Can You Self Factor?
It’s that same old story, you start by looking at the Title Deeds.
Self-factoring isn’t just a choice some owners can make one morning; whether or not you can self-factor governed by the property’s Title Deeds. It’s possible that a specific factor is named in the Deeds and it might be difficult to move away from them. This situation is most likely in a relatively new development where the developer has chosen an initial factor and noted their name in the Deeds. In these cases, if there’s a strong imperative to move to a different factor then close attention to the Deeds and the Development Management Scheme will likely show you a way of changing the arrangements.
The Deeds (in conjunction with Tenement or Development Management Scheme) will tell you how much of a majority will be required to replace your factor. If your current factor has made themselves so unpopular that almost all owners want a change then then achieving the required majority might not be too onerous, otherwise you might have to engage in a process of persuasion!
The Big Benefits
Most owner groups who are looking at self factoring would see the potential benefits as being:
- reduced (or close to zero) management costs (no factors fees).
- better accountability, things won’t get “stuck in the system” for ages.
- definitely no markup on contractors costs.
- overall a greatly enhanced sense of ownership of reapairs, maintenance and issues.
Which all sounds very positive, so why doesn’t every tenement or development “self-factor”. Well, there are quite a few potential downsides if the conditions aren’t just right for a self-factored approach.
The Potential Downsides
Unfortunately there are potential downsides to self-factoring, here are a few:
- in all but the smallest tenements/developments almost inevitably a small group of owners are likely to end up doing most of the work. Others may have indicated at the outset that they’d play their part in due course, but they may well hide or have excuses when the time comes to step up.
- although factors fees will no longer be charged, administration does cost something – phone calls, paper, postage, copying etc. Someone has to pay for these and if there isn’t a fund then it’ll probably fall to the most engaged owners.
- some builders and other trades may be reluctant to work with self-factors, fearing they won’t get paid. So demonstrating that the funds are in place upfront might be helpful.
- it can be hard to do when there are many absentee owners, because they aren’t available to lend a hand, only “moral support from afar.
- getting tough with reluctant payers, can be tricky and lead to falling out with neighbours.
The Bank Account
You’ll need a dedicated, stand-alone bank account so that you can pay bills, but opening one if you are an unincorporated body can be challenging. Not every bank offers accounts to unincorporated bodies.
Common Buildings Insurance
Almost certainly, your Deeds will require a common buildings insurance policy to be in place at all times. You’ll need to instruct a qualified surveyor periodically to update the Reinstatement Cost Assessment, which you’ll need to share with your chosen insurance broker(s). Do you have the capacity to get the jigsaw pieces in position and to make sure that you are getting an appropriate deal?
Debt Collection
This is often the “con” that breaks self-factoring groups. Think about the social and legal difficulty of chasing a neighbour for money. A professional factor acts as a buffer; in a self-factored building, you’ll have to knock on your neighbour’s door to demand £500 for a roof leak, which can affect community spirit! Having said that, many factors aren’t very proactive in chasing debts.
Compliance
Self-factored buildings aren’t exempt from safety laws. You must address the group’s responsibility for fire safety in common areas, asbestos surveys (if applicable), and lift maintenance. If the group fails to do this, the liability falls on the owners individually.
