A Scottish property factoring company is urging tighter regulation around homeowners’ float funds, warning that a lack of independent verification could leave customers ‘exposed’ if money held on their behalf is not properly managed.
The Scottish Government has committed to a full review of the Property Factors Code of Conduct. Glasgow-based Newton Property Management, which manages approximately 40,000 properties across Scotland, believes routine independent auditing of float funds should become standard practice.
A factor’s float is a refundable sum of money paid by homeowners when moving into a property or when a factor is appointed to a development. The float allows property factors to deal quickly with routine repairs and emergencies, rather than waiting for every owner in a building to settle their share first.
The Code of Conduct requires floats to be accounted for separately from a factor’s own funds.
Newton’s call for change follows its own acquisition experience over the past two decades. In this time, it has acquired 14 factoring businesses, with float accounts described as either ‘missing or materially deficient’ in almost two thirds.
Stephen O’Neill, chairman of Newton Property Management, said, “A properly managed float allows factors to act quickly when repairs are required. In factoring, timing matters, and floats bridge the gap. The problem lies in the fact that many homeowners have no practical way of knowing whether the money held on their behalf genuinely exists at the level it should. If a factor says there is £20,000 in a float account, or £200,000, how would homeowners know? In most cases, they wouldn’t.
“Not every factor is acting improperly, in fact, many are not. But proper scrutiny protects everyone: homeowners, contractors, factors and the credibility of a much-criticised industry.
“Too often, sectors wait until a crisis before reform follows. Property management should not make the same mistake. If floats are not being handled correctly, eventually something will give. When it does, it will not be corporate balance sheets carrying the greatest burden. It will be ordinary homeowners discovering too late that the money supposedly safeguarding their building was not adequately protected.”
Under One Roof, Scotland’s tenement charity, agrees with Newton’s call for tighter regulation. Chief executive Mike Heffron added, “All too often we receive enquiries from flat owners raising concerns about the lack of transparency and communication from their building’s factor. Missing funds from float accounts are a serious concern, as under-funded or non-existent floats will have significant effects for flat owners expecting that these payments will ultimately pay for needed repairs and maintenance.”
