London & Quadrant Housing Trust (202104947)

REPORT

COMPLAINT 202104947

London & Quadrant Housing Trust

3 November 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

The complaint is about how the landlord handled the resident’s request to assign his tenancy.
The Ombudsman has also investigated the landlord’s complaint handling in relation to the above matter.

Background and summary of events

Background

The resident was an assured tenant of the landlord’s property, which he occupied with two other tenants. The property is a three-bedroom flat in a communal building.

Summary of events

On 26 August 2020 the resident wrote to the landlord to advise that he and one other tenant were planning to move out. He explained that the third tenant wished to remain with two new tenants and that they had already found one replacement tenant. The resident requested further information on how to progress the issue.
The landlord replied on 27 August 2020. It stated what documents and information it would require from an incoming tenant. It also explained that the incoming tenant(s) would be subject to a referencing check from an outside agency. It further informed the resident on how his deposit would be handled and how the tenancy agreement would be amended when he moved out.
Two replacement tenants were identified, and between 3 September 2020 and 5 October 2020 the landlord corresponded with all parties to gather the required information to proceed. On 29 September 2020, the landlord informed the parties that the incoming tenant nominated to replace the resident was struggling to obtain a reference from his current landlord, and that they would not be able to proceed with the application without it. The landlord suggested that the resident, the remaining tenant and the other incoming tenant – who had provided all the requested information – sign the amended tenancy agreement.
On 16 October 2020 the parties enquired if the resident and/or the remaining tenant would need to pay the six months’ rent remaining on the tenancy agreement upfront if they signed the amended tenancy agreement. The landlord replied and explained that, as per its tenancy assignment policy, as all the tenants were students the rent would be required to be paid in advance. It confirmed that if the resident signed the amended tenancy agreement that he would then also be liable to pay the rent in advance.
The resident wrote to the landlord on 16 October 2020 and confirmed that he would be paying the remaining rent in advance. The landlord confirmed on 17 October 2020 that the tenancy agreement had been amended to reflect the change in occupants.
On 28 October 2020 the resident informed the landlord that his replacement tenant had pulled out as he was unable to arrange a reference from his current landlord. The resident also gave notice to end his tenancy and explained that the other two tenants would remain and continue to look for a new replacement tenant.
On 16 November 2020 the resident advised that a new replacement tenant had been found, and asked the landlord to confirm what information it would require to transfer the tenancy. The landlord replied on the same day with a list of documents it would require, and with more information about the process for incoming tenants.
The resident contacted the landlord on 18 November. He explained that the incoming tenant had been unable to progress his application, and asked if it could contact him to discuss the matter further. An internal landlord email sent on 23 November 2020 stated that as the incoming tenant was self-employed, it had been informed by the referencing agency that he would need to show that he had been in employment for the previous six months, had incoming salary for the next six to 12 months, or have sufficient savings to cover the rent. The landlord noted that the incoming tenant was unable to meet those requirements and that it had advised the resident to discuss the matter with his flatmates.
The resident wrote to the landlord on 23 November 2020. He informed it that the new replacement tenant had found alternative accommodation as he was unable to provide a 12-month employment contract or show savings equivalent to 30 months’ rent. The resident added that the landlord’s position was unreasonable and in breach of the tenant agreement. He also stated that he should not be liable to pay any more rent for the remainder of the tenancy as he had already moved out.
The landlord replied on 23 November 2020 and explained that it could only accept applicants who passed the application process, and it could only release the resident from the tenancy if an incoming tenant was found who passed the rental criteria.
The resident wrote to the landlord on 25 November 2020. He said he believed that its position regarding the second incoming tenant was unreasonable. The resident also informed the landlord that he would continue to look for a new replacement tenant that met its requirements.
On 21 December 2020 the resident wrote to the landlord and requested to raise a formal complaint. He said:
1. He had been advised by an outside body that the landlord’s requirements for a replacement tenant were unreasonable.
2. The rent was required to be paid in advance, but the references sought by the landlord for the second incoming tenant were for if the rent were to be paid normally. This was not in line with how it had handled the reference for the first replacement tenant.
3. The landlord requested evidence of a 12-month working contract from the second replacement tenant, which would be eight months beyond the end of the tenancy and therefore this would be unreasonable.
