Peabody Trust (202009028)

REPORT

COMPLAINT 202009028

Peabody Trust

25 August 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

The complaint is about:
1. The landlord’s response to the resident’s requests for a breakdown of the service charge spend for the financial year 2018/19.
2. The proportion of the service charges paid by the resident and the level of the landlord’s management fee.
3. The landlord’s handling of the formal complaint.

Jurisdiction

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.
After carefully considering all the evidence, in accordance with paragraph 39g of the Housing Ombudsman Scheme, the complaint concerning the proportion of the service charges and the level of the landlord’s management fee is outside of the Ombudsman’s jurisdiction.
Paragraph 39g of the Scheme states that the Ombudsman will not consider complaints which, in the Ombudsman’s opinion ‘concern the level of rent or service charge or the amount of the rent or service charge increase’.
In this case, it is evident from the resident’s complaint that they have concerns about the level of the service charges, as they believe they have paid a higher proportion of service charge than the proportion set out in the head lease. The resident has provided evidence that their apportionments vary to those set out in the head lease. The landlord in response to this, has stated that the head lease allows for the managing agent to vary the apportionment of the charges.
Moreover, the resident has also complained that the level of the management fee is not justified, as its role is limited and it is not responsible for the maintenance of the property or the calculation of the service charges.
It is not the Ombudsman’s role to make findings about the level of, or, the reasonableness of the service charges, as such authority lies with the First Tier Tribunal (Property Chamber). The tribunal has the authority to review the terms of the resident’s lease and the head lease in conjunction with the costs charged to the resident and make a decision as to whether the apportionment of charges is correct. The tribunal also can decide whether the landlord has charged a reasonable management fee relative to the service it provides.

Background and summary of events

Background

The resident initially had a shared ownership lease for the property with the landlord, which commenced in October 2013. In February 2020, they staircased to 100%. The property is a flat within a block.
There is a head lease between the landlord and the freeholder of the block within which the property is located. The freeholder has appointed a managing agent which is responsible for providing all services to the block, including the maintenance and the provision of the service charges.
The managing agent issues the service charges to the landlord, who in turn, pass these onto its residents to recover the charges.
It is understood from the information provided, that the managing agent in place when the 2018/19 service charges were accrued, was no longer in place when the resident requested the breakdown of the charges in May 2020.

