Hansard

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.

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