4. As the second replacement tenant was unable to provide a work contract, the landlord asked them to prove that they had sufficient savings to cover the rent. The tenant had enough savings to cover their share of the rent up to the end of the tenancy However, the landlord requested them to show savings of £27,000. This amounted to over 30 months’ of rent when the remaining length of the tenancy was four months.
As a resolution to the complaint, the resident requested that the landlord explain how it handled the reference process for the incoming tenants and that it considered compensating him for the period of time he had been liable for rent after he moved out.
The landlord acknowledged the complaint on 23 December 2020 and stated that it aimed to provide a full response by 8 January 2021. The landlord then issued a stage one complaint response to the resident on 7 January 2021. It informed him that:
1. It had sent the resident the list of information it would require from the second incoming tenant on 16 November 2020. This email also included a copy of its mid-tenancy adjustment (MTA) guide.
2. The document explained that an applicant who is self-employed is required to provide it with a SA302 tax calculation document. The incoming tenant was unable to do this.
3. It contacted its referencing agency to enquire if alternative references and/or documents could be used in replacement of the SA302 form. The agency gave it a list which was passed on to the incoming tenant on 18 November 2020. However, the tenant was unable to provide any of the listed documents, and at this point both he and resident were then informed that the application was unlikely to pass to the referencing stage.
4. In reference to the resident’s compensation request, the landlord noted that it was unable to remove the resident from the tenancy until the MTA had been completed. As the tenancy had not been assigned, he remained responsible for the rent.
The resident responded to the landlord’s letter on 7 January 2021. He said that he was dissatisfied that the stage one response had not addressed all the issues he had raised in his letter of complaint. In response, the landlord advised that the resident could request an escalation of the complaint to address his outstanding issues.
The resident subsequently requested escalation of his complaint on 17 January. He said:
1. The stage one response did not address the issues specifically highlighted.
2. The landlord staff member who wrote the stage one response was the same staff member who had declined the incoming tenant’s application.
3. The documents sent by the landlord on 16 November 2020 related to information required for a 12-month tenancy agreement, when only four months were left on the agreement.
4. The documents sent on 16 November 2020 made no reference to self-employed candidates requiring savings equivalent to 30 months’ of rent.
5. The resident had raised the possibility of a MTA when signing the new tenancy agreement on 1 February 2020. The landlord should have provided more information to him at this time relating to what requirements it would need from a prospective replacement tenant.
6. It was unclear if these requirements are mandated by the landlord or by the outside referencing agent.
7. He had never requested to be removed from the tenancy agreement.
The landlord acknowledged the resident’s request on 19 January 2021. The resident wrote again on 6 February 2021 and requested an update on the status of the complaint. The landlord replied on 9 February 2021. It apologised for the delay and confirmed that the complaint had been escalated to the next stage of its process. The landlord further explained that due to a backlog of complaints, there would be a delay in providing a full response.
The stage two complaint response was sent to the resident on 10 March 2021.The landlord said:
1. Clause 5.4.1 of the tenancy agreement states that the resident ‘must not assign this tenancy without prior written consent, which shall not be unreasonably withheld. You and we agree that we will be reasonable in withholding our consent if the property is not suitable for the proposed assignee, or if the assignee does not pass our referencing checks, credit checks and other standard pre tenancy checks’.
2. All applicants are required to be fully referenced and pass the affordability criteria to be added to an existing or new tenancy.
3. All of its tenancy agreements state that the rent is paid monthly, with an exception for students who are required to pay the rent in advance for the term of the tenancy.
4. Self-employed applicants are required to have been self-employed for a six-month period so that earnings and affordability can be checked for referencing. A SA302 form or an accounts reference is also requested.
5. If a self-employed applicant is not able to provide evidence of their earnings, proof of savings will be requested. These savings will need to be sufficient to cover rent and living costs.
6. The criteria is set by the landlord with its referencing agents to ensure that applicants have the correct affordability to sustain the tenancy.
7. It was therefore satisfied that it had not unreasonably withheld consent for the tenancy to be assigned and would not consider awarding compensation to cover the resident’s rent payments.
On 30 May 2021, the resident wrote to this Service and expressed his belief that the reasons given by the landlord to decline the two prospective replacement tenants were unreasonable. He added that to put things right, he wished to be refunded the rent from 23 November 2020 to 24 March 2021, a total of £3,400; and to be compensated for the time and inconvenience that this matter had caused.

