PROPOSED ACCREDITATION SCHEME FOR PROPERTY MANAGERS
MEETING OF STAKEHOLDERS' WORKING GROUP
HELD ON 20 AUGUST 2009 AT 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 Sheila Gilmore and Alison McDiarmid.
RH welcomed Martin Ogilvie, who was representing GHA Management in the absence of Alison McDiarmid. He also welcomed Lewis Shand Smith, Chief Ombudsman with The Ombudsman Service Ltd, who was in attendance for agenda Item 3.
2. NOTE OF THE MEETING HELD ON 16 JULY 2009
A note of the meeting held on 16 July was approved.
Matters arising
a. Mediation
RH explained that it had been necessary to postpone the mediation paper until the September meeting of the working group.
b. Scheme viability
DM advised that he hoped to be in position to report at the September meeting on the estimated number of private firms operating within some of the main urban areas of Scotland.
3. THE SURVEYORS OMBUDSMAN SERVICE
Lewis Shand Smith outlined the services offered by the Surveyors Ombudsman Service (SOS) and how these might meet the requirements of an accreditation scheme for property managers. Copies of the presentation were tabled.
During the subsequent discussion the following points were noted as being of particular relevance to the scheme:
· The Ombudsman takes an inquisitorial approach and proceeds by asking questions about what happened, what should have happened and what can be done to rectify the situation. Investigations are largely paper-based, using the member's complaints file as the starting point and using e-mail as a principal route for questions. A telephone mediation service is also available and can be included in a scheme's terms of reference.
· The Ombudsman aims for a consistent approach and, unlike the courts, takes account of what is fair and reasonable in all circumstances and is not bound by strict interpretation of the law or precedent.
· The Ombudsman service will help consumers to articulate their case. This also applies at the point of initial approach when the enquiries team will assist consumers in using their supplier's complaints procedure (if they have not already done so) thereby giving the supplier the opportunity to put things right. A case fee is not charged for this service and in the experience of the SOS approximately 40% of cases redirected to the supplier have been dealt with to the satisfaction of consumers and therefore exit the system without incurring fees. Further cases are resolved without the need for a full investigation and approximately one in 14 of initial enquiries is finally accepted for investigation.
· The Ombudsman service can enforce its decisions in court as all member firms sign a deed poll committing them to accepting and implementing these decisions. However the complainant has the right to reject the decision and take the case to court or some other redress route (although none have yet been successful in having a decision over-turned).
· In reaching a decision on financial compensation the Ombudsman aims to restore the consumer to their position prior to the need for complaint, although the consumer must be able to demonstrate loss. The Ombudsman can also make 'time and trouble' payments to take account of inconvenience.
· In the view of LSS, the main differences between Ombudsman services and typical small consumer adjudication schemes are that the Ombudsman service is accessible and free to consumers (many adjudication schemes make a charge to consumers) and the consumer has a right to take their case to the Ombudsman (for many adjudication schemes both parties must agree).
· The Ombudsman can consider cases where there is no direct contractual relationship between the supplier and the consumer on the basis of the supplier's duty of care to the consumer. For example in many cases dealt with by the SOS the contractual relationship is between the surveyor and the mortgage lender, but the surveyor's duty of care towards the consumer brings the case within the remit of the Ombudsman. In cases of this type investigations would focus on the process followed.
LSS clarified that this duty of care is not interpreted in the strict legal sense, although the Ombudsman does take into account the law. He also confirmed that specific arrangements for absentee landlords and their tenants could be included in the terms of reference of a new scheme.
· The experience of other Ombudsman schemes has shown that the pattern of complaints is likely to build up slowly to a peak and thereafter decline gradually as suppliers improve their service and complaints handling. This improvement loop is assisted by the various mechanisms that exist for feeding back the Ombudsman's comments and recommendations for change/good practice on an individual supplier and industry-wide basis. The scheme Annual Report is a principal vehicle for disseminating industry-wide recommendations.
· SOS staff are aware of the possibility that some complaints may be vexatious and they always try to weed them out at the initial stage before a case fee becomes payable.
· An individual owner within a group of owners would be entitled to submit a complaint in their own right, even if this impacts on other owners. However in situations where the same complaint was submitted by a number of owners within a group the Ombudsman would take a decision in respect of one complaint and informally recommend this decision to the supplier as the outcome for the other complaints (without charging a case fee). If a supplier did not act on this advice, the Ombudsman would accept the other complaints and charge the full fee for investigating each case.
· An appropriate time bar for complaints would be agreed and included in the terms of reference for a new scheme.
· The Ombudsman will expect to receive only the most difficult complaints, representing approximately 1% of the number submitted to the supplier. Experience has generally shown that firms who are good at dealing with complaints tend to receive more complaints - possibly because consumers see an effective redress route which is worthwhile using.
· The most efficient and cost effective way for The Ombudsman Service Ltd to provide a redress service for the accreditation scheme would be to extend the terms of reference of the SOS to include property managers.
