my view and that of my Conservative colleagues.
I welcome the bill’s wide scope and its intention to include registered social landlords and land-owning maintenance companies—which have been much discussed—even if drafting amendments might be required to bring them fully within the bill’s scope.
I also welcome the fact that the registration scheme will sit on top of a statutory code of conduct that will set out the service standards that owners and tenants can expect. I have no doubt that that can build on the Herculean labours of those who participated in the voluntary accreditation scheme group, but—I trust—with a good deal more urgency than they have evidenced so far. With a statutory code of conduct, the Scottish Government of whatever complexion will at least have a responsibility as the driver of a code of conduct rather than the facilitator of a voluntary scheme, which I suspect is half the problem.
Of course, what I have said does not mean that the bill in its present form is perfect. Several concerns were expressed in evidence to the committee, are highlighted in its report, have been described today by Patricia Ferguson, Duncan McNeil, the minister and Mary Mulligan and—I have no doubt—will be described by members who follow me. We need to ensure that appropriate transition measures are in place if a property factor is deregistered. A genuine debate must be had about the appropriate dispute resolution mechanism. On balance, I prefer the option of using the home owner housing panel as the appropriate body, rather than the ombudsman scheme, which the Government prefers.
It is to be hoped that a registration scheme will improve standards among service providers, but I believe firmly in the power of the market as a driver of standards. One issue that remains to be addressed properly is the barriers to switching property factors, which exist as a result of entrenched title conditions that favour the status quo and, in many instances, the factor that the developer of an estate or block of flats selected.
The relevant legislation is complex—it involves the Tenements (Scotland) Act 2004 and the Title Conditions (Scotland) Act 2003, which the Parliament has passed. However, an overriding statutory provision is needed to facilitate the ability to switch factors on a majority vote of the property owners who cast their votes. I appreciate that Patricia Ferguson’s bill does not cover that and I suspect that the issue requires a more thorough review of existing law. However, I noted that the minister referred to the 2003 act in the context of land-owning maintenance companies. Perhaps that is an avenue for further examination. Whatever happens, if need be, I hope that an incoming Government will consider the wider competition-driven requirement as a priority for the next parliamentary session.
I support the bill, which enjoys wide public support, if my mailbag is anything to go by. Patricia Ferguson has struck a chord with her bill and I look forward to it proceeding at subsequent stages.
16:14
The Liberal Democrats welcome the member’s bill that Patricia Ferguson has introduced and offer our congratulations to her. I also congratulate the clerks, witnesses and committee members, all of whom contributed significantly to get the bill to this stage.
The bill aims to provide home owners with much-needed protection from factoring companies who overcharge, do little of the work that they are contracted to provide and put every obstacle and excuse in place when it comes to resolving a dispute with residents. We hope that the bill will raise standards in the property management industry, albeit that some of its detail will need to be looked at more closely at stage 2 if residents’ concerns are to be overcome.
Since the mid-1990s, developers have engaged factoring companies to maintain common areas and to charge residents for that service. They have done that by writing into title deeds that residents jointly own common areas and should seek to have a factoring company to maintain such areas. The usual situation is for the factor to be engaged initially by the developer. That means that rather than, for example, paying an up-front fee for in-perpetuity maintenance to the local authority, the developer hands on responsibility to the people who purchase their new home. Many such purchasers subsequently claim that their lawyer, estate agent or, indeed, developer did not inform them of the on-going costs that are associated with their new property. To add insult to injury, in recent years a new model has become quite common, in which the factor owns the common areas of land within a new development and is legally able to charge residents for the maintenance of the land and equipment that the factor owns.
As a member of the Local Government and Communities Committee, which is the designated lead committee for the bill, I have had the opportunity to examine the evidence that was presented by a range of bodies including factoring companies, housing associations and consumer bodies. We also took evidence from concerned residents and from the Minister for Housing and Communities. The committee supports the general principles of the bill subject to further examination of a number of issues. In our stage 1 report, we noted the clear evidence that testified to the problems that members of the public encounter with property factors. Some of the problems relate to the maintenance of shared parts of a building—for example, the stairwell in a block of flats. Other problems relate to the maintenance—or, some would say, the lack of it—of public open spaces and equipment.
The large volume of complaints that I receive in my constituency makes me certain that any existing or proposed voluntary accreditation scheme will not address the problem of factors that provide a poor service to consumers. We need to proceed with a statutory framework to regulate property factors and provide a reasonable quality of service to residents who own or use land or property that is maintained by a factor.
Part 1 of the bill places a duty on Scottish ministers to prepare and maintain a register of property factors. In order to be added to that register, the property factor must be considered to be a “fit and proper” person. That means that they can be removed from the register if they fail to comply with the code of conduct or any order of the proposed home owner housing committee. Registration can also be refused. As other members have said, the issue of deregistration raises some significant questions. If a factor fails to meet the standard and is removed from the register—that will take place only once dispute procedures have been exhausted—where will their removal leave residents? Clarity is needed to ensure that there are no unintended consequences in that regard.
The code of conduct will serve a useful role in setting out the standards that are to be expected from property factors. However, more detail is required on the standards that should be included in the code, as well as on how it can improve the service standards that property factors provide, without referring to reserved matters.
As all members will be aware from our work in our constituencies, property factoring issues affect many people throughout Scotland; the problem is not only in our cities. Around 225,000 house owners in Scotland are forced to use property factors to carry out repair and maintenance responsibilities in their estates. As things stand, it is extremely difficult to progress a dispute with a factor. Owner-occupiers can find themselves legally boxed in and unable—at least in practical terms—to get out of a contract with an unsatisfactory property factor.
The Scottish Government’s plans for a voluntary, industry-led accreditation scheme for property managers do not go far enough. The Government has stated that it will impose statutory measures should this prove necessary. It is clear that such mandatory measures are required now. There is cross-party support for taking action in this area, although opinion is split on whether a voluntary scheme should be tried first. We share the view of the Office of Fair Trading that a voluntary scheme gives people no effective means of redress if things go wrong. At the very least, a statutory accreditation scheme should be ready to be enacted should that happen.
