Hyde Housing Association Limited (202100147)

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REPORT

COMPLAINT 202100147

Hyde Housing Association Limited

7 March 2022


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 is about:

a)     the level of the service charge.

b)     the landlord’s administration of the service charge.

  1. This investigation has also considered the landlord’s complaint handling.

Jurisdiction

  1. What we can and cannot consider is called the Ombudsman’s jurisdiction. This is governed by the Housing Ombudsman Scheme. When a complaint is brought to the Ombudsman, we must consider all the circumstances of the case as there are sometimes reasons why a complaint will not be investigated.
  2. After carefully considering all the evidence, in accordance with paragraph 39 g of the Housing Ombudsman Scheme, the complaint relating to the level of service charge is outside of the Ombudsman’s jurisdiction.
  3. Paragraph 39 g of the Scheme states that the Ombudsman will not consider complaints which, in his opinion ‘concern the level of rent or service charge or the amount of the rent or service charge increase’. In this case, it is clear from the resident’s correspondence with both the landlord and this Service that she has concerns about the reasonableness of the service charge in that the landlord has included a charge in the 2019/20 bill for a deficit carried over from 2018/19, which is prior to the resident moving into the property.
  4. It is not the Ombudsman’s role to make findings about whether service charges have been charged at a reasonable level by a member landlord as such authority lies with the First Tier Tribunal (Property Chamber). The tribunal has the authority to scrutinise the terms of the lease in conjunction with costs charged to the leaseholder and make a decision as to whether the landlord’s position is appropriate. This includes whether the landlord acted in accordance with the lease in deciding to recover charges that were highlighted by the resident’s enquiries.
  5. The Ombudsman Scheme provides the authority for the Ombudsman to best define a complaint in relation to the issues at hand. In this case, the complaint, as defined for the purposes of this investigation, has drawn a distinction between the level of the service charge and the landlord’s administration of the service charge, as this enables the Ombudsman’s position to be clarified from a jurisdictional perspective and provides for those aspects of the complaint that are within jurisdiction to be identified and addressed. In addition, the Ombudsman’s remit allows for an investigation to consider a landlord’s complaints handling; this issue has also been considered here.

Background and summary of events

Policies and procedures

  1. The landlord’s complaints policy states that it aims to respond to stage 1 complaints not later than 20 working days. If unable to do so it will advise the customer additional time is required and ask how frequently they would like it to provide updates. If the target of 20 working days is reached without an update for the customer about the deadline, at this point the complaint will escalate to stage 2 of the procedure.
  2. The landlord’s complaints policy also states that it aims to provide stage 2 responses within 20 working days.

Background

  1. The resident is a shared ownership leaseholder, having moved into the property in May 2019.

Summary of events

  1. The resident received a service charge bill in September 2020 for the 2019/20 financial year.
  2. Having spoken to the landlord over the phone, the resident sent an email on 3 November 2020 seeking further clarification. The service charge included a deficit from 2018/19 and the resident queried why the managing agent had only just billed the landlord for this. The resident also said that it was unacceptable to be charged an amount without knowing what it was for. She quoted from the invoice pack where the landlord had said: ‘I appreciate you want more detail on this and we have requested it from (the managing agent), but the cost is assumed to be correct at this stage.’ The resident said she was confused as how the process worked and requested that a breakdown be sought from the managing agent. Whilst the resident said she appreciated being sent out the invoice pack, these were figures that made no sense without an idea of how the costs were incurred.
  3. The landlord responded on 12 November 2020 to say that the 2018/19 deficit amount was an unexpected addition to the 2019/20 actual and that it had requested further information from the managing agent as to the detail. It said that, broadly speaking, if it was billed for anything during the 2019/20 financial year then that could be included in the actual for that year. It said that, depending on what information came back from the managing agent, it may be able to take further action on this matter. The landlord went on to say that the managing agent undertakes the service charge works for the estate and then invoices the landlord, with those costs being passed on to the tenants. It said that it did have to assume costs were correct unless it had information to the contrary. It said that, in this case, it appreciated that there was a large deficit and so it was right and proper that tenants receive more detail on what constituted the charges. It said that, more broadly, it was working to improve the information that managing agents provided on service charges and to increase transparency.
  4. On 19 February 2021 the landlord wrote to the resident again under the heading ‘Service Charge Actual 2019/20’. Having apologised for the delay in responding to the resident’s query, the landlord said that it was now able to provide additional information. It said that the managing agent service charge comprised:

a)     Balancing (actual) charge covering period 01/04/18 to 31/03/19. This is correctly included in the 2019/20 total as the invoice was received by the landlord in the 2019/20 financial year.

b)     The remainder of the charges are the estimated figures for the financial year 2019/20 that it had received from the managing agent.

