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Eastlight Community Homes (201909770)

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REPORT

COMPLAINT 201909770

Eastlight Community Homes

3 February 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 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 the residents’ request for compensation.

Background and summary of events

  1. The residents were tenants of the landlord’s property (‘property A’). In December 2019, the residents completed a mutual exchange with a neighbour and became tenants of property B. The residents subsequently served a notice to quit seven days later, at which time the tenancy at property B came to an end.

Law and Regulations

  1. The Leasehold Reform, Housing and Urban Development Act 1993 (‘the Act’) sets out the rights of tenants to be compensated for improvements made to a property. Section 99A of the Act states :

“(1) The powers conferred by this section shall be exercisable as respects cases where a secure tenant has made an improvement and –

(a)  The work on the improvement was not begun earlier than the commencement of section 122 of the Leasehold Reform, Housing and Urban Development Act 1933,

(b)  The landlord, or a predecessor in title of the landlord (being a local authority), has given its written consent to the improvement or is to be treated as having given its consent, and

(c)   At the time when the tenancy comes to an end the landlord is a local authority and the tenancy is a secure tenancy.”

 

 

 

Landlord policies

  1. The landlord’s policy relating to compensation for improvements provides:

“The statutory duties that apply to Local Housing Authorities under The Leasehold reform, Housing and Urban Development Act 1993 are applicable to social housing providers, by requirement of our Regulator.

We will therefore compensate residents for improvements carried out during their tenancy, when they leave.

…

Residents can claim compensation for their own improvements providing that:

  • It is a qualifying improvement (examples listed in the policy)
  • They have a secure or assured tenancy.
  • Written permission was obtained before the work was completed.
  • The completed work was inspected, signed off and all conditions met.
  • All relevant invoices and receipts are kept.
  • Compensation payable is in excess of £50.

Compensation will not be payable where a tenancy has come to an end because:

  • An order for possession was made.
  • The right to buy or acquire has been exercised.
  • The property has been disposed of to the tenant.
  • A new tenancy of the same property has been granted.”

