A2Dominion Housing Group Limited (201805079)
REPORT
COMPLAINT 201805079
A2Dominion Housing Group
20 December 2019
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 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 complainant 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 administration of service charges for communal electricity charges and complaint handling.
Jurisdictional decision
2. The complaint, so far as it relates to the level of service charge, will not be considered by the Ombudsman. This is because paragraph 23 (g) of the Housing Ombudsman Scheme states:
“The Ombudsman will not investigate 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”.
3. Additionally, paragraph 23(i) of the Housing Ombudsman Scheme states:
“The Ombudsman will not investigate complaints which, in the Ombudsman’s opinion: concern matters where the Ombudsman considers it quicker, fairer, more reasonable, or more effective to seek a remedy through the courts, a designated person, other tribunal or procedure”.
4. Section 27A(1) of the Landlord and Tenant Act 1985 states:
“an application may be made to the appropriate tribunal for a determination whether a service charge is payable”.
5. The Ombudsman will not consider the complaint so far as it relates to whether the service charge is payable or its reasonableness, as the complainant clearly has recourse to the tribunal to contest these matters and it would be fairer, more reasonable and more effective to seek a finding and remedy through the relevant tribunal.
Background
6. This complaint involves a lease between four parties. It is perhaps convenient to first set out the relationship between the relevant parties here:
‘the complainant’ is the leaseholder of a ground floor flat (‘the flat’)
‘the flat’ is the complainant’s property and located in a purpose-built block of flats (‘the block’)
‘the landlord’ is the freeholder and owner of the block and the landlord for the purposes of the complainant’s lease. The landlord is not a member of the Housing Ombudsman Scheme
‘the management company’ controls and manages the block. It is a compulsory member of the Housing Ombudsman Scheme.
7. The complainant contends that the management company has not taken regular meter readings for the communal electricity and has not adequately responded to his concerns and queries.
The obligations on the management company
8. Under the lease, the management company owes various obligations to the complainant, and, vice versa. These include, as follows:
8.1. The obligation on the complainant to pay the service charges
Clause 3 of the lease
“[The complainant] covenants with the (…) Management Company (…) with the intention of binding the Property in the terms specified in the Third Schedule”
Paragraph 1(a)(i) in the Third Schedule
“To pay the Maintenance Charge and the Rent on the days and in the manner herein provided without any deduction (whether by way of set-off lien charge or otherwise) whatsoever”.
8.2. What is included in the service charge
The ‘Management Charge’ (as relevant to this dispute) is defined as:
“in relation to the Building and the Common Parts (…) if the sums spent or to be spent by the Management Company on the matters specified in Part I of the Fifth Schedule and so far as the same relate the matters specified in Part II of the Sixth Schedule as estimated or adjusted in accordance with Part I of the Sixth Schedule (…)”
Paragraph 7 of Part I in the Fifth Schedule states:
“To pay all rates taxes assessments and outgoings charged imposed or assessed in respect of the Common Parts”.
Paragraph 6 of Part II in the Sixth Schedule
“All sums paid by the Management Company for the (…) lighting and managing of the Development whether or not the Management Company was liable to incur the same under its covenants herein contained (…)”
8.3. Obligations on the management company in respect of preparing the service charge statements
Paragraph 1 – Part I of the Sixth Schedule
“The Management Company shall as soon as practicable after the 1st day of April in each year prepare estimates of the sums to be spent by it on [Estimated Management Costs] (…) in respect of
(a) Expenditure relating specifically to the Buildings and Common Parts pursuant to the provisions of Part I of the Fifth Schedule; and
(…)
And shall forthwith thereafter notify [the complainant] of such Estimated Management Costs”.
9. Taken together the provisions mean, in simple terms, that the complainant is responsible for paying the service charges as defined as the ‘Management Charge’ in the lease. The management company is only permitted to charge for ‘outgoings’ as assessed so far as they relate to ‘lighting’ the ‘development’. The ‘development’ includes the ‘the building’ which in turn includes the common parts. Hence the parties seem to agree that electricity charges may be claimed back through the service charge.
10. The management company is responsible to produce estimated costs in April of each year. These provide an estimate of the service charges for the coming year. The management company will then issue final accounts for the year ending in March each October. The complainant is obliged to pay a 25% proportion of the costs paid by the management company when they become due.
Summary of Events
11. The complainant’s lease commenced on 22 December 2009. The evidence shows that the electricity supplier only received one reading on 26 February 2013. It is not clear if it was the management company that provided this.
12. The evidence shows that the electricity supplier for the block provided bills quarterly from 2009 until 2017. Save for the reading above, the remaining bills were based on estimated usage for the block.
