Inquilab Housing Association Limited (202108931)

REPORT

COMPLAINT 202108931

Inquilab Housing Association Limited

8 February 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:
1. Handling of arrears on the rent and service charge accounts.
2. Complaint handling.

Background and summary of events

Background

The resident has a shared ownership lease with the landlord that started in 2013. The property is a one-bedroom flat. The landlord has no vulnerabilities recorded for the resident. The lease set out the obligations of the resident and landlord; including the resident’s obligation to pay rent and service charges. In late 2020 the landlord gave the resident licence to sublet the property.
On 23 March 2020 the UK government announced a national lockdown due to Covid-19. This was eased from June 2020 when schools and non-essential retail outlets re-opened. The government introduced new restrictions from 22 September 2020 and a second full national lockdown was announced on 31 October 2020 that came into effect from 5 November 2020. While restrictions were lifted slightly over Christmas, there was a new national lockdown from 6 January 2021. While schools re-opened on 8 March 2021, the “stay at home” order remained in place until 29 March 2021. On 19 July 2021 most legal limits on social contact were removed in England and the final closed sectors of the economy reopened.
The Coronavirus Act 2020 passed by Parliament on 19 March 2020 gave the Government emergency powers to handle the pandemic. It also provided measures to combat the economic effects of the pandemic including the power to halt the eviction of tenants. It introduced temporary measures to protect tenants during the coronavirus pandemic. These included:
1. A stay on possession proceedings between 27 March and 20 September 2020.
2. A stay on evictions between 17 November 2020 and 31 May 2021.
At this time the Building Societies Association and the National Housing Federation set out the support shared owners could expect from their housing association and their mortgage lender during the pandemic. This included:
1. During this crisis, no shared owner would be evicted from a housing association home as a result of financial hardship caused by the coronavirus.
2. Acting compassionately and quickly where people are struggling to pay rent. This included flexibility on when to collect rent and working closely with shared owners to agree on affordable and sustainable repayment plan for any arrears that build up.
During the pandemic, the landlord’s website said that “to avoid accruing rent arrears, we urge you to continue to pay your rent. If you are facing financial difficulties, please contact a member of staff immediately”. It also suggested that residents who were experiencing any financial hardship due to the pandemic, for example if their income had been affected, should follow the Department for Work and Pensions guidelines for new claims.
The landlord’s income collection and arrears recovery policy says that the landlord will take legal action to recover rent arrears where the tenant responsible is failing to take adequate steps to resolve the situation. Initial legal action for assured and fixed term tenants involves the service of a Notice of Seeking Possession; this will only be done after the landlord has attempted to contact the tenant in question in person.
In the landlord’s 2020-21 Annual Review for Resident’s it said that it had reached out to those who were suffering financially by offering financial planning and budgeting advice to help people on furlough, and ensured fair rent payment plans were put in place for residents who had fallen into rent arrears.
From January 2020 the landlord has had a two-stage complaints procedure. It aims to respond within ten days at both stages of the procedure. It says that complaints which are not satisfactorily resolved at stage one will be reviewed by a designated senior manager who has not been involved in the complaint investigation, and the response approved by a Head of Service/Director. In an earlier complaints procedure operated by the landlord, the stage two response consisted of a review by a complaints panel.
The landlord’s complaints and compensation policy says that it may make ex‑gratia “goodwill” gestures or payments where it considers it “morally appropriate”, without recognising any liability or obligation.
In April 2022 the Ombudsman’s published our Complaint Handling Code (the Code) which set out requirements for member landlords that will allow them to respond to complaints effectively and fairly.
The Code also says that landlords must confirm the following in writing to the resident at the completion of stage one in clear, plain language, among other things, details of how to escalate the matter to stage two if the resident is not satisfied with the answer. Additionally, in the final complaint response the landlord should provide details of how to escalate the matter to the Ombudsman if the resident remains dissatisfied.