Summary of events

On 14 May 2020, the resident asked the landlord to provide a breakdown of the service charge spend for the financial year 2018/19. The resident provided the landlord with a copy of a breakdown it provided to them in June 2019, for services charges from 2015 – 2018. The breakdown set out the specific costs incurred for services delivered to the Estate, Block, District Heating System and Gym. It also stated the apportionment of each cost.
The resident asked the landlord to provide the breakdown for 2018/19 in the same format and explained that they wanted this information because they did not believe that the apportionment of the service charges was in accordance with the landlord’s head lease.
On 19 May 2020, the landlord provided a summary of the service charge expenditure against the budget for the year 2018/19. The resident was not satisfied with this as it did not include a breakdown of spend under each category, which they had received in previous years. The landlord acknowledged this and advised that it may take time to provide this.
The resident acknowledged this and noted that they were also seeking the apportionment of the charges. The landlord confirmed that it had asked the former managing agent to provide the details about the charges in the same format as the resident requested and would forward this as soon as it was received.
In June 2020, the resident followed up on their request as they had not received the breakdown. They also asked the landlord whether the accounts for the year 2018/19 had been finalised. The landlord confirmed that it contacted the former managing agent in May 2020 but had not received a response. It advised it had not received the final accounts for 2018/19 yet but expected this would be included with the 2019/20 end of year statement, which would be received by the end of September 2020.
The resident chased the landlord again on 3 July 2020. It confirmed that it had contacted the managing agent a second time, but still had no response. It agreed to email the former managing agent again that day and mentioned that due to the Covid 19 pandemic, the former managing agent may be prioritising queries according to urgency.
The resident submitted a formal complaint on 15 July 2020, as they were unhappy with the time taken to provide the breakdown. The landlord confirmed on 27 July 2020, that it had passed the complaint for investigation, and apologised for not getting a response from the former managing agent.
On 7 August 2020, the landlord notified the resident that it had a contact for the former managing agent and had requested the 2018/19 service charge accounts. It then contacted the current managing agent on 12 August 2020 and asked if it had the 2018/19 service charge statement of account. The current managing agent said that it was waiting for the final accounts from former managing agent and was chasing this regularly. It agreed to update the landlord once it received an update. The landlord informed the resident of this.
The resident received a welcome letter from the current managing agent, dated 7 August 2020, advising that it had been appointed to manage the property. The letter referred to the freeholder of the block as the resident’s landlord. On receipt of this the resident asked the landlord on 26 August 2020 to confirm who their landlord now was, as they had staircased to 100% earlier that year and the letter they received implied that the freeholder was now their landlord.
The landlord responded on 19 September 2020 and advised that if it was the landlord when the resident was a shared owner, it would continue to be the resident’s landlord and to whom they paid ground rent. It confirmed that it had a headlease with the freeholder.
From then through to October 2020, the resident made further queries to the landlord about who they would pay ground rent and service charges to. The landlord informed the resident on 28 October 2020 that it collected ground rent but the resident paid service charges to the managing agent. The resident asked the landlord to check this as they had been paying service charges to the landlord and not the managing agent, as it suggested.
On 12 October 2020, the landlord followed up with the current managing agent for the 2018/19 service charge accounts.
In November 2020, the resident contacted this Service for assistance with their complaint as they had not received a response to the complaint they had raised in July 2020. Around the same time, they chased the landlord for a response to their request for clarification on who they should pay service charges to.
We contacted the landlord on 8 December 2020 and asked it to contact the resident about the complaint. On 18 December 2020, it called the resident. This Service has not been provided with the notes from the call.
The landlord provided its stage one response to the resident’s complaint on 8 January 2021. It:
1. Confirmed that it was chasing the managing agent for the 2018/19 service charge accounts. It said regarding the 2019/20 service charge accounts, that it had been served a section 20b notice by the managing agent as there were delays in finalising the accounts.
2. Explained that as a result of the learning from the complaint, it was working with the managing agent to ensure that all future service charge breakdowns provided, were transparent and accurately reflect the lease.
3. Acknowledged that it failed to conclude the complaint in a timely manner and offered the resident £50 for their time, trouble, and inconvenience.
On the same day it issued the stage one response, the landlord wrote to the current managing agent and asked when it was likely to be sent the 2018/19 accounts. It also raised queries about the apportionment of the charges. The managing agent responded however, did not address the landlord’s question about when the 2018/19 would be sent.
On 15 January 2021, the resident wrote back to the landlord confirming that they remained unhappy with its response. As well as complaining that they believed that their apportionment was higher than it should be, they complained that:
1. They did not accept the compensation the landlord offered, as they spent a significant amount of time trying to resolve the issues.