The Liberal Democrats welcome Patricia Ferguson’s bill and are content to support it at stage 1.
16:20
I, too, congratulate Patricia Ferguson and thank her for introducing the bill. As one of the original signatories to the bill proposal, I am pleased to speak in this debate and to support the bill at stage 1. Like other members, I have no doubt that some—not all—factors do not give a good service. We have heard from many organisations on the issue. David McLetchie mentioned the Office of Fair Trading, which carried out a study of factoring that revealed that a substantial number of people were not satisfied with the service that they received.
Patricia Ferguson gave the example of a case that she has encountered. All of us deal with a huge number of cases that relate to factoring. As someone who stays in a factored property, I know at first hand just how difficult it is to get any service from factors, although I will not name any of the factors that were involved.
I will give some examples of issues that I have encountered. Duncan McNeil mentioned cases of light bulbs costing £30, but I will highlight one issue that is raised with me and, I think, all other members. People get really frustrated, upset and angry when they receive a bill that is not detailed; when they phone the factors to ask for details, they are told that they must pay the bill as it stands, although they do not know what they are paying for. There is a particular problem with factors using preferred contractors. Even when tenants and residents look for contractors that can do the job more cheaply, factors will not accept a quote from them; basically, they go for the highest price. In some cases—not all—a percentage of the costs goes to the factor and not to the contractor.
Another issue is competitive tendering. When people ask their factor whether it has sought tenders from three contractors, they are told that it has not, because it has its preferred contractor. However, when people look around, they may find that the contractor that they wanted could do the work for half the price that their factor’s contractor is offering. Issues of that kind really frustrate and annoy the people who are required constantly to pay such bills.
As has been said, people may be sent letters with a charge of £30 or £35 to say that they are two days behind in paying their factor’s fees. There is absolutely no understanding of how people have to live and of how angry they get when they are trying to get repairs done. When people have bought flats in properties that include residences that have been let privately, it is very difficult for them to get the factor to contact the landlord, to ensure that they pay their share of any bills.
Although I am very supportive of the bill, there are some issues that I want to raise. Patricia Ferguson will understand that my points are not intended as a criticism of the bill. However, like other members, in the limited time that I have I would like to explore some issues further.
The most important section in the bill is that which provides for a code of conduct. I am pleased that the minister and Patricia Ferguson have agreed that we must get that right and that a lot of work has been done on the issue. I look forward to seeing that, because if we get the code of conduct right we can move forward in the proper manner.
I have some concerns about the registration charge of £750 to £1,000 per factor. In the bill as drafted, it is not clear how that will apply. Will houses be banded by council tax or will the charge apply to groups of properties? Clearly, it will affect private factors, but will it also affect social factors, which have been mentioned and include councils and housing associations? Will there be checks and balances to ensure that the charges that factors pay to register are not passed on to tenants? I would like us to look at that issue at stage 2, as the current provisions in the bill on registration do not address it.
The issue of dispute resolution has been raised. The bill will establish a home owner housing panel and home owner housing committees similar to the private rented housing panel and private rented housing committees. I do not know how much that will cost, as it is not costed in the financial memorandum to the bill. I would like more information on that provision to be provided at stage 2. The fact that staff will receive specific training is mentioned, but does that mean that more staff will be employed? Will the president, chairmen and committee members come from the existing panel, or will they be appointed or elected? We need to be clear about that.
A question was raised by the Property Managers Association Scotland regarding complaints procedures relating to property managers. Will the procedures be deemed obsolete if the bill goes through?
There are further issues that I would like to raise; I hope that we can get them ironed out at stage 2 through amendments. By raising these issues I am not being critical—I am trying to be constructive—and I genuinely look forward to stage 2, when we can ensure that we get the bill right for the good of all the people who, like me, live in factored property.
16:25
Like other members, I congratulate Patricia Ferguson on introducing her bill and getting it to stage 1. She should be commended for her hard work and diligence on a highly complex issue. I vouch for the fact that she was determined to reach the chamber today—I shared the train journey with her. The phrase “husky dogs” was mentioned a number of times, in case we could not get on that dreaded train. We are here, anyway.
The committee has provided a comprehensive analysis of the various challenges that we face in considering the bill. Patricia Ferguson has shown a mature attitude to taking on a number of those challenges, showing humility where required and ensuring that the issues will be dealt with at stage 2.
I am convinced that the bill will give consumers protection from the unscrupulous and unacceptable practices of many property factors. I understand that more than 200 factors are unregistered under the current regime, which is unacceptable.
Part 1, which deals with the registration of property factors, will require Scottish ministers to prepare and maintain a public register of all property factors. In the information age that we live in, it is perfectly reasonable to require such information to be provided on the internet. That requirement should not be seen as cumbersome; it should have been in place already. It should not be difficult to provide people with that sort of opportunity.
Part 1 will allow Scottish ministers to refuse or deregister a property factor, and to remove them from the register of factors. I welcome the inclusion of that provision in Patricia Ferguson’s bill. When we discuss the issues and challenges that we could face if we were to deregister a factor, we should take into account some of the challenges that other professions face when people have to be deregistered. I do not remember anyone advising me that we could not deregister a dentist because he had a number of clients—that is like saying that we should not challenge the very principle of whether he should be a dentist in the first place, because of the chaotic circumstances that would ensue. As part of the principle of the issue, it should be accepted that, where a factor is not performing its duties, it should not be in place. However, I appreciate the challenges of dealing with title conditions and so on, and I hope that the minister can address some of those challenges.
A further challenge is the very principle of whether to regulate. As a number of witnesses stated at committee, the feature of regulation appears in a number of professions and has done for many years. It is a proven case, and David McLetchie amplified that point. The voluntary approach has simply not worked and, as has been stated by many people in the industry—from the profession itself—the rogue factors would simply opt out of the scheme if it was voluntary. What Patricia Ferguson proposes will provide clarity for all concerned, including reputable factors in the industry. There are many such factors, but the rogue factors make it difficult to acknowledge that.
