Hexagon Housing Association Limited (202302818)

REPORT

COMPLAINT 202302818

Hexagon Housing Association Limited

31 July 2024

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

This complaint is about the landlord’s handling of:
1. The resident’s queries about service charges and the administration of her service charge account.
2. The related complaint.

Background

The resident is a shared ownership leaseholder of the landlord. The property is a 2 bed flat on the 3rd floor of a building.
On 25 February 2022, the landlord wrote to the resident providing estimated details of her rent and service charges for the financial year 2022-2023.
The resident contacted the landlord in March 2022 to say that there were several errors in the notice with regards to the service charges. The landlord and resident agreed that she would continue to make payments at the rate she thought the payments should be, and the landlord would confirm the amounts due once it had reviewed the charges. Her account would be put on hold in the meantime.
The landlord wrote to the resident in June 2022 to provide some clarification on the amount of service charge and sinking fund contained in the notice. The resident responded with further queries, but she felt she did not receive a satisfactory response.
On 21 December 2022, she raised a complaint with the landlord. She said that:
1. Its communication with her had been poor.
2. It had sent her arrears letters when it had agreed that it would put account on hold.
3. There were errors in the calculation of the service charge.
4. The accumulated sinking fund was not showing on the notice it had provided.
5. She also wanted clarification about audit arrangements and reassurance that the freeholder service charge was correct.
The landlord issued its stage 1 complaint response on 9 January 2023:
1. It said that it had failed to respond to emails within the timescales in its service standards. It apologised for this and said that it was recruiting to the team to meet the demands of the service.
2. It agreed that there were errors in its rent letters. It said that it should have sent a letter of apology out to all leaseholders that this had affected, and this had not happened. It apologised for this.
3. It said that it had agreed revisions to the service charge figures with the resident and they had confirmed this in writing, however, it had not updated the IT systems to reflect the new figures. It would update the system.
4. It had included details of the accumulated sinking fund with the service charge final statements, but not in service charge estimates. It would provide the resident with the balance of the accumulated sinking fund.
5. The freeholder service charge was audited by the freeholder and the landlord. It would undertake a further investigation to get a breakdown of the freeholder service charge.
6. It said that it provided leaseholders with an estimated service charge at the start of the financial year. Following an independent audit it then issues service charge actual statements. There was usually a time delay between the estimate and the actual statement being issued. The landlord was currently undertaking an audit in relation to the previous financial year.
When she had not received a response by 17 January, the resident wrote to the landlord requesting an update. She asked for further information on some of the charges that she felt were inaccurate.
The landlord responded on 25 January 2023 and said that:
1. It would request a further hold on her account.
2. The auditors had raised issues about free holder service charges, and it was addressing these queries.
3. It would provide a further update on 1 February 2023.
In February 2023, the landlord wrote to the resident on 2 occasions providing her with an update.
The landlord wrote to the resident on 9 March 2023 to say that it had reviewed the figures and it provided details of some changes. It also provided details of the sinking fund contributions and it agreed to provide a breakdown of the freeholder service charge in future notifications.
It is unclear from the records provided when the resident asked the landlord to escalate her complaint to stage 2, the landlord acknowledged her request on 21 March 2023 and said that it aimed to respond by 18 April 2023.
The resident wrote to the landlord on 18 April 2023 as she had not received a response. She queried some of the figures provided by the landlord and asked for complete and clear statements. She included with her letter a formal request to inspect accounts and other supporting documents.
On 9 May 2023, the landlord issued its stage 2 complaint response. It apologised for its complaint handling failures, however it said that it managed service charge disputes outside of its complaints process and that the relevant team was investigating it and would respond to her outside of its complaints procedure. It offered her £80 compensation for its complaint handling failures.
On 23 May 2023, the resident wrote to the landlord on 23 May 2023 to query its response as it had addressed some of her queries about the service charge through the complaints procedure at stage 1. She said that she was concerned that the landlord was offering no recourse to dispute these issues, outside of the First Tier Tribunal. She said that she was concerned that the landlord’s communication had been poor, and it had not responded to her correspondence. She asked it to escalate her complaint to stage 3.
When she had not received a response by July 2023, the resident chased this with the landlord. It responded on 27 July 2023, apologising for the delay and explaining that the person she had been corresponding with had left the organisation. The landlord agreed to respond to her by the 15 August 2023.
On 15 August 2023, the landlord told the resident it was completing the end of year accounts and it hoped to respond to her by 29 September 2023.
The resident wrote to the landlord on 30 August 2023 to express disappointment that a response would be delayed for a further six weeks. She said that she wanted to staircase, but she could not do so until it had resolved the service charge issue. She said that she continued to receive arrears letters despite the landlord agreeing with her as to what she should be paying until it had resolved the issue.
On 5 September 2023, the landlord told the resident that it could not guarantee a response by 30 September 2023. It had reviewed the revision to that year’s service charge estimates and it would apply the relevant adjustments and amendments to her account. It had also discussed the revision to the service charge for 2022-2023 and it would look at this as part of the year end accounts for that period.
On 21 September 2023, the landlord provided the resident with a notice for service charges for the financial year 2022/2023. It acknowledged that there had been a delay in sending the actual service charge statement for 2022/2023. It said that it was serving the notice within 18 months of the 2022/23 service charge incurred expenditure. It provided details of the actual costs incurred to date for the year 2022/2023 for the building.
On 29 September 2023, the landlord provided the resident with the information in relation to the management/free holder invoices and the sinking fund. It said that as it received the request for copies of invoices on 18 April 2023, this was outside of the six-month statutory timescale for requesting the accounts, which were issued on 29 October 2021. It said that there were some discrepancies with the invoices provided and the actual accounts for 2021-22 and that it would apply the relevant adjustments.
The landlord held a stage 3 panel hearing on 21 November 2023. The panel upheld the resident ’s complaint and:
1. Apologised for its poor communication. It said that this was due to staff turnover, but it had since recruited more staff which has improved service delivery.
2. It had since been working to resolve the resident ’s outstanding queries and it was in regular contact with her. It included details of some of the outstanding figures in the complaint response with an assurance that it would respond to the remaining items once the 22-23 actual accounts were finalised.
3. It said that it had included information about service charges in the lease. It recommended that the resident obtain independent legal advice about interpreting the terms of the lease, including those relating to service charges, where she had any queries about its implementation.
4. It offered the resident an increase in compensation from £80 to £300 in recognition of its service failures.