13. The complainant contacted the management company on 6 October 2017 to query the final accounts issued by the landlord. He specifically queried why the cost of electricity had increased drastically.
14. The complainant raised a complaint on 11 December 2017, as having not received a response to his concerns about the electricity costs. He explained:
14.1. He had contacted the management company on 6 October 2017 about the service charge statement.
14.2. On 17 November 2017, he received a reply from a Leasehold Property Manager, stating there were errors on the statement regarding estate costs. That did not, stated the complainant, address how the light and electricity charge for the block had increased by around 186% from £268.90 in 2015/2016 to £769.68 in 2016/2017.
14.3. Since raising the query on 6 October 2017, the complainant explained he had sent two further emails chasing a response. The complainant confirmed that no answer at all had been provided.
15. The management company acknowledged on 18 December 2017 and advised it would provide a response within 28 working days.
16. The complainant wrote to the management company on 20 December 2017, in which he explained that despite his request on 6 October 2017, he was still awaiting a response. The complainant asked how the errors had occurred on the service charge statement.
17. On 21 December 2017, an Income Team Manager wrote to the complainant on behalf of the management company. The manager explained that the electricity was billed quarterly, and it appeared that only two bills had been added to the final bill in 2015/2016 – and the remainder on the 2016/2017 accounts.
18. A Complaints & Resolution Caseworker wrote to the complainant on behalf of the management company on 17 January 2018. The contents of that email can be adequately summarised as follows:
18.1. The caseworker apologised that the management company had not responded to the query raised on 6 October 2017. The caseworker further explained the delay amounted to a breach of its internal service standards.
18.2. It was explained that, as the query had been passed to two of the management company’s staff members, confusion had been caused whereby each staff member believed the other would respond to the query.
18.3. As regards the increase in cost, an oversight had occurred and only two electricity invoices were charged to the residents of the block in 2015/2016, as opposed to four. As such, the management company had undercharged for that period. This is why there were increased charges in 2016/2017.
18.4. The caseworker offered to facilitate a telephone call from one of the management company’s Leasehold Team Managers.
18.5. The complainant was informed of his right to escalate the complaint – if he remained dissatisfied.
19. The complainant responded on 28 February 2018 by email, in which he explained:
19.1. The charge for electricity had increased from £268 in 2015/2016 to £769.68 in 2016/2017.
19.2. In 2016/2017 three electricity invoices had been received – in which case the electricity costs were likely to be even higher than the estimated cost at that time.
19.3. It was difficult to understand the annual charge for electricity for the block. The complainant requested a copy of the most recent quarterly statements – so he was able to calculate the figure.
19.4. The complainant asked why the estimate for the electricity for 2018/2019 was set at nil.
20. The caseworker responded on the same date (28 February 2018) confirming that the complaint would be escalated to a senior manager within the management company. Having not received a response, the complainant wrote to the caseworker on 4 April 2018 to confirm his request to escalate the complaint to stage 2 of the complaint procedure. The caseworker confirmed the complaint would be responded to by a director.
21. The Head of Leasehold Services set out the management company’s final response on 2 May 2018, as follows:
21.1. The electricity and lighting bills paid were based on ‘estimates’ provided by the electricity supplier. That made estimating the cost of the electricity in the coming year ‘difficult’ to accurately predict. In order to mitigate this moving forward, the Property Manager of the block would take meter readings when on-site to pass to the electricity supplier.
21.2. The management company was considering moving energy supplier to obtain preferential rates – and to consider using ‘smart meters’ to obtain readings remotely in future.
21.3. These actions would allow the management company to accurately predict the cost of electricity moving forward.
21.4. The complainant was offered an apology for the management company’s failure to respond within reasonable time limits.
22. On 8 May 2018, the complainant requested copies of the meter readings provided to the electricity supplier. He went on to explain that:
22.1. Whilst the electricity bill dated 8 December 2016 had an estimated reading of 23295. He explained he had taken a reading on 4 May 2018 which was 05249. That was a difference, he stated, of 18,046 kWh.
22.2. The complainant claimed this showed a history of incorrect billing which affected the annual service charges. The complainant asked the management company whether it had an actual copy of the meter readings it passed to the electricity supplier.
22.3. The complainant specifically requested a ‘revised’ breakdown of the costs for the block since it took over responsibility – together with evidence from the electricity supplier.
22.4. The complainant asked for clarity on these points before referring the matter to the Housing Ombudsman.
23. The Head of Leasehold Services responded on the same date (8 May 2019) stating it had passed the complainant’s questions to the block’s Property Manager to respond to within 5 five working days. There is no evidence this email was specifically responded to by the landlord.
