FACTORING POLICY. This policy sets out the scope of and management arrangements for the Association s Factoring Service.

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1 FACTORING POLICY 1.0 INTRODUCTION This policy sets out the scope of and management arrangements for the Association s Factoring Service. 2.0 FACTORING DEFINITION a property management service provided to property owners to co-ordinate and carry out work on their behalf, usually in respect of repairs, improvements, maintenance, insurance and associated administration. 3.0 REGULATORY AND LEGISLATIVE FRAMEWORK This policy (and the supporting procedures) has been produced with reference to the following documents: Communities Scotland Performance Standards AS5.2 Factoring Ochil View Corporate Objectives nos 1 and 2 The Scottish Executive s Good Practice in Housing Management Factoring The Guide to the Abolition of Feudal Tenure (Scotland) Act 2000 The Title Conditions (Scotland) Act 2004 The Tenements (Scotland) Act 2004 The Tenements (Scotland) Act 2004 (Prescribed Risks) Order SERVICE PROVISON The Association s Factoring Service aims to provide a good quality, self-funded living environment for home owners. The Association aims to provide a service where it is in our interest and in the interest of our tenants to do so and where owners positively affirm their interest in the Association providing a factoring service to them. The Association notes the advice of the Land Tribunal that owners cannot be compelled to co-operate with improvements. 5.1 Scope The Association reserves an option to provide a Factoring Service to the following owners : tenants who have exercised their right to buy their home from OVHA those who previously exercised the right to buy their home from Scottish Homes sharing owners owners who have purchased dwellings outright from OVHA (ie former sharing owners or properties developed for outright sale, excluding Homestake).

2 5.2 Service to Flat Owners Where a service is provided to owners of flatted developments, it will include: reactive repairs, cyclical maintenance, improvements and renewal of common parts. These are detailed in the owners Deeds of Conditions/Community Burdens and include: roofs, external walls, common close and stairs, communal gardens and landscaped areas including garden walls and fences repairs to private common water mains and drainage pipes buildings insurance A cost benefit analysis will be undertaken on the value of collecting a factoring fee for common reactive repairs arising from flats in mixed ownership developments. These minor works may be undertaken without a service charge if it is in the interest of the Association or its tenants. 5.3 Service to House Owners Where a service is provided to owners of houses it will be limited to the following: landscaping of common gardens and landscaped areas where applicable (ie where not adopted by the local authority or maintained by the owners) repairs to private common water mains and drainage pipes A cost benefit analysis will be undertaken on the value of collecting a factoring fee for common reactive repairs. These minor works may be undertaken without a service charge if it is in the interest of the Association or its tenants. The Association will also insure shared ownership properties and flatted properties when are located in a block which contains properties which are owned by the Association. 5.4 Homestake The factoring service will not be extended to include properties developed under the Homestake Initiative as maintenance responsibilities will remain with the Homestake owner. Common landscaping will be an exception but will be resisted during the design process. 5.5 No Association Ownership The Association will not provide a service where it has no ownership involvement. 5.6 Association in Minority Ownership Where the Association is a minority owner, it will encourage owners to appoint an alternative factor and will provide advice and guidance on the appointment. 5.7 Community Burdens and Conditions Where the Association has reserved the right within a deed of conditions/community burdens to provide a factoring service but there is no signed factoring agreement, it will encourage current owners to sign an agreement and will impose a factoring agreement on subsequent owners. 2

