Property Factoring
Who is it for?
This advice is for all owner occupiers and owner landlords of tenement buildings.
The majority of tenement properties in Glasgow have been managed over a long number of years on behalf of owners by established property factoring companies.
Since 2012, by law all property factors must be registered by the Scottish Government.
The majority of tenement properties in Glasgow have been managed over a long number of years on behalf of owners by established property factoring companies. Since 2012, by law all property factors must be registered by the Scottish Government.
The property factor will either be a private company or a Registered Social Landlord. In some tenements, the name of the property factor is written into the Title Deeds because that company was involved in the management of the letting and maintenance of the property at the time the tenement was constructed.
Over the years, the property factoring arrangements may have changed, so you should check with your solicitor that you have a property factor, and whether or not the property factor is named in the Title Deeds.
Having a property factor has many advantages for homeowners:
- As a point of contact for minor repairs and replacement of building parts and common fittings.
- Providing assistance and advice to an owners' meeting in the tenement.
- Procuring quotations from contractors for different types of works.
- Having an independent organisation to assess the condition of the property and appointing a contractor on your behalf to carry out repairs.
- Organising new works e.g. installation of a close door or controlled entry system.
Your property factor will provide a range of services, but not all factors will provide exactly the same service. The property factor is engaged by the owners and therefore cannot act on their behalf, where permission is needed, without majority agreement.
This is because, either:
- owners have come to an agreement on which services will be provided or
- the property factor has advised that he/she cannot or is unable to provide a particular service
Examples of the range of services which a property factor may provide are below:
Example of "Core" Services
- Maintaining the property
- Assess reported repairs or maintenance issues affecting the common fabric of the building
- Organise emergency works e.g. preventing further flooding from burst pipes; effecting temporary repairs to ensure that properties are wind and watertight
- Decide what other routine repairs are necessary and complete the works within an agreed timescale
- Provide information to owners on the costs of any works out-with any agreement on routine maintenance or emergencies
- Appoint contractors to carry out works
- Ensure that works have been completed to a satisfactory standard
- Collect floating charge from new owners to pay for certain repairs
- Providing advice and information
- Provide quotations for extraordinary works and encourage owners to agree on a price
- Organise and attend owner meetings when requested
- Provide out of hours emergency contractor information
- Billing
- Pay for common works, then bill owners for their proportionate share of the cost having worked out that share on the basis of Title Deeds or Tenement Management Scheme in force
- Provide bills for work carried out (usually quarterly) and management fees arising
- Complaints handling
- Have a complaints process in place to manage disputes e.g. over billing, alleged poor workmanship
- "Non-Core" services such as
- Carrying out periodic common element condition surveys at the behest of owners
- Organising common buildings insurance cover
- Collecting and administering common reserve funds out-with the Float
- Organising improvement works on behalf of owners e.g. fitting a controlled entry system
- Providing caretaking services
- Providing a lift maintenance service
- Providing a garden maintenance service
This list is not exhaustive and you should refer to the Written Statement of Service provided to you by your property factor which will set out the standard services they provide and possibly those non-standard services which they can provide at an extra charge.
The Statement is intended to be unique to your common property and based upon the Title Deeds (or Tenement Management Scheme where this has been agreed between owners)
Many property factors will request that a new owner pay into a floating charge fund (commonly referred to simply as "The Float") either shortly before or immediately after purchase.
The purpose of the Float is to allow the property factor sufficient working finance to effect repairs or cover other immediate costs, without loss to that business in advance of the normal regular bills being sent out.
The property factor will repay this sum to the owner when the property is re-sold again, less any sums owned which would not otherwise be charged through a final bill. Often the requirement to pay the float is enshrined in the Title Deeds.
Property factors, however, can from time to time, request a top-up to the float to reflect inflation and rises in other costs. This is a legitimate request, although it has been challenged from time to time by owners given that this appears to operate like a deposit.
However, historically, float charges have not moved in line with inflation, and the value of the float should reflect current costs, and be fairly charged across all owners in the block regardless of the point in time at which the flat owner purchased (or inherited) the property.
The majority of property factors will only seek an increase or top up to the float when it is deemed absolutely necessary.
A "sinking fund" or buildings reserve fund is a more substantial sum than that raised through the float and is more likely to apply to larger modern housing complexes, especially in high density developments with for example lifts, pumps, fans, air conditioning, communal lighting and other electrical switchgear.
These modern buildings may also require specialist regular maintenance of specific common parts of the building such as roof gardens, glass roofs and deck access balconies.
The purpose of a sinking fund is to ensure that certain major items can be repaired or replaced in the event of a failure or when they have reached the end of their life expectancy. As the name implies, a sinking fund is an exhaustible sum levied at a specific point in time from all of the owners.
A buildings reserve fund is established for the same purpose but may also be topped up from time to time in a similar way to the Float, and by agreement, may be boosted from time to time with the agreement of a majority of owners.
In both cases, a fund may be established on behalf of the owners' association when the development is first populated, and this is likely to be condition of purchase and written into the Title Deeds.
Your property factor is obliged by law (The Property Factors (Scotland) Act, 2011) to register with the Scottish Government as a property factor.
The Public Register includes a query system where the address of a property can be entered which will identify the property factor responsible for managing the common property on behalf of the owners in that building if there is one.
Self factored properties are not included in the register. The Register is updated annually and is not a "live" system.
The Act also stipulates that registered property factors must adhere to a Code of Conduct and provide a written statement of services to every homeowner where they operate as the property factor to existing owners within one year of the property factor's first registration with the Scottish Government .
This means that for most existing home owners, the Written Statement will have been sent out to all factored owners at some point between 2012 and 2014.
In addition, where the property has changed hands, the property factor must provide a copy of the Written Statement to any new homeowners.
If the property factor wishes to change the terms and conditions of the service provided, it must notify ALL homeowners in the property where the change of service level is being proposed.
Disputes with property factors can be referred to the First Tier Tribunal Housing and Property Chamber. This is an independent adjudication body whose remit is to consider any claims that the Code of Conduct has been breached by a property factor.
If you are dissatisfied with the service being provided by your property factor, in the first instance, you should contact the property factor directly. They may have a formal complaints process which you should exhaust before considering making a complaint through the Home Owner Housing Panel (HOHP).
Any complaints about the conduct of a property factor relating to a service matter which occurred before the date of implementation of this part of the Act will not be considered i.e. anything before 1 October 2012.
Should you and your fellow owners in the tenement or block opt to move to another provider, or indeed consider self-factoring, it is very important to consult your title deeds to determine if there are specific conditions under which you and a sufficient number of other owners in the property would not be able to end the contract with your current factor and appoint a new property factor.
Otherwise, a simple majority of owners should be able to end the service contract with the existing property factor and contact an alternative factor with a view to asking them to take over the service.
The majority of registered private property factors operating in Glasgow are members of the Property Managers Association Scotland (PMAS).
There are a number of tenement blocks in Glasgow where owners have decided to organise their own building repair and maintenance. This is called self-factoring and often arises as a result of a dispute with a factor where agreement cannot be reached or where owners believe that they can achieve better value for money or service from contractors by doing this directly.
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