A number of members, including me, deal with cases that concern property factors. As I said, many factors try their best to provide a service, sometimes in difficult circumstances, for example when owners—often absentee landlords—show no interest in investing in their properties.
However, the issue is that there is not a level playing field. Consumers are being exposed to unscrupulous activity on the part of factors, particularly when they dispute bills. It is common for consumers to dispute invoices—I have done so many times and I am sure that many members have done likewise. A constituent of mine disputed a bill for £8 from Walker Sandford Property Management, which turned into a bill for £1,200, because of the charges for the reminder letters that were sent to him. I appreciate some of the challenges that Walker Sandford and other property managers face in collecting invoice returns, but it is unacceptable that the people whom they serve—our constituents—should be charged £15 per letter or that a bill should accumulate to more than £1,200.
I hope and am convinced that Patricia Ferguson’s bill will deal with such unacceptable practice and that the provisions on dispute resolution will ensure that there is a level playing field for everyone. I commend the bill and I hope that it will be passed at stage 3.
16:32
Stage 1 is an important staging post in assessing the many issues that are the origin of the bill. I pay tribute to Patricia Ferguson for the methodical manner in which she has enabled us to examine each issue. The staging post has given members the opportunity to consider the evidence that our constituents provided—there was considerable evidence, in my case—and the evidence that various interested parties supplied.
As David McLetchie made clear, the Scottish Conservatives had reservations about whether there was a need for a legislative process. However, as time has passed we have become increasingly concerned about the loopholes in the existing legislation and increasingly conscious of the concern that remains about whether the sector itself could take the measures that are needed to ensure that it reforms.
An important factor—I ask members to forgive the pun—is that 30 per cent of people who are looking after properties are letting down their customers in some way. Too many disappointed people have flagged up the lack of a sufficiently robust complaints procedure, and too few residents are aware of their rights.
As we heard in the debate, in almost every constituency in Scotland there is evidence of residents encountering difficulties with their factors. There is no doubt that in many—although by no means all—cases, such residents are from older and perhaps more vulnerable groups. Therefore, the issues deserve full parliamentary scrutiny.
I put on record again that many factors do an excellent job and provide first-class facilities across the board. It is essential that we support those factors and that proposed new legislation is neither overbureaucratic nor too restrictive for the choices that customers must make.
We need to be clear that new legislation will tackle: first, the question of accreditation, regulation and quality assurance; secondly, the absence of effective complaints procedures against factors who default; and thirdly, as Sandra White said, the need for greater transparency when it comes to obtaining relevant financial information about a managing company’s accounts.
When it comes to better quality assurance, we need a level playing field, as Paul Martin said. Currently there is often a considerable contrast between conditions in older title deeds, which make almost no provision for common decision making, and conditions in newer title deeds, which provide for more extensive and more comprehensive service provision.
We have understood the calls to seek mandatory regulation, including compulsory registration, since that might be the best way of benchmarking factors against best practice. There have been arguments on both sides for us, but the key principle must be to ensure effective consumer choice and the absence of expensive red tape.
We are absolutely clear that there must be an effective complaints procedure that leaves no scope for the difficult factor to manipulate the situation and discriminate against the customer. There must be clarity about the respective roles of the managing company and the body of owners and residents, and their responsibilities as well as their legal rights.
We believe that there must be much greater facility for financial transparency, so that owners and residents can see clearly what their money is being spent on and how value for money can be measured. We particularly noted the concerns that were raised by the Scottish Consumer Council when it made its submission to the Office of Fair Trading, that in too many cases consumers find it difficult to exercise collective choice and switch, which can be a constraint upon suppliers and can prevent consumers from getting best value for money.
Does Elizabeth Smith accept that clarity on the point that she has just raised might make it easier for some people to accept liability for payments, and not get into that excessive series of letters to which some members have referred?
Mr Brown makes a valid point, and I and the Conservative party in general accept it. It is a strong message in the bill.
The relationship between the property manager and the owners in a shared property is currently defined by complex legislation, property deeds and agreements, which often means that customers do not understand their rights and obligations. Likewise, consumers often fail to understand the processes that are involved in switching, and should they wish to pursue complaints, there is an absence of an effective mechanism, which allows dishonest factors to play the system even more.
I was an initial signatory to the bill. I am very much persuaded by the information that I have received from my constituency area that legislation is necessary. I therefore reiterate our support for the bill at stage 1.
16:37
I welcome the opportunity to speak on the Property Factors (Scotland) Bill at stage 1. I thank Patricia Ferguson for introducing the bill, and I thank my fellow committee members, the clerks, and all those who gave evidence to the committee. The bill shows how members of the Scottish Parliament can work in partnership.
The bill’s roots lie with Gordon Jackson in the 2003 to 2007 parliamentary session. It was introduced in the current session by a Labour MSP and it has received strong cross-party support. I and a number of my Scottish National Party colleagues have been strong supporters of the bill and I hope that its general principles will be agreed to at decision time.
As a fellow Glasgow MSP, I have been keen to support the bill. I and Patricia Ferguson have similar constituency concerns and case loads in relation to property factors, and it is only right that Labour and the SNP MSPs work jointly and constructively to assist their constituents in Glasgow and tackle the problems of poorly performing and, at times, downright cowboy factoring services.
I commend the Evening Times and The Herald for bringing the issue into sharp focus. Their evidence is mentioned in the committee’s stage 1 report, as they
“found examples of gross overcharging, allegations of intimidation and threats of bankruptcy for refusal to pay disputed bills”.
Their service is therefore noted this afternoon.
Of course, the problem is not just a Glasgow issue. We have heard from MSPs from different parts of the country. The bill sets out to address a Scotland-wide concern.
I also extend praise to the Scottish Government, which has been working with the property factors stakeholder group to achieve a national voluntary accreditation scheme. I note that work on that has been paused until the outcome of the bill is known. I hope that it will not have to continue at all: I urge the Parliament to support the statutory regulation in the bill. I am sure that the stakeholder group’s work will not go to waste and that the knowledge of voluntary accreditation that was gained from the exercise will be used to inform the standards that are expected, including the code of conduct that will be made by regulation. Much of the spadework has been done.