The tenancy agreement

Clause 5.4.1 of the tenancy agreement states: “you must not assign this tenancy without our prior written consent, which shall not be unreasonably withheld. You and we agree that we will be reasonable in withholding our consent if the property is not suitable for the proposed assignee, or if the assignee does not pass our referencing checks, credit checks and other standard pre-tenancy checks”.

The MTA Guide

The landlord’s MTA guide (the guide) describes the six stages in the MTA process, how they will be undertaken and what information the landlord requires from an applicant to approve their application. In summary:
1. Stage one of the process is a request for information of the incoming and outgoing tenants (name, address, contact details, income and employment details).
2. Stage two lists the type of documents the landlord requires from incoming tenants. For self-employed applicants, the landlord requests their most recent SA302 form and the latest six months of bank statements. The guidance explains that this is required to show that the applicant is currently self-employed and has a gross turnover of at least three times their share of the rent.
3. Once the above two stages have been met, the landlord will pass on the details it had collected to its referencing agents. They will then contact the incoming tenant and ask them to fill out a referencing form. At this stage, references will be requested from the referees (employer, accountant and landlord – whichever is applicable).
4. Stage four of the process is for a new tenancy agreement to be sent out and signed by all remaining and incoming tenants.
5. Stage five requires an email to be sent from the outgoing tenant to confirm they no longer have a right to any refund of the deposit. How the deposit is repaid at the end of the tenancy would be a matter for the tenants to arrange between themselves. The final stage of the process is for the signed copy of the tenancy agreement and an updated deposit certificate to be sent out to the parties.
The guide also states that the outgoing tenant remains liable for the rent until stage five has been completed.

Complaints policy

The landlord’s complaint policy states that a stage one response will be issued 10 working days after a complaint is received. If it cannot respond within 10 days, it will explain why and write again within a further 10 working days.
If a resident is dissatisfied with the stage one complaint response, they may ask for their complaint to be escalated to stage two. On receiving the stage two request, the policy states that it will make contact with the resident within two working days to give them the opportunity to explain “their side of things”. It will then write to the resident with the outcome of the complaint within 20 working days. If the landlord is unable to respond within 20 working days, the policy says that it will explain why and write again within a further 10 working days.

Assessment and findings

The first replacement tenant’s application was declined as they were unable to provide a reference and could not progress past stage three of the MTA process. While the resident’s dissatisfaction with this is noted, the MTA guide clearly explains that the referencing agent will request references as part of the process. As the first replacement tenant was unable to provide a reference, it was not unreasonable to decline to progress the application further.
After the resident found the second replacement tenant, discussion took place around what documents would need to be provided to progress the application. The landlord confirmed that it had emailed him with the list of documents. When the landlord responded to the resident’s complaint, it said that the second incoming tenant was unable to provide the SA302 tax form, and had only been carrying out freelance work for “a couple of months”. As such, the required documents listed at stage two of the MTA guide could not be provided. The landlord therefore used its discretion to ask the referencing company what other information could be used to support the application. It said that it subsequently emailed the replacement tenant with a list of the alternative documents/information he could submit.
Internal correspondence shows that the member of staff who had been liaising with the resident asked the referencing company what the criteria for self-employed applicants would be on 18 November. The member of staff said that in response, she was informed that the applicant would need to show:
1. That they had been self-employed for at least six months.
2. An accountant reference in the last 30 days.
3. Confirmed projects in the next six to 12 months as proof of income while renting with the landlord.
It was added that if the above could not be met, the applicant would have to demonstrate that they had sufficient savings. The member of staff said that the referencing agency calculated this as at least £27,562.80 – as it would be expected to cover rent as well as living costs. The landlord concluded that the second incoming tenant was also unable to demonstrate the above, and therefore advised him – and the resident – not to proceed with the application.
There was no obligation on the landlord to see what other information or documents could be submitted in lieu of the SA302 tax form and six months of bank statements demonstrating self-employed earnings. Its decision to exercise its discretion and seek guidance from the referencing company was therefore reasonable in the circumstances. When it responded to the complaint, the landlord advised that it set the referencing criteria, together with the referencing agents, to ensure that applicants have “the correct affordability to sustain the tenancy”. The landlord also explained that self-employed applicants must be employed for a six–month period so that earnings can be evidenced – this is irrespective of the time left on the existing tenancy.
The resident’s comments and concerns regarding the criteria are noted. However, as detailed above, the second incoming tenant was unable to provide the documents or evidence as set out in the MTA guide. The landlord could have informed the resident and the second replacement tenant not to proceed with the application at that point in time. However, it sought to establish what other evidence the referencing agent could use to determine the second incoming tenant’s eligibility – and this was reasonable action in the circumstances.
While the resident has raised concerns that the guide appears to be “generic text for a 12-month tenancy”, this is the landlord’s formal guide for considering applicants’ eligibility in the event of a MTA. It should also be emphasised that eligibility is not determined based on the applicant’s ability to meet the rent obligations for the remainder of a tenancy. Rather, all self-employed applicants will be required to show their income as a self-employed induvial for the six months leading up to the application; and that they have a gross turnover of at least three times the share of rent – via the SA302.
It is acknowledged that the MTA guide is silent in relation to savings; however, as detailed above the application would not have progressed to stage three of the process as the required documents listed at stage two of the process could not be provided. Nevertheless, upon questioning by the landlord, the referencing agent had advised that savings could be used to determine eligibility if the applicant was unable to provide evidence in relation to the self-employed income requirements. The sum of approximately £27,000 was not stated as the amount that would be required for the second incoming tenant to sustain the existing tenancy; rather, this was the figure that the referencing agent said would be required to show that a self-employed applicant would be able to meet the rent payments, over the entire course of the tenancy, and other day-to-day expenses – in lieu of demonstrating historic income over a period of six months, and future earnings.
As the tenancy could not be assigned, it was not inappropriate for the landlord to decline to reimburse the resident as per his request. Although the resident’s concerns and the implications of the tenancy failing to be assigned are noted, the Ombudsman has not seen any evidence which shows that the landlord had failed to act in line with the MTA guide. Furthermore, the Ombudsman has not seen anything to suggest that the landlord exercised its discretion unfairly when seeking to establish what other evidence could be used by the second replacement tenant as part of his application.