2. The level of the landlord’s management fee did not reflect the service they received. They explained that they believed this because the landlord’s role was limited in comparison to the managing agent and:
  1. It had slow response rates and did not provide a clear answer to the queries they had raised, following receipt of the letter from the managing agent in August 2020.
  2. The landlord had not dealt with a report they made to it in May 2019, that their balcony was rusting.
  3. The landlord had not provided updates on the cladding issues since 2018.
  4. When it received detailed information from the managing agent about service charges and changes to the managing agent for the block, it did not forward this information to its residents. They highlighted that they were still waiting for the breakdowns for the year 2018/19.
  5. The landlord did not appear to scrutinise the service charge budget.
  6. The landlord had served them with section 20 notices for works that were not applicable as it does not maintain their block.
  7. Residents had reported issues with anti-social behaviour on the estate in August 2020, but the landlord had not followed through on actions it agreed to take.
  8. That they paid the same managing fee to the landlord as the residents in a neighbouring block, which the landlord was responsible for maintaining. They believed the fee should be less, as the landlord had less responsibility for their block.
On 9 February 2021, the landlord wrote back and confirmed that it was reviewing the points the resident raised and would seek the input of the managing agent, where required.
On 22 March 2021, the resident contacted this Service as they had not received a response to their stage two complaint, submitted on 15 January 2021. We asked the landlord to provide the resident an update on their complaint. It responded on 1 April 2021, saying that it had not raised a stage two complaint because the matter about the apportionment of charges, was something it needed to clarify with the resident. It said that the other issues raised, did not form part of the resident’s original complaint, and would be responded to as a general enquiry. It advised this Service that it notified the resident of this.
The resident contacted us again on 22 April 2021 to inform that they had not heard from the landlord about the stage two complaint. We contacted the landlord again, and it confirmed on 13 May 2021, that it had escalated the resident’s complaint. It contacted the resident the same day and asked why they remained unhappy with the stage one response. The resident referred it to their email dated 15 January 2021.
On 8 June 2021, the landlord issued its stage two response. It said:
1. It was awaiting advice from its rents and service team to respond to the resident’s points about the apportionment of the charges and the landlord’s provision of updates and detailed service charge information.
2. That the management fee it charged was standard, considered fair and covered the communications it sent the resident as well as its dealings with the managing agent.
3. In relation to the complaint about its slow response, it said that the managing agent sent the letter in August 2020, without realising that the resident’s lease was with it and not the freeholder. It noted that it understood that the letter coincided with the resident staircasing and understood why the resident had believed that their lease had been transferred. It confirmed that the resident’s lease remained with it and agreed that this should have been made clear to the resident.
4. In relation the reported issue with the balcony, that it could not find a record of a report being made about the balcony. It confirmed that it asked its home ownership team follow up on the query and asked if the resident could send images of this in the meantime to provide context.
5. In respect of issue with the updates on the cladding, it raised a separate complaint in relation to this and provided the resident with the reference number for the complaint.
6. Regarding its scrutiny of the budget, it explained that it could only challenge issues within six months of the final statement and if the freeholder provided invoices, there was limited action it could take. It said that if there was anything unusual, it would follow this up but it relied on its residents to let it know if they had any concerns. It noted that it had previously followed up on any concerns the resident raised.
7. That it was aware that of an issue with section 20 notices being sent residents which did not apply. It said that this happened because its system did not distinguish between properties it managed and those it did not. It said that to resolve this, it would need to review its records but until it did this the resident would have to discard any letters they received from it of this nature. It said that if works were required on the estate, the managing agent would let the resident know.
8. About the anti-social behaviour report made in August 2020, that it had a record of a report but could not find record of this being followed up. It apologised and said that the staff member who had been leading on the matter, was no longer a member of staff. It asked the resident to advise if there was still an issue with anti-social behaviour so that it could report this to the neighbourhood team.
9. In relation to the management fees being charged to the resident in comparison to the residents of blocks it was responsible for maintaining, it said that it charged for any work that it does through service charge.
10. Said that it understood that the resident had listed the service issues they had experienced over the years to justify why they wanted a refund of their management fee however, this was not something it could do. It confirmed that alternatively, it could offer compensation for the delays the resident experienced in receiving a response and offered £200.
On 9 June 2021, the landlord sent the resident a follow up response to the points it was unable to answer in its stage two response. In relation to the complaint point about it not providing information it received from the managing agent, it said that this was only forwarded on request, but it would send the resident updates going forward.
The resident referred the complaint to this Service as they remained unhappy with the outcome of the complaint.

