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London & Quadrant Housing Trust (202000112)

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REPORT

COMPLAINT 202000112

London & Quadrant H T

14 December 2020


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. This complaint is about the landlord’s response to the resident’s concerns about the Energy Supply Agreement it sent to their solicitor during the purchase of their property.

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. Paragraph 39(m) of the Scheme states that the Ombudsman will not investigate complaints which, in the Ombudsman’s opinion concern matters which fall properly within the jurisdiction of another Ombudsman, regulator or complaint-handling body;
  3. Part of this complaint relates to the level of ongoing utility costs. If the resident is unhappy with the level of the charge from the utility supplier, they should initially log a complaint with the supplier. Advice about how to do so, and what further action the resident can take were they to be dissatisfied with the response from the supplier can be found at https://www.ofgem.gov.uk/consumers/household-gas-and-electricity-guide/complain-about-your-gas-or-electricity-bill-or-supplier

Background and summary of events

Background

  1. The resident has a shared ownership lease with the landlord. The property (defined in the lease as the Property) is a four-bedroom house. The resident purchased and moved into the property in November 2019.
  2. Clause 3.31.1 of the lease obliges the leaseholder to ‘enter into a supply agreement with the Utility Services Provider in respect of supply of, the metered usage of, and the payment for heating supplied to the Premises via the Customer Interface Unit and for the maintenance of the relevant infrastructure’.
  3. Schedule 6 of the lease defines:
    1. The ‘Consumer Interface Unit’ as ‘the heat exchanger interface point within the Premises between the community heating network and the Estate and the internal heating/domestic hot water systems in the Premises’.
    2. The ‘Utility services provider’ as ‘such provider as shall be nominated by the Landlord from time to time to provide heating to the Estate and the dwellings within the same’.
  4. The Energy Supply Agreement obliges the Utility services provider to supply heat (‘hot water produced by (its) energy centre and supplied to (the resident) to provide space heating and domestic hot water’) to the resident’s property from the Supply Start Date until termination provided that the resident’s home is connected to its Heat Network and that all Charges set out in the Agreement are paid by the resident. The agreement defines the Heat Network as ‘the plant and Equipment used to generate Heat and the network of pipes, meters and ancillary equipment that transfers Heat to (the resident’s) Home, including the heat interface unit’.

Summary of Events

  1. On 17 February 2020, the resident logged a formal complaint with the landlord. The resident said that this was a further formal complaint following their previous complaint of 27 January 2020, which they said the landlord had acknowledged but provided no further response to. The resident explained that when they moved into the property in November 2019, they had signed the landlord’s Energy Supply Agreement, through their solicitor.
  2. The resident went on to explain that in the document they signed, the standing order charge was £0.457 /day (plus VAT). However, when they received the welcome pack from the company responsible for the communal heating supply, the usage charge was given as £1.07 (plus a £0.30 capital replacement fund charge) making it £1.37 p/day. The resident said that the Capital Fund replacement charge of 0.30p per day was also not mentioned to them as a potential daily cost on the Energy Supply Agreement provided by the landlord at the time of purchase. The resident said that ‘‘given that we costed for the original charges when purchasing the property...it is shocking to receive a document from (the utility supplier) stating that we should pay nearly three times the daily rate we agreed to and signed up for in November’’. The resident said that they failed to see how the landlord ‘‘can suddenly raise the agreed prices to this extent, especially since the heat supply agreement is a legally binding document, signed by both parties’’. The resident said that the outcome they were seeking from their complaint was to pay the sum they initially agreed.
  3. On 6 April 2020, the resident submitted a Web complaint to the Ombudsman. The resident explained that they signed a ‘‘legally binding’’ heat supply agreement with the landlord, through their solicitors, prior to moving into the property. The resident said that it was only after they moved in that they were advised that the agreement included a ‘‘much higher standing charge, with an additional capital replacement fund charge’’. The resident said that there was a ‘‘considerable’’ difference and that they felt strongly that they were mis–sold the charges they were expected to pay. The resident explained that they had contacted the landlord on ‘‘several occasions over the last three months via phone and email’’ and that ‘‘whilst our complaint has been registered, no-one has come up with a satisfactory explanation for this or offered anything in the way of compensation… All we’ve received is a verbal apology.’’ The resident said that they ‘‘feel strongly that (the landlord) should honour their own legally binding document and that we should pay the standing charge for heating and hot water as laid out clearly in their own heat supply agreement, which we signed via our solicitor.’’
  4. On 21 April 2020, the landlord wrote to the resident, following contact from this service. The landlord said it was sorry that the resident had had to contact the Ombudsman, said it would escalate their complaint, carry out a full review and provide them with a response within 10 working days.
  5. The landlord issued its response on 28 April 2020. The landlord said that it’s Energy Team had spoken to the resident on 27 March 2020 and advised them that the utility supplier was responsible for the billing at their address and ‘‘therefore are able to set their own tariffs’’. The landlord also said that during that conversation the resident had said that ‘‘they had received an incorrect supply agreement from Landlord Enquiries via their solicitor and they were going to seek legal advice as they believed that they had been miss-sold the property on that basis’’.
  6. On 20 May 2020, the landlord’s In-house Legal Department wrote to the resident. The legal department acknowledged that the landlord had sent a copy of its own Energy Supply Agreement ‘‘by way of an administrative error’’ for which the resident had received a verbal apology but denied that it had made ‘‘any misrepresentation upon which the resident had relied. The legal team went on to say that ‘‘Given the administrative error, purely as a goodwill gesture and without any admission of liability, (the landlord was) willing to make a payment to (the resident of £157.00 in full and final settlement of all claims (they) may have against (the landlord)’’. The legal team said that this was calculated as the standing charge excess of £0.85 per day as from the day that the resident completed their purchase to the date of this letter. The legal team also went on to say that:
    1. It did not accept that had the resident ‘‘known that the supply was provided by (a utility supplier) rather than (the landlord), the two having different charging schemes, (the resident) would not have continued with the purchase of the property’’.
    2. The resident’s solicitor should have noticed the error when they undertook their Utility Searches.
    3. ‘‘Even if (the landlord) were the supplier, it could assign/subcontract its obligations to SSE at any time’’, under paragraph 14.1 of the Supply Agreement. The legal team went on to put the resident ‘‘on notice that (the landlord) assigns/subcontracts its obligations to (the utility supplier) as from the date of this letter’’.
    4. Whilst the standing charge to the utility supplier is higher, it includes capital maintenance costs which would otherwise be recovered from the landlord via a variable service charge and so ‘‘the costs would be similar but recovered in different ways.’’
  7. On 25 June 2020, the resident emailed the landlord to express their dissatisfaction with the landlord’s response and to decline the landlord’s offer of £157 compensation ‘‘given the huge disparity in costs’’. The resident said that they dismissed the landlord’s denial that it made any misrepresentation and its ‘‘conjecture’’ that the higher charges would not have influenced their decision to purchase the property. The resident went on to say that the landlord’s  ‘‘verbal apology does not mitigate the fact that we will be paying roughly £313.90 more per year for the next 19 years that we are locked into this heat supply contract (if that’s what’s left on the contract, (the utility supplier) have so far failed to tell us). That equates to approx. £5,964.10x more than what we agreed to.’’ The resident also said that the landlord was ‘‘trying to shift the blame onto their solicitor’’ and that they were ‘‘deceived into thinking we were paying the agreed set of charges and were only informed otherwise once we’d moved in.’’. The resident explained that the resolution they were seeking was for the landlord to ‘‘honour their own legally binding documentation and allow us to pay the heat supply at the rate we initially agreed to, for the duration of our locked in agreement with (the utility supplier).’’
  8. On 30 June 2020, the landlord issued its final response to the resident’s complaint. The landlord declined to escalate the complaint, which it said would ‘‘have no influence on the outcome’’. The landlord said that it had answered all the concerns that resident had raised, it was ‘‘not prepared to increase the sum offered’’, that their complaint had now completed its complaints process and that if they wished they could not refer their complaint to the Ombudsman.
  9. The resident emailed the landlord’s final response to the Ombudsman on 1 July 2020. The resident told the Ombudsman that the landlord was ‘‘not prepared to admit any wrongdoing and believe that the sum of £157.00 is a sufficient ‘goodwill gesture’ for mis selling our heat supply’’. The resident also said that both the landlord and the utility supplier had ‘‘repeatedly tried to direct us to the other party, with neither admitting any liability for this serious error and breach of contract’’ and that the landlord had suggested the error should have been spotted by their solicitor.

