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East Midlands Housing Group Limited (202007482)

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REPORT

COMPLAINT 202007482

East Midlands Housing Group Limited

27 July 2021


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

  1. The complaint is about the landlord’s response to:
    1. The resident’s concerns regarding the level of service charges.
    2. The administration of the service charge account and its communication.

Jurisdiction

  1. 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.
  2. After carefully considering all the evidence, in accordance with paragraph 39 of the Housing Ombudsman Scheme, the following aspect of the complaint is outside of the Ombudsman’s jurisdiction.

The level of service charges

  1. Paragraph 39(g) of the Scheme states that the Ombudsman will not investigate complaints which “concern the level of rent or service charge or the amount of the rent or service charge increase;”
  2. The First-Tier Tribunal (Property Chambers) makes determinations on disputes about the liability to pay a service charge, including by whom, to who, how much and when a service charge is payable. In order to decide liability, the Tribunal also decides whether service charges and costs have been reasonably incurred.
  3. Given the above and in line with paragraph 39(g), any dispute about the amount level of the service charge is more appropriately dealt with by the Tribunal. Accordingly, the Ombudsman will not investigate the Resident’s complaint regarding the level of service charge. We will consider whether the landlord communicated with the resident appropriately and whether it acted in line with its policies and procedures.

Background and summary of events

Background

  1. The resident is a shared ownership leaseholder at the property, a two-bedroom house. The resident is subject to the terms and conditions contained in the tenancy agreement.
  2. Under Section 3 of the tenancy agreement the resident has an obligation to pay rent and outgoings including the ‘reasonable costs, charges and expenses incurred by the landlord in connection with the provision, maintenance and management of the communal facilities’. Under the agreement rent charges and other particulars would be reviewed annually on 1 April.
  3. The landlord operates a two-stage complaints policy. The policy requires that the complainant is kept updated throughout the complaints process. If the resident makes a complaint at the first stage, the landlord should respond within 10 working days. If the resident is dissatisfied with the response, the resident can request a complaint panel review of the decision and it aims to provide a response within a reasonable time.
  4. The landlord’s Compensation policy provides for discretionary compensation payments “by way of apology in instances where our services have not matched published standards irrespective of actual loss or expense incurred by the customer”. Under its Discretionary Compensation Guide its states goodwill gestures of up to £50 are payable for low impact stress and inconvenience.

Summary of events

  1. On 25 March 2020, the landlord contacted the resident and advised of an increase in the rent and service charge at the property. It advised that the direct debit would be adjusted to reflect the increase.
  2. In April 2020, the resident contacted the landlord and inquired about the increased service charge and asked it to provide a breakdown of the charge. The landlord acknowledged that the increase was an administrative error and amended the charge; however it did not provide the resident with a copy of the service charge breakdown.
  3. On 18 October 2020, the resident made a complaint to this Service about the landlord’s handling of service charge issues at the property. This Service advised the resident to make a formal complaint to the landlord and that the issue would need to complete the landlord’s complaints process before it could be investigated by this service.
  4. On 22 October 2020, the resident contacted the landlord and made a formal complaint in relation to a service charge error. The resident claimed that the service charge had doubled and that it had changed her direct debit without her consent. The resident asked for a breakdown of the service charge to see where the money had gone and identify how she was in arrears. 
  5. On 26 October 2020, the landlord contacted the resident and stated that it was in communication with the relevant departments and would provide a response as soon as possible.
  6. On 10 November 2020, the landlord contacted the resident and said that there would be a small delay in providing its stage one formal response.
  7. On 11 November 2020, the landlord issued the resident with its stage one formal response and addressed the following:
    1. It acknowledged that the doubling of the service charge was an administrative error on its behalf and offered an apology. It advised that steps had been put in place to prevent this happening in the future. 
    2. It stated that the change in direct debit was a result of a small amount of arrears that had accumulated on the resident’s account over several months. It advised that due to the small amount of arrears accrued by the resident (0.49p) it did not generate a letter and was resolved by a 0.07p change in the direct debit amount. It said the resident can contact it if it was not happy with the resolution.
    3. It advised that on review of the resident’s account the rent or service charge amount should not have changed at all in the first 12 months as the resident was a shared owner of the property. It requested that the resident’s charges reverted back to those agreed at the time of sale. It said that an officer would provide the resident with a breakdown of the service charge within 24 hours. It advised that in order to prevent similar events in the future it had put more stringent checks in place.
    4. It said that the resident was £87.20 in credit and in order to get it back to her it would amend her direct debit to £285.24 for December, this was the normal rent and service charge less the credit, and it would be amended back to the £372.44 from January. It asked the resident to contact it if this was not agreeable.
    5. It offered the resident £50 goodwill gesture for the distress and inconvenience caused.
  8. On 12 November 2020, the resident contacted the landlord and asked for her complaint to be escalated to stage two of it’s complaints process. She advised that she would like the £87.20 refunded to her and the direct debit left at the correct amount so that she would know where she was financially. She asked when she would receive a copy of the service charge breakdown and advised that £50 was not adequate due to the ‘stress’ caused.
  9. On 12 November 2020, the landlord provided the resident with a copy of the service charge breakdown and confirmed a complaint panel review for the 3 December 2020.
  10. On 17 December 2020, the landlord issued the resident with its final stage two complaint panel response which addressed the following:
    1. It apologised for the errors that occurred over the past nine months and advised that the service charge increase was a system error which was resolved after the resident contacted it in April 2020. It acknowledged that it failed to provide the resident with a breakdown of the service charges when requested and that its failure was due to reduced staff as a direct effect of the Covid-19 pandemic. It said that all errors raised had been resolved and that it was looking for digital based solutions to ensure that it did not happen in the future.
    2. That it incorrectly adjusted the resident’s service charge and acknowledged that it should have remained at a static value. It stated that the direct debit was adjusted without consultation and adjusted again when the resident raised the mistake. It provided the resident with a breakdown of the service charge and credited the resident £87.20 that was overpaid.
    3. That £50 compensation offered adequately reflected the errors that occurred and the short time they took to resolve.
  11. On 17 December 2020, the resident rejected the landlord’s offer of compensation.