Assessment and findings

As explained in the above jurisdiction section, it is not for this service to decide on the level of the service charges or whether they are reasonable. This assessment will consider the landlord’s response to the request for the service charge breakdown for the year 2018/19. We will also consider the landlord’s handling of the associated formal complaint.

The landlord’s response to response the request for the breakdown of service charges for the year 2018/19

In this case, the landlord is not responsible for the provision of the service charges in the first instance. It is reliant upon a third party (in this case the managing agent) to issue the service charge accounts before it passes this onto its residents. The resident is therefore reliant on the landlord, to pursue the managing agent in relation to any queries they raise about the service charges.
In such situations such as this, the Ombudsman expects the landlord to effectively pursue the managing agent on the resident’s behalf. It also expects landlords to ensure that there are effective communications between all parties.
The resident requested a breakdown of the service charge expenditure for the year 2018/19 and wanted the landlord to provide this in a particular format. The landlord agreed to pursue the managing agent for this and advised it may take a while to provide it.
Given that the former managing agent who provided the service charge accounts for the year in question, was no longer in place, it was reasonable for the landlord to mention it may take time to provide the information requested.
After its initial contact with the former managing agent in May 2020, it followed up with it again in June and July 2020. When the resident chased it for a response between May and June 2020, it explained the actions it had taken to obtain the information from the former managing agent.
It notified the resident once it had obtained a point of contact, on 7 August 2020 and from there onwards, it is apparent that the current managing agent was in contact with the former managing agent on the landlord’s behalf.
The landlord continued to chase the information and asked the current managing agent in August, October, December 2020, and January 2021, about whether it had received the service charge accounts for the year 2018/19, from the former managing agent.
The landlord’s responses were appropriate, it continued to chase the managing agent for the information between May 2020 and January 2021. Its efforts to keep the resident updated did fall short, as the resident had to prompt it numerous times for an update between May and July 2020. Although, when those updates were requested, it provided responses explaining what efforts it had made to chase the information.
After it provided the resident with the update in August 2020, there is no evidence that it provided the resident with an update again, until it provided its stage one response, even though it continued to chase the managing agent between August 2020 and January 2021. In the stage one response, dated 8 January 2021, it confirmed that it was chasing the managing agent for the information and, on the same day, it did do so.
Given the time the resident spent pursuing the information, it is understandable that this would have caused them frustration, distress, and inconvenience. I am satisfied however, that the landlord took reasonable steps to engage with the managing agent to obtain the information up until the point it provided its stage one response, however, find that its communication with the resident regarding its pursuit of the information fell short.
In their stage two complaint, dated 15 January 2021 the resident highlighted that they were still awaiting the 2018/19 service charge breakdown. The landlord did not address this at any point in the stage two response and there is no evidence that the landlord pursued the managing agent again for the information after 8 January 2021. Furthermore, there is no evidence that the landlord ever provided the breakdown requested.