I favour statutory regulation for a number of reasons. For instance, will rogue factors actually bother to sign up to a voluntary scheme? The committee has already heard of problems in getting property landlords to sign up to a landlord registration scheme. That scheme is compulsory, but because of significant issues in prosecutions only one unregistered landlord has ever been successfully prosecuted.
If we cannot get cowboy landlords to register for a compulsory registration scheme, what chance would we have of getting rogue factors to join a voluntary accreditation scheme? The case has been made for compulsory accreditation and I believe that it would be beneficial to place registration on a statutory footing.
There are issues in the bill, and I hope that the committee, including me, as a member, has been constructive in its scrutiny. For example, there are unclear areas around the £5,000 that an unregistered factor would be fined and the enforcement provisions related to that. We comment on that in the committee report. In the financial memorandum, Patricia Ferguson rightly acknowledges that precise costs cannot currently be quantified, as the scheme will be demand led. That is not a problem, but it is one difficulty in assessing accurately the assumptions in the financial memorandum.
There are three groups of people who use factors. We are here to defend the home owners who have been wronged, given a poor service or exploited by factors. The second group is those who are unable to pay because of financial circumstances and the third group, which we must acknowledge, are the unwilling payers who will use any mechanism presented to them to drag out and resist paying because they just do not want to pay. Whether we go for a home owner housing panel or an ombudsman approach, that group will be a difficulty, and the cost assumptions will become difficult for whichever scheme we go for. It is fair to acknowledge that in today’s debate.
The bill is about driving change forward, and the best way to drive change is to make it easier for people to switch their factors. If the industry knows that people have the opportunity to switch, it will up its game. We have acknowledged in the committee report that it is not easy to switch factors. We should not pretend that those who need to switch factors have the capacity to do it: a lot of vulnerable home owners are too busy making ends meet to worry about switching factor. We must make switching easier.
I will finish by talking about the unintended consequences of deregistration. Paul Martin’s point was well made that we plan for deregistration in other fields such as dentistry—that was the example that was given. The fact that there will be difficulties does not mean that we should not use the power. Indeed, it is essential to have it. However, regardless of how deregistration or other policing mechanisms work, I ask that, if the bill is passed, the next Government conducts an early review to see how it is bedding in. That will be necessary, and amendments may be needed at that stage.
I will support the bill and I pay tribute to Patricia Ferguson for introducing it.
16:43
Factoring is an enormous issue in the new-build flats in my constituency, albeit not in the traditional tenements, which in Edinburgh have never had factors.
As I have received the same kind of complaints from a large number of housing developments about a considerable number of factors, I have come to the conclusion that there is a systemic failure related to a lack of regulation and the absence of required standards. At a recent meeting of representatives of many housing developments in my constituency, we set up an online arrangement to share factoring experiences and make the best of the current bad system. When I consulted them and hundreds of other constituents about Patricia Ferguson’s bill, there was only support and not one objection. I am therefore not in any doubt about the principles of the bill, and I congratulate Patricia Ferguson on introducing it.
For me, the key issues are, first, getting the detail of the bill right, including the dispute resolution procedure; secondly, having a strong and effective code of conduct; and, thirdly, looking beyond the bill to other actions that may be required, such as amendment of the Title Conditions (Scotland) Act 2003.
At the heart of the bill is a requirement that all factors should adhere to required standards embodied in a statutory code of conduct. In that sense, section 13 is the pivot of the bill, and I am glad that the code of conduct will be consulted on in a separate process. In that sense, passing the bill is part 1 of a two-stage process.
I believe that the core standards that have already been consulted on are a reasonable starting point, but I do not think that we should regard them as the final word. People must be consulted on the detail of the code of conduct, which will be at the heart of the legislation.
The standards must address the common complaints with which so many of us are familiar—the lack of transparency around billing and accounts; poor value for money; failure to arrange repairs; inadequate complaints handling; and the many issues that we have heard about in relation to insurance, such as the large commission that factors often gain from arranging insurance. The bill will succeed or fail in accordance with the quality of the standards and the effectiveness of their enforcement.
Some people have raised fears about the consequences of deregistering a factor, but that must exist as the ultimate sanction. Without it, the bill simply would not work. It is, however, intended to be a last resort, and intermediate steps such as mediation and enforcement notices are of more immediate importance. That is why we must get the dispute resolution procedure right. As we move to stage 2, that will be one of the key points of discussion. I note the minister’s enthusiasm for an ombudsman system, but I have doubts as to whether the typical ombudsman function is appropriate for the factoring industry. There is a quote from Mike Dailly at the bottom of page 23 of the committee’s report, which I think I have time to read out. He stated:
“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.”—[Official Report, Local Government and Communities Committee, 29 September 2010; c 3526.]
Moreover, Patricia Ferguson’s suggestion that we use the existing infrastructure of the committee that was set up by the Rent (Scotland) Act 1984 is a useful one. I was responsible for the Housing (Scotland) Act 2006, which used that infrastructure to set up the private rented housing committee, and the reports and research that I have seen in relation to that suggest that it has been successful as a mechanism for not only driving up standards in the private rented sector, but mediation. As mediation will be important for the successful implementation of the bill, the experience of the private rented housing committee in mediation is another plus factor in support of that suggestion for a dispute resolution procedure.
As the committee suggests, switching is important to the debate. As Bob Doris said, if we could get a more effective switching mechanism, that would supplement the standards and mechanisms that are being set up in the bill. There would perhaps develop an effective market in which factors might compete with each other on the basis of quality. The problem at the moment is that it is very difficult to switch. As I highlighted in the factoring debate in March, when one housing development in my constituency switched it ran into certain problems. That whole area needs to be investigated. I therefore support the committee’s recommendation that the Government should commission further research on that complex issue. That will involve looking at the Title Conditions (Scotland) Act 2003. I was pleased to hear the minister say that we may even be able to address some of that in the context of the bill. A further amendment of that act will be required in the next parliamentary session.