Summary of events

  1. In 2016, the residents made enquiries with the landlord about the Right to Acquire process as they wished to own property A. The process began in 2018; however, by July 2019, the residents had been informed that they would be able to acquire the leasehold title only, and that the car port would not be included as part of the sale.
  2. The residents did not wish to acquire the property on that basis, so decided not to proceed. The residents have informed the Ombudsman that they told the landlord that they wished to “walk away” from property A altogether but were told that they would need to “put back” all the improvements which had been made, or they would be “charged” as the fixtures and fittings were of a high specification which it could not maintain for a new tenant. The residents have informed this Service that “to get around” this, they entered into a mutual exchange with a neighbour.
  3. The mutual exchange completed at the beginning of December 2019, and the residents became tenants of property B. However, the residents completed a purchase on the open market at the end of November 2019, and therefore gave notice on the tenancy soon after the mutual exchange was completed.
  4. In January 2020, the residents wrote to the landlord to make a formal complaint. They said that they should have been advised sooner that they could not buy the freehold title; and that they had spent time and money upgrading the property on the basis that they would eventually own it. The residents added that they wished to be compensated for the losses they had incurred.
  5. Further correspondence was exchanged, and in a stage 2 complaint review dated 28 January, the landlord said:
    1. It understood that:
      1. The residents had given notice to end their tenancy on property B and had purchased a property on the open market.
      2. the complaint concerned the administration of a Right to Acquire their former tenancy at property A.
      3. The residents had recently undergone a mutual exchange with their neighbour and acquired the tenancy to property B as a result. The mutual exchange completed on 9 December 2019.
    2. It had upheld the complaint about poor administration regarding the Right to Acquire property A. It noted that the residents had withdrawn their application on the basis of “inaccurate advice” about the tenure of the property, and the parking provision on the estate.
    3. It wished to apologise for the poor service the residents had received.
    4. It noted the residents comments that they had made improvements to property A with the intention to ultimately buy it. The works included a new bathroom, new kitchen and a tiled floor.
    5. Its property improvement policy set out the definition for ‘qualifying improvement’ and the terms and conditions under which it would consider payment for a new kitchen or bathroom.
    6. The policy states that residents must seek permission before carrying out improvements and that inspections should take place following any upgrade to the existing fixtures and fittings.
    7. When the residents decided to swap their tenancy with property B, they took on the responsibilities associated with that property. Any interest in the tenancy relating to property A ended, together with any claim for the improvements, when they completed the deed of assignment on 9 December 2019.
    8. In response to the residents’ complaint, it had amended its Right to Acquire process so that the legal checks on properties are completed earlier. It said that this will mean that:
      1. the status of the property i.e. leasehold or freehold will be apparent at an earlier stage.
      1. the property search would also reveal any issues with parking or restrictive covenants attached to the property.
      2. The processing of Right to Acquire applications would be more streamlined with “clear accountability and timelines for actions” for all members of staff.
    9. It wished to offer the residents a gesture of goodwill for the time and trouble in bringing their complaint. It wished to offer £50 in line with its policy. It noted that the residents’ email stated that they wished for the landlord to consider compensation for the abortive costs of legal and mortgage fees incurred. However, it was unable to consider these costs as such expenses are entered into by the tenant and are considered ‘at risk’ until the sale completes.
  6. The residents subsequently contacted this service as they were unhappy with the response and compensation offer. This Service provided them with advice about escalating their complaint; and further correspondence was exchanged between the landlord and residents. This included the residents providing the landlord with receipts and evidence of the costs they had incurred.
  7. On 9 March 2020, the landlord advised that it had reviewed the evidence that the residents had sent and wished to make a final offer to the value of £530. It said:
    1. that this covered the abortive costs in relation to the Right to Acquire application. This included, specifically, the legal costs of £360 and the valuation costs of £120. This was in the addition to the goodwill gesture of £50.
    2. It was unable to consider reimbursement for the costs of installing the new kitchen. Its policy on tenant improvements provides that permission must be sought at the time of the installation and payment is then made when the property becomes empty at the end of the tenancy. However, in this case the property did not become empty, as a mutual exchange took place.
  8. The residents remained dissatisfied and the landlord escalated the complaint to the next stage of its complaints process. In its stage 3 response sent on 31 March 2020, the landlord said as follows:

Right to Acquire

  1. The offer for compensation for inconvenience was reasonable.
  2. Offered £530 as full and final settlement in relation to its failings regarding the Right to Acquire.

Improvement works

  1. Its records show that the residents undertook improvement works at property A in 2013. However, they did not apply for consent prior to undertaking the works and this invalidated a compensation claim. However, it was noted that retrospective permission was granted in 2019, as part of the mutual exchange.
  2. Its policy for compensating improvement works is that the tenant provides the details of the costs, and they are subsequently discounted based on the benefit the tenant would have enjoyed and the condition, up to a maximum level of £3000. The compensation is then paid at the end of the tenancy.
  3. However, in the residents’ case, their tenancy did not come to an end but rather was assigned to their neighbour. The decision to mutually exchange forfeited their right to compensation as the choice to move was theirs.
  4. Looking at the timeline of events, it noted that the residents had actually completed their purchase of a private property at the end of November 2019 – prior to assigning their tenancy. In purchasing their property, property A ceased to be their primary place of residence and put them “in breach” of their tenancy.
  5. Nevertheless, there was a case to answer in respect of the administration of their Right to Acquire claim. However, it was satisfied that £530 was an appropriate sum.
  6. In respect of compensation for the improvements, it said that it considered the residents had waived those rights when pursuing the mutual exchange.
  1. The residents referred the matter to the Ombudsman as they remained unhappy with the landlord’s offer. In correspondence to the Ombudsman, they said that they wished to recoup some of the money that they had spent in “wasted rent” and in trying to buy property A, and that they wanted back some of the money that they had spent on improvements to the property. The residents added that they had always sought permission before starting projects at property A.

