A2Dominion Housing Group Limited (202121214)

REPORT

COMPLAINT 202121214

A2Dominion Housing Group Limited

19 July 2023

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 the landlord’s handling of:
1. The resident’s request for service charge information for the financial year 2020-21.
2. The associated complaint.

Background

The resident is a shared owner of a flat in a residential building set within a complex (the ‘complex’) of several mixed-use buildings.
A superior landlord is the freeholder of the complex, and an external agent (the ‘agent’) manages the complex on behalf of the freeholder. The landlord leased three residential blocks within the complex, one of which is the building of the resident’s property. The agent provides estate services, while the landlord provides block services, for which the resident pays through variable service charges administered by the landlord. The landlord sends its estimated service charge notice around March and the final, actual statement of account in September each year. Leaseholders are required to pay any difference between the estimate and the actual bill.
The resident wrote to the landlord on 5 October 2021 and said that the actual service charge bill for the accounting period 1 April 2020 to 31 March 2021 was approximately 40% higher than the estimated bill for the same period. She said she was extremely frustrated that this “seems to be an issue each year”. The resident asked the landlord for a full breakdown of the costs and an explanation for the increase in each of the six expenditure categories of the service charge. The resident asked the landlord to treat her email as a formal complaint. She chased the landlord for its response on 28 October 2021.
The landlord responded on 18 November 2021 and apologised for the delay in responding to the resident. It said:
1. Block Communal repairs had been under-budgeted in previous years, but this was amended for the current financial year. Under this expenditure heading, there was an overspend of £21,963.37, which included a £10,458 repair for the heating system.
2. The TV aerial expenditure was under a contract for £3,600 per annum. However, it was budgeted £1,061. It did not know why, but it said it amended the budget for the current year.
3. It was reviewing queries it received from leaseholders. Once the review was completed, it would send residents a further breakdown and an invitation to meet and discuss the service charges.
4. It advised the resident to get in touch if she did not hear back within ten working days.
The resident wrote to the landlord again on 13 December 2021 and said she had waited ten weeks for the landlord’s response which did not arrive, and that despite her requests, the landlord did not acknowledge her formal complaint. She said the deficit payment of her service charge account had caused her great distress and anxiety.
The landlord acknowledged the latest email from the resident as a formal complaint and responded on 23 December 2021. It apologised for the delay and said:
1. A breakdown of the communal repairs and an explanation of the agent’s charges were posted on the resident’s Google group. It apologised that the resident did not receive the information.
2. It arranged to meet with residents in January 2022 and could also arrange individual appointments for the resident to discuss service charges.
3. It attached information about how it was setting the budget for the resident’s building. It recognised there were significant variances in recent years, and it worked on a way to set its budget more accurately.
4. It would send the rest of the information about fire safety charges that the resident requested by 7 January 2022.
On 21 February 2022, the resident contacted the landlord and said she had waited six weeks after the landlord’s deadline of 7 January 2022 for it to send the information requested. Meanwhile, she said she received a demand to settle the deficit in her account within 14 days, yet the landlord had not addressed her request for information since October 2021. She asked to escalate her complaint to stage two.
The landlord responded on 29 February 2022 and said it could not escalate the complaint to stage two because it had not yet fully responded to stage one. It explained that it experienced unprecedented demand for service and apologised for the delay.
The resident approached this Service for advice. Subsequently, the landlord accepted the resident’s complaint at stage two and sent its final response letter on 19 April 2022. It apologised for the delay in responding to the ‘original information request’ (5 October 2021) and the ‘official complaint’ (13 December 2021). It offered the resident £90 in compensation.
The landlord provided most of the information the resident requested on 20 June 2022. It explained that:
1. The external agent was using different accounting periods starting in October each year, which meant the landlord had to make a calculated guess of the external agent’s budget for six months of the year.
2. In the other six months, there may be charges dating as far back as three years, as the agent’s accounts were finalised several months after the landlord sent its end-of-year accounts to the resident.
3. These factors increased the likelihood of a balancing charge to reconcile the accounts; however, it was looking at ways to improve its forecasting in the future.
4. It identified some errors regarding fire safety works that should not have been charged to the resident’s account, and it said it would credit the resident’s account once it received approval from senior management.
The resident pursued the landlord in July and September 2022 for the credit. On 30 September 2022, the resident wrote to the landlord and said she still had not received the credit; meanwhile, she had received a further actual service charge bill, and her deficit increased by an additional £900.
The resident contacted this Service on 30 September 2022. She said the landlord provided information in an Excel spreadsheet which, in her opinion, was prone to mistakes because of manual data input. She said that, given the landlord’s previous accounting errors, she felt she could not trust the accuracy of accounting, which made her feel vulnerable and at the mercy of her landlord. She said the landlord was chasing payment from her, yet it did not apply a credit note to the account with respect to errors it had identified months earlier. The resident is seeking the landlord to provide clearer information in a timely manner and compensation for the distress and time spent pursuing the matter.