We also need to publicise some of the provisions in the 2003 act. At least one housing development in my constituency has it in its title deeds that it cannot change factor until the selling of the last house; yet section 63 of the 2003 act makes it absolutely clear that anyone has the right to change factor after five years and that that provision overrides any individual title conditions. Let us publicise the 2003 act and amend it in due course.
16:49
I echo others in the chamber in congratulating Patricia Ferguson on the bill, which touches on a subject that is of great concern to many of our constituents.
Some 36 per cent of the population live in tenement flats—many in Glasgow and Dundee—maisonettes and apartments, and around 50 per cent of those people live in privately owned flats that have a property manager. Some 30 per cent of those have a private sector manager and 20 per cent have a registered social landlord as a manager.
Although the majority of people are happy with their factors, a large proportion—30 per cent—are dissatisfied, and the problems that they face are highlighted by the fact that in 2009 as many as two thirds were unhappy with the way in which their complaint was handled.
The Scottish Government has been acting on the recommendations of the recent OFT report that suggested self-regulation of the industry and has been working with stakeholders towards a voluntary accreditation scheme for property managers and land maintenance companies. However, the support today for Patricia Ferguson’s bill demonstrates the Government’s commitment to taking the matter further to ensure the best protection for residents. As Bob Doris said, the work that has gone into putting together the voluntary accreditation scheme will not be wasted. I hope that it will feed into Patricia Ferguson’s bill at stage 2 and, perhaps, beyond.
The bill aims to improve the position of those who are dissatisfied with their factor and Patricia Ferguson must be congratulated on introducing it.
I will use an example from Dundee to demonstrate why we need to establish a system of statutory registration for all property factors and an alternative means of resolving factoring disputes. I am sure that the situation will be all too familiar to members from experiences in their constituencies.
Panmurefield village in Dundee is in the constituency of my colleague Shona Robison. It is a new-build estate of 71 properties that has its open spaces managed by a property manager. Residents were charged £80 or £120 a year by the factor for the upkeep of the common spaces, and it was not long before problems started to emerge, such as the lack of maintenance work or sub-standard work being done. Members will be aware that the Local Government and Communities Committee has been presented with a raft of similar complaints from across Scotland.
After repeated attempts to rectify the situation with the factor, the residents formed an association and householders united to force the property factor to give up its role of manager of the common ground. One would have thought that that would have been the end of the situation but, despite losing the contract, the property factor continued to issue bills to residents and threatened to send sheriff’s officers to enforce payment. That caused great distress, particularly among elderly members of the community, and it took a civil court ruling before the demands for payment stopped.
The residents have now awarded the management contract to Dundee contract services, which has highlighted just how much they were being overcharged by the previous factor. As most people probably know, Dundee contract services is a contracting arm of Dundee City Council. It maintains the city’s open spaces and competes with the private sector to provide building services such as common ground maintenance. As a result of changing their property factor, residents in Panmurefield village have seen their annual bill fall from an average of £110 to less than £20 a household.
The residents of Panmurefield village were lucky that the size of their community made it less difficult to change their factor than it would have been if the common ground had been owned and maintained by a land management company such as the infamous Greenbelt Group.
The committee and other members have highlighted a number of issues that warrant further consideration at stage 2 and beyond. I hope that the consensus that has been expressed in the chamber today will continue so that the bill will be supported not only tonight, but at stage 2 and stage 3, so that it can become law. It addresses some important issues.
16:54
On behalf of the Liberal Democrats, I praise Patricia Ferguson for introducing the bill and for the manner in which she has done so. Although this debate will receive less publicity than others that we have had in the chamber, it addresses an issue that is much more important to many people, in Glasgow and other parts of the country, than many of the subjects that we deal with in this chamber.
When I was first elected as a Glasgow councillor, many years ago, the quality of factors and complaints about factoring services was a significant matter. Dissatisfaction levels were high. It is true that, in intervening years, the nature of the property market has changed considerably, as have tenure patterns. The condition of the fabric in the old red sandstone buildings, for example, has been immeasurably improved. There are more owner-occupiers and more split-ownership properties, which is an important issue. Councils and Glasgow Housing Association, for example, are involved in dealing with private owners in a way that they rarely were under previous systems. As Malcolm Chisholm pointed out, we have more new flats that come with complex provisions in the deeds of conditions for factoring-type arrangements. Throughout those massive changes, levels of satisfaction with factors have remained low and complaints have remained high; that is the background to the bill.
It is important to remember that not every issue is the fault of the factor. If a major roofing repair is thwarted because someone will not pay their share up front or even accept liability for it, that is the fault not of the factor, but of the owners or the system. There can be infelicities in the deeds of conditions that render arrangements for maintaining grassed areas difficult to enforce and to fund.
Sometimes, dare I say it, the factoring costs—not just the fees, but the outlay of expenditure—lead to a situation in which the level of service is poor and the charges are relatively low, although higher than they should be for that level of service. The issue of the service that is provided should in some cases be at the centre of the argument.
As Bob Doris rightly said, the matter of the unwilling payer is a central point. The provision of some clarity through the standards and conditions that the Scottish Government has put in place would assist in informing people so that they understand and appreciate the things for which they should rightly be paying, as opposed to the things for which they are wrongly charged in some situations at present.
In many former council tenements, the council, or the GHA as its successor in Glasgow, holds a majority of the votes because it owns five out of eight houses in the block, for example. There can be arguments about whether the council or the GHA uses that monopoly control in a way that reflects the interests of the minority of home owners, to whom it also has factoring duties. There are complex problems that impact on neighbours of houses in multiple occupation, houses that are let from landlords and houses that are managed by letting companies for owners or landlords. There can be problems with antisocial conduct or harassment from some occupants and their families, whether they are owners or tenants. All those things, while they are not strictly factoring issues, are very much interrelated, which makes it difficult.
I think that Patricia Ferguson has had some dealings with residents in sheltered housing facilities, such as Stonelaw Court in Rutherglen, where there are factoring facilities that deal not only with lifts and such things, but with aspects such as liability in the title deeds for a house manager’s flat and support. That is much wider than what we might regard as traditional factoring services.