Summary of events

On 6 April 2020 the landlord wrote to the resident thanking him for his email with details of his change of circumstances, that is, that he had been furloughed following the lockdown. It said it was asking its residents to “pay what they can afford and if you were able to pay anything towards your rent and service charges prior to being furloughed that will be noted.” It added that it “will continue to charge rent and service charges but for those whose financial circumstances have changed we shall note that payments are not likely to be received and no legal action will be taken to recover the money owed during this period”.
On 29 September 2020 the resident told the landlord that he was getting permission to sublet his flat as this “would be extremely helpful in my situation” and he would be in a position to start paying rent again soon.
On 12 November 2020 the landlord asked the resident to contact it about the arrears and provided a statement. In response, the resident told the landlord he was shocked to have received this statement showing rent arrears of £3,129. He said he was likely to remain on furlough given the recent lockdown.
On 13 November 2020 the landlord asked the resident if he was able to make any contribution to the outstanding arrears. In response, the resident explained that he was on 80% of his basic pay on furlough which was less than half of his full pay (50% of which were allowances).
From 24 April 2021 the resident sublet the property.
On 27 April 2021 the landlord wrote to the resident saying that he was in arrears of £4,396.54 It asked him to make a payment of £477.65 within the next five working days.
On 27 May 2021 the resident complained to the landlord by email about his rent arrears which stood at £4,396. He said he had done his best to pay what he was able to afford of his rent which was £200 a month which had been agreed with the landlord on 27 November 2020. The resident explained he had been placed on furlough during the pandemic and had had to sublet his flat to be able to pay his mortgage, rent and bills. He said the arrears should be written off as per their agreement. He quoted the email from the landlord dated 6 April 2020, above.
The landlord acknowledged the complaint the same day. The resident chased the landlord for a complaint response on 28 June and 2 July 2021
On 9 July 2021 the landlord issued its stage one complaint response to the resident under its formal complaint procedures. The main points were:
1. It apologised for the delay in replying adding all correspondence should be received via the tenant portal as this allowed his request to be handled in the most appropriate and efficient manner.
2. It confirmed the outstanding balance was due in line with the conditions of his lease agreement.
3. It explained that the advice given previously by the customer and communities manager was in response to the pandemic and it was offering support to residents by suspending legal action. It added that the no eviction restrictions were now being lifted by the government and it was reviewing all cases to take the necessary steps to protect its income stream but also to engage with its residents to agree payment plans.
4. It said, as the resident was not contributing to the arrears on his account, he was defaulting on his mortgage. It said it understood that the pandemic posed significant financial challenges and it would provide as much support as possible to enable the resident to manage his lease.
5. It proposed two plans to clear the debt on his account and said that, if he was unable to clear the balance in one payment to let it know which option was affordable within seven days. The landlord added that, if he was unable to afford the repayments, it would need to contact his lender which might result in his home being re-possessed.
6. It signposted the resident to the lease advisory service for advice.
On 13 July 2021 the resident asked the landlord to escalate his complaint. He also said that its website said that complaints could be made face to face, by phone, online, by email, by letter or by fax.
On the same day the landlord apologised to the resident for the wrong information on its website and said it would update it immediately as it no longer used the customer services email address; its portal was designed to be the main platform for correspondence between it and residents/leaseholders. It recognised this as a service failure and offered £20 compensation. The landlord added that it could escalate the complaint to stage two and asked to speak to him about that. It also explained that, when the lender was informed about rent arrears, they usually cleared the debt with it and extended the mortgage payments instead.
In that email the landlord also asked the resident for an update about his current situation and said that, hopefully, his employer had been in contact with him about returning to work. It added this would give it an indication about when he would start reducing the arrears and how much he would be able to afford to contribute to the arrears each month.
In response the resident said that he had paid his rent and service charge in full from May 2021; he said he was still furloughed.
On 19 July 2021 the landlord wrote to the resident about the rent arrears and asked him to contact it. It added that, if he did not engage with it, it would take legal action by way of a Notice of Seeking Possession.
On 14 August 2021 in response to the resident’s statement that he would discuss his case in writing only, the landlord said it was seeking confirmation about whether he was now subletting the property, which should allow him to contribute towards the arrears. It said that, unfortunately, given his refusal to discuss a realistic repayment plan, it would have to notify his mortgage lender of his breach of mortgage. The landlord signposted him to the Leasehold Advisory Service, a debt advice charity and a credit union.
On 23 August 2021 the landlord’s solicitor wrote to the resident and said that, unless these arrears were cleared by 30 August 2021, it would issue a Notice of Seeking Possession.
On 24 September 2021 the landlord told the resident that it could see he had arranged repayment of the rent arrears through his mortgage lender which was a satisfactory resolution.
On 10 October 2021 the landlord issued its final response to the resident under its final complaints procedure. The main points were:
1. It apologised that its stage two review response was not previously actioned. It explained it had not believed that was necessary following his agreement to allow his lender to repay his arrears to it.
2. It had now received the full amount from his lender and his rent account was up to date. It had sent him a statement for his records.
3. When the flat was rented out the resident had an income and was required to agree a repayment plan with it but refused to do so.
4. It explained that the process for securing large arrears of rent from shared ownership tenants included an option to approach the mortgage lender. This was common practice in the sector and was necessary before any formal forfeiture actions were taken. It said this allowed the lender an opportunity to remedy the breach since they were also party to the ownership. The landlord added that lenders often prefer to add the debt to the mortgage term over repossession and forfeiture proceedings. It did not uphold this part of the complaint.
5. The sector adopted a zero-eviction policy during the pandemic and the landlord had given the resident permission to temporarily sublet the property, which he had done. It noted that the resident took on extra lending to bring his property up to the standard required to sublet the property. When the resident had rental income, he was required to agree a repayment plan with the landlord, but he refused to do so.
6. Throughout this period, the resident made no payments towards the arrears and he asserted that he was not responsible for paying the arrears, as the landlord had agreed to write them off. The landlord said that that was not the case and, although it tried to explain this to the resident, he had refused to engage with it. The landlord said it did not take legal action against the resident and instead had tried to provide support and advise. It did not uphold this aspect of the complaint.
7. The landlord acknowledged that the final complaint response to the resident was delayed and explained that was in part because it was raised by email and not via its tenant portal. It apologised for that delay and offered compensation for the inconvenience caused. It added that this response failed to include his rights of appeal. It noted this was an error and refresher training has been provided to the staff member. It upheld this aspect of the complaint.
8. The landlord said it was a mistake to abandon the stage two response once the lender had agreed to pay off the arrears at the end of September 202; it said it should have got his agreement to do so first. It offered compensation of £50 for the inconvenience caused. It upheld this aspect of the complaint.
9. The landlord noted that the rent arrears that accrued were legally payable and formed an integral part of their contractual agreement. It explained there was no justification for writing off the arrears.
When the resident approached the Ombudsman he said, because of the landlord, he had to move out of the property and spend over £3,000 in solicitors’ fees to be able to rent it out. He said he also had to take a loan to cover these fees plus his rent arrears of over £4,000 after he was threatened with legal action while still furloughed. He said this situation had caused him a huge amount of stress and worries and he had been signed off from his job for three months for stress, depression and anxiety.
The resident also said that he had paid his rent arrears under protest and only to prevent any further legal dispute with the landlord. As an outcome to his complaint, he said that he wanted the sum of his rent arrears returned to him in full.