Assessment and findings

Scope of investigation

The Housing Ombudsman will not investigate complaints about the level of a service charge. Paragraph 42 (e) of the Housing Ombudsman Scheme says: ‘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.’
However, the Ombudsman will consider complaints in the context of a member landlord’s: management of service charge accounts and handling of enquiries relating to service charges. Concerns about the level of service charges are more appropriately dealt with by the First Tier Tribunal for arbitration of the reasonableness or level of service charges.
Therefore, this investigation is not about the level of the service charge requested by the landlord. It is about whether the landlord dealt with the leaseholder’s concerns and whether it explained the additional charges appropriately.

Policies and procedures

Under the terms of the lease, the landlord is obliged to provide services for which leaseholders are obliged to pay by way of a variable service charge. The lease requires the resident to pay service charges in respect of services provided by the landlord and for services provided by the agent on behalf of the freeholder.
Leaseholders have the legal right to request and obtain a summary of relevant costs, which are defined by Section 18 of the Landlord and Tenant Act 1985 (the ‘Act’) as ‘the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charges is payable’, in the period for which the service charge is payable or in an earlier or later period’.
The landlord’s complaint procedure says that requests for information will not be treated, in the first instance, as complaints and, therefore, will not be processed through the complaint procedure. However, when a resident requests to raise a complaint, “this could become a Stage one complaint”. Where a service charge is being disputed, this is either resolved in-house directly or at the First Tier Tribunal (Property Chamber). The landlord operates two stage complaint process. Stage one response within 10 working days. Stage two response within 20 working days.
The landlord’s compensation policy says leaseholders can receive between £50 and £150 according to the detriment caused. Time and trouble compensation start sat £35 for one month of impact, £80 for three months of impact, £160 for six months of impact and £240 for a year of impact.

The resident’s request for service charge information for the financial year 2020-21

