Wednesday, 25 February 2009

More homes for Scotland

Tough economic times presents a golden opportunity to build more houses for affordable rent in Scotland. While there may be political argument over where the money will come from, it strikes me there is an immediate source in Glasgow.

The Glasgow Housing Association (GHA) made a profit of more than £50m last year and is still receiving Scottish Government grants of around £50m per annum. In these difficult economic times Communities Minister Alex Neil could consider redirecting some of these taxpayer funds into house building for social rent in Glasgow.

It would provide a much needed fiscal stimulus to the west coast of Scotland, and help address the rising demand for good-quality, affordable social housing.

Before anyone says it's not as simple as that, the Communities Minister could use his powers under the Housing (Scotland) Act 2001 to take over the GHA's board. Tough times need tough solutions. Statutory appointees could direct the GHA to use its wealth and borrowing powers to kick off the largest social house-building programme Scotland has seen in years. It's a matter of will.
And now that the Council of Mortgage Lenders supports a pre-action protocol in Scottish mortgage repossession cases, will the Scottish Government maintain that protocols as set out in England are 'rubbish', the precise words of Nicola Sturgeon MSP?
What law centres and many others have been calling for is a Scottish protocol that ensures repossession is a genuine last resort and, if not, the right for the court to dismiss non-compliant actions. Instead of arguing what England has or has not, the Scottish Parliament has the power to introduce its own mechanism that could be life-changing for many hard-pressed households up and down the country.
Again, it's all about the will to tackle weaknesses in the system and things that are grossly unfair, such as the fact poor people facing repossession in Scotland might have to pay not only the bank's legal expenses for needless court actions but also their own Legal Aid bill. That is just plain wrong, but because the Scottish Government takes this as a criticism of itself - which it is not - it has pulled up the drawbridge on all of these important issues and is refusing to listen.
Why can't we have a consensus for the good of the nation?

David & Goliath

Cheeky bankers at the Royal Bank of Scotland did a volte-face this week in plans to award themselves £1bn in bonuses. I say cheeky because senior executives would have largely been on the dole if the UK Government hadn’t taken a 70% stake in their company. A total of £175m will now be paid out in bonuses.
Don’t get me wrong I’m sympathetic to the front-line workers who rely on these payments to top-up their £17,000 per annum salaries. Those bonuses are really workers’ wages. But it could never have been right to award millions of pounds to executives who had brought the bank to its knees. It’s the moral equivalent of suggesting jail birds be given a pino colada and sent on a Caribbean cruise.

Up in Oban the RBS are under fire from Ian Hamilton Q.C. His small claims action alleges the bank were negligent in selling him shares last April by representing themselves as solvent when they were in fact insolvent. What say the RBS? Err, never mind that question we want to remit this to the ordinary cause roll please. Why? Because there are complex documents to examine? Is this a Machiavellian tactic?

If a claim turns on complex issues of fact why can’t a sheriff sitting in the small claims court examine that evidence? I accept if there are substantial preliminary debate points then small claims procedure is not perfect – and the same might be said for summary applications - however, it is still possible to fix a hearing which can proceed as a ‘debate’ if the court and parties are happy.
Examining ‘complex evidence’ is what a sheriff does day in day out whether sitting in the small claims, summary or ordinary court. From Ian Hamilton’s stance if his claim is remitted to the ordinary court his protection against an unlimited award of expenses flies-off and pursuing a claim worth £1,282 becomes an absurdity. Why would anyone pursue such a relatively small sum when they could be faced with a legal bill for many thousands of pounds in the event of failure?

In the context of unfair bank charges litigation across the UK I’ve seen the banks employ and deploy all sorts of tactics over the years against party litigants – picking them off and upping the ante because they have the economic muscle to do so. All of which means Mr Hamilton’s case raises a very important principle about access to justice. If he is picked-off then justice will have been denied.
Mr Hamilton’s claim illustrates a weakness in the Scottish legal system. Scotland does not have a class action procedure. It is interesting to note that a couple of weeks ago a class action was filed in the Southern District of New York against RBS, essentially along the same lines as Ian Hamilton’s case. The reality is a class action can allow lots of people with similar small claims to come together, pool their resources, so that they have an equality of arms against a economically powerful opponent.