Assessment and findings

Handling of arrears on the rent and service charge accounts

After the UK went into lockdown at the end of March 2020, the landlord acted appropriately by writing to the resident in response to his change of circumstances when he was furloughed. It explained that rent and service charges would still be charged but it noted payments were unlikely to be received. It noted further it would take no legal action to recover the money owed “during this period”. It is reasonable to assume, on reading this, that the period referred to is the period that the resident was furloughed. There was no suggestion by the landlord that any accrued arrears would be written off; that was not part of the measures introduced by the Government to combat the economic effects of the pandemic.
The landlord subsequently acted reasonably by changing the terms of the resident’s lease to enable him to sublet the property. It was also reasonable for the landlord to suggest that the resident contact his mortgage lender to add the arrears to his mortgage, to avoid possession proceedings.
In the final response the landlord explained that the resident had an obligation to agree a repayment plan, once he had rental income. It said, however, that he had not engaged with it and continued to believe that he was not responsible for the arrears. Given that the resident’s circumstances had changed and he had a new source of income from renting out the property, it was reasonable for the landlord to instruct its solicitor to warn the resident of the legal action that could be taken to repossess the property. However, while that warning was given, there is no evidence that any legal action was taken as it appears this warning led the resident to contact his mortgage lender to extend his mortgage to cover the rent arrears.
It would have been good customer service if, when the landlord became aware that the resident had rental income, to have explicitly explained to him that, due to this change in his circumstances, he was required to start repaying the rent arrears that had accrued. It could also have explained that, due to this change in his circumstances, the information contained in its email of 6 April 2020 no longer applied.
The Ombudsman acknowledges that lockdown and the subsequent furloughing of staff in many sectors was stressful. It is also acknowledged that the resident incurred costs in bringing the property up to a standard that was lettable. It appears that the resident erroneously understood that the email of 6 April 2020 meant that he was no longer responsible for the rent that accrued while he was furloughed; rather that the landlord would not take action to recover the arrears while his situation remained the same. However, the action taken by the landlord to recover the arrears was reasonable.