3 6.0 FACTOR S RESPONSIBILITIES 6.1 As Factor, the Association s service will include: Inspections Undertake inspections of common property every two months in order to determine the condition in relation to the proposed cyclical/planned maintenance programme. Reports will be made available for inspection to service users upon request. The maintenance programme may be updated when inspection reveals a more rapid deterioration or may be deferred should the fabric/component be wearing better than expected. With reactive common repairs, pre-inspections will be carried out as required in order to accurately determine the work necessary. Post inspections will be carried out on 10% of common repairs to ensure satisfactory completion and a good quality standard of work has been achieved before charges are invoiced. Monitoring Works Arrange and oversee the maintenance, repair, renewal and authorised improvements to common parts by approved contractors in accordance with the Procurement Policy and in compliance with the Deed of Conditions. Cyclical Maintenance Undertake a programme of cyclical maintenance which will reflect and be informed by the inspection programme Authority to Carry Out Works in Excess of Float Sum Obtain authority from owners as specified in the Deed of Conditions/Community Burdens to carry out works in excess of the factoring float sum Maintenance Fund Maintain, renew and account for the Maintenance Fund. Provision of Information Provide owners with periodic information about the factoring service. Provide comprehensive and clear financial information which provides details on repairs and associated expenditure and accounts to owners at least every 6 months. Provide a clear and comprehensive handbook that will be updated as required. Communication Convene meetings of owners as necessary in line with their Deed of Conditions/Community Burdens or as requested by owners Insurance Insure relevant properties for full replacement value including site clearance charges and professional fees. Cover will include fire and flood and will be provided by a major insurance company at a competitive cost for the appropriate level of cover. Insurance will cover the prescribed risks which are set out in the Tenements (Scotland) Act 2004 (Prescribed Risks) Order 2007 Owners are required to participate in this insurance scheme and therefore have 3

4 no need to purchase their own building insurance. The cost of this insurance is included in the factoring charge. The Association will advise owners, via the Owners handbook, that cover does not include personal effects, furniture, fittings etc and that it is their responsibility to ensure that they are adequately covered in this respect by household contents insurance. The householders of any properties insured by the Association will receive a copy of the insurance cover with their factoring account. 7.0 OWNERS RESPONSIBILITIES Owners responsibilities will be set out in the Owners handbook. The Association will advise owner occupiers and sharing owners of their responsibilities at the time of purchase to ensure that they have an understanding of the respective roles held by owners and the Association. However, as identified by both independent consultants (PIEDA) and the Scottish Consumer council, purchasers lawyers should take a more active role in advising their clients. The Association will also therefore also encourage buyers to seek advice from their solicitors. 8.0 GENERAL MANAGEMENT AND ADMINISTRATION 8.1 To provide an effective management and administration service to owners, the Association will: Maintain records in respect of each block of flats and individual dwellings Record the repairs and other charges for the common parts of the block Apportion the charges for repairs, cyclical maintenance and other services Issue accounts to owners and pursue payment for monies which are due to the Association Deal with enquiries relating to management arrangements and accounts which are issued Advise and consult as appropriate with owners over major repairs, cyclical maintenance and planned maintenance 8.2 Responsibility & Coordination The Development and Property Services Manager will submit an annual report on the provision of factoring services to the Housing and Development Committee. The Development and Property Services Manager has the primary responsibility for the factoring service within the Association. However, in exercising this responsibility, the Development and Property Services Manager will liaise closely with the Assistant Property Services Manager, the Finance and Corporate Services Manager and the Housing Services Manager. The departmental services are set out in Appendix FACTORING SERVICE AND STANDARDS (for items of common ownership) The Association will not provide a repair service for individual repairs to the owners property. The service for eligible common repair, renewal and improvement works will be as follows: 4

5 9.1. Defects Liability (in relation to New or Refurbished Properties) The service defined in the Association s zero defects policy will be provided. Defects are not repairs; repairs arise through accident, negligence, wilful damage or any other external factors, which could not reasonably be deemed to be the responsibility of the contractor. Where defects arise, they should be reported immediately to the Association who will inform the contractor. Immediately prior to the expiry of the defects liability period each property will be inspected by a representative of the Association, the Clerk of Works and the Contract Architect to establish whether any other defects exist which require the contractors attention. Owners will be notified in writing of this visit. The Association will charge for a latent defects service where required. Owners will in the first instance be referred to National House Building Corporation or Zurich where this cover is in place. 9.2 Common Repairs, Renewal and Replacement and Cyclical Maintenance The Association s approved contractors will carry out repairs and maintenance. The Association will identify items for renewal and replacement. Common repairs should be reported to the Association as early as possible. A record will be kept of the date and the name of the person reporting the repair. These will be added to those identified by the Association s inspections. The association s inspection reports will be available for inspection by owners. Repairs will be categorised and given the following response time: Emergency 4 hours Urgent 24 hours Routine 10 working days Repairs/maintenance costing less that 100 per house/flat will be instructed without reference to the owners and will be paid for out of the 100 factoring fund. The Association will invoice the owners for an amount identical to the cost of repairs in order to maintain the fund at 100. Repairs/maintenance costing over 100 per house/flat will be subject to the Association obtaining three competitive quotations. The owners will then be notified in writing of the nature of the work and the total costs etc. A meeting of the Association and the owners will be held to discuss the quotations and obtain authority for the works to proceed. Each owner will be bound to pay their share of the costs of any such repairs (including the Association s administration costs) prior to such repairs being instructed. If owners fail to respond within the specified time, the Association reserves the right in the Factoring Agreement to instruct certain categories of work under certain conditions and pursue reimbursement. 5