· LSS confirmed that the SOS investigating team have appropriate in-house and panel expertise to allow them to deal with property management complaints. Additional expertise would be developed in relation to Scottish ownership and tenement law.
4. THIRD PARTY REDRESS
RH introduced a paper outlining options for third party redress, which had been circulated.
The working group endorsed the recommendation, set out in the paper, that adjudication was more appropriate than arbitration for the purposes of the accreditation scheme.
RH reported that the suggestion had been made that it might be possible to change the way in which the Private Rented Housing Panel (PRHP) operated to make it more suited to dealing with property management disputes. However the group generally took the view that as a tribunal, PRHP had more in common with the courts system in terms of formality and this might act as a deterrent to owners (who also already had the option of using the courts). For this reason it was agreed that discussion should focus on the options of adjudication and private sector Ombudsman services.
The group considered that there were benefits in being part of a large, well-known, well-established and trusted scheme such as an Ombudsman service which was already understood by, and familiar to, the public. This option was considered more suitable for handling consumer complaints than the consumer adjudication schemes which tend to have a lower profile and are less familiar to the public. The group also saw benefits in using a wider property-related scheme such as the SOS, which had already built up relevant expertise and a reputation within the sector. The following were noted as being particular advantages of the Ombudsman scheme: the use of a deed poll to bind members to accepting decisions; the ability of the Ombudsman to enforce decisions in court; the investigative approach; having access to a free filtering service for initial enquiries which would assist consumers in using their supplier's complaints mechanism. It was also considered a marketing advantage to have the accreditation scheme linked to a high profile Ombudsman service. The group accepted that any scheme would have to be open to non-accredited suppliers to comply with the Ombudsman's terms of reference.
On the basis of investigations carried out to date the working group agreed to recommend to the accreditation body that an Ombudsman service was a suitable arrangement for providing independent third party redress for the accreditation scheme. However it would be for the host body, once appointed, to carry out a more detailed comparison of the services and charges of the various providers of redress. In the interim, estimated costs will be revised in the light of updated information about the likely number of complaints (LSS advised more likely to be around 530 per year, but check with OFT whether their statistics were intended as annual).
5. INDEPENDENT CERTIFICATION
A paper outlining initial investigations into the options for certification had been circulated.
The group discussed whether the process of certifying compliance with the accreditation scheme's requirements should meet external, and possibly international, standards. They recognised that external certification would help to build credibility, customer confidence and commercial advantage but weighed this against the additional administrative and financial costs which this would place on the accreditation scheme and its individual members.
The group noted that both Landlord Accreditation Scotland and the local Edinburgh landlords accreditation scheme had chosen self-certification. The Edinburgh scheme does not inspect processes but it does undertake some complaints checking, follows through on complaints, uses questionnaires to gather information at a basic and more detailed level, issues audit reports and carries out occasional spot-checks (for example on essential documentation).
Members of the group were concerned that the demands and costs associated with using some forms of external certification (such as a UKAS accredited certification body) would be a burden on property managers and act as a deterrent to membership. The issue of cost was once again important in view of the intention that the accreditation scheme should ultimately be self-financing. In view of these considerations it was felt that a less onerous process of self-certification should be designed to suit the needs of the scheme and protect the interests of consumers and the host organisation could have a central role in this process. The suggestion was also made that property managers whose processes are already externally certified might receive exemption from parts of the application process.
However it was also felt that there was merit in investigating the possibility of backing up self-certification with external endorsement through membership of the OFT's Consumer Codes Approval Scheme (CCAS). Any application for CCAS approval would have to be made by the host or accreditation body, acting as code sponsor for the scheme as a whole. While participation will involve a commitment in both time and resources, this is likely to be less onerous than certification linked to UKAS and evaluations of CCAS have shown that the majority of members consider that the benefits outweigh the work involved in maintaining membership.
As a preliminary position the working group agreed that the following possibilities should be explored:
· compliance checking being carried out within the scheme (rather than externally).
· backing this up with external endorsement through membership of CCAS.
6. STANDARDS
The group considered Draft 5 of the core standards paper, which had been updated to reflect discussions at the meeting of the standards sub-group held on 13 August, including specific comments submitted on behalf of Consumer Focus Scotland (CFS) and PMAS.
a. Comments from CFS
CFS tabled further comments intended mainly to strengthen the consumer protection aspects of the standards, but with some other additions. These were discussed as follows:
Standard 2: CFS took the view that property managers should provide translations into other languages and Braille as they have a responsibility to ensure that their clients understand the contract into which they have entered (or are about to enter). It was noted that while, for example, both Glasgow and Edinburgh City Councils provide translation services, the cost of doing so is expensive. The cost of providing a similar service is likely to represent a significant overhead for a small business and this could act as a deterrent to membership of the accreditation scheme.
In concluding the discussion RH noted that the following points would have to be investigated and clarified to allow a decision to be reached:
· Legislative requirements/Scottish Government policy in relation to the provision of translations.
