London & Quadrant Housing Trust (202110036)

REPORT

COMPLAINT 202110036

London & Quadrant Housing Trust

6 May 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 resident’s complaint was about:
   1. The landlord’s response to the resident’s request to sell his shared ownership property on the open market.
   2. The landlord’s complaint handling.

Background and summary of events

2. The resident occupied a two-bedroom first floor flat under a shared ownership lease with the landlord. The resident owned it together with his then wife and they jointly owned a 25% share of the lease. The resident was in the process of divorce and ancillary proceedings from his wife. As part of the resolution of the ancillary proceedings, the court made an order that the property be sold. The complaint related to the landlord’s response to the circumstances of the sale of the property and the resident’s request to “staircase” (increase his and his ex-wife’s share to 100%) in order to enable the sale of a 100% share of the lease.

The legal and policy framework.

3. Under the lease, the resident agreed he could only sell the property in accordance with the provisions of the lease, known as the landlord rights of pre-emption or right of first refusal. The procedure consisted of serving notice on the landlord with a valuer’s certificate offering a surrender of the lease. The landlord would have the option of, within 8 weeks of such notice, accepting a surrender or refusing it but nominating a purchaser. If the landlord did not respond, the resident would be free to assign the lease. The landlord was obliged under the lease, to respond promptly to any request by the leaseholder that the pre-emption provisions did not apply. The purpose of this provision was to protect public funds and social housing.
4. If the sale was assigned pursuant to a property adjustment order under family law legislation (Section 24 of the Matrimonial Act 1973), the sale would be exempt from this restriction. The lease had an information sheet appended explaining the landlord’s right of first refusal. The note stated that the right of first refusal did not apply where the property was transferred or assigned as a result of the divorce of the resident. The resident had a right under the “staircasing” provisions to serve notice that he wished to acquire a larger interest in the property.
5. Under the landlord’s complaints policy, the landlord would respond to a complaint within 10 working days of receipt.
6. If a resident asked to escalate the complaint, the landlord would respond within 20 working days of the request to escalate. If it were unable to meet the timescale, it would explain why and write again within a further 10 working days.
7. The landlord’s home ownership procedure promised to ensure its residents received “a consistent and effortless experience in its handling of all homeownership requests”.
8. On receiving a relevant query, which included sales and staircasing, the landlord would offer advice to the customer “where” (sic) they can do so and issue an information pack and record this as an activity against the customer’s record. The landlord would have up to eight weeks to find a buyer. The eight-week nomination period could be waived by the landlord should it wish to do so. The procedure was similar regarding the “staircasing” procedure. Again, the landlord would send out the relevant information pack and record it as an activity on that customer’s record.

