Property maintenance / factoring fees

KG

The hypothesis: Property owners in Scotland (and elsewhere??) may not be getting the best deal available when it comes to factoring / property maintenance charges because of the unchallenged dominance of large property management companies.

The background

I am not sure how it works in England, but here in Scotland it is common to have a 'factor' to manage the communal areas and common repairs for blocks of flats.

Flat owners pay a monthly factoring fees which appears to cover cleaning of communal areas, grass cutting in the back court and (often) buildings insurance.

On top of this, owners are liable for their share of the cost of any common repairs. These common repairs are handled through the factor, who usually decides on what repairs they deem necessary, informs residents that they are going to happen and bills them accordingly (including an admin charge).

There are pros and cons to this solution, but I am increasingly concerned about the fees being charged by large factoring companies who take on the role of factor for new builds (from the '80s onwards).

The problem

I assume that the factoring companies are selected by the developers of the new builds as someone needs to take responsibility from the off.

However, my concern is that they then remain indefinitely as unchallenged factors, with no competition to motivate them to make sure they are getting the best deal for the owners when it comes to repairs, and little chance for new, more competitive factors to emerge.

In essence, I am not sure that the consumer is getting value for money.

Basic fees

I've been looking at flats to buy recently so have had access to a lot of information on factoring fees as this is a standard question on the home report provided to potential buyers. I would normally expect to pay around £35 - £55 per month factoring fees in a traditional victorian 8-flat block, but fees on many new builds are noticeably higher.

I recently questioned whether the figure of £100/month factoring fees (from one of Glasgow's prominent factoring companies) for a flat on the market for £75k was correct and was told yes - but that the flat had a lift and underground parking.

This seems like a rather high fee when you consider it only covers building insurance and ongoing scheduled maintenance (such as gardening, cleaning and lift maintenance) for the common areas. It would not - for example - include the repair bill for the lift if it broke down outside of the normal maintenance schedule.

The company in question are factors for the whole development of flats - I estimate there are around 30 flats in this development, meaning that they have an estimated income of £36k a year from this development alone. This is before they take any 'administration fee' as part of their management of any communal works which need done.

I know there are outgoings (building insurance, a gardener, a cleaner, a lift engineer), but this figure still seems like a 'good earner' for the company.

Common repairs

In terms of common repairs, I know of an owner who was asked to contribute £100 to the cost of replacing around 30 meters of 7-foot high wooden fencing surrounding a drying green after it partially blew down during a recent storm. This owner lived in one of an estimated 66 flats who all used the same drying green, meaning that the cost of this common repair was a total of £6,600.

The owner's son owns a fencing company and was gobsmacked by this price, so he called the factor and offered to do it for half that amount (which would still have been well above his normal rates) but was told that they couldn't use his company as they 'were not on the list'.

Whilst factors (I believe) have a duty to get a number of quotes for any piece of communal work, this example seems to indicate that they may not be casting their net wide enough to get the best deal for owners.

Buildings insurance

On top of all of this, the fact that factors fees include building insurance is also an area for concern as there is a lack of transparency over how competitive these fees are.

It may well be that, given the position they are in - with several thousand properties across the city to insure, these large companies can get the best deal for owners when it comes to negotiating the price of buildings insurance. And I do see the sense in paying into a common policy.

However, like the management of common repairs factors are, in the main, trusted to just get on with it, and owner pays the fees without knowing if they got the best deal for them.

Owners rights

Well - I am not sure what these are really. Which is kind of the point of the post. I think this is something that should be challenged, but I am not sure where to start

I know that, under the Tenament Scotland Act which came into force back in 2005(?) a minority of owners in a building cannot stop the progress of work agreed to by the majority of owners. But I do not know whether this extends to a choice of factor, or whether this is written into the deeds to your property (for new builds at least).

I do know some flat owners in England who are a part of residents committees who seem to have more of a say in things, but I am not clear whether such committees replace factors or work alongside them; what legal powers they have; and if there is anything similar north of the border.

So - anyone got any info to add? Any suggestions on how we challenge this?

KG


p.s. - sorry, I was gonna make the headings bold to stand out more, but the formatting doesn't seem to work on this computer.

bod1467

Once a factor is an incumbent then it can be difficult to oust them. It CAN be done but it needs a quorum of residents (which should be defined in the deeds/missives) to agree.

Having a factor is not (usually) a requirement ... what IS a requirement is having arrangements in place to handle things like maintenance of common areas, insurance etc. When I moved to Scotland some 16 years ago I moved to a new-build estate. (Mix of 2 and 3 bed houses, and 2 bed flats). We did NOT engage a factor in the early days - we self-factored, by forming a residents' association, electing a committee (I was chairman), making all the necessary "factoring" arrangements and collecting fees from each property to cover these costs. (We were non-profit ... all committee members gave their time free, and expenses were minimal. It was very cost-effective).

It worked well for a few years, then people started getting selfish and tried to avoid paying, leading to confrontations and hassles that the committee were no longer willing to endure. In the end we engaged a factor because it meant the legalities were then the responsibility of a 3rd party company. This also meant that all properties saw a 50%+ increase in their monthly charges ... the selfish ones caused EVERYONE to and up paying more.

Fast-forward several more years ... we no longer have any facyor, nor a residents' association. We were fortunate in that the council adopted the common areas.

KG

bod1467 wrote: »

Fast-forward several more years ... we no longer have any facyor, nor a residents' association. We were fortunate in that the council adopted the common areas.

Yeah - the council / housing associations seem to be the best value for money tbh. Usually because they tend to own some of the property themselves and so don't want unnecessary expense.

bod1467

Ours is still a "private" estate. (As in private properties, not council or HA). It's just that the roads, pavements and other common grounds have been adopted by the council, so we don't need a factor to maintain them or take out public liability insurance.

wealdroam

This thread would be better placed on the Housing board.

Slowhand

I'd never ever again buy a flat with a Factor. I had a top floor flat in Ibrox and the Factor was useless when the roof leaked (still had to pay their annual charges though). I had to get the Environmental Health involved to get it fixed. There was a number of phantom repairs on bills as well.

bod1467

Who was your factor? (PM me if necessary). Ours had the initials G & W.