  1. The landlord explained that, in this respect, the accounts from the managing agent always run behind the current year in this way. For example, the balancing (actual) charge for 2019/20 is received by the landlord later in 2020, which will be billed to tenants later in 2021.  The landlord said it appreciated that this method of billing was unclear and apologised.
  2. The landlord gave a comparison of general repairs costs in 2017/18 and 2018/19. It said that the latter costs had come in significantly higher than the previous year and so had created a deficit. The landlord said it had requested details of the general repairs and maintenance from the managing agent to see what made up the amount of £24,981 and that the breakdown received was included in the letter to the resident.
  3. On 3 March 2021 the resident approached the landlord with further queries about the deficit, such as why the figure of £24,981 wasn’t applied to the 2018/19 service charge when it must have been an expected cost at that point and if not, what was the expected cost for general maintenance and repairs in 2018/19. The resident also queried the distribution of the deficit amount between the different properties on the estate.
  4. On 22 March 2021 the landlord replied, explaining that the extra cost (in this case the deficit figure of £648 for 2018/19) is invoiced by the managing agent around six months after the financial year ends, once their accounts are completed. Therefore service charges always run behind. The landlord also explained how charges were apportioned to each flat.
  5. The resident responded the same day, saying she had been told by the landlord that the amount of £648 had been billed later by mistake by the managing agent and added to the service charge review in 2020. The resident then quoted from the Landlord and Tenant Act 1985 which said that service charge accounts should be prepared and copies made available to all contributors within six months of the end of the financial year, or any shorter timescales required by the lease. If for some reason the accounts cannot be prepared within six months of the year end, all parties should be informed of the reasons and any statutory notices served. The resident said she was not informed within six months and that she was not even the owner at the time, therefore it was an error by the landlord and the managing agent.
  6. The landlord replied on 25 March 2021 to say that it had been invoiced by the managing agent for the 2018/19 deficit charge within six months of the end of the financial year and so it was in compliance with the Landlord and Tenant Act 1985. In turn, as it is a cost that the landlord receives during its 2019/20 financial year, it is correct to then include it as part of the collated expenses in the 2019/20 actual.
  7. The resident then told the landlord (also on 25 March 2021) that she had received legal advice that all landlords and tenants must be informed when a deficit has occurred within the six month period, which she was not. She said that she was also entitled to a full breakdown of any overspend, which should have side notes explaining what actions were taken to get to these costs as supporting evidence for the overspend.
  8.  The landlord responded on 12 May 2021. It said that its Head of Property had advised that, upon receiving an invoice from the managing agent for service charges, it could pass this on to tenants from the date it was incurred. The author of the email said that he was not legally trained and did not deal directly with the translation and application of legislation, but was trying to assist the resident with her query. The landlord said that it had previously provided a line by line breakdown for the 2018/19 general repairs and maintenance costs.
  9. On 17 May 2021 the resident contacted this Service, saying that the landlord had not provided a sufficient breakdown of costs or answered her question about having to be notified within six months according to the law. She also said that she had always been told by the landlord that whenever any monies owed are over 5% then it had to notify her in writing. Instead, the deficit amount from 2018, before she lived there, was invoiced in 2020. The resident said she did not believe that she should be liable for paying the extremely backdated deficit amount. The resident then explained that she had been sent letters demanding payment.
  10. On 6 July 2021 the landlord provided its stage 1 complaint response. It firstly said it was sorry that the resident had had to wait for responses. In terms of responding to the complaint about the inclusion of the deficit amount for 2018/19 in the following year’s charges, the landlord simply quoted from a previous response that it had sent the resident. It then said that identifying areas of concern and acquiring the necessary information from a managing agent can be slower than it would like and that it was an area that continued to be raised as a concern with senior management in Property Charges to see if any improvements could be made. It said that it had created a new team over the past year to act as a point of contact when tenants had queries about service charges. Whilst that team could not get involved in the calculation or invoicing process, they were able to highlight errors and work with relevant colleagues to make the necessary corrections. The landlord did not uphold the resident’s complaint but offered her £200 in recognition of delays and the time and trouble taken in pursuing the complaint.
  11. On 15 July 2021 the resident wrote to the landlord to explain her dissatisfaction with the stage 1 response. In terms of compensation, the resident believed the whole amount of the deficit figure should be disregarded. She said that she had still not had answers to certain questions. When querying why the deficit was so high she had not received sufficient information nor an income and expenditure account to explain the total spend, only an ‘example document’. Furthermore, she was not aware of anyone else in her building being billed for the 2018/19 deficit. Mistakes had been made on the initial 2018/19 service charge statement with the block services being included in error and the 2019/20 charge included ground rent in error, so why were there continuous errors.
  12. On 19 August 2021 this Service chased the landlord for its stage 2 response, asking it to be completed by 27 August 2021.
  13. On 6 September 2021 the landlord provided its stage 2 response. The landlord said that there were 30 properties across the estate and all their service charges included a deficit amount. It said that it had previously provided a detailed breakdown from the managing agent for the general repairs and maintenance which was highlighted as the cause for the overspend. In terms of not being informed within six months, the landlord reiterated that the previous information provided was correct and that, because of the 18-month cycle for a service charge, it will always have a final statement included from a year prior where a managing agent is involved. This is correct as it is the year that the landlord has paid the managing agent’s invoice as opposed to when the costs were incurred. The landlord said it was looking at ways that it could identify where a service has an unexpected overspend during the financial year and how it could relay that information to its tenants in preparation for a deficit in the statements. The landlord increased its compensation offer to £250 for delays and the resident’s time and trouble in having to pursue the complaint.
  14. Further correspondence post dating the complaints process confirms that the landlord issued the resident with a notice seeking possession in relation to rent arrears. It is not clear from the evidence whether these arrears related to the service charge dispute under consideration here, or whether the arrears relate to rent owing for the proportion of the property that remains in the landlord’s ownership. In any case, the landlord confirmed, in December 2021, that further court action would not proceed whilst the Ombudsman’s investigation continued.