Assessment and findings

Costs associated with the Right to Acquire process

  1. During the complaints process, the landlord initially offered the residents £50 compensation. Following review, this was increased to £530. As detailed above, the landlord advised that this was intended to cover the legal costs of £360, and the valuation costs of £120. This was in the addition to the goodwill gesture of £50.
  2. The decision by the landlord to reimburse the residents for these costs was appropriate. Whilst the landlord was initially correct in advising that the residents had taken on these costs ‘at risk’, it was appropriate to consider reimbursing these costs given its finding that the responses could have been more timely and accurate during the Right to Acquire process.
  3. Furthermore, the landlord informed the residents of process changes that it had made to ensure that similar errors do not occur in the future. The changes detailed by the landlord shows that it has learn from the complaint and the failings which were identified. This demonstrates that not only did the landlord try to put things right with the complainant, but it has also introduced process changes in light of what its investigation found.

Compensation for improvements to property A

  1. When the landlord considered the residents’ request for compensation for improvements to property A, it advised that their right to compensation had been forfeited. This was on two grounds – firstly, they had not obtained permission prior to having the works completed; and secondly, the tenancy had not come to an end when they left property A; rather it had been assigned to their neighbour with whom they mutually exchanged.
  2. As detailed above, in correspondence to the Ombudsman, the residents have advised that they did seek permission before carrying out projects at the property. Whilst the residents’ comments have been noted, the Ombudsman has not seen any evidence which shows that written permission for improvements to property A had been provided by the landlord prior to 2019.
  3. The Ombudsman has been provided with a letter which was issued by the landlord following the mutual exchange inspection in October 2019. Within this, the landlord advised that there had been improvements that had been carried out without the relevant permissions, and that these would need to be applied for retrospectively before the residents could proceed with any exchange. There is no evidence which shows that the residents disputed this at the time, or provided the landlord with evidence to show that permission had been obtained previously.
  4. It follows that the landlord’s comments that the residents had forfeited their right to claim compensation given that permission had not been sought prior to carrying out works were appropriate and in line with its policy.
  5. During the complaints process, the landlord also advised that the residents could not seek compensation for the improvements which had been carried out to property A as the tenancy relating to that property had not come to an end. The landlord informed the residents that when they completed the mutual exchange, the tenancy for property A was assigned to their neighbour, and they acquired the tenancy for property B.
  6. The landlord provided the residents with appropriate advice and information in this regard. When properties are swapped through a mutual exchange, the tenancies do not come to an end; rather, they are assigned to the incoming tenant. It is on that basis that a new tenancy agreement is not signed as part of the process.

Rent payments

  1. It is noted that the residents regard the money spent on rent as “wasted” given that they could not subsequently acquire property A. However, by signing the tenancy agreement, the residents had agreed to pay rent as a condition of occupying the property. This was without a guarantee that they would subsequently be able to acquire the property. It follows that there is no basis for rent payments, or partial rent payments, to be returned to them. This was appropriately explained by the landlord during the course of the complaints procedure.

Determination (decision)

  1. In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration by the landlord response to the residents’ request for compensation.

Reasons

  1. In response to the residents’ complaint, the landlord identified failings in how it had handled their Right to Acquire application. In recognition of the inconvenience to the residents the landlord offered £50 compensation. This was subsequently increased to reimburse the residents for costs they had incurred in legal fees and a valuation of property. This was appropriate. The landlord also made changes to the Right to Acquire process so that other residents did not encounter the same problems in the future.
  2. The landlord declined to offer the residents compensation for improvements they had made to property A. This was on the basis that the relevant permissions had not been obtained prior to carrying the works out, and as the tenancy relating to property A had not come to an end. The landlord’s decision was appropriate, and in line with its policy and relevant legislation.
  3. The residents were legally obliged to pay rent under the terms of the tenancy agreement. This was irrespective of whether they were going on to acquire the property or not. There was no obligation on the landlord to consider returning any of the rent payments after the resident’s Right to Acquire application did not proceed, or after the tenancy came to an end.

Recommendation

  1. Within 4 weeks of the date of this decision, the landlord should pay the residents the £530 compensation which was offered at the end of the complaints procedure, if this has not been paid previously.