The service charge notice from the landlord explains that each year the service charge will be estimated, and at the end of the accounting year, the landlord will then send a statement with the actual costs. The service charge will include the costs of the external agent, which provides fire safety and maintenance of the communal areas.
The Ombudsman recognises that, in this case, the service charge administration iscomplex. The landlord’s accounting period starts on 1 April each year andends on 31 March. The agent’s accounting year begins in October. For six months of the year, the landlord must make a calculated guess as to what the agent’s budget might be. Equally, some transactions might take three years to appear on the resident’s account. This complicates the landlord’s forecasting and makes it more likely that there would be a surplus/deficit in the actual accounts.
The Ombudsman would expect the landlord to actively engage with the agent to address the budget overspend and ensure greater accuracy of its forecasting. There is no evidence that the landlord did that.
The agent wrote to the landlord on 1 April 2021 and explained the reason for the overspend. It would have been reasonable for the landlord to write to the resident about the overspend they could expect in their service charge in six months. Such pre-emptive action would have enabled the resident to budget accordingly.
On 5 October 2021, the resident requested from the landlord the breakdown of the service charge and an explanation of the overspend. The landlord provided the information in stages over a protracted period. According to the evidence, the resident pursued her request for information as late as September 2022. This was not appropriate and a failing on the part of the landlord.
The landlord initially responded on 18 November 2022, after the resident had to chase up a response. While it acknowledged the points raised by the resident and offered some information, it did not know why items within its control, such as block repairs and the TV ariel, were under-budgeted. It also said that it needed to gather more information from the agent. The landlord’s response was unsatisfactory and did not fully address all the resident’s queries. While it is reasonable to allow the landlord more time to gather the information from the agent, the landlord should have been able to provide the information on items that were within its control.
The landlord’s response of 23 December 2021 was a better example of how it should have responded to the resident’s initial request. Although it did not explain the overspend in each area of expenditure, as the resident requested, it gave an overview of how it budgeted and why variances would occur. It provided a breakdown of items it was responsible for. It acknowledged that more information was needed from the agent, and it offered to arrange a one-on-one meeting with the resident to discuss her concerns. This was an appropriate response but should have been provided sooner, avoiding a 10-week delay.
The landlord advised the resident that it would provide her with fire safety charges by 7 January 2022. There is no evidence it did so. The resident pursued her request for information several times with the landlord, and she explained that the deficit in her account, created by the service charge overspend, caused her great distress and anxiety, and she reiterated her need to understand what she is being asked to pay. In February 2022, the landlord had still not provided the resident with the information it had said it would. Yet, it demanded that the resident pay the service charge deficit within 14 days. The landlord missed an opportunity to suspend the demand for payment, given the ongoing uncertainty about the fire safety charges. This would have reassured the resident and enabled the landlord the time it needed to gather the information that the resident requested.
The resident pursued her request for information several times during the year, and this Service intervened to help escalate the complaint through the landlord’s complaint procedure. The landlord sent its final response letter on 19 April 2022, followed by information it collated to answer the resident’s request, which it sent on 20 June 2022. It also provided an explanation of the overspend in each of the expenditure headings, as the resident requested. Many of the items detailed in this letter were not related to the external agent, and the variance was due to inaccurate budgeting that the landlord had sole responsibility for.
The landlord wrote to the resident again on 24 June 2022 and advised that following the previous letter, it has identified an error totalling £2,621.40 that should not have been added to the service charge accounts. However, it said it was waiting for a senior officer to authorise the removal of the charge. There is evidence that the resident kept pursuing this. It is unclear whether the landlord removed the charge eventually.
The Ombudsman would look to see that when the landlord was alerted to the error, it should have taken timely and appropriate action to rectify it. In this case, the landlord was vague about whether the errors identified will be credited, and it later failed to keep the resident up to date regarding the status of those charges.
Overall, the resident’s request for information about her service charge was not dealt with appropriately. There was an extensive delay in the landlord’s response that was not all related to the external agent’s accounting periods. The landlord could have provided most of the information in a timely manner. The landlord also missed an opportunity to mitigate the resident’s distress by suspending the demand for payments it could not explain at that time. In all the circumstances of the case, the Ombudsman is not satisfied that the landlord responded appropriately to the resident.
It was appropriate that the landlord recognised that its handling adversely affected the resident. In its stage two response, it offered compensation of £90. However, the level of compensation offered was insufficient as it did not reflect the extent of the resident’s distress and frustration. The resident also experienced frustration due to the payment demands for the debt the landlord could not explain at that time.
An order of £300 compensation has been made to remedy these failures. This sum is within the Ombudsman’s remedy scale for cases involving maladministration, where the impact on the resident has not been permanent. In this Ombudsman’s view, this sum is appropriate to compensate the resident for the distress, including the time, trouble, and delays in resolving matters.
Finally, there is no indication that the landlord has ‘learned from outcomes’ in this case or detailed any actions it would take to prevent similar issues from recurring in the future. A further order is made below to address this.

The associated complaint

The resident requested in her original email on 5 October 2021 that the landlord treat her email as a formal complaint. The landlord treated this as a service request. This became relevant as the case progressed through the landlord’s complaint procedure. On 13 December 2021, the resident said she had waited 10 weeks since she first raised the complaint and asked to escalate her complaint to stage two. The landlord said it could not do so because the complaint was not formally opened at stage one. This had caused 10 weeks of delay for the resident and had magnified her distress and frustration.
The resident requested to escalate her complaint to stage two on 26 February 2022. The landlord responded 36 working days later, on 19 April 2022, and sent the information requested on 20 June 2022, which was 178 working days after the resident first complained to the landlord on 5 October 2021. This was not appropriate, and the delay caused the resident further frustration.
It is essential that a landlord’s complaints process is clearly defined, with appropriate options for escalation detailed at each stage of the process. This provides transparency and reassurance for the resident and allows the landlord to manage the process in a timely manner. This might have enabled the resident to make an informed decision about the next steps at a much earlier stage should she be dissatisfied with the landlord’s response.
Overall, there was a service failure regarding the landlord’s handling of the associated complaint, and a remedy has been ordered below.

Determination

In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration by the landlord’s handling of the resident’s request for service charge information for the financial year 2020-21.
In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was a service failure by the landlord in its handling of the associated complaint.

Orders and recommendations

Orders

Within four weeks of the date of this report, the landlord must:
1. Pay the leaseholder a total of £450 in compensation for the failures identified (comprised of £300 in relation to its handling of the request for service charge information and £150 in relation to its handling of the formal complaint. If the £90 previously offered has already been paid, it can be deducted from this total). The compensation must be paid directly into the resident’s bank account and not offset against any service charge arrears.
2. Review its handling of the resident’s request for information to determine the reason for the delays and failings identified in this report and what action has/will be taken to prevent a recurrence of these in the future. The landlord should advise the Ombudsman of the outcome of this review.
3. Confirm that the charge for the fire safety works has been removed from the resident’s service charge accounts.