Notting Hill Genesis (202114098)

REPORT

COMPLAINT 202114098

Notting Hill Genesis

27 October 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 complaints

1. The complaint is about the landlord’s response to the resident’s concerns about:

1. The level and reasonableness of the plant room maintenance cost included in the 2021/22 service charge estimate.
2. A delay in issuing the final accounts for the 2019/20 service charges.

Jurisdiction

2. 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.
3. Paragraph 42(e) of the Housing Ombudsman Scheme states we will not consider complaints which, in our opinion, concern the level of rent or service charge or the amount of the rent or service charge increase.
4. Paragraph 42(g) of the Housing Ombudsman Scheme states we will not consider complaints which, in our opinion, concern matters where we consider it quicker, fairer, more reasonable or more effective to seek a remedy through the courts, other tribunal or procedure.
5. After carefully considering all the evidence, in accordance with paragraphs 42(e) and 42(g) of the Housing Ombudsman Scheme, the following complaint  is outside of the Ombudsman’s jurisdiction:

1. The level and appropriateness of the plant room maintenance cost included in the 2021/22 service charge estimate.

6. In his formal complaint the resident said that the plant room maintenance cost represented a new cost in the 2021/22 service charge and as it related to proposed major works to the building that he had not been consulted on, his contribution towards these works should be limited to £100 in any one 12 month accounting year. He said this was in accordance with clause 7 of the document titled ‘Summary of tenants’ rights and obligations’ included with the service charge schedule. The resident said that based on the apportionment for his property, his contribution for the plant room maintenance cost came to £206.70, as such this exceeded the amount he should have to pay and he disputed the cost on this basis. 
7. In its complaints responses, the landlord said that the plant room maintenance cost was not a new cost for a new service, rather it was an updated cost of a current and historical service that had been included in previous service charges but was listed under a separate heading. It said the plant room was maintained by its heating contractor, and this cost was for the repair, maintenance and replacement of equipment where necessary. It acknowledged that in previous years, the cost for this had been underestimated, indicating a higher cost each year to residents going forward.
8. As the crux of the complaint relates to the level  of the service charge, in accordance with paragraphs 42(e) and (g) of the Housing Ombudsman Scheme, the appropriate body to determine these issues is the First Tier Tribunal (FTT).  This is because the FTT has the expertise and remit to determine the reasonableness of any increase to the service charge. In addition, the FTT can determine if a cost is such that it requires a landlord to consult with residents on via the section.20 consultation process for major works. Therefore, this complaint is one that is better dealt with by the FTT which has the remit to consider the different elements to this complaint.  Therefore, it falls outside of the remit of the Ombudsman on this basis.

Background and summary of events

9. The resident is a shared ownership leaseholder. The lease started on 16 August 2019. The property is a 2 bedroom property located on the third floor of the estate.
10. On 24 September 2020, the landlord sent the resident a section 20b notice advising that in accordance with current legislation it was required to advise owners where it may not be able to make a service charge demand within 18 months of the expenditure being incurred. The letter stated that in accordance with section 20b(2) of the Landlord and Tenant Act 1985 it was giving notice that costs had been incurred which he will subsequently be required, under the terms of his lease to contribute to by payment of a service charge. It states the costs for 2019/20 totalled £275,888.13, therefore the estimate deficit currently stood at £49,750.21. However, it informed the resident that this deficit related to intercompany billing for the Energy Provision Team for the Communal Gas which it said would not affect leaseholders. It advised that once this was removed from the accounts, the resident would be in a surplus although stated this may be subject to change when the accounts were finalised.
11. On 9 April 2021, the landlord wrote to resident with an update in regards to the final accounts for the 2019/20 service charge. Whilst this Service has not had sight of this communication, both parties have confirmed it advised that the final accounts had been with auditors since January 2021. 
12. On 14 April 2021, the resident raised a formal complaint with the landlord. He referred to a phone call with the landlord on 9 April 2021 and said that his complaint concerned the delay in providing the final accounts for the 2019/20 service charges. He complained that the 2019/2020 accounts had not been finalised despite it being 13 months since the accounting period for this service charge ended (31 March 2020).
13. The resident referred to the section 20b notice sent by the landlord in September 2020 informing him of the delay in getting the accounts audited or finalised and also its communication of 9 April 2021 stating that the accounts had been with the auditors since January 2021. However, he complained that no timeline had been provided as to when the 2019/20 accounts would be finalised and tenants would be informed about any surplus or deficit balance. The resident said this was contrary to Clause 7.6 of the Shared Ownership Lease ‘Adjustment to actual expenditure’ which required landlords to provide details of actual expenditure as soon as practicable after the end of the accounting year.
14. The resident asked the landlord to provide a timeline for when he would be provided with the finalised accounts. He also asked that it paid him any interest where there was a surplus balance.
15. On 29 April 2021, the landlord provided a stage one complaint response within which it acknowledged that the end of year accounts for the 2019-20 accounting year had not yet been issued. It said these were typically issued in September each year and the delay arose because during preparation of the accounts an anomaly was identified which may have resulted in residents incurring unreasonable costs. It advised that in accordance with s.20b of the Landlord and Tenant Act, all leaseholders were issued a statutory notice advising them that the accounts would be delayed. It said that the accounts were currently with auditors and it expected to receive the certified accounts back from auditors in 6-8 weeks and currently anticipated a surplus on his account.
16. The landlord stated that it worked hard to ensure its service charge accounting process was both compliant and transparent at all times. However, it appreciated that service charge accounting was complex because it must follow a statutory process. It signposted the resident to a dedicated area on its website showing ‘a service calendar’ to support residents’ understanding.
17. On 4 May 2021, the resident requested for his complaint to be escalated to stage two of its complaints process. The resident advised that he was unhappy about the ongoing delay in producing the final accounts for the 2019/20 service charge and said that the timeframe given of 6 to 8 weeks, was unacceptable.
18. On 28 May 2021, the landlord provided the resident with a stage two final complaint response. It referenced the resident’s dissatisfaction with the outcome of its stage one response sent to him on 19 April 2021.
19. Regarding his dissatisfaction regarding the delay with the 2019/20 accounts, it reiterated that there had been a delay with issuing the end of year account for 2019/20 due to the need to remove expenditure that should not have been included.  It said that it appreciated that the discrepancy should have been identified earlier, however once the need for the delay was identified, it followed the correct process by issuing all residents with a notice informing them that the accounts would be delayed.
20. Further, the landlord said it recognised he had spent a significant amount of time querying the 2019/20 service charges and trying to understand why there have been delays and what was happening next. It offered him £50.00 in compensation for the delay.
21. On 21 September 2021 the resident told the Ombudsman that the accounts for year ending March 2020 had still not been finalised as such there has been a lack of urgency by the landlord in providing him with an accurate view of what was owed.
22. In response to our further information request, on 25 October 2022, the landlord confirmed that the final account in question was sent to residents on 14 February 2022.