The Scottish Law Commission set out model rules for such a procedure 16 years ago in a draft Act of Sederunt. So why has there been no real progress? The Scottish Government could easily introduce a procedure for class actions in Scotland speedily. After all this would have no impact whatsoever upon the substantive law of the law – and the Scottish Parliament can consent to Acts of Sederunts in a 40 day turn-around.
So come on let give David a box to stand on when he tackles Goliath.

Tuesday, 24 February 2009

The X Factor

Ask anyone who has ever lived in a tenement about property factors and you'd better make sure you have a flask of tea and chocolate hobnobs at hand. You'll be in for a woeful story of poor service, dodgy repairs, and rip-off charges. Can anyone think of an industry that is as unregulated as Scotland's property factor market?

An industry where the good, the bad, and ugly roam free on the prairie. Clint Eastwood would have a hard time with some of these cowboys. You can sack your property manager if they don't have the X factor but it can be difficult or impossible in practice. My colleagues at Govan Law Centre acted for a close of homeowners who unanimously sacked their factor five years ago and are still receiving bills. The company refused to accept it was sacked! And the legal aid board wouldn't grant civil legal aid for a declarator and interdict.

Many homeowners complain their factor does no actual management work and simply sends out bills for unearned fees. If you don't pay they will slap on charges and interest and turn their customers into debtors. There are too many factors who seem to spend all their time running a manufactured debt collection business. One factor in Glasgow operates a scam that is so outrageous it would bring a tear to the glass eye of a loan shark.

Here's how it works. You don't pay a £15 monthly bill on time so they send out a reminder letter every week and charge £17.62 for the privilege. They also apply monthly compound interest. I've seen clients with a bill of couple of hundred pounds metamorphisise into a bill of thousands of pounds. And we then get actions for payment, legal costs and ultimately petitions for sequestration. It's a scandal.

Visit the debtors court in Glasgow and you'll discover it is dominated by property factors. As the draftsperson of the Abolition of Poindings and Warrant Sales Act I and many others in Scotland found it morally repugnant to see vulnerable people have their few household possessions poinded or sold off for pennies. The replacement to warrant sales was the exceptional attachment order and guess who uses that now? To some factors it's the unexceptional attachment order. There are good and decent factors but equally there are bottom-feeders who make Dick Turpin look like a cuddly ted.

Back in 2007 I drafted a consultation paper for a proposed Property Factors (Scotland) Bill for Gordon Jackson QC. That project has now been championed by Glasgow MSP Patricia Ferguson. The proposal would see the creation of a Scottish Property Factors Register to ensure that only 'fit and proper persons' could be factors, as well as setting out minimum statutory standards. We also suggested an extention to the jurisdiction of the Private Rented Housing Committee to handle homeowner complaints. In early 2008, Govan Law Centre worked closely with the Evening Times on a campaign exposing sharp practice and calling for statutory regulation of property factors.

Many people were delighted when the Office of Fair Trading (OFT) announced its investigation into the Scottish property factors market in June last year. Last month the OFT published its MORI findings which provided robust statistical evidence confirming what everyone suspected. A remarkable two-thirds of those who had complained to their factor remained dissatisfied. The market was and is failing thousands of Scotttish homeowners. Redress in practice remains illusory for the many.

Thursday, 12 February saw the publication of the OFT's final report. Given the shocking findings of the OFT's research any reasonable person might have thought calls for tough regulation was a given. But instead the OFT has told us to trust dodgy businesses to regulate themselves. Quite frankly the OFT's recommendations are a shambles and show that our regulators - who let us down with the banking meltdown - are letting us down again.

There is also double standards in the OFT and Scottish Government's support for voluntary self-regulation - and I'm leaving aside the fact we already have self-regulation and it doesn't work. If you rent out a flat in Scotland you need to be 'a fit and proper person' from Part 8 of the Antisocial Behaviour etc., (Scotland) Act 2004. Yet if you preside over the repair and maintenance of many thousands of homes you can be a con-artist, bankrupt, or fraudster. There is absolutely no protection for the public.

Who believes bad factors are going to start being nice if we ask them nicely? The OFT's conclusions are utterly incompatible with their own findings. Voluntary self-regulation is a nonsense when there is evidence of mass customer dissatisfaction and market failure. I remain committed to working with Patrica Ferguson MSP on her proposed bill to introduce a statutory framework to root out cowboy factors and protect the public. If the Scottish Government and OFT won't act to protect homeowners in Scotland hopefully the Scottish Parliament will.

