Tips For Property Management Firms To Successfully Gather Factor Fee Arrears
June 2019

The majority of residential flats and housing developments now have shared areas and common land which needs to be maintained by an appointed property management company. In return for these services owners-occupiers are charged factoring fees, however in times of economic hardship it has become a fairly common occurrence that fees are left unpaid by the owners causing cash flow problems for the development account. Factor fee debt can accumulate for a variety of reasons, but it’s important in all instances to tackle arrears recovery at the earliest opportunity. We’ve put together our top tips for any property management firms that are having trouble ensuring home owners pay their factors fees in full & on time.

  • Ensure a Debt Recovery policy is in place
    Details of debt recovery processes are most commonly included in a Written Statement of Services which is issued to all parties. This section of the statement should outline each step of the recovery process, as well as detailing your rights to charge the debtor administration fees and recover any collection costs incurred due to their failure to pay.
    It is also good practice to refer to the Deed of Conditions for the specific development in this document.
  • Obtain information from residents up front
    Gathering background information from the property owners from the offset is essential for property managers as it can aid recovery efforts should debt collection or legal action prove necessary.
  • Keep a record of payments
    Keep a record of when factor payments are due and when these are paid by residents.
    When payments are received send a receipt to your client each month or quarter, depending on the frequency of payments requested. The receipt should detail when the payment was made, the time period it covers, the amount paid and any amount outstanding.
    Being able to provide clear statements of accounts, which detail all transactions that have taken place on a specific resident’s account, is very useful as it helps resolve any disputes raised at an early stage.
  • Write to the owner
    If after 21 days the arrears remain unpaid, send another letter to confirm your intention to take legal action. If after a month the balance is not paid and another month is now due, it is time to lodge a Notice of Potential Liability (NOPL) against the property.
    The letter should request that the outstanding balance should be paid immediately and should ask the owner to ensure that all future payments are paid on time to avoid falling in to arrears again. You should explain that any unpaid arrears could result in court action being taken against them and state that they will receive a Notice of Potential Liability if the arrears remain unpaid.
  • Serve a Notice of Potential Liability
    Keep a record of when factor payments are due and when these are paid by residents.
    Our property management clients benefit from our tailored system which includes an optional automated stage in the workflow which can be triggered by balance to prepare and register a Notice of Potential Liability with the Registers of Scotland. Using either the Tenements Scotland Act 2004 or the Title Conditions Scotland Act 2003 notices were introduced to limit the financial damage associated with non-payment and ensure settlement was made in full when the heritable title is moved or sold.
    Following these steps, if the case has not been fully paid or an instalment plan agreed within 30 days of the initial load we work closely with the client to discuss how best to proceed. Our systems ensure that our clients are involved at each stage in the recovery process.