Assessment and findings

Scope of the investigation

  1. The jurisdiction section above detailed the reasons why this investigation has not considered the level or reasonableness of the service charge. It is clear from the complaint detailed in the resident’s correspondence with this Service that she is concerned about how a service charge deficit accrued in the 2018/19 financial year and how that amount has been rolled over and charged in the 2019/20 bill. In particular the resident queries why she should be liable to pay an amount stemming from a period prior to her moving into the property. These issues relate to how the service charge has been calculated and therefore sit outside of the Ombudsman’s remit.
  2. This investigation is concerned with the landlord’s handling of the resident’s queries about the level and administration of the service charge and its subsequent handling of her complaint. The investigation shall not extend however, to consideration of the merits of the landlord’s specific responses as to how it has apportioned costs, or calculated charges following the resident’s reports as such issues would be within the tribunal’s remit.
  3. More recent correspondence (December 2021) has confirmed that the landlord has commenced possession proceedings in relation to rent arrears, though formal court action has not yet taken place, seemingly in response to the ongoing Ombudsman investigation. It is not the Ombudsman’s role to intervene in any possession process taken by the landlord and any formal court action would prevent any such issues being considered under the Ombudsman’s dispute resolution process. As the landlord has confirmed that court action has been suspended, this investigation has proceeded, within the limited remit described in this section and the jurisdiction section above.

The landlord’s administration of the service charge.