Chronology

9. On 12 March 2020, the resident’s family solicitor wrote to the previous freeholder with a copy of the resident’s notice of intention to proceed with a financial application in relation to ancillary proceedings and financial settlement between the resident and his then wife.
10. According to the land registry, the landlord had acquired the freehold (and consequently the remaining 75% of the lease) on 25 May 2018.
11. On 22 March 2021, the court made an order that the home should be sold forthwith on the open market and made provisions of how the net proceeds of sale would be applied.
12. The resident’s family solicitor wrote again on 29 March 2021, this time to the landlord, according to the letter by special delivery and email, informing it of the order to sell the property on the open market. It stated that “Even though the above assignment will not trigger your right of pre-emption, as per clauses 3.19.1 and 3.19.5 of the lease, we are bringing the order to your attention and enquiring into your likely interest in purchasing their 25% interest. If we don’t hear in two weeks, the sale will proceed as per the lease and the order.“
13. The landlord did not reply.
14. On 5 May 2021, the resident telephoned the landlord informing it he was in the process of selling his property and making enquiries in relation to fire safety intended for a mortgage provider. No information had been logged on the landlord’s system. On the same day, the resident also made enquiries regarding his selling his property and for the administration charges involved. The landlord advised him to apply for a management pack and gave him all the details of what the pack included and how much it amounted to.
15. According to a memorandum of sale dated 11 May 2021, the resident had agreed a sale of the property and instructed conveyancing solicitors. The resident contacted the landlord again on the same day to state that landlord had informed him that, as he was selling 100% of the property on the open market, there was no set/minimum price, but he only need to ensure he paid the landlord its 75% share of the sale price. He wished to ensure that there would be “no issues” concerning “staircasing” to complete the sale process.
16. The landlord replied on 17 May 2021 that the information was not correct. As a shared owner, he had to follow the information on its website. His lease stated that that it had an eight week “nomination period” and he should not be selling his property on the open market at this time. The email included information about how to start the process of selling the property through the landlord. Once the resident had reviewed the information on the website, he would need to request a valuation report for the property and provide this to the landlord. The website explained the process and why a valuation was required.
17. The resident replied on the same day. He had been advised that, according to the relevant clauses in the lease, the sale would not be subject to the pre-emption provisions. He said this was stated in his solicitor’s letter of 12 March 2020. “On the basis of the above”, a court order was issued on 22 March 2021 ordering the resident to sell the property on the open market. He also referred to his solicitor’s letter of 29 March 2021. He stated that “even though” he was exempt from the right of pre-emption, he had offered the landlord the opportunity to re-purchase their 25% share first. As no response was given, he had proceeded to sell the property on the open market as per the Court Order. He stated that he informed the landlord accordingly on 5 May 2022 who then advised him on the next steps. It had assured him that this was recorded on his file. He spoke again to the landlord the following day to request written confirmation of the process as he had a prospective buyer and the solicitors involved wanted confirmation that there would be no issues concerning staircasing to complete the sale process. He asked how the staircasing aspect would work in this case and how to progress the matter.
18. On 18 May 2021, the resident’s solicitor requested a management pack from the landlord for the property.
19. According to an internal email on 19 May 2021, the landlord noted that it did not have a case set up for the property.
20. The landlord wrote to the resident again on 19 May 2021 stating that it had an eight-week nomination period in order to sell his home, and therefore he should not be selling his property on the open market at this time.
21. The landlord replied on the same day stating that the Court Order and lease “referred to different sections of the Matrimonial Causes Act 1973”.
22. On the same day, the resident wrote to his solicitor and the landlord stating that he had received a call from the landlord who had informed him that he should be following the landlord’s resale process and not the Court Order. In the conversation, he had cited the relevant clauses in the lease regarding the exemptions from the pre-emption provisions but the landlord had stated that the lease and court order “referred to different sections of the law and therefore he was not exempt”.
23. The resident’s family solicitor wrote to the landlord on 24 May 2021 requesting that the landlord cite the “particular clause” in the lease which “operated over and above the law”. The solicitor referred to similar exemption provisions in Right to Buy legislation. The landlord did not reply.
24. The landlord sought legal advice on 27 May 2021 as to whether it needed to follow the resale process.
25. The resident’s conveyancing solicitor wrote to the landlord on 21 July 2021 seeking confirmation that the eight-week nomination period had expired and it could proceed with the sale. It also awaited confirmation of the amount required to staircase the property to 100%.
26. The landlord replied on 22 July 2021 stating that it had not advertised the property as yet, as the owner had not yet completed the relevant paperwork and therefore the 8-week nomination period had not begun.
27. The solicitor replied on the same day that, given the contents of the resident’s family solicitor’s letter, the landlord was not entitled to pre-emptive rights. It was potentially jeopardising the resident’s sale in the meantime.
28. The landlord’s in-house solicitor considered the matter on 22 July 2021. The solicitor found that the sale was exempt from the provisions and gave his rationale.
29. The resident wrote to the landlord on 26 July 2021 with his complaint he described as follows:
    1. Obstruction of a Court Order
    2. Providing misleading information
    3. Failure to respond to communications
    4. Inconvenience and wasted time
    5. Poor customer service
    6. He had been advised that he would not be subject to the pre-emption provisions. He had offered the property to the landlord in any event but did not receive a reply. He noted that he had been provided with a management pack in the meantime. The landlord had not replied to correspondence.
    7. The parties had been waiting to complete this sale for the previous two months and there had been no progress. Due to delays, he was in a dire financial situation as he had had to pay further rent and mortgage payments.
30. The landlord wrote to the resident with some standard advice on 27 July 2021 regarding the sale. It explained that when the resident found a buyer, the landlord required an in-date independent RICS valuation to assess the current market value of the property. The resident would be responsible for covering the landlord’s solicitor costs of approximately £600 plus VAT. It would calculate the staircasing premium for the landlord’s share, based on the RICS Valuation.
31. The landlord wrote to the resident on 27 July 2021 with its stage one complaint response.
    1. It apologised for having provided incorrect and misleading information in relation to the sale of his home.
    2. It had sought legal advice from its in-house legal team who had advised that the resident was permitted to sell on the open market at the full value of the property.
    3. It could not locate the letters dated 12 March 2020 or 29 March 2021.
    4. It said if the resident was unhappy with the outcome of the complaint, he could escalate the complaint.
32. The resident replied on the same day stating he was unhappy. He considered that there was a conflict of interest, given the writer had dealt with the matter, and was part of the complaint. He requested an investigation. The letter did not justify the 11-week wait for a decision. The letters of 12 March 2020 and 29 March 2021 had been sent via special delivery post and by email. They were re-sent attached to his email of 17 May 2021. He said he attached proof of all correspondence. The response did not explain the lack of response to his solicitor’s email of 24 May 2021.
33. The landlord escalated the complaint on 27 July 2021 and said it would contact him within 20 working days, by 24 August 2021.
34. The resident sent the landlord a valuation dated 6 August 2021 on 9 August 2021. The landlord instructed its solicitors on 10 August 2021 to act in this staircasing transaction.
35. The landlord wrote again on 6 September 2021 stating it was carrying out a “full investigation” into his case and would respond by 8 September 2021.
36. The landlord wrote with its second stage response on 10 September 2021.
    1. It summarised the resident’s complaint.
    2. It cited the resident’s request the landlord waive its solicitors costs of £600 and VAT as compensation.
    3. It had asked the relevant officer to respond, as the officer was familiar with the case, in order to respond appropriately.
    4. It apologised for “any” inconvenience the landlord caused in a situation that was stressful enough.
    5. It was addressing resources within the team to prevent issues arising in the future which was “in part” the reason for the delay in the response from its in-house legal team.
    6. The delay was not acceptable and it agreed to waive its solicitors’ fees by way of compensation.
37. The resident replied on 13 September 2021 stating that the complaint response was delayed. He accepted that the landlord had carried out a full and in-depth investigation following his complaint. However, the landlord had not informed him of the outcome of the investigation and a number of the issues raised were unaddressed. It had not explained why the landlord had “obstructed “ the court order or why there was a failure to respond to communications and it had given conflicting and misleading information. He saw the waiver of fees as a gesture of goodwill and was also seeking compensation. He requested that his rent should be waived for three months to cover the period during which the landlord delayed its decision.