It is important that in considering those questions of definition we take on board not only the concerns to do with the Greenbelt Group, but some of the sheltered housing problems too. The landscape is complex: the definition of the factual situation of who is responsible for what can be difficult, and the property title rights can be confused, outdated or inadequate.
The Property Factors (Scotland) Bill is not a solution to the panoply of challenges, but it is a significant contribution in a discrete area. As we have heard, it raises a number of areas of interest such as definitions, the need for a compulsory register, the vital importance of an accreditation scheme and the enforcement mechanisms under that scheme.
The bill’s intention is to cover registered social landlords, which is right. I am a strong supporter of housing associations, especially community-based ones, but the GHA in particular has had a lot of issues with its factoring side in relation to the clarity of information that is provided, the basis of charges, hidden commissions and various other things. It is important that the GHA is subject to a proper regime, with proper attention given to issues of overregulation and other such matters.
Many of the arguments have been about whether the scheme should be voluntary or compulsory; I will put it slightly differently. The accreditation scheme that is being developed by the Government and the Property Factors Association Scotland is entirely central to what is needed and it should be professionally operated by the professional body. However, it must be backed up by compulsion. The public need to know who the firms that operate in that field are, that they have been approved as being fit to provide factoring services and that there are effective mechanisms for securing redress if there are problems.
On the point about enforcement, the warning about the expense of court actions is correct, but the alternative dispute resolution format—whatever it should be—must be robust, speedy and unbureaucratic, and it must end up with some sort of enforceable order, against the background of issues with unwilling payers. There must be clarity on that.
Like other members, I am not sure that the ombudsman approach would be best, but it is undoubtedly desirable to have an effective mechanism that does the trick without too much bureaucracy or legalism. Clarity of information is important in that regard.
In conclusion, the Property Factors (Scotland) Bill is important and I congratulate Patricia Ferguson on introducing it. She has done a service to the Parliament and to many parts of Scotland. No doubt we will sort out a number of the technical issues at stage 2, and it is important that the bill is passed during the current parliamentary session.
17:00
The debate that we have had today and the process that led us to it form a good example of the Parliament at its best. I only wonder why it has taken us so long to get to this stage. As has become clear during the debate, the reason is partially that certain elements of the subject are a minefield. For that reason I do not simply congratulate Patricia Ferguson on making it this far; she has my sympathy as well. She will have my support as the bill progresses.
We heard from a number of members, including Patricia Ferguson at the outset, that the bill has become necessary because there are those who have found themselves at the mercy of unscrupulous people. It would appear that legislation has become necessary because of the behaviour of a particular sector. Like many others, I emphasise that I genuinely believe that there are competent and responsible property and land managers in Scotland who are doing their job effectively, but it is all too clear from the evidence that has been presented that a surprisingly high proportion do not live up to those standards. We have heard that from a number of members who have given examples today.
I am prepared to acknowledge that the justification for the bill lies largely among those who operate as property factors for blocks of flats and other buildings across Scotland, but I share the experience that Mary Mulligan described. The cases that have come to my attention tend to relate to land maintenance companies. In many cases, green space has been allocated within an estate and there is a requirement to find a manager. My experience has led me to find out that some extraordinary things are happening, especially where development has taken place quickly and on a large scale. In Westhill near Aberdeen, for example, three different estates ended up in separate disputes with a land manager. An estate in Laurencekirk has also ended up in such a dispute.
I find that, as with other things, the people who find themselves in such disputes would like to find a way out of the arrangement that they have become involved in but, more important, they would far rather that the company simply delivered the service for which the householders are paying. That is why it is so important that we ensure that we have registration of property factors, a code of conduct and a means of dispute resolution. Those are the key elements that the bill would introduce.
As we have heard, there was a concerted attempt to introduce a voluntary accreditation scheme, but its failure to appear within an acceptable timescale and the doubts that many speakers from all parts of the chamber have cast on whether it would have the desired effect have brought me and others to the stage where it is obvious, if it was not before, that a proper statutory route is needed if we are to achieve the objectives.
Other interesting parts of the debate related to the changes that will need to be made to the bill and to existing legislation if we are to achieve our objectives. I was delighted to hear David McLetchie point out how competition can drive up standards. I was surprised to hear that resounding around the chamber and being repeated by members from all political parties—because we do not always find support for our views on competition. It is obvious that if people have the right to change factors, competition will deliver improved standards. The problem is that so few people have the opportunity to change factors or land maintenance companies. To make that possible, it might well be necessary to look at other legislation and consider changes to the Title Conditions (Scotland) Act 2003.
We are in the unusual position of considering a bill that is not in black-and-white form. Although a number of potential changes have been highlighted in the debate, the bill has the chamber’s support. The process will not be easy—indeed, in introducing this bill Patricia Ferguson has stepped into a minefield—but she will have my support and the support of the Conservatives. The Conservatives are delighted to support the proposal and will approve the bill’s general principles at decision time.
17:05
This has been an excellent debate in which all members have made quite heartfelt pleas for legislation. That is not always the case in this chamber.
As Jim Tolson pointed out, owners need early information about their property factor and the services that they can expect to receive because the lack of such information simply stores up problems for the future. After all, as Sandra White and Paul Martin made clear, owners have every right to know what they are being charged for.
The fact that one of constituents’ main complaints about property factors relates, as we have heard, to the quality of their work and that people often want to know how to complain about unsatisfactory work demonstrates the need for home owners and property factors to have a clear understanding of the agreed level of service and of how to raise and get an adequate response to complaints when the level of service is inadequate. I, like many other members, would welcome a code of conduct for property factors. I welcome Patricia Ferguson’s willingness to discuss the code of conduct further, but I also think that the opportunity for the Scottish ministers to consult on the code before laying it before Parliament will ensure that the views of all parties—factors and those who receive their services—on how to make it most effective are heard.
