Scottish Government

PROPOSED ACCREDITATION SCHEME FOR PROPERTY MANAGERS

MEETING OF STAKEHOLDERS' WORKING GROUP

HELD ON 5 NOVEMBER 2009 AT THE OFFICES OF CONSUMER FOCUS SCOTLAND, ROYAL EXCHANGE HOUSE, 100 QUEEN ST, GLASGOW

NOTE OF MEETING

1. APOLOGIES

A list of those who attended is attached at Annex A. Apologies had been received from Colin Baxter, Alison McDiarmid, Lionel Most, Natalie Sutherland and Jennifer Wallace.

RH welcomed Donald Reid who was representing The Law Society in the absence of Lionel Most, and Simon Stockwell, Head of the Scottish Government's Family and Property Law unit.

2. MEETING HELD ON 17 SEPTEMBER 2009

A note of the meeting held on 17 September was approved.

Matters arising:

a. Property Managers Association Scotland (PMAS) - annual conference

LMacD and DM had attended the PMAS annual conference, at which LMacD had made a presentation about the accreditation scheme. LMacD commented that there had been a worrying lack of potential support for accreditation based largely on a 'fear factor' and a real lack of understanding about what accreditation is likely to involve. However she felt that more information and education (in particular about the requirements of the core standards) would do much to address concerns and PMAS plans to arrange a seminar to inform its members.

b. Scheme viability

DM reported on a further approach to local authorities about their understanding of the property management market in their areas. This second approach brought a higher response rate of 25 out of a potential 32 local authorities. The information submitted indicated that there are approximately 35 small property management firms operating in addition to the 44 members of the Property Managers Association Scotland (PMAS). On the assumption that perhaps half of these additional firms might join an accreditation scheme, DM estimated potential membership as follows:

PMAS members: 44 (out of 44 - assuming all would join)

Other private firms - non-PMAS: 18 (out of 35 - assuming c50% would join)

Housing Associations (HAs): 80 (most recent estimate out of 115 factoring HAs)

TOTAL: 142

Following the previous meeting, RH reported that he had discussed with PKS the possibility of the Scottish Housing Regulator taking a role in promoting the principle of membership of the accreditation scheme with HAs. PKS had not envisaged a problem in principle, but had advised that the proposal would have to be put to SHR for formal consideration and approval.

With HAs forming such a high proportion of the potential membership, SG suggested that they might perceive the scheme as being built on an already highly regulated sector with standards which were higher than many others. There was a possibility that accreditation might only be of interest to those HAs who market their factoring services. However PKS did not anticipate a strong reaction from HAs and felt that as a sector they generally took a positive approach to new opportunities.

3. PROPERTY MANAGERS: REVIEW OF STRATEGY

RH advised the group that there were three emerging developments which he considered to have a bearing on stakeholders' current approach to addressing problems within the property management industry:

a. Recent more detailed exploration of costs, likely take-up and the practicalities of switching has given cause for less confidence that voluntary accreditation will prove both financially viable and effective within the desired timescale, although it is not possible to reach a definitive conclusion at this stage. In this context RH noted that pressure for statutory regulation is likely to increase if accreditation is not seen to be working by 2011.

b. It has become clear that if stronger measures prove desirable, the necessary legislative powers will not be within the devolved competence of the Scottish Parliament. The direct regulation of property managers would be a reserved matter requiring legislation passed by the UK Parliament, and in these circumstances the Scottish Government would work with Westminster to achieve the required solution for Scotland. There have, however, been two further developments which have a bearing on strategy:

• discussions with officials in the UK Department of Communities and Local Government (DCLG) have indicated that there is the prospect of legislation to regulate the activities of letting and managing agents in England and Wales and it may be possible to extend this to include Scotland. At present it is anticipated that if legislation is introduced, it is likely to be during 2011.
• there are indications that Whitehall officials are more positive about the prospect of tailoring reserved legislation to meet the specific circumstances of Scotland and an example is current work relating to the Equality Bill. It would be important that provisions were suitable for Scotland in view of differences in the nature of property management services in England/Wales and Scotland.

c. Third party redress in the form of an Ombudsman service has emerged as an alternative model for ensuring that standards are adopted and applied throughout the industry. The statutory regulation of estate agents in England and Wales is based on a requirement for all estate agents to join an approved Ombudsman scheme rather than imposing controls at the point of entry to the market. This raises the possibility of taking a simplified approach if stakeholders' objectives for the industry could be achieved within a suitably regulated environment.