Complaint handling

The landlord’s complaints process has two stages. At stage one, it is to provide a response within 10 working days. At stage two, it is to provide a response within 15 working days. If the landlord is unable to provide a response in this time, it is to inform the resident of this.
After the resident raised their complaint on 15 July 2020 the landlord failed to provide the resident its response within the timeframe set out in its policy. It provided a response in January 2021, six months later. In the six months it did not update the resident on the progress of its investigation.
As a result, the resident contacted this Service for assistance to prompt the landlord to issue its stage one response.
When the resident submitted their stage two complaint, they raised additional issues which did not form part of their stage one complaint to the landlord. When they complained about the level of the landlord’s management fee, they provided examples of issues they had with the landlord, as further reasons why they did not believe its management fee was justified.
The landlord confirmed on 9 February 2021 that it would be reviewing the points the resident raised but it did not respond. This prompted the Ombudsman to contact the landlord a second time to provide the resident with a response to their complaint. The landlord explained on receiving contact from this Service, that it would not raise a stage two complaint and would address the new issues the resident raised separately as enquiries. It stated that it had informed the resident of its decision to address the issues as such however, there is no evidence that it did.
Consequently, the resident contacted the Service again a third time to inform that they had not heard from the landlord with a stage two response. After we contacted the landlord again, it escalated the complaint to stage two.
It is noted that the issues the resident raised as reasons why they felt the landlord’s management fee was not justified, were raised in the context of the dispute about the reasonableness of the management fee charged. Nevertheless, it is appropriate that the landlord provided a respective response to each issue they presented, in its stage two response.
It passed those queries it could not address regarding the balcony and the cladding matter to the appropriate teams. It recognised that there had been an issue in it issuing Section 20 notices in error and explained its intentions to address this. It explained the instances where it would challenge the service charges. In addition, on finding that it had not followed through on actions it agreed to take in relation to anti-social behaviour reported in August 2020, it apologised and explained what the resident could do if the issue persisted.
One of the issues the resident raised was that the landlord did not provide detailed information, including that relating to the service charges, to its residents when it received this from the managing agent. This Service notes that this is a theme of the resident’s complaint. The resident has highlighted that the landlord is not transparent with the service charge figures and does not automatically provide detailed information about the charges.
The Ombudsman in its spotlight report on landlord’s engagement with private freeholders and managing agents, notes that landlords should ensure they are regularly and transparently communicating with their residents with respect to service charges.
Therefore, the landlord’s agreement to share the information going forward was appropriate. However, this Service notes that since this complaint finalised the complaint procedure in June 2021, the resident has submitted another complaint relating to requests they have made for breakdowns of service charges for the subsequent financial years.
Whilst the landlord provided respective responses to the additional issues raised within the stage two complaint and this was appropriate, the time it took to respond to the complaint itself, however, was unsatisfactory.
The landlord’s compensation policy explains that it can award compensation for time, trouble, and inconvenience. For instances, where there has been a low impact on the resident, but a high level of effort has been spent resolving a matter, it can offer up to £300 compensation. The landlord can also consider compensation for complaint handling, up to a maximum of £100.
In the response to the complaint, the landlord offered the resident £200 for the delays they experienced in getting a response. It was appropriate that it considered compensation however, the level it offered does not reflect the efforts the resident made to get responses to their complaint throughout the landlord’s complaints procedure.
It took a total of 11 months from when the complaint was submitted, before the landlord provided its final response. In this time, it failed to provide the resident with notification that its response would be delayed, and how long it expected to issue a response. In addition, the resident had to seek the assistance of this Service to get responses to the complaint, which contributed to their existing frustration in the pursuit of the complaint and the time and trouble they spent pursuing the matter.
I, therefore, consider that the landlord should offer an increased amount of compensation, totalling £400. This is to include, £300 to reflect the efforts the resident made to resolve the matter and the maximum £100 it can offer for complaints handling. An order has been made for this below.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme there was service failure by the landlord in its response to the request for the breakdown of the service charge spend for 2018/19.
In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was service failure by the landlord in its complaint handling.

Reasons

The landlord did take reasonable steps to pursue the managing agent for the breakdown of charges, up to the point it issued the stage one response. However, there is no evidence that it continued to chase this up or, that it eventually did provide this to the resident. Furthermore, its communication with the resident about its pursuit of the information fell short.
The landlord’s complaint handling fell short of the standard set out in its procedure. Its responses to the complaint at both stages were significantly delayed and during the delay period, it did not keep the resident informed about the progress of their complaint. Furthermore, the level of compensation it offered did not reflect the time and trouble the resident spent pursuing it for a response to the matters of the complaint and the complaint responses.

Orders

If the landlord has not already done so, it is to provide the resident with the breakdown of service charge spend for the year 2018/19. If the landlord has not provided this to the resident, it is to contact them within three weeks of this report to provide an update on its pursuit of this information.
In recognition of the finding of service failure in its complaint handling, the landlord is to pay the resident a total of £400 (inclusive of the £200 offered in the complaint response), comprising of:
1. £300 for the resident’s time and trouble pursing the matter.
2. £100 for complaint handling.

Recommendation

If the landlord is experiencing difficulties obtaining the service charge information from the managing agent, it may want to consider obtaining legal advice in relation to the enforcement of the terms of the head lease.