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Factors Act remedies for homeowners apply even after sale, Scottish tribunal rules

Homeowners remain entitled to use the dispute resolution mechanism in the 2011 Property Factors (Scotland) Act to settle disputes with their factors even after selling the property, a Scottish tribunal has ruled.10 Aug 2017

The Upper Tribunal for Scotland found in favour of David Shiels and Alan Blackley in two separate appeals against decisions of the Housing and Property Chamber of the First-tier Tribunal. The chamber had ruled that the words "a homeowner may apply" in section 17 of the 2011 Act, governing access to the dispute resolution procedure, disqualified both individuals as their applications were made after they sold the relevant properties.

This is the first appeal of a chamber decision to be issued by the Upper Tribunal for Scotland since a new structure for tribunals in Scotland came into effect on 1 December 2016. The Upper Tribunal is the appeal body for decisions made by the chamber, instead of appeals being heard by the courts.

Sheriff Anthony Deutsch said that the approach taken by the chamber in this case "produces an absurdity". There was "no logical or practical reason why the legislature should have granted to current homeowners a remedy for past breaches while denying the same remedy to persons who happen to have sold their property after the failure complained of occurred", he said.

"That would be at odds with its policy of making provision for dispute resolution," he said.

"When section 17(1) is considered as a whole it becomes clear that the right to apply to the tribunal is for determination of past failures on the part of the property factor. Once that is recognised it does not greatly strain the language of the subsection to interpret it as requiring only that the person making the application was a homeowner at the time of the failure which is the subject of the complaint," he said.

The Property Factors (Scotland) Act came into force on 1 October 2012. Its aim was to protect homeowners by introducing minimum standards and compulsory registration requirements for property factors, as well as introducing a mechanism to deal with complaints by homeowners about their factors.

The legislation began life as a private members bill which the Scottish government ultimately came to support, meaning that there were no official explanatory documents issued in connection with it, according to the sheriff. However, the purpose of the legislation was "readily discernible" by considering the situation before the law changed, he said.

"Before the 2011 Act was passed property factors in Scotland were not subject to regulation, they were not subject to any minimum standards of practice and disputes between property factors and homeowners could only be resolved by litigation conducted in the courts," the sheriff said.

"In introducing such measures it is plain that the legislature saw the existing free-for-all as a mischief which required to be remedied," he said.

The sheriff quashed the chamber's earlier decisions in both cases, and returned them to the chamber for further consideration.

"In some respects this issue shouldn't have arisen, and wouldn't have if the legislation in question had been clearer on who can make an application to the First-tier Tribunal," said litigation expert Steven Blane of Pinsent Masons, the law firm behind Out-Law.com. "The fact the Upper Tribunal held that the section in dispute 'must be construed purposively, in such a way as to give effect to the objectives and policy that underlie the provision' suggests that the provision/legislation wasn't as clear as it perhaps should be."

"Given the number of properties in Scotland that the legislation will apply to, it is important that homeowners' rights and remedies are clearly understood," he said.

"In effect, since it must have been obvious that disputes might arise after a sale, the definitions should have made this clear – and didn't," added Craig Connal QC of Pinsent Masons. "While purposive construction is understandable, as a recent Supreme Court decision makes clear, it has its dangers if a higher court feels it amounts to reading in words which simply aren't there."