In conclusion, RH considered that new developments and evidence indicated that there might be other options for building on the group's valuable work, particularly around standards and redress. In view of this information he asked the working group whether they wished to pause and review their strategic approach to raising standards within the property management industry.

The following points were raised during the discussion which followed:

• The group shared concerns about the viability of a voluntary accreditation scheme in view of the information obtained about the structure of the industry, potential membership figures and the level of membership fees that are likely to be acceptable (especially for those already regulated to some extent such as Housing Associations and RICS members). Other related points discussed included the potential for 'passporting' members of other organisations and the potential for membership fees being passed on to clients in the form of higher charges.
• The reports from DM and LMacD under matters arising (Scheme Viability and PMAS conference) were also especially relevant in the context of viability. In particular, DM's estimate of 142 members assumed that all 44 members of PMAS would join an accreditation scheme whereas the PMAS annual conference indicated that the figure might be considerably less.
• While the importance of financial viability was recognised, it would be important for the group to take a balanced view based on consideration of evidence relating to all the factors including effectiveness in meeting objectives.
• The group should be clear about its motives for recommending any change of direction - in particular separating the need for a change of approach from the potential opportunity which has arisen to legislate through Westminster. In relation to this point, RH clarified that if the model chosen for a tailored regulatory scheme was to duplicate accreditation, then a change of approach would be appropriate.
• The group agreed that if statutory regulation in the future is becoming more likely there is merit in exploring whether positive steps now towards regulation might be better than moving towards it after accreditation has been tested - especially if this allows a more suitable form of regulation which is tailored to the specific requirements of Scotland. There was some concern that the opportunity for tailored legislation should not be missed and consequently there was support for the idea of trying to gain powers now in case they are needed later. More information would, however, be required about what DCLG intend for England and Wales and the prospects of shaping this for Scotland.
• While the property management sector is relatively small in terms of the number of suppliers, its activities affect a large proportion of the population in Scotland and CFS has been working towards some form of regulation of the industry for a long time. CFS is therefore concerned that consumers might be left with no protection if stakeholders recommend that statutory regulation should be pursued instead of accreditation and there are subsequent delays in introducing legislation.
• Raising standards is an important objective even when a redress route is available as most consumers do not wish to encounter the poor standards that will cause them to seek redress in the first instance.
• KB reminded the group that the OFT report on property managers in Scotland had identified complaints handling as the main area requiring improvement. OFT envisaged independent third party redress as being central to any regulatory scheme for Scotland (whether voluntary or statutory) and playing a key role in raising standards. As well as offering consumers an effective mechanism for complaint, such a mechanism would represent only a light burden on those property managers who provide a good service and would act as a powerful force for positive change within the sector. KB felt that if statutory regulation proved necessary stakeholders could still achieve many of their goals for the industry by selecting a model which used third party redress as a means of enforcing the core standards developed for accreditation.
• It was noted that the Scottish Government had previously given a strong message in support of accreditation and it could be damaging to relations with both suppliers and consumers if accreditation was introduced but not given adequate time to prove itself effective.
• There are important differences in the models available for statutory regulation and the model adopted for landlord registration (as opposed to landlord accreditation) was noted as being one which promoted minimum rather than higher standards.
• Further investigations and market testing will be required in order to firm up estimated membership figures. In order to obtain meaningful data, a clearer picture of the membership fee will be required.

The working group agreed that it should review its strategy in the light of the information presented. However to allow members to consider whether a change of approach was required they would need to examine and compare the various options for accreditation and statutory regulation in more detail in terms of:

• viability;
• likely effectiveness in meeting stakeholders' objectives;
• likely timescales for demonstrating effectiveness.

It was agreed that the above information would be prepared for the next meeting of the working group.

4. CONSUMER ENGAGEMENT STRATEGY

DW introduced a paper which had been circulated. Part 1 related to options for consumer testing of the standards while Part 2 presented options for ongoing consumer engagement by the accreditation scheme.

The group welcomed the paper, which they felt would be valuable no matter which strategic approach was taken to addressing the problems of the sector.

CFS recommends that consumer testing and engagement should include consumers drawn from all sectors of the industry, including self-factoring. It was suggested that it might be very useful to explore the motivations of self-factoring owners who had previously used the services of a property manager.

Part 1: it was agreed that arrangements for consumer testing should be implemented as soon as possible on the basis recommended by CFS (CFS to discuss arrangements with Scottish Government). The deliberative workshop is likely to be carried out under the Scottish Government umbrella.

Part 2: as recommended in the paper, it was agreed that CFS should redraft/expand Part 2 for consideration by the accreditation body, once it is established.

