Malcolm highlights some concerns from constituents about factoring charges
Infrastructure Committee legislation on Property Factors Malcolm Chisholm (Edinburgh North and Leith) (Lab):
This is interesting for me because I made a submission to the consultation, and one never knows how many suggestions from one’s submission have been taken up. Probably not many of mine have been taken up, but other people’s may have been. It would be interesting to get an indication of how much change was brought about by the consultation. I will raise a couple of my points now and a couple later, if I may - I will not go through all of them.

A couple of things that were in the first version of the code have been omitted from the final version. Why has the original section 1, on general obligations, been omitted completely? That was the only section of the original version that referred to title deeds, which are a big outstanding issue in relation to factoring. That and some other matters that were in the general obligations section of the original version have disappeared. Why?

Perhaps of even more concern is the omission of what would have been section 2.6 - it was section 3.6 in the original version but, because of the omission of the original section 1, the sections in the new draft do not correspond with those in the original. Section 3.6 of the original version, on communication and consultation, said: “You must ensure that homeowners have a route for providing feedback to you on the service provided.”

In my response to the consultation, I suggested that you add that factors must respond to the feedback and take action to improve services where reasonable. That subsection has disappeared from the end of section 2, so there is no reference to home owners having an opportunity to provide feedback.

Two good things that were in the original document have disappeared altogether. Why have they suddenly disappeared?

Keith Brown:

Some things have been taken out of the general obligations section because, in a number of cases, they cut across reserved issues. For example, some points in relation to title deeds and compound interest involved complicated interactions between reserved and devolved issues. We tried to make sure that we kept the remit of the revised code within devolved issues and that we took on board the comments of home owners and other interests.

Malcolm Chisholm is right to say that there have been a number of changes, and I will confirm what they are. We have simplified the requirements in relation to the written statement, in particular the requirement to review or to interpret the title deeds. We have extended the timetable for property factors to provide the written statement to their existing customers. We have removed the reference to compound interest, because that is not within devolved powers. However, a home owner can still apply to the home owner housing panel to say that the charges that are being levied are excessive. The home owner housing panel may rule that a charge is excessive in cases where that is because of compound interest, although they may not state that as the reason. That check is still there.

The requirement on factors to provide sinking funds, or reserve funds, as trust accounts has been removed because we concluded that that was not appropriate for a statutory instrument. References to the fairly complex relationship between title deeds and the court have been simplified. In all of this, title deeds will remain superior to provisions of the court when there is a conflict between the two. The relationship between title deeds and contractual agreements has also been simplified in the code of conduct. That accounts for some of the changes.

There is a substantial degree of coverage of communication and consultation in the code of conduct. We believe that “Good communication is the foundation for building a positive relationship”.

We are quite conscious of that. Indeed, this morning I spoke to a home owner whose dealings with a factor highlighted that good communication is sometimes not happening. The code seeks to change that. In particular, the code seeks to ensure that communication is not allowed to be abusive or intimidating. That will be particularly beneficial in, for example, sheltered complexes or complexes designed for older people. Putting that in the code will be very useful.

The code also says that home owners have to be provided with contact details, including a telephone number. It states: “If it is part of the service agreed with homeowners, you must also provide details of arrangements for dealing with out-of-hours emergencies”.

Factors “must have a procedure to consult with the group of homeowners and seek their written approval before providing work or services which will incur charges or fees”.

There are exceptions to that where there is a degree of delegated authority. Regarding feedback, we are requiring factors to “respond to enquiries and complaints received by letter or email within prompt timescales.” They should deal with those “as quickly and as fully as possible, and ... keep homeowners informed” as required. Factors’ “Response times should be confirmed in the written statement”.

We believe that those things will move us towards far better lines of communication and consultation between home owners and factors, even if that is different from what was in the original version.

Malcolm Chisholm:
I have two other issues to flag up, and a general question to ask.

I imagine that the committee will agree to the motion. What opportunities will there be to amend the code in the future if it is found to be deficient? I would be grateful if you could answer that question as well as respond to my other points. I think that everybody is very positive about the 2011 act, but people said in the debate on the bill that the code of conduct is at its heart. If it is not strong enough, people will be disappointed in the legislation, which we do not want.

I have a couple of suggestions for additions to the code, which flag up issues. People are concerned about the way in which charges tend to go up significantly from year to year. Section 3.3 of the code helpfully deals with that, stating that there must be a “detailed financial breakdown of charges”.

My suggestion is to add that any increase in charges should be fully explained. Some of the complaints about factoring services that I get involve people saying, “Why has my bill suddenly doubled? Nobody has told me why.”

I will mention just one more suggestion rather than go through all of them. People are also greatly concerned when they have to pay for people who have defaulted on their payments. That is dealt with in section 4.7 of the code, which states: “You must be able to demonstrate that you have taken reasonable steps to recover unpaid charges”.

Obviously, people feel that it is an injustice if they have to cover the charges of two or three people - or more - who fail to pay. I suggest adding the word “all” before “reasonable steps” in section 4.7, but I am more concerned to flag up the issue as another major problem that needs to be addressed.

I hope that what is in the code of practice will help. I am just arguing that those two sections ought to be strengthened, because the issues that are involved cause so much concern.
May 23rd 2012