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Midland Heart Limited (202007704)

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REPORT

COMPLAINT 202007704

Midland Heart Limited

4 March 2021


Our approach

The Housing Ombudsman’s approach to investigating and determining complaints is to decide what is fair in all the circumstances of the case. This is set out in the Housing Act 1996 and the Housing Ombudsman Scheme (the Scheme). The Ombudsman considers the evidence and looks to see if there has been any ‘maladministration’, for example whether the landlord has failed to keep to the law, followed proper procedure, followed good practice or behaved in a reasonable and competent manner.

Both the resident and the landlord have submitted information to the Ombudsman and this has been carefully considered. Their accounts of what has happened are summarised below. This report is not an exhaustive description of all the events that have occurred in relation to this case, but an outline of the key issues as a background to the investigation’s findings.

The complaint

  1. The complaint refers to:
    1. The landlord’s administration of the resident’s rent account.

Background

  1. The resident is a shared-ownership leaseholder. The landlord is the freeholder.

Summary of events

  1. On 22 August 2019 the landlord wrote to the resident to inform him of a rent increase which would take effect from 1 October 2019.
  2. The resident received a letter from the landlord on 5 August 2020 which detailed an increase to his Direct Debit payment which would take effect from 7 September 2020. 
  3. Following this, the resident contacted the landlord to express his dissatisfaction in relation to the landlord’s failure to adjust his Direct Debit in October 2019. On 28 August 2020 the landlord provided an informal complaint response which advised of the following:
    1. It noted that the resident had advised that he previously chose to pay via standing order to build a credit onto his rent account. He set up a Direct Debit payment in May 2018 and advised that he had asked for this to be set up for the rent amount. The landlord advised that it did not have a record of this conversation, although when a Direct Debit was set up an automatically-generated letter was sent to the resident and he would have had the opportunity to question the Direct Debit figure at the time.
    2. It noted that the resident had requested a refund or compensation for the credit he had lost on his rent account. The landlord advised that as the Direct Debit was not increased in line with the rent increase in October 2019, the credit on his rent account had reduced as there had been a shortfall. It noted that due to the credit on the account, the resident did not fall into arrears. It explained that the resident had been made aware of his rent increase and it could not refund this amount as the resident was contractually obliged to pay his full rent amount.
  4. On 3 September 2020 the resident raised a formal complaint in relation to the landlord’s handling of his rent account. He advised of the following:
    1. He explained that he had been notified by both the landlord and the rent tribunal that his rent was due to increase and the new amount would be in effect from October 2019. He noted that his Direct Debit was due to be adjusted and that his Direct Debit payments continued to be deducted.
    2. He said that he had received a further letter on 5 August 2020 which advised that his new rent would be taken from 7 September 2020. He then called the landlord to discuss this matter. The landlord had advised that the amount included his rent increase and an additional £5 per month payment as agreed. The landlord had been unable to clarify what the ‘agreed amount’ was for. He had requested to speak to a manager but there had not been a manager available. The landlord arranged a call–back.
    3. The resident had not received a call–back within a week so called the landlord again. He requested to speak to a manager again but was told that a call- back would be arranged. A call–back took place a week later and the landlord had apologised for the three-week delay.
    4. The landlord had advised that due to an administrative error it had failed to implement the rent increase from October 2019, and as a result the credit on the resident’s rent account was adjusted to cover the shortfall caused by his rent increase. He explained that his rent account had been in credit due to a previous issue, and he had been paying a higher amount than needed via standing order, before changing to a Direct Debit payment in May 2018. He confirmed that until 1 September 2019 his rent account had been in credit, after which the credit had been adjusted due to the landlord’s error.
    5. The resident expressed dissatisfaction that the landlord had not contacted him when it had failed to implement the rent increase from October 2019 and that there was a need to make an arrangement for any outstanding balance. He said that the credit on his rent account had been adjusted without his agreement and he felt that part of his monthly rent included an administrative fee which he felt had been taken under false pretences as the landlord had failed to complete administrative tasks such as implementing the rent increase.
    6. He advised that a member of staff had said that he was responsible for ensuring the correct amount was being taken by Direct Debit for his rent. He felt that it should be the landlord’s responsibility to ensure any increase or adjustment to any Direct Debit payments were made. He maintained that he had not had any contact from the landlord, and he was unsure as to when the additional £5 per month had been “agreed”.
  5. The landlord issued a formal complaint response on 22 September 2020 and advised of the following:
    1. It noted that the resident had been made aware of his rent increase on 22 August 2019 and that this would take effect on 1 October 2019. It explained that the resident would have been able to appeal the increase at the time if he felt that it was not in line with the Fair Rent Increase. No appeal was received and therefore the rent increase was “agreed”.