24. The complainant remained dissatisfied with the landlord’s handling of the matter and referred his complaint to this Service. The complainant informed us that the outcomes he was looking for were:
24.1. The management company to provide copies of the meter readings since 2009;
24.2. The management company to provide a full and revised breakdown of the actual costs for the block since 2009;
24.3. For the Head of Leasehold to respond to the email of 8 May 2018;
24.4. A formal apology; and
24.5. Compensation for the inconvenience the matter had caused the complainant – as well as for the time and effort spent pursuing the matter.
25. The management company responded on 10 October 2019 and informed the Ombudsman:
25.1. It did not have meter readings back to 2009 because they formed paper records. The management company did not record when meter readings were sent to the energy supplier which is something it was looking to implement in the future.
25.2. As regards the actual costs, the management company produced invoices from the supplier. These were not the full invoices from 2009.
25.3. The complainant’s email of 8 May 2018 had been responded to in the substantive complaint responses. The Ombudsman notes that the management company did not state when the specific responses were provided.
25.4. It stated the Head of Leasehold Services had apologised on 2 May 2018.
25.5. The management company offered £260 compensation for the distress and inconvenience caused in line with its compensation policy.
26. The complainant, in turn, set out his position as follows:
26.1. He requested a full revised breakdown so that he could see for himself what the correct usage was and what the correct charges should have been;
26.2. He simply wanted to be placed back into the position he ought to have been in, had the management company taken readings periodically;
26.3. The management company had effectively admitted it had no record of taking or submitting actual meter readings;
26.4. Based on the supplier bills provided, it had been impossible to decipher what the correct charges should have been; and
26.5. It was still unclear whether the management company had taken meter readings since the complainant’s correspondence with it on 8 May 2018. Moreover, the management company had not responded to that correspondence.
27. The management company informed the Ombudsman that it has since taken meter readings for the week ending 13 December 2019. It stated it would now scan these on to its case management system, so as to maintain records.
Assessment and Findings
28. The lease required the complainant to pay the management company costs ‘imposed’ or ‘assessed’ associated with the common parts. It can be reasonably inferred on the basis of fairness that the electricity costs would be ‘assessed’ based on the meter readings as opposed to imposed. Moreover, if the management company is going to charge for the cost, it would be reasonable and, indeed fair in all the circumstances, that the costs would be correctly assessed with reference to the meter readings.
29. It is important to note that the complainant is paying, via his service charge, for the cost of staff and the cost to calculate and send service charges associated with the block. It would be a legitimate expectation of the complainant’s that he would receive a proper and adequate service for the price he is paying. The management company ought to have provided the electricity supplier with accurate readings on a regular basis – to ensure the complainant (and other leaseholders) were correctly and fairly charged.
30. Whilst the Ombudsman notes the management company stated it had no record of the readings as they were on paper which had been disposed of; there is also no evidence that it provided meter readings to the electricity supplier on a regular basis. It is hard to conceive that the electricity supplier would not have received at least some of the readings over a ten-year period. In the alternative, it would have been reasonable for the management company to have obtained readings when it received the bills showing the cost was based on estimated usage. Based on this, it is fair to conclude that the management company did not act as it reasonably ought to have in respect of the electricity readings.
31. To add to this, the management company promised, following the complaint procedure to ensure it would obtain meter readings. There is no evidence to confirm the management company carried out any meter readings despite its promise. The management company admits and recognises it has not met this standard. As such it is responsible for failing to abide by the promises it made. The Ombudsman finds that the management company failed to reasonably take any readings from October 2017 to December 2019 when it reasonably could have.
32. Turning now to the communication on this matter; the complainant is concerned that his correspondence of 8 May 2018 was not responded to. The management company states it responded to its substantive complaint responses. The Ombudsman finds that the final response was issued on 2 May 2018 – so the queries later raised could not have been considered in its final response. Having considered all the evidence, the management company did not fully respond to the queries raised by the complainant on 8 May 2018.
33. Specifically, the complainant asked whether the management company had actual readings. There is no evidence a response was provided to this question until 10 October 2019 following the Ombudsman’s involvement. The answer to that question was that the management company did not have any copies of meter readings.
34. Secondly, the complainant asked the management company to take meter readings and revert back to the electricity supplier and obtained a revised breakdown. The Ombudsman concludes in light of the discrepancies with the billing this was a reasonable request. There is no evidence the management company did this. Importantly, according to the management company it has not done this until the week ending 13 December 2019 despite being aware of the dispute since October 2017. As already set out, that is not appropriate or fair in all the circumstances. The management company is at fault for this.
35. As regards the compensation of £260 offered to the complainant, the Ombudsman is satisfied that this amount is listed in the landlord’s compensation policy.
