Bournville Village Trust (202014113)

REPORT

COMPLAINT 202014113

Bournville Village Trust

23 December 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 is about the landlord’s application of payments made by the resident for a purpose she did not intend.

Background and summary of events

Background

2. The resident has been an assured tenant at the property of the landlord since 11 October 2008. The landlord is a registered provider of social housing.
3. The landlord operates a two stage complaints policy. A stage one response should be given within 10 working days of a complaint, and a stage two response within 15 working days of an escalation.
4. The landlord operates a policy in relation to residents’ rent accounts. The policy notes that it may serve a notice seeking possession and apply to the court for a possession order in instances where rent is not paid.
5. The landlord operates an income management policy. At the time of the complaint, the policy did not note how payments made to the landlord while a resident was in rent arrears would be prioritised. Following the resident’s complaint, the landlord has included paragraphs in its policy which state that where court costs arise as a result of court action in relation to the rent arrears, these will be placed into a sub account, separate to the rent account. Payments received from a resident will be prioritised towards clearing arrears prior to then clearing court costs.

Summary of events

6. Over the period from 2013 to 2018, the resident’s rent account fell into arrears on five occasions resulting in the landlord sending notice of possession letters demanding payment of the arrears or risk court action for repossession of the property. Throughout 2018, the resident liaised with the landlord regarding her arrears and set up a direct debit for continued payment of her rent. She also requested copies of her rent accounts and queried how a number of past payments had been applied. Following a conversation with the landlord regarding her arrears, the landlord noted on 5 October 2018 that the resident had raised concerns that her housing benefit payments which went towards rent were not in the amounts she expected. The landlord subsequently advised the resident that she address this concern with the local authority’s housing benefit department, but that the arrears nevertheless remained owing.
7. On 11 February 2019, the landlord issued another notice of possession in relation to arrears. The resident subsequently expressed her dissatisfaction to have received the notice as she believed she had a direct debit set up for collection of rent and arrears repayments. She continued to question whether the calculation of the arrears was correct. She also noted that there had been two direct debits in place, and she had recently cancelled the second.
8. The landlord explained that it had changed collection agents and that the second direct debit would have been set up by its new agent. The resident had subsequently cancelled this, leaving only the previous redundant direct debit on her account. The landlord subsequently arranged with the resident for the correct direct debit to be reinstated.
9. A further notice for possession in relation to arrears was sent on 8 March 2019, and subsequently, a court hearing was arranged for 29 April 2019. The hearing was adjourned for the parties to present further evidence, and at the final hearing, no decision was made by the court regarding the rent arrears resulting in the matter being ‘generally adjourned’. The court made an order on 31 May 2019 for the parties to each bear 50% of the court costs, with the resident ordered to pay the landlord £162.50 at the rate of £12 per month, payable monthly.
10. It is evident that in or around November 2020, the landlord advised the resident it considered the repayment of court fees to remain outstanding. On 30 November 2020, the resident advised she considered that she had made monthly repayments, as per the court order. On 3 December 2020, the landlord advised it had created an account separate to her rent account on its system for the court fees. It further advised that it had applied all funds received from the resident to her rent account “whether or not you intended them to be for rent or court costs,” as this was still in arrears. It therefore considered the full amount of the court costs to be outstanding.
11. On 8 December 2020, the resident expressed her dissatisfaction that the landlord had not applied the repayments, which had been made in the amounts ordered by the court, towards the court costs. She subsequently requested that these amounts be refunded to her.
12. On 9 December 2020, the landlord advised that all payments made by the resident had been applied to her rent account and that the resident had had access to her rent statement which noted this. It also advised it would be unable to refund the payments as her rent account was not in credit.
13. The resident raised a formal complaint in relation to the court costs, to which the landlord provided a stage one response on 1 February 2021. This response also covered two other complaints, one relating to ASB which the resident has advised is no longer in dispute, and a complaint relating to the landlord’s decision to only visit the resident’s property in pairs, which this service has also investigated under case reference 202100005. In relation to the court fees, the stage one response advised that the landlord’s communication of 9 December 2020 set out its position and that it had nothing further to add.
14. On 15 February 2021, the resident escalated her complaint, and the landlord provided its stage two response on 1 April 2021. It apologised for the delays to its response and advised this was due to the amount of information it had to review. The landlord reiterated that it had applied the resident’s payments to her rent arrears and would then apply any further payments towards the court costs once the arrears had been cleared. It advised this was “standard practice,” but accepted that this was not noted in any of its policies. It advised its policies had now been updated to reflect this. It noted that it had made reference to the court costs in a communication on 30 November 2020 regarding additional payments towards the resident’s ‘bedroom tax’, in which it said “if your bedroom tax deduction does cease and you start to receive Housing Benefit to cover all of your rent, then once any outstanding rent is cleared you may reduce your payments to cover just the court costs contribution which was set at £12 per month.” It concluded that while it failed to advise how it would treat payments where there was both rent arrears and court costs, it did not consider this had caused the resident any financial hardship as it believed it was owed both and both should be paid off accordingly.