Assessment and findings

When investigating a complaint, the Ombudsman applies its dispute resolution principles. These are high-level good practice guidance developed from the Ombudsman’s experience of resolving disputes, for use by everyone involved in the complaints process. There are only three principles driving effective dispute resolution:
1. Be fair – treat people fairly and follow fair processes.
2. put things right, and.
3. learn from outcomes.

Scope of the investigation

The resident ’s complaint concerns the information she had requested about the service charge increase, the landlord’s response to the queries she raised about the accuracy of calculations, and further information about the sinking fund and freeholder charges/management fee. In line with paragraph 42e of the Housing Ombudsman Scheme, the Ombudsman may not consider complaints that concern the level of service charge or, the increase of service charge or rent or disputes about billing and calculations. Complaints that relate to the level, reasonableness, or liability to pay rent or service charges are within the jurisdiction of the First Tier Tribunal. This investigation can, however, consider the landlord’s handling of the resident ’s service charge enquiries and its communication with her.

The resident ’s queries about service charges and the administration of her service charge account.

The lease requires the resident to pay a monthly service charge. The resident’s lease agreement states that the resident must contribute towards the landlord’s costs through the service charge. The charge broadly covers costs associated with management, insurance, and communal cleaning, lighting, heating, maintenance and repairs.
The lease says that the landlord will provide the leaseholder with an estimated service charge amount based on the planned service provision for the forthcoming year. “As soon as practicable” after the end of each account year, the landlord must provide correct accounts and provide the resident with a copy of the certificate.
Section 22 of the Landlord and Tenant Act (1985) gives leaseholders the right to request (in writing) to inspect a landlord’s accounts, receipts and other documents which support the service charge figures. A leaseholder must make the request within 6 months of receiving the summary. The landlord must provide facilities for inspecting relevant information available within 1 month of the request.
The resident made a request for explanations as to the estimated service charge for 2022-2023 in March 2022. It was reasonable that the landlord agreed with the resident that she should pay an agreed amount, which was less than the estimated charge, until it had resolved the issue. However, the landlord’s failure to communicate the arrangement to its accounts team meant that it chased her for arrears payments on at least 4 occasions, which caused her unnecessary distress.
While the landlord did provide the resident with revised fees in June 2022, which she agreed with, she made a request for an explanation as to 3 specific concerns on the estimated service charge for 2022-2023. When she did not receive a satisfactory response, she spent time and effort in raising a complaint in December 2022, to progress a resolution. However, the landlord further delayed in responding which prompted her to make a formal request in April 2023 under section 22 of the Landlord and Tenant Act 1985 for receipts and invoices. It was not until September 2023 that the landlord provided the requested information to the resident, outside of the statutory timescales, which was unsatisfactory.
When a resident raises queries about service charges, the landlord should be able to respond promptly providing the information in a consumer-friendly format. Prior to making her complaint, the resident had chased the landlord for this information on several occasions but while she received holding emails, it did not provide her with an update, which was a failing. Following her complaint, the landlord did provide her with updates, however it took almost 15 months for the landlord to provide the resident with all the information she had asked for, which was unreasonable.
The landlord did not have to provide receipts and invoices for previous years, given that over six months had elapsed since it had provided the service charge summary. However, given that the resident had been requesting this information informally since March 2022, it would have been fair for the landlord to have provided her with the information, to show its commitment to transparency and accountability in its service delivery.
In its stage 3 complaint response, the landlord conceded that there were failings both in its delay in responding to specific queries raised by the resident and in updating its records to record that there was a block on recovery action on her account. The landlord offered redress by apologising and offering an increase of compensation. It also looked to put things right by providing the resident with the information she had requested and agreeing that it would address any outstanding queries in its forthcoming actual accounts. It found that staff turnover had affected service delivery but that this had since addressed this, with the team now fully staffed and this had led to a significant improvement.
In considering whether there has been maladministration the Ombudsman will look both at the events which initially prompted a complaint and the landlord’s response to those events through the operation of its complaints procedure. The Ombudsman will not make a finding of maladministration where the landlord has fully acknowledged any failings, taken reasonable steps to resolve them and offered adequate redress.
In this case, the landlord has acknowledged there were service failings which led to delays. It identified the reasons for its service failure and told the resident what it has done to address them. It also took steps to put things right by apologising to the resident and offering compensation.
With reference to the Ombudsman’s remedies guidance, the landlord’s compensation of £300 was within the tariff of financial redress the Ombudsman would recommend in relation to a service failure that has had a significant impact on the resident.
The Ombudsman therefore considers that the landlord has made a reasonable offer of redress that satisfactorily resolves this aspect of the complaint.