Lacuna Obligatus

When a lacuna in the law obliges a public authority to do something unjust we can either watch all lemmingesque while citizens fall into that chasm or we can do something about it. Scotland’s legal aid system is failing vulnerable people facing repossession and homelessness. And this at a time when mortgage repossessions have soared by 92%. The diagnosis isn’t good.

You’re a single person or member of a family who has fallen on hard times: ill-health, the death of a loved one, or job lost in the recession. Household income becomes jobseekers’ allowance or income support and multiple debts appear along with mortgage arrears and mental health problems. Not only can this happen to anyone, it is happening to anyone. People from all walks of life are now facing repossession.

Less than 20% of UK households with mortgages have mortgage indemnity insurance and let’s not talk about the mis-selling and inadequacies of many of these policies. When the initial writ for repossession drops through the door protection is available by applying to the court for an order under the Mortgage Rights (Scotland) Act 2001. In most cases that will require a lot of court and legal work, but many people facing repossession are eligible for civil legal aid with a ‘nil’ financial contribution.

A ‘nil’ financial contribution is essential because how can anyone pay for legal aid when they are living on £60 per week, with debts coming out of their ears? Their lender will slap on ‘arrears charges’ equivalent to a whole week’s income just because they are in mortgage arrears each month – charges which I think are unfair and unlawful.
I’ve been working with Glasgow MP, Mohammad Sarwar, who will introduce a Bill in the House of Commons in April to argue that such charges (including bank and administration charges) should be proportionate and that new UK consumer protection is needed: see
Meantime people in Scotland living on or below the breadline and facing repossession are told by the Scottish Legal Aid Board if they manage to avoid homelessness they must pay their own legal aid bill. If not they may be subject to diligence or have their house forcibly sold. Why is this?

Section 17(2B) of the Legal Aid (Scotland) Act 1986 provides that where property is preserved in proceedings the Board’s tab must be paid out of that ‘property’. To be fair the Board believe they have no choice in this. Their opinion is if an assisted person avoids repossession and their house increases in value by 1 or more percent whilst in receipt of legal aid there has been a ‘preservation of property’ and section 17 kicks in.

How does a family with young kids living on less than £120 per week or a single person living on £60 per week pay a legal aid bill of £1,000? Clearly no-one can pay for legal aid when they are living on breadline benefits so the Board is now talking about clients granting a second mortgage in favour of them; with the client being responsible for setting this up.

In any other debt or eviction proceedings dismissed with the help of a solicitor there would be no argument about preservation of property. But because a mortgage debt is secured on a person’s home we get into a hypothetical discussion about fictional equity which is unrealisable. The reality is someone has got legal help because they were poor and in dire need; they have been told they have a nil contribution because they are poor; yet they are then treated as if they are wealthy.

The treatment of such vulnerable citizens is wholly inequitable and if you consider that regulation 33 of the Civil Legal Aid (Scotland) Regulations 2002 (the 2002 Regulations) exempts various categories of money and property from the ‘preservation of property’ rule – for example money payable under an Employment Appeal Tribunal order, actions for aliment, maintenance, or property preserved in divorce proceedings – you have to ask yourself why are people facing homelessness with no income excluded from free legal help?
The only answer I can find is this is a lacuna in the law. It is certainly not an intended policy initiative. Until December 3, 2001 most people in Scotland could not even oppose repossession proceedings. So if truth be told no-one has really thought about this. Well that is not quite true. I’ve been banging on about this publicly since January 2008, and well before then in correspondence.
While calls broadcast via TV and radio waves may have been picked up in the nearby Andromeda galaxy they have yet to attract the attention of Scotland’s Cabinet Secretary for Justice. To be fair Kenny has been busy with his plans to free criminals sentenced to less than 6 months. Tough community sentences require a lot of pizza, beer and Sky telly subscriptions to organise.
However, if Kenny gets a minute maybe he could turn his attention to decent hardworking families who have fallen on hard times and are threatened with homelessness? Could he please consider amending regulation 33 of the 2002 Regulations? It could be done within a matter of weeks and if he’s too busy, I’ve written the amendment just in case:

In regulation 33 of the Civil Legal Aid (Scotland) Regulations 2002 (2002/494) insert the following:

< (bb) in respect of the value of any property recovered or preserved from an application under the Mortgage Rights (Scotland) Act 2001 (asp 11); >