Complaint handling

There were lengthy delays in issuing the responses at both stages one and two of the formal complaint procedure after six weeks and 12 weeks, respectively, when the target was 10 working days.
The landlord acknowledged the delay at stage one and apologised but said that was due to the resident not using the tenants’ portal. It apologised again and offered £20 compensation when the resident pointed out that the website said complaints could be made in a variety of ways. The Ombudsman’s Complaint Handling Code says that landlords must make it easy for residents to complain by providing different channels through which residents can make a complaint such as in person, over the telephone, in writing, by email and digitally. While the Ombudsman recognises that it may not be feasible for a landlord to use all of the potential channels, there must be more than one route of access into the complaints system.
At stage two the landlord acknowledged that it did not escalate the complaint because it believed the matter had been resolved when the arrears were paid off by the mortgage lender. It apologised and offered £50 compensation. It was not reasonable for the landlord to take that position; the nature of the complaint meant that the arrears being paid off was unlikely to resolve matters for the resident. Having a second complaint stage allows for a review at a more senior level, bringing a wider perspective and level of expertise to a complaint, and may ensure full consideration of both sides of a complaint. The Code states that a two-stage landlord complaint procedure is the ideal and this ensures that the complaint process is not unduly long.
At stage two the landlord also failed to signpost the resident to the Ombudsman, in line with the Complaints Handling Code which says that in the final complaint response the landlord should details of how to escalate the matter to the Ombudsman if the resident remains dissatisfied.
Orders have been made, below, for the landlord to ensure that its complaint handling staff are aware that complaints can come from other sources other than the portal; ensure that all complaints are progressed to stage two where an escalation request is received; and to ensure that the resident is signposted to the Ombudsman in the final response – in line with its own complaints procedures and the Code.
In relation to the failures identified, the Ombudsman’s role is to consider whether the redress offered by the landlord put things right and resolved the resident’s complaint satisfactorily in the circumstances. In considering this the Ombudsman takes into account whether the landlord’s offer of redress was in line with the Ombudsman’s Dispute Resolution Principles: Be Fair, Put Things Right and Learn from Outcomes as well as our own guidance on remedies.
The landlord offered the resident compensation totalling £70 for its complaint handling failures. Its failings – the lengthy delays in the complaint responses; the failure to explain how to escalate to stage 2; and the failure to signpost the resident to the Ombudsman – mean that the resident experienced inconvenience and frustration. The sum offered of £70 is not proportionate to that impact which meant it took over four months to complete obtain a final complaint response from the landlord. An order has been made below for additional compensation £130 (£200 in total) to more adequately redress the impact on the resident over that period.

Determination (decision)

In accordance with paragraph 52 of the Housing Ombudsman Scheme there was no maladministration by the landlord in respect of its handling of arrears on the rent and service charge accounts.
In accordance with paragraph 52 of the Housing Ombudsman Scheme there was service failure by the landlord in respect of its complaint handling.

Reasons

The landlord’s handling of the arrears was appropriate. It took steps to support the resident when he was furloughed by giving him licence to sublet the property to try to limit the arrears accruing and provide him with an income. Once the resident had that new source of income, it was reasonable for the landlord to take steps to come to a repayment agreement for the arrears that had accrued.
There were various complaint handling failures for which increased compensation is appropriate to reflect the impact on the resident.

Orders

The landlord should take the following action within four weeks of the date of this report and provide evidence of its compliance with these orders:
1. Apologise to the resident in writing for its complaint handling failings.
2. Pay the resident the sum of £200 for the impact of those failings (minus any sums previously paid).
3. Ensure that its complaint handling staff are aware that complaints can come from other sources other than the portal; ensure that all complaints are progressed to stage two where an escalation request is received; and to ensure that the resident is signposted to the Ombudsman in the final response – in line with its own complaints procedures and the Code.