The Property Factors Scotland Act 2011 required all property factors to register on the newly formed Register of Property Factors. Failure to register is a criminal offence punishable by a fine or even imprisonment! Given the sanctions which exist it is important to be clear who is under an obligation to register. This is still proving a challenge for some entities providing property management services to residential schemes.
The legislation provides a definition of a property factor i.e. a person who, in the course of that person's business, manages or maintains land which is available for use by the owners of any two or more adjoining or neighbouring residential properties (but only where the owners of those properties are required in terms of the title deeds relating to the property to pay for the cost of management or maintenance of that land). The Property Factors Act identifies two factoring scenarios.
- Where the factor does not own the common parts of the residential development but only manages same;
- Where the factor owns and manages the common parts.
This second arrangement is typified by the Greenbelt arrangement where an entity takes a conveyance of the common areas and then charges home owners for the cost of maintenance by dint of a real burden in their titles.
There are however, other scenarios which bring a property manager within the ambit of the 2011 Act and two recent cases highlight that the net is spread wider than the simple Greenbelt arrangement.
Procurator Fiscal, Oban -v- Melfort Pier Holidays
The first case involved a development of holiday homes, Procurator Fiscal, Oban -v- Melfort Pier Holidays. Melfort created a development around the pier and harbour at Kilmelford near Oban. 18 units were constructed and 13 of these leased as holiday homes. The remaining 5 units were sold to owner occupiers. All of the units were subject to a Deed of Conditions which included reference to the use of a designated recreational area. All were entitled to use and contribute to the cost of its maintenance. A summary complaint was made against Melfort for their failure to register as a property factor. Melfort challenged this on both competency and relevancy grounds declaring that it didn't fall within the definition of 'property factor', because the legislation required that the management function be carried out in the course of that person's business. Melfort contended that its business was letting holiday cottages. The Court was prompt to reject such an argument, it wanted to uphold the purpose of the legislation to prevent unscrupulous factors from operating unregulated. The Court declared Melfort were obliged to register as property factors.
Cullochgold Services Limited -v- Blair
In the second case, Cullochgold Services Limited -v- Blair, a challenge based upon the need in the legislation for the land to be available for use by the owners of a two or more adjoining or neighbouring residential properties i.e. that those paying must have a right to use. Cullochgold owned and operated a private sewage system. Blair owned one of those houses served by the system and in terms of a Deed of Conditions he had to pay a service charge for that use. The question arose as to whether Cullochgold required to register as a property factor. The Sheriff indicated that Cullochgold was not a property factor because the sewage works were not available for use by the owners of the property, what they used was the service itself and not the service's source. A discussion flared about whether Cullochgold could therefore collect the service charge. Where a factor is removed from the factors register, it ceases to have the right to recover fees and costs. The question then arose as to whether fees and costs are recoverable by a person who failed to register in the first place. The Sheriff in Cullochgold did not accept that a failure to register as property factor necessarily eliminates the right to claim money for services which have been rendered.