5. STANDARDS

The working group considered Draft 7 of the core standards, which had been circulated.

Standards 12a, 12b and 13: AMcD and LMacD have not yet had an opportunity to discuss options for dealing with client accounts and it is hoped that they will be in a position to report back to the next meeting.

Standard 13: MO considered that it was not feasible to assign interest earned on client accounts to individual clients and consequently this standard would create an 'orphan asset' which might be the subject of future litigation, dispute or adverse publicity. If the interest belonged to the property manager to offset overheads, this should be reflected in management fees. LMacD and SB agreed that a disproportionate amount of work would be involved in separating client interest. SB considered that a requirement of this nature could act as a barrier to Edinburgh Stair Partnership joining the accreditation scheme as the work involved would result in a disproportionate increase in client fees. DW clarified that for CFS what was most important was the principle that the interest should be used for the benefit of clients.

It was agreed that the intention of the standard was to promote transparency and inspire consumer confidence. Standard to be revised to clarify that for float accounts interest earned should be used in a way which benefits clients collectively and property managers should be prepared to demonstrate this.

Standard 8: clarify wording with LDM.

6. ONLINE LEARNING MATERIALS

The group considered a paper outlining a proposal from Asset Skills Scotland.

They felt that good firms would encourage and support their staff in obtaining suitable qualifications, and that the effect of accreditation would be to expand this approach to a wider range of firms as the value and benefits of good practice became more generally recognised.

The approach taken by Landlord Accreditation Scotland was discussed and it was agreed that the accreditation body had an important role to play in gathering and providing information on available training. However the group considered that this role should be confined to monitoring, facilitating and signposting requests and should not extend to the provision of training.

7. MEDIATION

The group considered a discussion paper outlining options for mediation. However it was felt that in view of the high cost of mediation, and the fact that redress rather than mediation is the most appropriate solution for most disputes relating to property management, the proposals for discussion placed too great an expectation on the accreditation scheme.

It was agreed that:

• The scope of the scheme should extend only to disputes about property management issues and should not cover neighbour relations in general.
• The role of the host should be limited to signposting to free local authority community mediation services or telephone mediation provided free of charge by a designated Ombudsman service. (Note: as indicated in the options paper we have already been advised that some local authorities may not accept property management disputes as being within the remit of the community mediation services unless a specific arrangement and additional payment is made by the Scottish Government. There is likely to be a variation between local authorities in how they deal with requests.)
• Owners' associations have an important role to play in encouraging good relations and communication and their establishment should be encouraged. This has already been recognised in the draft core standards, which include a requirement for property managers to proactively encourage the establishment of owners associations.
• The requirement for a free (telephone) mediation service should be built into the specification for the provider of third party redress.
• More information should be obtained about the free telephone mediation available from the Surveyors' Ombudsman Service and how this might be built into the specification for an Ombudsman service.
• 8. DATE OF NEXT MEETING

To be arranged.

Housing Markets & Supply

November 2009

ANNEX A

PROPOSED ACCREDITATION SCHEME FOR PROPERTY MANAGERS

STAKEHOLDERS' WORKING GROUP

5 NOVEMBER 2009

LIST OF PARTICIPANTS

· Consumer Focus Scotland: Douglas White (Senior Policy Advocate)

· Convention of Scottish Local Authorities: Douglas Munro (Accounts Manager, Housing Investment, Glasgow City Council)

· Edinburgh Stair Partnership: Sarah Burns (Homeowners & Private Rented Services Manager, City of Edinburgh Council)

· Glasgow Housing Association (Management) Ltd - Martin Ogilvie (Executive Finance Manager)

· The Law Society of Scotland: Donald Reid (Conveyancing Committee)

· Office of Fair Trading: Kyla Brand (OFT Representative in Scotland)

· Property Managers Association Scotland: Lorraine MacDonald (Vice-President)

· Royal Institution of Chartered Surveyors in Scotland: Sarah Speirs (Head of Communications)

· Scottish Federation of Housing Associations: Sheila Gilmore (Consultant for SFHA factoring Good Practice Guidance)

· Scottish Government: Lucile Rankin (Property Advice Division); Simon Stockwell (Family and Property Law); Roger Harris and Shona Keenan (Housing Markets & Supply)

· Scottish Housing Regulator: Pamela Kellock-Shetty (Policy & Corporate Services)

APOLOGIES

Colin Baxter (Trading Standards)

Lionel Most (The Law Society)

Alison McDiarmid (GHA Management)

Natalie Sutherland (Chartered Institute of Housing Scotland)

Jennifer Wallace (Consumer Focus Scotland)