Clarion Housing Association Limited (201915413)

REPORT

COMPLAINT 201915413

Clarion Housing Association Limited

5 January 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 regarding:
1. The landlord’s administration of the resident’s service charge and rent account.
2. The reasonableness and level of the resident’s service charges.

Scope of Investigation

Within his complaint, the resident raised concerns regarding fairness of service charges levied by the landlord under the property’s lease agreement. The resident suggested that the service charges did not represent services received.
Paragraph 39(g) of the Housing Ombudsman Scheme sets out 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 of service charge increase.
Paragraph 39(i) of the Housing Ombudsman Scheme sets out that the Ombudsman will not consider 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.
The First Tier Tribunal Property Chamber (the FTT) deals with residential leasehold disputes between tenants and their landlords. The FTT can make determinations on all aspects of liability to pay a service charge and/ or administration charge, including by whom, to who, how much and when a service charge is payable. In order to decide liability, the FTT also decides whether service charge costs have been reasonably incurred and if so whether the standard of any services or works for which the costs are charged is reasonable.
In accordance with paragraphs 39(g) and 39(i) of the Housing Ombudsman Scheme the Ombudsman will not consider whether the resident’s service charges were reasonable or not. This is because the Ombudsman cannot consider such complaints and furthermore considers that the FTT may be able to provide a binding decision on the matter.

Background and summary of events

Background

The resident is a leaseholder of a 1-bedroom flat in a block of flats and has resided at the property since 2014. He owns a percentage of the shared ownership property. The landlord is a housing association, and they separately employ a managing agent to look after the block.
The landlord operates a two-stage complaint policy. The policy states that its responses at Stage One should be issued to complainants within 10 working days and its Peer Review (Stage Two) responses should be issued within 20 working days.
Section 4.21 of the landlord’s Compensation Policy notes that amounts of between £50 and £250 may be offered as a remedy in cases where there is ‘service failure resulting in some impact on the complainant’.
Although it is noted that almost all correspondence to the landlord is signed by both the resident and his wife, for simplicity, this report will refer to ‘the resident’ in the singular and refer to ‘he’ and ‘him’ at various points.