Assessment and findings

15. Based on the rent account statements provided to this service, there have been a considerable number of adjustments resulting from varying housing benefit payments and deductions due to underoccupancy that date back over many years. Based on the available evidence, this service is unable to carry out a detailed audit of the accounts to determine if the current balance is correct. The focus of this investigation, however, is to determine whether the landlord’s application of the resident’s payments which she believed related to court costs was correct. Regarding the remaining outstanding rent arrears, the resident’s position is that she continues to dispute the amount calculated by the landlord, and the landlord will need to follow its own policies to pursue the outstanding amount.
16. The landlord’s rent accounts policy notes that when arrears accrue, it may serve a notice seeking possession should the arrears not be paid. The resident has expressed her dissatisfaction at receiving such notices due to their formal nature, however, the Ombudsman considers the use of such notices to be standard practice in such instances and it was reasonable in the circumstances to alert the resident to the arears.
17. Following the court hearings in April/May 2019, the court made an order for the resident to pay 50% of the landlord’s court costs, to be paid at £12 per month. For the resident to comply with this order, she would need to make such payments from the date of the order on a monthly basis. The court made no such order that the landlord could refuse to accept payment of the court cost repayments until the rent arrears were paid in full. Indeed, no such decision about whether the arrears were payable or not was made, and they remained in dispute.
18. It is not disputed that the resident made payments to the landlord, in addition to her normal rental direct debits, in the exact amounts as ordered by the court in relation to the court costs. The payments were made using the details the resident previously had used for making payments to the landlord. The landlord has advised that it created a separate account on its system for the court costs, however, it is not evident that this advice was given to the resident at the time the account was set up, nor was it explained to the resident at this time how the landlord would apply payments received from her.
19. In its communication of 3 December 2020, the landlord advised that it had applied all payments received from the resident towards her rent arrears, regardless of the resident’s intention. In its stage two response, the landlord accepted that its written policies at that time did not indicate it would apply the payments in this way, but that it considered this to be “standard practice.”
20. The Ombudsman does not consider it fair that the landlord is able to apply payments received from the resident towards rent arrears regardless of the intention of the resident, and without making its intention clear to the resident first. The payments towards court costs were made pursuant to a court order, and by refusing to accept them for this purpose, the landlord is causing the resident to potentially be in breach of this order. While it would have been prudent for the resident to have clarified with the landlord how to correctly repay the court costs prior to sending the payments, having been alerted to the correct intention of the resident, and given that the payments had been in the exact amounts as ordered by the court, it was unreasonable for the landlord not to seek to apply the payments accordingly.
21. In its stage two response, the landlord made reference to the fact it had indicated that the court costs remained outstanding in its correspondence dated 30 November 2020. This was not sufficient, however, to rectify that it had failed to outline how it had set up a separate account for the court costs or explain how it would treat repayments. It was appropriate, however, that the landlord apologised for the delay to its stage two response, and while the Ombudsman considers it best practice to give prior warning where timeframes for formal responses will be missed, in this instance, the apology and explanation were sufficient remedy for this service failure.
22. The landlord’s failure to advise the resident on how she could differentiate payments for the court costs, its failure to provide its position on how it would treat payments received, and its failure to subsequently rectify the application of the payments for the correct purpose would have caused the resident distress and inconvenience in having to chase this issue up several times. This amounts to service failure for which compensation is appropriate. In reflection of the distress and inconvenience caused to the resident, an amount of £50 is appropriate in the circumstances.
23. In addition, to return the resident to the position she would have been in had the service failure not occurred, an order has been made below for the amount of £162.50 to be transferred from the resident’s rent account to the sub account relating to court costs.
24. A recommendation has also been made below for the landlord to review and/or seek legal advice regarding its policy for prioritising all payments received towards arrears where repayments for separate balances have also been ordered by a court.

Determination (decision)

25. In accordance with paragraph 54 of the Housing Ombudsman Scheme there was service failure by the landlord in respect of the complaints regarding its application of payments made by the resident for a purpose she did not intend.

Reasons

26. Following the court’s order that the resident repay to the landlord 50% of its court costs, the landlord failed to advise the resident that it had set up a separate account for these costs and how it would apply any repayments received. It also chose to reapply all repayments received towards the resident’s rent arrears, which were in dispute, despite the court order that the resident repay the court costs. When alerted by the resident that these payments, which were in the precise amounts ordered by the court, were intended for repayment of court costs, the landlord’s advice that it was its policy to prioritise all repayments towards rent arrears prior to the repayment of court costs was unreasonable given the court’s order and its failure to clearly communicate with the resident as to how it would treat any incoming payments.

Orders and recommendations

Orders

27. The Ombudsman orders the landlord to pay compensation of £50 or any distress and inconvenience caused to the resident by its application of payments made by the resident for a purpose she did not intend.
28. The Ombudsman further orders that the landlord transfer an amount of £162.50 from the resident’s rent account to the sub account relating to court costs.
29. Both of the above orders must be carried out within four weeks of the date of this determination.

Recommendations

30. The landlord to review and/or seek legal advice regarding its policy for prioritising all payments received towards arrears where repayments for separate balances have also been ordered by a court.