Malcolm Chisholm, Elizabeth Smith and other members have, in today’s debate and in earlier debates on the issue, highlighted examples of property factors’ failure to deliver an adequate service. Sections 15 to 20 provide a framework for properly resolving disputes, section 17 sets out the referral process for complaints and section 15 confers on the private rented housing panel and committees—as the renamed home owner housing panel and home owner housing committees—additional functions to deal with such complaints. As Duncan McNeil said, we are still uncertain about the costs of the panel, but I accept Patricia Ferguson’s reassurances that she will provide further information on the issue at stage 2. I know that some members were attracted to the ombudsman option, but I agree with Malcolm Chisholm that there is more certainty about the home owner housing panel and therefore I support that approach. That said, I agree with Robert Brown that whatever system is put in place it should be clear and enforceable.
I have to say that I never thought that switching was the bill’s main aim. I appreciate David McLetchie’s view that that could raise standards, although I would hope that such issues would be addressed in the code of conduct. As Bob Doris pointed out, switching takes time and energy and I am sure that home owners would rather spend their time and energy on something more pleasurable. In any case, having to switch is actually a sign of failure and should therefore be avoided. Nevertheless, the option to switch must be available to ensure that the point of deregistration is fully carried through. I agree that the process must be made more straightforward. Allowing for time to elapse might help people find a replacement. We certainly have to address what happens when the property factor owns the land. Indeed, the issue has been raised constantly this afternoon and I am sure that we will make every effort to address it at stage 2.
At the beginning of the debate, I said that I sincerely welcome the bill. Let me be clear: I believe that property factors play a vital role in managing tenements, flatted properties and open spaces. I qualify that by saying that I am not completely convinced that the property factors whom I have come across have the necessary expertise to manage sophisticated drainage systems, for example, but in general I see the need for property factor services.
Some people, including some of my constituents, have suggested that owners could fulfil the role, but my experience is that it is difficult to make that work. I have also heard people say that local authorities should take on the role. As we have already heard, some do, but that means an additional cost. I cannot see any local authority being desperate to take on that responsibility for all council tax payers at no additional cost. Therefore, it seems that it is important that we have in place a framework that encourages and supports good and responsible property factors and puts out of business rogue factors who do not fulfil their part of the deal and try to exploit owners financially, and that framework should be supported by legislation.
I look forward to working with local government colleagues in our stage 2 deliberations to address the points that have been made today. Far too many people in Scotland are suffering because of rogue factors. I am sure that the bill will assist them, and I hope that we can move quickly so that they do not have to wait much longer for a resolution.
17:11
This debate on the principles of the bill and the issues that are to be addressed at stage 2 has been good and consensual. I congratulate Patricia Ferguson and The Herald and the Evening Times on their campaign.
I will begin by addressing an issue that clearly needs to be addressed at stage 2: the dispute resolution mechanism. Costs are a relevant factor, particularly these days—Duncan McNeil mentioned that on behalf of the committee. There are three relevant points about costs. I will give members some facts that will obviously be included in the consideration of the best way forward.
First, the cost per private rented housing panel case is running at just over £2,000. Under the ombudsman system that is run by Ombudsman Services: Property, which used to be called the Surveyors Ombudsman Service, the costs are an annual subscription fee per member—which is the factor—of £150 plus VAT and a fee of £335 plus VAT for each case that is investigated. There is a wide difference in costs between the panel approach and the ombudsman approach.
The second point about costs relates to who pays. Under the current arrangements, the Scottish Government—that is, the taxpayer—picks up the costs associated with the housing panel. If those arrangements continued, I imagine that there would be similar costs for dispute resolution in relation to factors. At the moment, the cost for the current panel is running at £440,000 per year. Under the ombudsman system, as things are at present, the taxpayer does not pay any of the costs, which are entirely levied on the factor, and the factor is liable to pay each time a case is raised against them. It seems to me that, whether we go down the panel route or the ombudsman route, it would be very unfair for the taxpayer to pick up the cost for errant factors.
The third point about costs relates to the overall budget. As I said, the current budget for the existing panel is £440,000, and it deals with around 220 cases per year. I would imagine that, particularly in the early years after implementation of the bill, there might well be more than 220 cases per year. If the taxpayer has to pick up the bill, we need to factor in the additional cost that would be involved in doing so. As Duncan McNeil highlighted, in considering the way in which we handle dispute resolution, the cost of the alternatives needs to be examined in detail.
In relation to those figures—£2,000 a case and 220 cases a year for the private rented housing panel—is the minister convinced that the panel provides value for money at that cost? It seems to me to be seriously underutilised if we are spending all that money to deal with such a small number of cases. Could the panel not do with more work?
The reality is that it is quasi-judicial. As Mr McLetchie will know, anything that is judicial, and particularly anything that involves lawyers, can be extremely expensive. I agree with Mr McLetchie that it is not always value for money.
Will the minister take a further brief intervention on that?
Of course, from another lawyer. Are they going to declare an interest, Presiding Officer?
The issue is about the need to have at the end of the process an enforceable order so that everybody knows where they stand. It is a judicial process and it has to have an element of judicial consideration. Would an ombudsman system provide that?
The enforceable order would be the responsibility of other authorities and not necessarily the panel or ombudsman. My point is that there are a great deal of detailed issues to be addressed in part 2. I agree with Mary Mulligan that Robert Brown makes a valid point that we need to consider enforcement, including who does the enforcement, what it costs, and whether that cost is passed on to an errant factor. All those matters need to be addressed in the bill but, in its current form, it does not do so. I am highlighting that those issues need to be rectified. Whichever model members prefer, we are all agreed that those matters need to be addressed and resolved at stages 2 and 3.
Sandra White made relevant points about the composition of the panel and other matters. Another relevant point is the expertise that is required, either for an ombudsman or a panel. A lot of careful consideration is required, given the importance of dispute resolution to the effective functioning of the bill.
Another general point relates to switching. Although that matter is not covered by the bill, our plans for the future on switching are important. The issue of switching, whether in relation to traditional property factors or land maintenance companies, has featured heavily in the debate and in the evidence to the committee. The committee said that the ability of consumers to switch their factors or land maintenance companies is a major issue, and I agree with that. An ability to switch providers more easily would help to improve many of the issues that consumers face when dealing with the industry.