Summary of Events

On 2 March 2020, the resident emailed the landlord to advise that he was ‘not happy with the provided response…to our letter asking for a transparent cost breakdown showing the real cost to run our block of flats’. He clarified that he was asking for the landlord, and the managing agent, to provide a ‘report’ on how they spent resident’s money (service charges). The resident noted that he had received a response from the landlord, but that it was not ‘competent’ and included ‘just a few invoices…that did not match the full list of services for our block of flats’ and came without any description. He also stated it was unfair that the landlord had advised in February 2020 that the rent and service charges would go up by £48.74 a month and that the landlord should have provided ‘a clear reason’ for this increase. The resident clarified that he wished to see ‘all the expenses’ the landlord and managing agent made to ‘run our block of flats from 2014’, along with ‘all contractors’ invoices’.
Two days later, on 4 March 2020, the resident sent a further email, this time addressed to the landlord’s Chief Executive, which he stated was a formal complaint. He advised the complaint was about:
1. Being overcharged ‘in the form of an additional ground rent charge’.
2. An additional charge of £655.42 had been added to his account ‘for no reason’.
3. The landlord not providing a breakdown of the ‘actual expenditure to run our block of flats’ as he had requested, and that the landlord was ‘constantly increasing the monthly payments’ (the resident provided an outline of how the rent, service charge and ground rent charges had increased year on year between 2015/2016 and 2019/2020).
The resident requested that the landlord ‘remove the additional unjustified charges listed above’ and provide a ‘transparent report on real expenditure’ on his block, along with ‘invoices from service, repair and maintenance contractors as we are not allowed to ask (for them) from…the management company’.
On 22 April 2020, the landlord provided its response at Stage One of its complaint procedure. It stated that it considered his complaint to be ‘relating to the additional charges placed on your service charge account’ and noted the following:
1. It noted the resident had emailed on 4 March 2020 and advised that he had been ‘chasing a for a response’ to his query about the above but had received no response.
2. It confirmed that letters it sent to the resident on 17 December 2019 and 24 January 2020 which addressed ‘the additional costs and increase in service charge’. It stated it had confirmed that ‘the ground rent charge is correct’ and that this had been ‘reiterated in the letter sent in December 2019’.
3. It advised that it could not find a record of a charge the resident had referred to, of £665.42, being debited from his account but noted that ‘a total amount of £891.89 has been debited and this includes the £200 ground rent charge’.
4. It sent further copies of the aforementioned letters, along with ‘additional documents and invoices’ which it had sent in January 2020. It also advised that it would be organising a meeting with other tenants in the resident’s block and a representative from the managing agents, ‘once it is safe to do so’, taking into account the coronavirus restrictions that were in place at the time.
On 20 July 2020, the resident sent a further email to the landlord’s Chief Executive and copied in his local MP and this Service, to ‘highlight the many issues and grievances we have been experiencing since 2016’. He stated his email was also prompted by a latter from the landlord, dated 13 July 2020 and which this Service has not seen, which the resident reported said the landlord was ‘going to start legal action against us (the resident and his wife) if we don’t pay arrears accumulated since May’. The resident stated he believed this had been motivated by the landlord not wanting to respond to his complaints. He advised that the following concerns and issues remained outstanding:
1. He had not received a response regarding his query, made in September 2019, relating to an ‘actual service charge adjustment’ of £494 that had been added to his account.
2. He had requested ‘many times’ invoices from service contractors carrying out maintenance work in his block and had had to contact his MP due to not receiving a response. he advised that the landlord then responded directly to his MP and advised that ‘all invoices would be provided’ but that these had subsequently not been forthcoming. The landlord had also advised the MP that a meeting would be set up, but this had not been arranged.
3. The landlord was overcharging him in the form of an ‘additional ground rent charge’.
4. The annual rent was being increased by more than the 0.5% which he stated was stipulated as the maximum possible increase in his lease.
5. The landlord had previously offered the resident ‘credit’ of £72.86 but otherwise only provided dismissive responses and did not provide any resolution to the points he had raised.
The landlord acknowledged the resident’s escalation request on 4 August 2020. It apologised for the delay in doing so and advised it would aim to provide its Peer Review response within 20 working days.
On 2 September 2020, the landlord issued its Peer Review (Stage Two) response and advised that it understood his complaint to be about its ‘handling of your service charge concerns’ and provided the following responses:
1. Regarding the alleged overcharges, the landlord clarified the terms of the resident’s lease (that ground rent would be charged at £200 per annum for the first 25 years) and that it had advised him of this in its letter of December 2019. It noted that in his complaint the resident noted that the ground rent ‘was included in (his) monthly service charge payments’. The landlord clarifed that ground rent was previously debited at £16.67 per month but from April 2017 it debited the charge in one lump sum annually. It explained this was because ground rent was ‘an annual demand and is separate to your monthly rent and service charge’ and it provided a breakdown of the resident’s annual charges (rent, estimated service charges and ground rent) from 1 April 2014 to 31 March 2021. It also acknowledged that he had incorrectly been charged £300 for ground rent for financial year 2014/2015 but that it had added an abatement to the account to bring the overall monthly charges back into alignment. The landlord additionally provided statements for the resident’s account covering August 2014 to March 2018 and April 2018 to July 2020, which it noted were in different formats due a change in its IT system, but clarified that the £200 charge for ground rent was consistent and remained separate from other charges.
2. Regarding a charge of £494.66 that was added to his account in September 2019 without explanation, the landlord advsied it had ‘sent (the resident) the certiifcate of actual expenditire for the 2018/2019 financial year’ which outlined ‘the variances between the estimated service charges for that year and what the actual spend was’. It noted that the total variance was a deficit of £655.42 which was then added to the resident’s account on 30 September 2019. The landlord then clarified that, having carried out some investigations, it had applied charges of £76.43 (relating to day to day repairs) and £63.36 (relating to building insurance) incorrectly so credited back a total of £160.76 to his account (£139.79 plus an additional 15% admin fee). It advised this resulted in the figure of £494.66 total variance for the year 2018/2019 and clarified that this was caused by the actual costs of the managing agent being higher than estimated. The landlord advised it had notified the resident of this in its January 2020 letter and further explained that it used the managing agent’s most recent budget to estamate charges for the following financial year.
3. The landlord clarified that, while it had estimated the 2018/2019 charge to be £1430.28 (based on the managing agent’s budget from the previous financial year), having collated all the invoices it had paid, the actual cost was £1930.45. It noted that its previous response had provided the resident with ‘all the invoices we had paid’ (totalling £1930.45) and that these were paid to the managing agent and the building insurer. It provided the resident with a further breakdown of all the invoices and copies of the invoices for reference. It also provided further explanation regarding the building insurance costs and the increase in the managing agent’s costs, which it stated had ‘mainly come from the estate costs and the additionl of HIU (Heat Interface Unit) servicing’.
4. It clarified that the ‘managing agent fee’ referred to its 15% admin charge that ‘covers (the landlord’s) costs of preparing and reconciling the service charge account, overheads and other back office functions’ after the managing agent had recharged its services to the landlord and the landlord had recharged them on to residents. It referred to Clause 2 of the resident’s lease with regards to the provision of a management fee.
5. Responding to the resident’s claim that it had not provided the ‘requested breakdown of actual expenditure’, it noted that it was yet to receive the managing agent’s year end accounts for 2018/2019 (it noted that the managing agent’s accounting year ran from June to May), and that once it had received these, it would calculate any balancing adjustments. It reiterated that it had, in line with the lease,‘provided you with invoices we have paid’.
6. Regarding the resident’s query over the rent being increased by more than 0.5%, contrary to the lease terms, the landlord referred to Appendix 3 in its Key Information for Shared Owners document which stated:
  1. ‘Any increase in the rent will be capped at a figure representing the RPI (retail price index) increase plus 0.5%’.
7. The landlord clarified that, therefore, the only circumstances in which the rent would rise by 0.5% was if the RPI figure was either zero or negative. It provided a summary of the resident’s annual rent charges, and the respective RPI, for each year from 2014 to 2020.
8. With regards a residents meeting, the landlord clarified the offer of a meeting with residents and a representative from the managing agent where it could ‘provide verbal explanations of how service charges are calculated and recovered’ still stood, however it had not been able to arrange this ‘due to the current restrictions’ (referring to the coronavirus restrictions in place at the time). It advised it would continue to speak to residents via other methods in the meantime.
9. The landlord offered a total of £75 in compensation, consisting of £50 for the way it handled the resident’s Stage One complaint (the length of time taken to issue the response, and that the response did not have enough ‘depth’) and £25 for the delay in progressing his complaint to the Peer Review stage.