Assessment and findings

The landlord’s response to the resident’s request to sell his shared ownership property on the open market.

38. The role of the Ombudsman is to consider the actions of the landlord, including its responses and decisions. Even where the landlord has accepted its own failings and offered compensation to a resident, the Ombudsman will investigate a complaint, assess the actions of the landlord and, where appropriate, consider, as a result of its investigation, whether the compensation offered was fair in the circumstances and, if not, increase it, if the Ombudsman considers it appropriate to do so.
39. The resident’s solicitor’s letter of 12 March 2020 was sent to the incorrect organisation, therefore no fault is attributed to the landlord in that regard. The landlord either did not receive the resident’s solicitor’s letter of 29 March 2021 or it overlooked it. The fact that the solicitor’s letter itself indicated that it was emailed and sent by special delivery to the landlord’s head office and by email, would indicate that the landlord had overlooked the correspondence. However, the resident resent the correspondence very shortly after he had raised the issue of the sale and, in the circumstances, it was inappropriate that the landlord did not take it into account in its initial decision not to allow the property sale to go ahead on the open market, in particular as its own homeownership procedure stated that the landlord had a discretion to waive its rights.
40. In relation to its policy, which may have been amended since, the Ombudsman has noted that the policy stated the landlord would offer advice to the customer “where” (sic) they can do so (sell the property). The Ombudsman considers that the intended wording was “whether” (sic) they can do so. The Ombudsman will make a recommendation in that regard.
41. It was then inappropriate not to consider the resident’s position for a further three weeks. While the landlord’s policy stated that it would provide information and log the resident’s case, the landlord missed a number of opportunities to engage with the issues, despite the resident’s contact and communications, and despite the resident’s solicitor’s request for a management pack and information about staircasing, which would have related to information about service charges and demonstrated that there was a sale in process.
42. The evidence indicated that the resident decided to wait for the eight weeks to elapse before going ahead with the sale. While it was frustrating for the resident that the nomination period had not elapsed by mid-July, and the landlord had not taken the letter of 29 March 2021 into account, the resident had not taken steps to trigger the nomination period, such as obtaining a valuation report which process was indicated in the landlord’s email and website. While the purpose of the valuation was for the purposes of the staircasing, it was required to trigger the nomination period, even if the resident did not intend to sell through the landlord.
43. It may be that the resident’s solicitors considered it was sufficient to allow the eight weeks to pass and the resident did not want to incur the costs of a valuation prematurely. Either way, it was not unreasonable that the landlord did not consider the nomination period had been triggered. However, while the evidence was contradictory regarding the discussions which took place in early May, there were sufficient approaches by the resident to have warranted greater engagement by the landlord to ensure that the resident was aware of its next steps. As at 19 May 2021, the evidence showed that the landlord had not logged the resident’s intention to sell, despite his and his solicitor’s communications. The Ombudsman found that the landlord did not implement its own procedure regarding sales, such as providing relevant guidance and sending out information packs.
44. While it was appropriate for the landlord to seek legal advice, there was an inappropriate delay in doing so. The matter was clearly complex. The issue concerned the interpretation of a court order, the relevant legislation and the lease. It also required some understanding of matrimonial law. It was not clear from the face of the order or the legislation whether this was a relevant assignment that fell within the exemption from the landlord’s pre-emptive rights.
45. It was inappropriate that the landlord did not then “chase” that legal advice which further delayed the landlord’s final decision by two months. It was also unreasonable that the landlord did not consider its discretion within its policy, to waiver its rights of pre-emption in any event.
46. The landlord concluded that the resident was entitled to sell the property on the open market and was therefore not subject to the pre-emption provisions. The Ombudsman concludes that there was an unnecessary delay of over two months  in the landlord’s decision and this caused the resident frustration and delay to the sale transaction, and may have had a financial impact on the resident. However, the Ombudsman also considers that £720 (£600 plus vat) is reasonable compensation for the landlord’s service failure, given that the impact was not long-lasting and given the Ombudsman’s guidance on compensation, which is moderate and non-punitive.
47. In relation to the resident’s request for a rent rebate for the period of delay, this would be a matter of whether the landlord had been negligent. This would be a matter for a court to adjudicate upon, as the question would require an analysis of legal principles and the evidence relevant to the issue of negligence. However, in the Ombudsman’s view, the waiver of the landlord’s solicitors’ fees constituted adequate redress.