Assessment and findings

The administration of the service charge account and its communication.

  1. The resident’s tenancy agreement states the resident is liable to pay all reasonable costs, charges and expenses incurred by the landlord. The resident queried the service charge amount in April 2020 and requested the landlord explain her service charge amount. On review the landlord acknowledged the mistake and appropriately corrected the service charge error within a reasonable timeframe; however, it failed to respond to the resident’s request for a service charge breakdown. When a resident requests information on service charges, the landlord would be expected to provide a clear response in a timely manner.
  2. There was a period of time where there was no action by either party until the resident made a formal stage one complaint on 26 October 2020. The resident raised that the landlord had not provided a copy of the service charge breakdown. The landlord appropriately acknowledged its mistake and explained that the global pandemic had played a role in its oversight and provided the resident with a copy of the service charge information on 12 November 2020. The landlord appropriately offered the resident a £50 goodwill gesture for the overall recognition of the distress and inconvenience caused and advised that it had put steps in place to ensure that such a mistake would not happen again in the future. This amount offered by the landlord would be reasonable to adequately compensate for this acknowledged failure considering the underlying cause had been corrected in April 2020.
  3. The resident made a complaint that the landlord adjusted her direct debit amount without her consultation. The landlord acknowledged in its stage two formal response that it had adjusted the amount in order to correct a perceived error however it led to a £87.20 overpayment by the resident. The landlord discovered the overpayment during its investigation into the service charge increase and once it became aware of the error it acted promptly to correct the service charge amount and established a plan for the overpaid funds to be returned to the resident.
  4. The evidence provided in Paragraph 11 indicates that the landlord informed the resident on 25 March 2020 of the pending increase to her rent and service charge account and that her direct debit would be adjusted to reflect this. The lease agreement is silent on the methods for collecting rent and service charges however it would be reasonable to conclude that the landlord changed direct debit amount for convenience to the resident and not to deliberately overcharge the resident. The landlord appropriately offered the resident an apology and advised that steps would be taken to ensure that this did not happen again and that residents would be adequately informed about any future direct debit changes.
  5. As highlighted above in Paragraph 23 the landlord offered £50 compensation for the distress and inconvenience caused by its acknowledged failures. This Service does not award compensation in a punitive manner and given the circumstances of the case and that the landlord acknowledged the mistake, acted efficiently in investigating the issue and corrected the identified errors, the amount of compensation offered was adequate and in line with its compensation policy. 

Determination (decision)

  1. In accordance with paragraph 55(b) of the Housing Ombudsman Scheme there was reasonable redress offered by the landlord for its acknowledged failure in respect of the administration of the service charge account and its communication.

Reasons

  1. The landlord acknowledged that it failed to provide the resident with the service charge breakdown and apologised for its mistake. The landlord took appropriate steps to provide the resident with the information she required and fittingly offered the resident compensation for the distress and inconvenience caused. The landlord acknowledged that it had changed the resident’s direct debit amount and this led to a small overpayment by the resident. On discovering that there had been an error in the calculation it offered the resident an apology and advised that steps would be taken to ensure that this did not happen again and that residents would be informed about any future direct debit changes. The landlord appropriately offered the resident £50 compensation for the distress and inconvenience caused by both failures which was in line with the landlord’s compensation policy.

Recommendations

  1. The landlord is to reoffer the resident the £50 compensation for the distress and inconvenience caused.
  2. That the landlord reviews its policies and procedures in relation to the administration of rent and service charges to ensure no further errors occur and investigate if similar errors have affected other residents.