Assessment and findings

  1. The lease obliges the resident to ‘enter into a supply agreement with the Utility Services Provider in respect of supply of, the metered usage of, and the payment for heating supplied..’
  2. It is not disputed that, at the time of purchase, the landlord incorrectly provided the resident’s solicitor with its own Energy Supply Agreement, rather than that of the actual Utility services provider for his property. It was therefore appropriate for the landlord to apologise to the resident for its error.
  3. The landlord sought to resolve the discrepancy by assigning the contract to the Utility services provider who had been supplying the energy from the time of purchase and giving notice to the resident that it had done so. This was in accordance with Section 14.1 of the Supply Agreement the resident signed, which states that the landlord is entitled to ‘‘assign our rights and obligations under this Agreement at any time on written notice to you to a third party.’
  4. It is also not disputed that the Utility services providers’ standing charge was higher than that in the Energy Supply Agreement initially supplied by the landlord. In recognition of the higher costs the resident incurred between when they signed the incorrect agreement and the date of the above notice of assignment, the landlord offered the resident a goodwill payment of £157.00, which it said covered the difference between what the resident expected to pay and what the actual standing charge was (which was higher). The landlord also explained that whilst the Utility services providers’ standing charge was higher, it included capital maintenance costs which would otherwise be recovered from the landlord via a variable service charge and so ‘‘the costs would be similar but recovered in different ways.’’
  5. I appreciate that the resident has indicated that if they had been correctly informed about the costs of the heating at their property, they may not have proceeded with the purchase. However, during the purchase of the property it was for the purchasers solicitors to make all the relevant checks and for the purchaser to decide whether to purchase the property based on the advice provided by their solicitor. It is not within the Ombudsman’s remit to make a determination as to what the resident may or may not have done had the correct Energy Supply Agreement been provided at the time of purchase.
  6. As I have also explained earlier in this report, this service can also not consider the ongoing liability to the resident with regards to payment of utility costs or the level of charges levied by the utility supplier.
  7. Having considered all the evidence, and for the reasons explained above, I am satisfied that the £157.00 goodwill payment offered by the landlord provided reasonable redress to the resident’s for its acknowledged error.

Determination (decision)

  1. In accordance with paragraph 55(b) of the Housing Ombudsman Scheme there was reasonable redress by the landlord in respect of its response to the resident’s concerns about the Energy Supply Agreement it sent to their solicitor during the purchase of their property.

Reasons

  1. The landlord acknowledged its error and offered the resident £157.00 as a goodwill payment, that covered the difference between what the resident expected to pay and what the actual charge was (which was higher).
  2. In accordance with the terms of the Energy Supply Agreement the resident signed, the landlord also sought to resolve the discrepancy by assigning the contract to the correct Utility services providers.

Recommendations

  1. That within 6 weeks of this determination, if it has not done so already, the landlord is to pay the resident the £157.00 ‘goodwill gesture’ it offered in response to the resident’s complaint.