    2. It had found that it had not adjusted the resident’s Direct Debit to reflect the new rent increase, although, due to the credit on the resident’s account, he had not fallen into arrears. It was now aware that the Direct Debit payment did not cover the resident’s new rent charge and the resident had been advised that this would be amended as of September 2020 during a phone call on 10 August 2020.
    3. It understood that the resident felt that it had taken credit from his rent account without his consent but advised that without this credit, the resident would have fallen into arrears. In line with his lease, if the resident’s rent account had been in arrears for over 12 days, interest would have been charged on the amount.
    4. It acknowledged that the resident wanted a refund of the administration charges. It understood that it had not amended the resident’s Direct Debit in 2019, although the administrative charges covered more than the administration of his rent account and it could not refund this amount to him.
    5. The landlord partially upheld the resident’s complaint as it had not amended the resident’s Direct Debit to reflect the rent increase. The landlord apologised for this and said that it had implemented additional measures to ensure that rent paid is in line with the rent charged in future. It advised that if the resident remained dissatisfied at its response, he could escalate his complaint to the next stage of its complaint process. 
  6. The landlord emailed the resident on 30 September 2020 and acknowledged that he had requested to escalate his complaint on 24 September 2020 over the phone. It noted that the resident wished to escalate his complaint as he believed that the landlord had stolen money from his rent account without permission and that the landlord had not written to him to advise that it had failed to implement the rent increase. The landlord advised that the resident would receive a response within 20 working days.
  7. The landlord issued its final response to the resident on 21 October 2020 and advised of the following:
    1. It had reviewed the resident’s complaint and found that it had correctly informed the resident of his rent increase, but it had failed to adjust his Direct Debit. As the resident’s rent account had been in credit and had not fallen into arrears, this error had not been highlighted. Once it had been aware of the shortfall in the resident’s rent payments it had contacted the resident to inform him that the Direct Debit would be increased. As a result of the resident’s complaint, the landlord had introduced an improvement which ensured that the rent charged, and the rent paid were cross-referenced to prevent instances such as this occurring again.
    2. The landlord acknowledged that the resident felt that it had taken money from his rent account without his consent. It stated that it would be able to return the credit to the resident’s account if he paid the arrears which had accumulated on the account immediately.
    3. The landlord declined the resident’s request to escalate his complaint to a formal review as it determined that its previous complaint response had been thorough and accurate.
  8. The Ombudsman wrote to the landlord on 28 November 2020 and proposed mediation to resolve the complaint. It noted the resident’s proposed resolution which was for the landlord to repay any monies used from his credit balance, arrange a repayment plan for any arrears on the account following a refund of his previous credit, and offer an award of compensation for the distress and inconvenience caused.
  9. The landlord emailed the Ombudsman on 3 December 2020 and said that it would be happy to engage in mediation. It explained the process it followed prior to changing a resident’s rent figure. It said that it would be able to offer compensation in line with its Compensation Matrix for its error in communicating with the resident, although it would not be able to refund the credit to the resident’s account whilst there were arrears on the account. It noted that the credit on the account prevented the resident from falling into arrears and prevented formal action.
  10. On 16 December 2020 a telephone call took place between the Ombudsman and the landlord. The landlord explained that crediting the rent account and setting up a payment plan for the arrears would not be logical. The landlord offered an award of £35 compensation in light of its error in not changing the Direct Debit amount.
  11. The Ombudsman called the resident on the same day to advise him of the landlord’s offer of compensation. The resident refused this offer and maintained his position that the landlord had not notified him that it had started to take the increased rent payment and had not adjusted his Direct Debit accordingly. He explained that the landlord should have communicated with him and had taken the credit from his rent account to cover the difference in the rent payment increase and that this was done without his permission.
  12. The Ombudsman contacted the landlord on  16 December 2020 and advised that the resident was not willing to accept its offer of £35 and asked the landlord to provide information requested for investigation.
  13. The landlord emailed the Ombudsman on 21 December 2020 and explained that it wanted to resolve the matter with the resident. It explained that it would not look to credit the account and set up a repayment plan as the credit value would need to be held in a separate account until the outstanding amount was cleared. It advised that it may lose sight of this repayment. It confirmed that to conclude the matter it would be willing to offer the resident £94 compensation, which was the difference between the resident’s credit when the Direct Debit should have been increased until the credit reduced and the Direct Debit was adjusted.
  14. The Ombudsman called the resident on 20 January 2021 and explained the landlord’s offer of £94. The resident advised that he was not satisfied with this offer. He maintained his position that the landlord had not contacted him until he had raised a complaint. The landlord had thought he was challenging the rent increase which he was not.

Assessment and findings

The landlord’s administration of the resident’s rent account.