6 9.3 Right of Access The Association, its authorised representatives and contractors will have right of access to the whole property including individual houses where this is required for inspection; or to effect a repair to common parts or services; or to prevent damage to the property. Except in emergencies, three days notice will normally be given. 9.4 Emergencies Emergencies shall be defined as circumstances or situations, which are considered dangerous or seriously detrimental to the safety of the property or persons. Emergency repairs, which arise within office hours, should be reported immediately to the Association. Those arising outwith office hours should be notified to the Associations approved out of hours contractors, contact details being provided on the Association s office number. The Association reserves the right to instruct emergency work without recourse to the owners. However, the Association will notify the owners within seven days of the repairs being carried out and the charges will be included with their next invoice. 9.5 Common Areas Under the terms of the Deed of Conditions of the property it is each owner s responsibility to maintain the common areas, e.g. close, stairs, landing, back courts, gardens, grounds etc unless there is an agreement for these services to be provided on behalf of the owners by the Association. In the absence of such an agreement, if an owner fails to discharge their responsibility to maintain the common areas, the Association reserves the right within the Factoring Agreement to arrange for the necessary work to be carried out and levy a charge on the owners. 9.6 Services Owners may request that the Association instructs certain works. The Association may agree to instruct the works and may obtain competitive quotations (unless in the case of an emergency) and submit these to the owners for approval. The consent of the majority of owners is required before new services can be implemented. The provision of statutory services out with the control of the Association, e.g. stair lighting, landlord supplies, will not be subject to competitive quotations and these will therefore be charged at cost to owners. 6

7 10.0 FINANCIAL ADMINISTRATION OF SERVICES AND WORKS 10.1 Chargeable Costs Services Accounts will be issued twice yearly and will comprise the following: - Service Charges e.g. Lighting, Landscape Maintenance, Close Cleaning (if applicable) The Association s Management Fee (which includes buildings insurance) Repairs, with a schedule detailing repairs carried out during the period Repair costs will be apportioned according to the share shown in the Deed of Conditions. The Deed of Conditions/Community Burdens may show that some repairs should not be apportioned eg repairs to private common water mains. Owners will cover the full cost of such repairs and may also be required to instruct the work. Accounts from private contractors will be available for inspection at the Association s offices for a period of fourteen days following the issue of accounts Maintenance Fund The Association will levy an annual charge on all owners who receive a factoring service to accrue a fund which will be used to cover major repairs, improvements, planned and cyclical maintenance. The charge will be set at 120 per annum and will be revised in line with inflation and rounded to the nearest 5. A revised factoring agreement will include provision for a maintenance fund. New owners will sign the revised factoring agreement and existing owners will be encouraged to agree to the new conditions. Work will not commence until sufficient funds have accrued. Annual statements will be provided to contributors. The fund will be non-refundable; savings on contracts will be returned to the fund and funds, including contingency funds, will not be returned to owners following sales Payment of Account Accounts will fall due for payment within twenty-eight days of issue. Statements of account will be issued at least six monthly. The Association will follow the Rechargeable Repairs Procedure to ensure that arrears are minimised and the outstanding debts are recovered. All reasonable legal means will be employed such as placing a charge on the property. The Association will manage arrears in accordance with its arrears management policy 10.4 Calculation of Costs Where owners agree to the proposed works they shall be advised of the anticipated cost based on the accepted tender. Added to the amount of the anticipated cost shall be a proportion of consultants fees, planning and building warrant charges, where applicable, and an allowance of 5% to cover the Association s administrative costs. A contingency sum of 10% of works costs will be added to the approved works costs. 7