36. Nevertheless, the Ombudsman derives his powers from statute, namely, the Housing Act 1996 (‘the Act’). Schedule 2 of the Act sets out how housing complaints should be handled in the housing sector. Paragraph 7(1) of Schedule 2, states that the Ombudsman must:
“determine it by reference to what is, in his opinion, fair in all the circumstances of the case.”
37. Subparagraph 6 of paragraph 7 (of the Act) states:
“A member who is ordered by the housing ombudsman to pay compensation or take any other steps has power to do so (…)”
38. The relevant part of the Housing Ombudsman Scheme (as approved under the Housing Act 1996) (‘the Scheme’) states:
“43. The Ombudsman will determine complaints by what is, in his opinion, fair in all the circumstances of the case. In his determinations, he may reject the complaint or make orders or recommendations including that the member:
(…) b. pay compensation to the complainant;”
39. There is nothing within the Housing Act 1996 or the Scheme that requires the Ombudsman to strictly follow a landlord’s compensation policy when considering compensation. Whilst we will consider a compensation policy, the Ombudsman is not bound by it and must decide cases on the basis of ‘fair and reasonableness’.
40. Having taken the entirety of the circumstances into account and the powers available to the Ombudsman, I have decided the level of compensation awarded is not fair or adequate to take into account the full impact on the complainant. As such, an increase is required.
41. In deciding the level of compensation, I have taken into account the Housing Ombudsman’s guidance on remedies[1]. The type of award offered is between £250 -£700, with the starting point being £260, as offered by the landlord. I consider that the award should be increased given the aggravating features of this case, which include:
41.1. the length of time for which the issue has been ongoing; and
41.2. that the management company has failed up to December 2019, take any meter readings.
Determination (decision)
42. In accordance with paragraph 42 of the Housing Ombudsman Scheme, the Ombudsman has found:
42.1. The management company was responsible for maladministration in the way it administered the service charges for the electricity in the block;
42.2. The management company was responsible for maladministration in the way it handled the complainant’s complaint.
Reasons
43. Paragraph 42 of the Housing Ombudsman Scheme states:
“When investigating, the Ombudsman is concerned to establish whether the member has been responsible for maladministration (which includes a finding of service failure) which may include, but not exclusively, circumstances where the member:
a. failed to comply with any relevant legal obligations;
b. failed to comply with any relevant codes of practice;
c. failed to apply its own procedures;
d. delayed unreasonably in dealing with the matter;
e. behaved unfairly, unreasonably, negligently, or incompetently; or
f. treated the complainant personally in a heavy-handed, unsympathetic or inappropriate manner.”
44. The management company is responsible for maladministration because it:
44.1. most likely failed to carry out regular meter readings regularly;
44.2. failed to respond to the complainant’s correspondence fully in a timely manner; and
44.3. failed to comply with its complaint resolution.
Orders and Recommendations
45. IT IS ORDERED THAT: the management company does within 28 days of the date of this determination:
45.1. take meter readings for the block and provide the same to the electricity supplier and specifically request that it recalculates the usage for the relevant period;
45.2. pay the complainant £650 compensation for the following:
- the distress and inconvenience caused by failing to take regular meter readings. The compensation should increase from £260 to £450;
- £100 compensation for failing to adequately respond to his correspondence within a reasonable time; and
- pay the complainant £100 for the landlord’s complaint handling.
46. IT IS ORDERED THAT:
46.1. once the management company receives a response from the electricity supplier it must, within 14 days, adjust the service charge account as, and if, necessary to reflect any changes;
46.2. within 14 days of completion of the Order set forth in paragraph 46.1, the management company must provide the complainant with a copy of the electricity supplier’s correspondence together with any recalculation for the service charge for electricity; and
46.3. within 8 weeks of completing the Order set out in paragraph 46.1, the management company must determine if, and how, the other current and previous leaseholders have been affected by the failure to take regular meter readings. It should devise a redress policy of how it will compensate current and previous leaseholders of the block for the failure to take regular meter readings.
47. IT IS ORDERED THAT:
47.1. the management company does within 8 weeks of this determination devise a written procedure on how the electricity meter readings will be taken and disseminate that to the residents of the block for approval.
48. It is RECOMMENDED THAT the procedure should take into account:
- Who (within the management company) will be responsible for taking meter readings and how often they will be taken;
- How the meter readings will be stored so they are accessible;
- How the meter readings will be submitted to the energy supplier; and
- When accounts payable receive the electricity bills, whether the team should check whether the bill is for actual or estimated usage.
[1] A copy of the Ombudsman’s guidance on remedies can be found here: https://www.housing-ombudsman.org.uk/about-us/corporate-information/policies/dispute-resolution/guidance-on-remedies/). Page 15