· The scope of the requirements of the accreditation scheme should be defined, in particular whether property managers should be required to assist clients to access translations or whether they should actually provide translations, whether illiteracy should be covered, which documents should be covered.
· The extent of the role of the accreditation body in assisting property managers.
· The cost of obtaining translations.
· Landlord Accreditation Scotland should be approached to establish how they deal with requests for translations, the cost and the frequency of requests for this service.
Standard 11: suggested revision agreed.
Standard 12: original wording to stand subject to deletion of 'under the contract'. Will require guidance on the procedures to be followed.
Standard 32: re-word as follows: 'Property managers must do everything within their power to follow ...........'. To be left open for alternative factoring arrangements and clear guidance will be required on acceptable alternative arrangements (eg formally agreed by the owners).
Additional standard 1: agreed as proposed but noted that this provision will rely on self-certification. Guidance required on what is a relevant offence and implications of failure to declare.
Additional standard 2: include as an additional bullet point under Standard 8 (in plain English). Guidance required to explain that this is the property manager's view of the basis of appointment and owners should consult a solicitor in the event of any queries.
Additional standard 3: include as guidance relating to core services under Standard 8.
Additional standard 4: incorporate by adding 'including review processes' to fee structure bullet point under Standard 8
Additional standard 5: include as guidance under Standard 26 but in relation to the approved list codes of practice, which involve meeting higher standards.
Additional standard 6: incorporate by adding 'or inadequate service' at the end of Standard 28 and by revising Standard 36 to include reference to complaints about contractors.
Additional standard 7: incorporate as guidance to explain the meaning of the term 'clearly' in Standard 1. Plain English in this context to mean no legal or technical terms, abbreviations or jargon. Keep plain, simple and understandable - Plain English Campaign requirements not intended.
Additional standard 8: omit.
Additional standard 9: accept as an additional standard under 'Communications' . Add 'in accordance with any relevant legislation'.
Additional standard 10: accepted as an addition under complaints, but only summary details to be provided in annual report. Guidance on how to record complaints, possibly with a template for this purpose.
Members of the working group were asked to submit any additional comments by e-mail for consideration at a further meeting of the standards sub-group (to include LMacD, LDM and Consumer Focus Scotland). Some suggested changes to the wording and guidance had also been received from NS and these will be incorporated in the next draft, which will be prepared for the September meeting. The next stage in considering the core standards will be to explore their applicability to land maintenance companies, in particular the land ownership model.
b. Cross Funding
LDM raised the issue of 'cross funding' which involves a property manager using a surplus in the funds of one group of owners to offset a temporary deficit in the funds of another group of owners (all within a single client account). Cross funding is normally used to avoid delays in instructing work which could arise if some owners did not pay their contributions in advance of work beginning. LDM advised that there is an obligation on solicitors to ensure that client accounts always contain sufficient funds to meet all sums due to clients. He was not necessarily suggesting that the solicitors' practice would be workable within the different context of the property management sector. However, he was concerned that cross funding could discredit the scheme in the event of a property manager going into liquidation while cross funding works and he felt that this was something which the group should be aware of.
The group noted that while many modern title deeds include provisions for this practice, older deeds do not and ruling out cross funding is likely to result in one of two scenarios:
· Placing an excessive burden on property managers if they were required to fund any owners' deficit to avoid delays in starting work. This would act as a deterrent to membership of the accreditation scheme. or;
· Presenting owners with the unpalatable options of delaying the start of essential work if some owners not having paid their contributions in advance or having to provide larger floats to cover delayed payments in situations of this type.
The working group decided that while it was important that they were aware that cross funding might be a potential issue in the future, they should not intervene to impose a requirement which would result in either of the above scenarios.
JW noted that her colleagues were currently investigating consumer protection for pre-payments and she hoped to be in a position to report on this matter at the next meeting.
7. DATE OF NEXT MEETING
Thursday 17 September at 10 am (Thistle House, Edinburgh)
Housing Markets & Supply
September 2009
ANNEX A
PROPOSED ACCREDITATION SCHEME FOR PROPERTY MANAGERS
STAKEHOLDERS' WORKING GROUP
20 AUGUST 2009
LIST OF PARTICIPANTS
· Lewis Shand Smith, Chief Ombudsman, The Ombudsman Service Ltd (agenda Item 3 only)
· Chartered Institute of Housing Scotland: Natalie Sutherland (Policy and Practice Officer)
· Consumer Focus Scotland: Jennifer Wallace (Principal Policy Advocate); 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: Lionel Most (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 Government: Lucile Rankin (Property Advice Division); Roger Harris and Shona Keenan (Housing Markets & Supply)
· Scottish Housing Regulator: Pamela Kellock-Shetty (Policy & Corporate Services)
· Trading Standards: Colin Baxter (Trading Standards Manager, City of Edinburgh Council)
APOLOGIES
Sheila Gilmore (SFHA)
Alison McDiarmid (GHA Management)
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