8 In order to provide owners with a degree of security and to encourage their participation any additional costs shall be restricted to 10% of the original anticipated cost based on the accepted tender. Consultant s fees, together with the Association s administrative cost shall be based on this amount. The actual cost to be charged to an owner shall be based on the final account, their proportion of consultant s fees, planning and building warrant charges where applicable and an allowance of 5% to cover the Association s administrative costs (subject to the 10% restriction detailed above) Recovery of Owners Costs Work to owners properties shall not commence until the Association has accrued sufficient funds to cover all costs, together with a signed mandate authorising the Association to undertake the works Accountability The Association will liaise with the contractor on the works programme on behalf of the owners. The Association shall therefore remain accountable to the owners and shall maintain records for each owner detailing monies received against expenditure. Details of owners accounts shall be made available to them on request with a full statement of account being provided on agreement of the final account CONSULTATION, LIAISON & INFORMATION The Association will ensure that appropriate information on the factoring service is issued to owners in a variety of ways, including separate leaflets and items in Association s newsletters and an Owners Handbook. The Association will consult and liaise with owners as required on repairs or maintenance work, in particular where the individual cost of the work required will exceed 100. The Association will arrange meetings on factoring services with owners as required or in response to a request from owners. Prior to purchase, potential owners will be given clear information about the responsibilities of being an owner, including repair and maintenance obligations and indications of costs, where possible. The Association will embark on a long term plan to provide a guide to translate all deeds into plain English summaries. After missives have been concluded detailed information will be issued to the owner including: Factoring Agreement, Summary of Deed of Conditions/Community Burdens, Factoring Policy Owners Handbook Information about insurance 8

9 A plain English summary of the Deed of Conditions/Community Burdens where available This information will either be provided by the Association or the purchaser s legal adviser ALTERING AND TERMINATING THE FACTORING AGREEMENT The Association will retain the right to provide factoring services until such times as all adjoining houses and/or shops/properties are in private ownership or until the majority of owners within the property wish to terminate the agreement. All new purchasers will be required to sign a revised Factoring Agreement which requires owners to contribute to a Maintenance Fund. The Association retains the right to transfer their rights and obligations under this factoring agreement to a third party to act as Factor, should the Association, in its sole discretion deem it appropriate DISPUTES 13.1 Neighbour Disputes Owners are expected to conduct themselves in a manner, which does not cause annoyance or nuisance to their neighbours and in accordance with statute, local byelaws and the Deed of Conditions/Community Burdens. Any breaches of statute or conditions laid down in the Deed of Conditions/Community Burdens should be referred to Ochil View Housing Association Ltd for advice or intervention as required. This will not, however, prejudice the right of any owner to take such legal action as they see fit Disputes with the Association Complaints or disputes regarding repairs or maintenance works should be referred in the first instance to the Development and Property Services Manager. The Association will respond to complaints and appeals regarding the factoring service and charges in accordance with our Complaints Policy. Where we fail to resolve a complaint, complainants will have the right of access to the Scottish Public Services Ombudsman MONITORING & REVIEW The following Key Performance Indicators will be collected and reported on an annual basis to Housing and Development Committee: Factoring arrears Debt recovery Expenditure % of new factoring agreements that have been signed Property profile including sales Performance against key performance indicators Policy review 9

10 Satisfaction levels will be ascertained during surveys which are undertaken every 5 years and following completion of major works. The Development and Property Services Manager will ensure, in liaison with management colleagues, that the provisions of this Policy and the supporting Procedures are implemented by all concerned. This policy will be reviewed at least every 3 years. The factoring charge will be reviewed every year The factoring agreement will be reviewed every 5 years Trish Baxter Development & Property Services Manager January 2008 Policy Consultation and Review Process Reviewed by Management Team 31 March 2006 and 1 December 2006 Reviewed by a meeting of Owners on Recommended by the Housing, Development & Property Services Committee on 12 th December 2007 APPROVED BY THE MANAGEMENT COMMITTEE ON 31 st JANUARY