The landlord’s complaint handling

At the time of the complaint, the landlord used a 2 stage complaints policy, with an optional third stage. The policy says that it will acknowledge a stage 1 request within 2 working days and provide a written response within 10 working days. Where a resident requests that their complaint be escalated, it will provide a stage 2 response within 20 working days. A resident can then either refer their complaint to this Service or request that the landlord review the complaint at stage 3, where it will be heard by the landlord’s board panel. It aims to complete this stage within 28 days.
When the landlord decided to treat the resident ’s complaint of 12 December 2022 as a service request, it did not follow its policy which says that it will treat an expression of dissatisfaction as a complaint, and this will include “the time it has taken to sort out an issue”. It then accepted the complaint on 21 December 2022, 6 days outside of its target response timescales. Its stage 1 complaint was then issued within its published response timescales.
The landlord responded to the resident ’s stage 2 complaint 15 days outside of its published response timescales. In its letter, it said that the landlord did not cover service charge disputes in its complaints policy. This response was irrational given that it had considered the resident ’s service charge complaint at stage 1 of its complaints procedure. Further, the landlord’s complaints policy did not expressly exclude complaints relating to service charges.
The landlord then agreed to escalate the resident ’s complaint to stage 3. The Ombudsman considers that a 2 stage landlord complaints procedure is ideal and that complaints should only go to a third stage if a resident has actively requested this. The landlord has since informed this Service that it has reviewed its complaints procedure and no longer offers a stage 3.
In this case, there is evidence that the resident did ask the landlord to escalate her complaint to its optional stage 3 in May 2023 and the resident was given the opportunity to refer her complaint to the Ombudsman instead. However, there was a significant delay of 6 months before the landlord convened a panel meeting and issued its written response. The landlord’s complaints policy specifies that it aimed to respond to a stage 3 complaint within 28 days of receiving the request.
The delay of 6 months was excessive and, in the absence of an explanation, unreasonable. In total, the landlord’s complaints procedure extended for a full 12 months which was unfair and not in line with either its policy or the Code.
The landlord did not follow its policy given that there were both significant delays and errors in the landlord’s complaints response. At stage 2 the landlord offered the resident £80 in compensation for its ineffective complaint handling. The landlord did not reconsider its complaints handling at stage 3. This Service finds that the landlord’s cumulative complaint handling failings amounts to maladministration. It adversely affected the resident and unnecessarily delayed a resolution to the issue. Consequently, the Ombudsman orders the landlord to pay the resident £300 for her distress and inconvenience, time and trouble in raising and chasing her complaint response with the landlord.
We encourage landlords to self-assess against the Ombudsman’s Spotlight reports following publication. In May 2023, we published our Spotlight on Knowledge and Information Management. The evidence gathered during this investigation shows the landlord’s practice was not in line with that recommended in the Spotlight report. We encourage the landlord to consider the findings and recommendations of our Spotlight report unless the landlord can provide evidence it has self-assessed already.

Determination

In accordance with paragraph 53b of the Housing Ombudsman Scheme, in relation to the landlord’s response to the resident ’s queries about her service charges and administration of her service charge account, the landlord has made an offer of redress to the resident which, in the Ombudsman’s opinion, satisfactorily resolves the complaint.
In accordance with paragraph 52 of the Scheme, there was maladministration by the landlord in its complaints handling.

Orders and recommendations

Orders

Within 4 weeks of the date of this report:
1. the landlord is to pay the resident the amount of £300 in compensation in recognition of the resident ’s distress, inconvenience, time and trouble caused by the landlord’s ineffective complaints handling.
2. The landlord is to confirm with this Service once it has made this payment.

Recommendations

If it has not done so already, the landlord should pay the resident the £300 it had offered her at the conclusion of its internal complaints procedure.