  1. Having received a service charge bill in September 2020, the resident made contact with the landlord over the phone to request more information. She received further information by post, following which there began a long series of correspondence between the resident and the landlord. There were often long gaps between the landlord making contact with the resident. For example, it emailed her on 12 November 2021 with regard to providing more concrete information about costs, but then did not provide that information until 19 February 2021. In addition, the resident emailed the landlord on 25 March 2021 and did not receive a response until 12 May 2021. Some of this delay may have been as a result of the landlord awaiting more information from the managing agent, but that does not account for all of the delay. However, when the landlord did reply, it was at length, and it apologised for the lateness in responding on each occasion.
  2. The resident and landlord disagree on the level and clarity of information provided. The resident says that she has never received a sufficient breakdown of the deficit amount. The landlord says that it provided a line by line breakdown of the general repairs and maintenance costs in question. Whilst the Ombudsman can see that the resident was provided with information, it clearly did not satisfy the resident as she repeatedly stated that she had not received the requested information. In response, it would perhaps have been helpful if the landlord had explained the breakdown of costs in plain English in one of its letters rather than just providing ancillary paperwork.
  3. Though the resident was dissatisfied with the extent of the information provided by the landlord in response to her reports about the service charge, it is clear that she did receive a response to her requests nonetheless. This included a specific response to her query about income and expenditure for the disputed period and its viewpoint that it was correct  to have billed the resident for the service charge figure in dispute.
  4. Whilst the resident clearly disagreed with the responses given, it is not the Ombudsman’s role to arbitrate over the landlord’s reasoning here, but to consider whether the landlord has responded to the issues raised through its complaints process. In this respect, it is apparent that the resident did receive responses to her enquiries and as such, the Ombudsman is satisfied that this element of the complaint has been responded to.
  5. The reasonableness of that item on the resident’s bill is a matter for the tribunal. The legal argument that the resident has made about the timeliness of the service charge bill is also something that the tribunal could look at. The landlord expressed its own dissatisfaction about the insufficiency of the information provided by the managing agent in respect of costs and the consequential lack of detail that it was providing to its tenants. However, having identified this, it is taking steps to speed up the process to provide more information at an earlier stage.

Complaint handling

  1. According to the stage 1 response, the resident first complained on 14 April 2021. The landlord provided its stage 1 response on 6 July 2021. Therefore, it took approximately twelve weeks to respond, rather than the 20 working days set out in its own complaints policy.
  2. The Ombudsman has not seen any evidence that the landlord followed its own policy in advising the resident that it would need more time to carry out the stage 1 investigation or that it asked her how frequently she would like updates. Therefore, according to the landlord’s own policy, it should have automatically escalated the complaint to stage 2 after 20 working days.
  3. The stage 2 complaint was also not provided within 20 working days of the resident requesting an escalation. It was provided just over three weeks late, after the landlord was chased by this Service. Furthermore, the landlord failed to signpost the resident to the tribunal as a means of challenging the level of service charge.
  4. Given the extent of the failures identified here, it was appropriate that the landlord apologised and offered an amount of compensation to reflect the detriment these failures caused to the resident.

Compensation

  1. The landlord has addressed the delays, both prior to and during the formal complaint process. It apologised and offered £200 compensation for these failures in its stage 1 response. When there was further delay in responding at stage 2, it increased its offer to £250.
  2. The total amount of compensation offered related to both the landlord’s delay in providing the resident with information pertaining to her service charge enquiry, and also the complaint handling failures identified. In the Ombudsman’s view, the total amount of compensation offered was both proportionate and reasonable given the failures identified.

Determination (decision)

  1. In accordance with paragraph 39 (g) of the Scheme, the complaint about the level of the service charge is outside the Ombudsman’s jurisdiction.
  2. In accordance with paragraph 55 (b) of the Scheme, the landlord made a reasonable offer of redress for service failures identified with its response to the resident’s reports about the service charge.
  3. In accordance with paragraph 55 (b) of the Scheme, the landlord made a reasonable offer of redress for service failures identified with its complaints  handling.

Reasons

  1. The landlord responded to the resident’s questions about the disputed amount of the service charge. Though the resident was not satisfied with the information provided, it is not within the Ombudsman’s remit to assess the extent to which the information provided to her justifies the charge she was made liable for, as this is an issue more appropriately dealt with by the tribunal. It was appropriate however that the landlord recognised that it had taken some time to provide the resident with relevant information and that she had experienced significant distress and inconvenience in the pursuit of her complaint. For these failures, the landlord’s offer of compensation is considered both reasonable and proportionate.

Orders and recommendations

Recommendations

  1. The landlord to ensure that the resident is given sufficient time to digest the contents of this investigation and to consider her next options, such as possibly approaching the tribunal, before it re-commences possession proceedings.
  2. The landlord to ensure that residents in similar situations are signposted to the tribunal at the earliest possible opportunity, so as to enable them to make more informed decisions about their case.