Someone’s Got To Do It

When we live in buildings or developments that have common parts or shared responsibilities involving two or more property owners, somehow there needs to be coordination between owners. Someone needs to arrange the buildings insurance, someone needs to arrange repairs to the shared areas like stairwells, someone needs to divvy up the electricity bill for the shared lighting and get it paid. And quite a few other things need coordination.

So here is a non-exhaustive list of some issues that require attention and/or coordination in a communal living setup.

• Arranging for Common Property Repairs and Maintenance:
  • Coordinating routine maintenance (for instance, communal stair cleaning, lift upkeep, garden/grounds maintenance).
  • Organising repairs for unexpected issues (such as roof damage, blocked gutters, burst pipes).
  • Dealing with emergency call-outs for urgent problems that pose an immediate risk.
• Managing Contractors and Works:
  • Getting price estimates and quotes for work from multiple suppliers.
  • Appointing and supervising tradespeople and contractors to carry out repairs and maintenance.
• Financial and Budget Management:
  • Budgeting for anticipated maintenance and repairs.
  • Billing and collecting payments (management fees, maintenance costs, and any required contributions to a float or sinking/maintenance fund) from individual homeowners.
  • Managing and holding client funds (like ‘floats’ or maintenance funds) in a legally acceptable way.
• Insurance:
  • Arranging and maintaining a common buildings insurance policy for the entire block or development, where required by the title deeds.
• Communication and Administration:
  • Providing homeowners with a Written Statement of Services, detailing their duties, authority, service standards, and how costs are calculated.
  • Consulting with homeowners on major repairs or maintenance decisions, as required by law and the title deeds.
  • Managing the overall administration related to common property upkeep.
• Compliance and Legal:
  • Ensuring work complies with relevant health and safety and other legal standards.
  • Taking action (including debt recovery procedures) against owners who fail to pay their share of costs.
  • Providing a formal complaints procedure for homeowners.

Small Is Easy, Bigger Isn’t

So there are quite a few things to think about in a situation where owners share responsibility for areas or paying for services.

If you look back over the list above there are some items which will “normally” be quite well defined and can be dealt with objectively with occassional reference to the Title Deeds (what proportion of a certain cost should fall to each owner), but there are also quite a few “softer issues” that will require conversation, negotiation or even mediation between owners.

In a small building with two or three flats and therefore just two or three owners this normally isn’t a big deal (although all things have their exceptions). In a small setup the owners probably get to know each other quite well, get to understand the views of the others and one owner putting in the effort to cut the grass or clean the stairwell doesn’t normally feel like they are being taken advantage of, because the other owners will “do their bit” in the days and weeks to come.

But in bigger buildings, with more owners (and absentee owners), or in a development, it all becomes a bit more impersonal, even if groups of owners know each other very well. It may well need an external 3rd party to take charge of the issues noted above, not only because the tasks have become more onerous with scale but also likely to “depersonalise” the situation as owners don’t want to be negotiating with each other all the time – down that path lies neighbours falling out.

Not that factors always stop neighbours falling out, I’m sure that sometimes they catalyse it!

Self-Factoring

Quite frequently if the building consists of only a handful of owners, right up to small to medium sized developments, the owners can successfully “self-factor”. This avoids the cost of an external property factor and the poor communication/accountability that comes with 3rd party factors (much more about that elsewhere on this site). Self factoring normally comes with a bit more formality and structure and will require individuals to (rotate through) roles like Chair. Owners keep tight control and clear visibility over all issues, including the big spends like insurance.

Self-factoring can be a great model if competent people put themselves forward who are, or can become, familiar with the appropriate legal requirements and are good at involving fellow owners. The worst thing in a self factoring setup is for those owners who aren’t on the organising committee to feel that there’s a lack of transpareny and that decisions are being “stiched up” by the committee.

The other main reason for self-factoring to fall apart is that it always seems to fall to a small group of people to do most of the work and others don’t volunteer. 80% of the work is done by 20% of the owners, or worse.

Where Are Factoring Businesses Born?

Strangely, several (many?) factoring businesses can trace their conception back to self-factoring or at the very least being dissatisfied with their property factor.

I’m aware of several factoring businesses whose founders were from one family, or a small group of friends, and who were bocoming increasingly fed up with their 3rd party property factors. These people were often from some other professional field and over several drinks they decided upon a change of career. They were going to start the factoring company that “did it right”, that delivered great customer service at a reasonable fee.

I wouldn’t want to over generalise but the evolution of these new factoring businesses tends to follow the path:

• startup, do a great job factoring their own development.
• fight hard to gain some clients, work hard, get some good reviews, making a profit was secondary.
• grow (let’s not forget that there are plenty of owners out there very keen to hear about a better factoring business).
• things start to go wrong with scale (unless the founders are very careful). Because the founders are more distant from the coalface, the staff aren’t as motivated to go the extra mile as the founders were, cost becomes an issue, and communications get lost in the corporate mire. I could go on!

This All Sounds Rather Negative!

You’d be right to come away from reading this page thinking that it all sounds rather negative. well it is. But the purpose of this blog is to equip you with more knowledge about factoring than the next block or development (quite likely more than your factor’s property manager), so that you can avoid the charlatans and pick the good ones.

Weirdly, poor factors beget more factors!