Assessment and findings

As noted within the Scope of Investigation section, this Service will not be able to determine whether the service charges, or ground rent charges, levied on the resident by the landlord are fair. If he wishes to challenge these, or the amount that they, or the rent charges, rise year on year, this would be best dealt with by a more relevant organisation, such as the First Tier Tribunal Property Chamber.
However, one of the main concerns the resident raised was regarding the fact he believes the landlord effectively charges him twice for ground rent and since financial year 2018/2019 has added an annual charge of £200 to his account while still charging him £16.67 per month via his service charges. Within the information provided to this investigation, it is apparent that the resident, when purchasing the property, was provided with a reservation letter which stated ‘ground rent is included in your monthly service charge and is £200 per year for the first 25 years’. Statements seen by this Service show that, from 2014/2015 until 2017/2018, the resident was debited, and paid, a separate ground rent charge at £16.67 per month (£200.04 in total over 12 months) so he does appear to have been aware that the charges were separate at this time. From 2018/2019, the landlord altered this to a one-off, annual charge of £200, debited in April of each year.
In its Peer Review complaint response, the landlord provided a table which showed the annual charges for the resident’s property. These included the rent, managing agent service, management fee and ground rent (for the financial year 2018/2019 there were additional charges for fire protection and buildings insurance), along with the total annual charge and a monthly total. These overall figures do not appear to be in dispute.
Based on the available evidence, and with the caveat that this Service is unable to carry out a detailed audit of the resident’s accounts, there is no evidence that the landlord is overcharging the resident by billing him twice for ground rent. The account statements seen by this Service show that, from the time the resident’s account was set up, there was a monthly charge of £16.67 for ground rent, alongside the separate charge for service charges. While it is noted that as mentioned above this changed to one-off annual charge of £200 from financial year 2018/2019, the statements again show that it was a separate charge and was separate from the service charges.
While it is noted that the resident’s property reservation letter at the time of purchase referred to the ground rent being ‘included’ within the property’s service charge, in the Ombudsman’s opinion this would be unusual and is not standard practice within the sector. A recommendation has been made at the end of this report for the landlord to clarify with the resident the information that was provided to him in his reservation letter. Accordingly, the accounts show that the ground rent and service charges have always been separate and, in the Ombudsman’s opinion, the annual and monthly totals for all charges provided by the landlord appear to be accurate. It is noted that the resident has queried the rise in the overall monthly payments following the landlord’s switch to charging the ground rent on an annual basis rather than monthly, but from the evidence available, the rise in overall charges appear to relate to an increase in the resident’s rent, rather than being double charged for ground rent.
The landlord’s Peer Review stage response attempted to provide a detailed reply to the concerns the resident had raised, and it was reasonable in providing further information and explanations of its position. It acted appropriately by trying to reassure the resident that its charges were accurate and provided an explanation and breakdown of the overall charges, although this Service notes that the resident has maintained in post complaint correspondence with the landlord that its account charges remain inaccurate. The landlord also acted appropriately by recognising that it should have provided a fuller response at Stage One of the complaint process, recognising that the resident would have benefitted from a better explanation of its position at the time. It was reasonable that, in its Review Stage response, it apologised for this and offered a small, but reasonable, level of compensation.
The landlord’s response regarding the additional charge of £494.66 added to the resident’s account in September 2019 was also reasonable and it explained how the amount had been calculated and why it had been added to the account. It was appropriate the landlord also provided a further explanation regarding how service charges are calculated based on estimates and it was appropriate that it provided the resident with copies of invoices it had paid.
While this Service has not seen a copy of the resident’s lease, internal landlord correspondence seen by this Service indicates the landlord believes the terms outline that the resident has the right to see invoices paid by the landlord, which it complied with. However, the resident has requested to see invoices paid by the managing agent to other contractors, which it states it does not believe is covered by the terms of the lease. It is noted in further landlord correspondence that it did however attempt to gain further information from the managing agent, with the hope of sharing this with the resident but this does not appear to have been provided to it to date. The landlord was therefore reasonable to advise the resident in its Peer Review response that it was not able to provide further information as it was yet to receive the managing agent’s year end accounts for 2018/2019 and that it had complied with its lease obligations by providing him with the invoices it itself had paid.
The landlord also acted reasonably when providing further clarification of the ‘managing agent fee’ and answering his query regarding the fact that then annual rise in his rent charge was allowed to be greater than 0.5%. It also was reasonable in clarifying that a proposed meeting with residents in the block and the managing agents had not materialised due to the coronavirus restrictions in place at the time. However, it is not clear whether this meeting has now taken place, while restrictions later in the year were loosened and a recommendation has therefore been made for the landlord to organise and set a date for this meeting if it has yet do so, or for it to organise a virtual meeting.
Based on the information available to this Service, while it is noted that the landlord should have responded to the resident’s queries more promptly (and it is not appropriate that the resident had to contact both his MP and this Service and escalate his complaint before he received the response above) there is no evidence his rent and service charge accounts are being handled inappropriately.

Determination (decision)

In accordance with Paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration regarding the landlord’s administration of the resident’s service charge and rent account.

Reasons

There is no evidence that the landlord is double charging the resident regarding his ground rent or any other charges. Its explanations of additional charges added to his account at various times are reasonable and appear to be based on accurate figures.
The landlord has, albeit somewhat belatedly, provided the resident with the further information he requested and provided a breakdown of the costs it has been charged by the managing agent, along with invoices paid and its position that it had adhered to the terms of its lease arrangement appears reasonable.
It appropriately identified that it could have provided a more comprehensive response regarding the concerns the resident had raised at Stage One of its complaint process, and it appropriately offered compensation for this.

Recommendations

The landlord should write to the resident, within four weeks of the date of this determination, to clarify the information provided to the resident within his reservation letter regarding the ground rent being included within his service charges.
The landlord should organise the promised meeting between itself, the residents in the block and the managing agent and provide the resident with a confirmed date. If it is not possible to arrange an in-person meeting, the landlord should arrange an online meeting.
The landlord should also consider whether it will re-offer the £75 compensation awarded to the resident in its final complaint response.