Scottish property factoring: questions and answers

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1. What is the exact scope of this market study?

The study will focus on the supply of communal property management services to owners of units in multi-owned dwellings and/or dwellings with communally owned space – typically owner-occupiers in a block of flats – and will include looking at self-factoring' (that is the owner-occupiers organise the property maintenance themselves). Where local authorities and housing associations provide property management services to independent flat owners we would count that as within the remit.

Property management services provided to individual owners, for example for the purpose of letting a property, are outside of the remit of the study as are property management services for commercial property.

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2. What is the size of this market?

We do not have exact figures for the size of the market at present. However, we do know that there are some 330,000 owner-occupied flats in Scotland and a further 85,000 rented from private landlords.  Of these, the majority of residents are likely to be in a relationship with a property management company. Average administration charges paid to property managers appear to be in the region of £100 per flat per year. Payments to property managers for repairs, maintenance and insurance will be additional to this sum and will clearly vary substantially between properties. The issue is, therefore, of considerable interest and direct relevance to a large number of Scottish consumers.

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3. Is the OFT going to look at all the issues identified by the Scottish Consumer Council (SCC)?

The OFT study will be looking at the supply of property management services across Scotland and we will be looking at similar issues to those considered by the SCC. In particular, we will be looking at the nature of the services and charges, service standards and the legal framework.

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4. Does the OFT at this stage consider there is a problem in this market?

The OFT has no preconceptions about what the study might find. The SCC has carried out some research into the supply of property management services which highlighted some potential consumer detriment in this area in Scotland. However, the SCC study was based on a limited sample of residents in the Dennistoun ward area of Glasgow and may not be representative of the position across Scotland as a whole.

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5. How involved is the Scottish Government in this? Has the OFT consulted the Scottish Government? Does it support the OFT proposals?

The OFT has been discussing these issues with the Scottish Government. The Scottish Government is supportive of the OFT's market study.

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6. Are any issues identified for the rest of the UK? Is it likely that the OFT might look at these other UK issues after Scotland?

The SCC supplied evidence to the OFT highlighting some potential consumer detriment in Scotland. The specific legal arrangements for the ownership and management of multi-owned dwellings is materially different in Scotland from other parts of the UK, hence the focus on Scotland where specific issues have been identified. At this stage, the OFT is neither ruling in, or ruling out, looking at the supply of property management services in other parts of the UK.
 

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7. What are the consequences of a market study - is a referral to the CC likely?

It is too early to say. There are a number of possible outcomes of a market study, including:

• making no recommendations
• publishing information to help consumers
• encouraging firms to take voluntary action
• encouraging an industry code of practice
• making recommendations to Scottish Government or sector regulators
• investigation and enforcement action against companies suspected of breaching consumer or competition law, or
• a market investigation reference to the Competition Commission.

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8. What are the kinds of problems in this area?

The OFT does not have any preconceptions about whether there are substantive problems in this area. However, it will be considering broadly:

• whether property managers provide good value for money – in terms of administration fees, standards of service, repairs being carried out to suitable standards and in a timely manner, etc
• whether residents are aware of their rights of redress and the contractual obligations of property managers, and
• how easy it is for residents to switch property managers.

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9. Has the OFT received complaints about this (from consumers)?
 
The OFT has received some complaints about property management services direct from consumers and has examined complaints/enquiries to Consumer Direct regarding property managers. Individual consumer complaints are not the main impetus for the study which has been stimulated by concerns raised by the Scottish Consumer Council and others.

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10. Can residents presently choose to appoint a different property manager if they are unhappy?

Choice and switching between property managers is an issue the OFT is considering in the study. Even if residents are legally able to switch property managers, this does not necessarily mean that the process is transparent, well-understood or easy to undertake, and the OFT will be looking into this. The OFT will be considering this question further in its study.

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11. Is the OFT aware of MSP Patricia Ferguson? Does it agree with her that legislation needs to be tightened and a new watchdog to deal with complaints established?

The OFT has met with Patricia Ferguson MSP recently to discuss her concerns. As noted above, there is a wide range of potential outcomes from a market study, one of which could possibly be to recommend legislative change to establish a new Regulator to oversee this sector and deal with complaints.

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12. Who can I contact about the OFT about this market study?

The contact details are as follows:

Scottish property managers market study
Floor 2C
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London EC4Y 8JX

Emails can be sent to: propertymanagers.study@oft.gsi.gov.uk

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13. If consumers need advice about this issue who is the best contact?

Depending on the nature of the advice required, there are a number of potential places that consumers can go to. In the first instance though, we would recommend that consumers contact Consumer Direct or their local Citizens Advice Bureaux.

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