11 Appendix 1 GLOSSARY OF TERMS Ochil View Corporate Objectives nos 1 and 2 To provide a comprehensive and responsive housing management service to the Association s tenants, sharing and factored owners (SO1); To provide a comprehensive and responsive property management service to the Association s tenants, sharing owners and owner occupiers ensuring compliance with the Scottish Housing Quality Standard (SO2) The Guide to the Abolition of Feudal Tenure Act This was issued by the Scottish Executive in March 2003 and advised the Association particularly on compensation for loss of feuduty, enforcement of amenity burdens and manager burdens. The Title Conditions (Scotland) Act 2003 This Act followed the Abolition of Feudal Tenure in 2000 and modified and clarified the law on real burdens and other title conditions. It set out a framework of rules for the imposition of conditions. The Tenements (Scotland) Act 2004 This Act provided a structure for the management and maintenance of tenements where this was not provided for in the owner s title deeds. The Tenements (Scotland) Act 2004 (Prescribed Risks) Order 2007 This order prescribes the risks against which owners must insure. Deed of Community Burdens (formerly known as a Deed of Conditions). This legal document forms part of the sale particulars and runs with the land ie will apply to successive purchasers in perpetuity. This documents: defines the common parts, rights of access, arrangements for building insurance provision for maintenance and share of repair and service costs specifies the responsibilities of each owner with regard to the general upkeep, repair and maintenance of specified mutual areas or services which are either within a block of flats or in the designated areas of ground shared by the owners in a building or group of buildings Provides information on consultation and arbitration arrangements The Association s deeds state that the Association reserves the right to provide a factoring service. Factoring Agreement This document is signed by the owner and the Association. A new agreement must be signed by successive owners. The Association in this document retains the right to provide factoring services. It covers the following matters: Statement of the basis on which the service is provided (eg Deed of Conditions/Community Burdens or voluntary basis) The period over which the service is provided The nature of the service provided 11

12 Commissioning arrangements Charging arrangements, including contribution to a sinking fund Complaints procedure Contact point within the organisation Arrangements for terminating the contract The Association s duties and service standards Occupancy Agreement This is signed by sharing owners. It is a standard document that sets out the conditions which the Association requires its sharing owners to abide by and contains some features in common with a tenancy agreement for a tenant. The occupancy agreement requires sharing owners to pay a service charge and confirms that the Association will arrange insurance for the building. Whilst the Association undertakes to carry out services, it retains (in schedule 3 of the document), the right to withdraw and/or vary the service after consultation and on giving not less than 4 weeks notice of any material change. Owners Handbook This document is produced by the Association. It provides more detailed advice on our factoring service and sets out owners rights and responsibilities. 12

13 DEPARTMENTAL SERVICE PROVISION Appendix The Housing Management Service will include: Provision of an Owners Handbook Conclusion of a Factoring Agreement with owners if this was not concluded at the time of purchase Provision of a Guide to the Factoring Service to the purchasers solicitors Invitation to new owners to a meeting, which will be convened shortly after the commencement of their ownership, to discuss the factoring service. Provision of periodic meetings for all new owners in that period Verification of owners details and period of responsibility for factoring charges prior to issue of accounts Monitoring of payment arrangements by owners to pay charges by instalments after the issue of accounts Referral of owners to external agencies for money and benefit advice Referral of unpaid accounts to Debt Collection Agency Liaison with Finance staff on the preparation of debt write-off proposals 2.0 The Financial Management Service will include: Retention of all paid invoices to be charged out to owners in a suspense account. Preparation of invoices to owners within 6 weeks after 31 March and 30 September. Forwarding of invoices to the Assistant Housing Services Manager for final verification. Management of the factoring ledger to reflect all payments made during the month. Reconciliation of the factoring control account on a monthly basis. Forwarding of all balances outstanding to the Assistant Housing Services Manager at the end of each month. Presentation of quarterly report to the Management Committee as part of the management accounts containing details of the debt levels and number of cases with outstanding debts. Budget preparation which includes the cost of providing the factoring service, with the service being fully costed and shown as a separate cost centre within the final budget. 3.0 The Property Service will include: Provision of information to Finance staff for factoring charges Inspection of common areas at 2 month intervals Maintenance of records of inspection Procurement of works and services Monitoring of standards of work and services Examination and approval of invoices Attendance at factoring meetings as required 13