The landlord’s complaint handling

48. While the first stage response was prompt, it is the Ombudsman’s view it should not have been dealt with by the officer concerned in the case as there was no element of review. Moreover, while it was prompt, it did not consider the elements that the resident raised. It did not recognise the frustration for the resident or its financial impact. It did not acknowledge the delay or offer compensation. It was also inconclusive and therefore not satisfactory. The resident’s frustration was exacerbated by the delay of the second response, even beyond the extension and the lack of recognition of the delay. There was no evidence of deliberate obstruction by the landlord. The offer of compensation in relation to the substantive complaint was satisfactory, however the Ombudsman finds there was some service failure in its complaints handling due to the added frustration it caused the resident.

Determination (decision)

49. In accordance with paragraph 55(b) of the Housing Ombudsman Scheme, in the Ombudsman’s view, there was reasonable redress offered by the landlord in response to the resident’s complaint about how it handled his request to sell his shared ownership property on the open market.
50. In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was service failure in relation to the landlord’s complaint handling.

Reasons

51. While the resident did not receive a “consistent and effortless experience in its handling of all homeownership requests” as promised in its policy, and there was a delay in the landlord’s decision making, the Ombudsman found that the compensation offered was reasonable redress, given there was no lasting impact on the resident.
52. The landlord’s complaint handling added to the frustration of the resident as it did not address the points the resident raised and did not, at least, initially offer a resolution.

Orders

53. The landlord is ordered to pay the resident compensation in the amount of £150 in relation to the landlord’s complaint handling within 28 days.
54. The landlord should confirm compliance with the order to the Housing Ombudsman Service within 28 days of this report.

Recommendations

55. The Ombudsman make the following recommendations:
    1. The landlord considers seeking legal advice at an early stage when matters of law and legal interpretation arise. The landlord should consider staff training to recognise when to seek legal advice.
    2. The landlord should ensure it diarises awaited responses so that they are kept track of.
    3. The landlord should ensure its staff are fully aware of its own policies and procedures in relation to the failings identified in this report.
    4. The landlord should avoid members of staff investigating complaints in which  they had been closely involved in the actions and omissions complained of.
    5. The landlord should avoid using terms such as an apology for “any” inconvenience which implies a qualified apology and share with its complaints team the Ombudsman’s Complaint handling Code. Complaint Handling Code – Housing Ombudsman (housing-ombudsman.org.uk)
    6. If it has not already done so, the landlord should check the wording in its homeownership procedure as identified in this report.
    7. The landlord should share with the Ombudsman its intentions regarding these recommendations within 28 days of this report.