  1. The resident’s lease states that the resident is responsible for paying his specified rent. If for any reason his rent account falls into arrears, the resident would be obligated to pay this and any interest which may have been applied. The landlord would be obliged to make the resident aware of any rent increases, provide information about the rent account, and communicate with the resident clearly. It would also be expected to alter the resident’s Direct Debit to ensure that the correct amount was paid into the rent account.
  2. The resident has advised that he was made aware that his rent was due to increase from October 2019; following this, the landlord had not adjusted his Direct Debit figure. The landlord later advised that the resident’s Direct Debit would be changed and effective from 7 September 2020. The delay in changing the Direct Debit had caused the credit on the resident’s rent account to diminish although it is noted that the resident did not fall into arrears during this time. The resident has said that he feels the landlord has used the credit on his account without his consent. He also expressed dissatisfaction that the landlord had not communicated effectively with him during this time.
  3. The landlord has offered reasonable redress in respect of its recognised failings of the administration of the resident’s rent account. The landlord has acknowledged that it did not adjust the resident’s Direct Debit to match the new rent figure in October 2019 and has apologised that it had not done this at an earlier stage. The resident was not significantly disadvantaged by the landlord’s failure to adjust his Direct Debit as his rent account had sufficient credit to cover the increased rent payments. His rent account had not fallen into arrears and subsequently had not accrued any interest which would be an additional cost.
  4. The resident has expressed concern that the landlord had not communicated with him during this time and it was not until he raised a complaint that he gained knowledge of the issue. As the rent account had not fallen into arrears, it was reasonable that the landlord would not have necessarily picked up on this error at an earlier stage as no arrears recovery action had begun. The landlord has taken points of learning from the resident’s complaint and has now introduced a system which ensures that the rent charged, and the rent paid are cross-referenced to prevent instances such as this occurring again. It would have been helpful for the landlord to address this matter with the resident once it had realised its error, although the resident was not significantly disadvantaged by this as his rent account remained in credit during this time and he was paying the correct amount of rent.
  5. The resident has advised that he did not feel he had the opportunity to discuss his complaint with the landlord, which led the landlord to misunderstand his complaint. It is noted that a number of phone calls took place which have been referred to by the landlord on multiple occasions in its complaint responses and acknowledgement letters. If the resident wished to raise any further concerns at this time, he would have had the opportunity to do so. It was reasonable that the landlord may have understood part of the resident’s complaint to be related to the rent increase as the resident had expressed dissatisfaction that the landlord had taken the credit from his rent account without his consent. 
  6. The resident credits his rent account by paying into it via Direct Debit; the rent is then deducted from the rent account, meaning the balance on the rent account changes. The resident had been made aware that the rent was due to increase, therefore a larger amount would be taken from his rent account each month. The resident would have had the opportunity to challenge his rent increase at the time if he had any concerns. The landlord has not unreasonably “taken” the credit from the resident’s rent account; it had collected the resident’s rent from the rent account in line with its obligations as the resident was obliged to pay his rent. It is noted that the credit on the resident’s account had diminished during this period as a result of the Direct Debit amount not being adjusted to match the new rent figure causing a shortfall. The resident would have been obliged to pay his increased rent figure regardless of the landlord’s error. Therefore, the landlord has not acted unreasonably by collecting the resident’s rent from his rent account as usual.
  7. In short, the resident was not significantly disadvantaged by the landlord’s error in not changing the resident’s Direct Debit as he would have been obliged to pay his increased rent and his rent account did not fall into arrears during this time. It is noted that the resident has spent time and trouble pursuing this complaint highlighting a lack of clear communication at an earlier stage. In view of its error, the landlord has offered £94 compensation to match the difference in the credit on the resident’s rent account; this is effectively a refund of the increased proportion of rent during this period. This amount of compensation is proportionate to the level of inconvenience experienced by the resident. This amount is in line with the Ombudsman’s Remedies guidance which states that compensation figures in this range are suitable for instances of service failure resulting in some impact on the resident; for example, where the failure did not have a significant impact. The landlord has also taken steps to improve its processes to ensure that this does not happen in the future and apologised to the resident for any inconvenience. This represents a reasonable response in view of all the circumstances.

Determination (decision)

  1.  In accordance with paragraph 55 (b) of the Housing Ombudsman Scheme, the landlord has offered reasonable redress in respect of its administration of the resident’s rent account prior to investigation which, in the Ombudsman’s opinion, resolves the complaint satisfactorily.

Reasons

  1. The landlord has acknowledged its error in not adjusting the resident’s Direct Debit payment in line with his rent increase and the inconvenience this may have caused. Following mediation, the landlord has offered £94 compensation which is proportionate to the inconvenience experienced by the resident through its error and the time and trouble the resident has spent pursuing this matter.

 

Recommendations

  1. It is recommended that the landlord pays the resident £94 as previously offered. This may be paid directly to the resident or credited to the resident’s rent account at the landlord’s discretion.