The Title Conditions (Scotland) Act 2003 contains provisions that enable managers of property to be dismissed and replaced. However, as members have said, it can be difficult to dismiss and replace property factors, in part because a high level of agreement among the residents is required, as Robert Brown pointed out. There is nothing in the bill on switching by residents, but the committee suggested that the Government should carry out research on that. We recognise the need to do that research and we will do it. We are considering whether it would be useful to issue a consultation paper on potential changes to the 2003 act to lay down clear procedures on the switching of land maintenance companies by residents.
The fundamental aim would be to ensure that switching can take place when two thirds of residents wish to dismiss and replace a land maintenance company. We must also consider the more traditional factors and how they can be more easily switched. I stress that the Government agrees entirely with the committee when it describes the matter as a “very complex issue”. My colleague Fergus Ewing and I will keep the Local Government and Communities Committee and the Justice Committee informed of the Government’s thinking on the matter.
Many issues remain to be resolved at stage 2. I again offer the Government’s services to assist the member in charge of the bill to ensure that we get it right at stages 2 and 3 so that the bill achieves everything we all wish it to.
17:20
I very much welcome the content and tone of the debate. I will try to respond as best I can to the issues that members have raised. The debate has demonstrated why there is a need for legislation. It is important that we proceed with the bill and press on to stage 2. I suppose that I would say that, wouldn’t I? However, the evidence bears that out.
Members have made some very interesting points and a number of themes have been picked up. I was interested in the points that were made by Duncan McNeil, Sandra White, Mary Mulligan and—I am sorry; I was going to mention Sandra White again. I will no doubt come back to her. They all mentioned the issues of detail on the invoices and bills that are sent out, and hidden commission. It is important that there is openness and transparency on such matters. Sometimes, bills that people query are justified, but unless dialogue is possible, through which a resident can query a bill and be given an answer, they will think that it is excessive to have to pay 20 per cent commission to their factor for their building’s insurance. That may well be excessive, but only the factor can explain that to them. At the moment, people do not know that that happens, so no explanation is given. It is extremely important that transparency and openness are built in.
At the recent meeting that I referred to, it seemed that a large number of people were paying 35 per cent commission to factors for their insurance.
I would not dispute that. I have heard a variety of figures mentioned. I have also heard about what, in the trade, are loosely called gentlemen’s agreements, whereby the factor’s brother-in-law paints the close and the transaction is kept in the family. That is the bad side of factoring, but there are very many good factors who work well with the people for whom they are contracted to work.
I am extremely interested in switching, to which it is important to devote some of my time. There is a need for people to understand what the current rules say. Most people have the right to switch, whether through their title deeds, the Tenements (Scotland) Act 2004 or some other legislation. The problem that we encounter is that switching requires a majority of the eligible people to attend a meeting, and that can be difficult to achieve, because some of them might be absentee landlords, might not be interested, might be on holiday, might be in hospital or might be prevented from getting to the meeting by the weather. It can therefore be quite difficult to change factor, even when people in a property or development feel that that is the right thing to do.
However, we must be extremely careful if we want to consider changing how people can switch. What could be put in place of a majority? It would have to be a minority. When a small number of people in a development come together, they might have a good shared agenda, but sometimes they might not have such a good shared agenda, in which case problems could come to the surface—the very problems that we are trying to resolve by means of the bill.
I take Robert Brown’s point about sheltered housing complexes. As he mentioned, he has had an interest in Stonelaw Court, which I have visited. In fact, the committee heard evidence from Ms Murray of Stonelaw Court on the difficulties that residents have had. I think that it is unacceptable that their lifts, their car parking spaces and the flat for the warden can form part of the consideration of what makes a majority, which allows the person who developed the property in the first place to have a controlling interest. That needs to be resolved. However, if we want to go into switching—I am happy to do so—we must be careful about it, because we do not want to create problems that are similar to those that we are trying to resolve.
I am delighted to have the minister’s support, which he had indicated to me privately, and I welcome the dialogue with him. His support perhaps went to the extreme last week, when he lodged the motion to agree to my bill at stage 1 in his name, with support from Ms Sturgeon. However, I found out that that was an inadvertent move by the Government and not a deliberate ploy. Anyway, that support is welcome, in whatever form it comes.
Mr Neil described what he called three challenges, one of which related to the definition of a property manager. I am not sure—I will check it out—that the definition that I have provided does not cover the circumstances that he outlined; I think that it does. However, if it does not, I am happy to consider the matter further. An important point relates to the interface between title conditions, the definition and deregistration, which I might talk about in a little more detail.
I heard what the minister said about the costs of a panel versus an ombudsman for the dispute resolution mechanism, but we must think about other issues, too. Mr McLetchie was correct to suggest that the home owner housing panel is perhaps underutilised and that expanding its work—perhaps without an increase in costs—might be sensible.
We must consider what we are trying to achieve and whether an ombudsman system would achieve it for us. I have sincere doubts about that. Whatever mechanism we put in place must be independent of property managers and must be seen to be independent. I am not sure whether the ombudsman service that the minister mentioned would fit those criteria, at least in the eyes of people who have problems.
I am slightly taken aback by the minister’s determination about ombudsmen, given that he told the committee in connection with another matter that his view was that having a court or a tribunal to deal with housing issues might be the way to go. That is my bill’s direction of travel; it does not take us back—as I see it—to an ombudsman system.
I hope that I have covered several of the issues that members have raised. I am conscious of the time. I am grateful to all those who gave evidence to the committee. I listened to what they said with much interest. The Parliament has shown today that we all collectively listened to the issues that the witnesses raised and those that our constituents brought to us.
I look forward to working with the committee and the Government to ensure that the bill in its final form is robust and resilient, provides a more transparent system for home owners, and safeguards home owners and the good factors who work in Scotland from the very few bad factors who take advantage of our constituents. We in the Parliament have raised the problem’s profile; now we need to raise the standard of the worst factors to the level of good factors. The bill will be part of that process.