Assessment and findings

Delay in issuing the final accounts for the 2019/2020 service charge.

23. Clause 7.6 of the lease states: ‘that as soon as practicable after the end of each Account Year, the landlord shall determine and certify the amount by which the estimate shall have exceeded or fallen short of the actual expenditure in the Account Year….’. The Landlord’s service charge policy echoes this.
24. In accordance with section 20b of the Landlord and Tenant Act 1985, landlords are required to notify residents where it may not be able to make a service charge demand within 18 months of the expenditure being incurred. This is echoed in the landlord’s service charge policy.
25. The landlord issued the resident with a statutory notice on 24 September 2020 advising that it may not be able to make a service charge demand within 18 months of the expenditure being incurred. It said this was because it had identified that the total costs incurred included a cost that did not affect leaseholders and which had resulted in a deficit, therefore it explained this  amount needed to be removed from the final accounts. 
26. In issuing the statutory notice which explained the reason for the delay, the landlord acted appropriately, furthermore as it explained this was to correct an error, on balance, the cause of the delay was reasonable.  However, it would have been helpful to the resident if the landlord had been clearer in regards to when he could expect to receive the final accounts. The landlord did provide a update in April 2021, however this only advised that the accounts had been with the auditors since January 2021. Therefore, in his formal complaint, the resident understandably requested for the landlord to provide a timescale for when he could expect to receive the accounts.
27. In its stage one response dated 29 April 2021, the landlord acknowledged that it usually provided residents with final accounts for the actual costs of providing services, in the September following the end of the previous account year. It also reiterated that due to the issue identified which it said may have resulted in the residents incurring unreasonable costs, it was necessary to delay the issue of the final accounts. Further, in response to the resident’s request for a timeframe for when he would receive the final accounts, the landlord advised it expected to be able to provide these to him within the next 6 to 8 weeks.
28. By providing a timeframe for when the resident could expect to receive the final accounts, the landlord acted reasonably. In its final response issued approximately four weeks later, the landlord did not indicate there was any change to the estimate date of when the resident could expect to receive the final accounts. However, in response to this Service’s further information request of October 2022, the landlord confirmed that the final account for 2019/20 service charge was not provided to the resident until 14 February 2022.
29. Therefore this shows the final accounts were issued 17 months after they were due in September 2020 and when the landlord also issued its section 20b notice. This was also eight months later than the date indicated by the landlord in its complaint response for when he could expect to receive them, demonstrating that the landlord failed to do what it promised. Nor is there sufficient evidence of the landlord proactively keeping the resident up to date on what was happening with the final accounts.
30. In its final response, the landlord offered the resident £50 in compensation in respect of the delay up to that point, however, taking into account the extended delay until February 2022 which the landlord has not explained to this Service, the redress offered to the resident in the complaints process is insufficient to resolve the complaint raised.

Determination (decision)

31. In accordance with paragraph 52 of the Scheme, there was maladministration by the landlord when responding to concerns raised about a delay in issuing the final accounts for the 2019/20 service charge.

Reasons

32. The landlord followed the correct process in notifying the resident about the delay with issuing the final accounts for the service charges for the previous account year. However, the subsequent delay of approximately 17 months was unreasonable and the landlord missed the timescale that had been given to the resident for issuing the final accounts.

Orders and recommendations

33. The Ombudsman orders that the landlord:

1. Pay the resident £200 in compensation for the delay in issuing the final accounts for the actual costs of providing services for 2019/2020.
2. The landlord is also to pay the resident the £50 offered in its complaints process if it has not already done so.
3. Comply with the above order within four weeks.