Complaint handling

The resident raised concerns about the landlord’s handling of his complaint. Namely that the member of staff who issued the stage one complaint letter was the person who advised him not to proceed with the MTA application. The resident says that he does not consider that she would have been able to objectively assess the dispute given her prior involvement.
The landlord’s Complaints policy states that it aims to resolve complaints “there and then”. If it is unable to do so, then it will refer the complaint to the “person or department best placed to help”. The resident’s concerns about the same member of staff dealing with his complaint are acknowledged. However, it was not inappropriate for the landlord to try to resolve the complaint locally given the wording within the Complaints policy. The member of staff was familiar with the facts leading up to the complaint, and was able to refer the resident to the relevant guide when informing him of the outcome of her consideration.
As the resident was unhappy with the response, the complaint was escalated and investigated by another member of staff. This was appropriate and in line with the landlord’s Complaints policy. This also ensured that the complaint was considered fairly and that the resident had the opportunity to challenge the decision.
While there was no failing in terms of who responded to the resident’s complaint at stage one of the process, the stage two response was sent outside of the landlord’s service standards as detailed above. The resident requested escalation of his complaint on 17 January 2021, and chased the matter on 6 February as he had not received a reply. The stage two was subsequently issued on 10 March – 35 working days after the escalation request, and 15 working days outside of the landlord’s service standards.
When responding to the complaint, it would have been appropriate for the landlord to acknowledge that it had failed to update the resident, and that it had responded outside of its timescales. In the circumstances, it would have also been reasonable for the landlord to consider offering some compensation for the inconvenience caused by the delay, and for the failure to keep the resident updated.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was:
1. no maladministration in the landlord’s handling of the tenancy assignment request.
2. service failure in the landlord’s handling of the resident’s formal complaint.

Reasons

While the resident’s concerns about the landlord’s handling of the MTA request are acknowledged, the evidence shows that the landlord followed the process as detailed in the MTA guide. In addition, the landlord exercised its discretion to ascertain what other evidence could be submitted by the second replacement tenant, and there was no obligation on it to take such action.
The resident raised concerns that the member of staff who had been dealing with the MTA responded to his complaint at stage one of the complaints process. Although the resident’s reasons for concern are understood, the landlord’s Complaints policy encourages the resolution of complaints at a local level. In addition, once the resident expressed dissatisfaction with the response, the complaint was escalated to a member of staff who was not previously involved.
The landlord failed to meet its service standards with regards to the timeliness of its stage two complaint response, and keeping the resident updated. The landlord failed to acknowledge this when it responded to the complaint, and it should do so now.

Orders

Within four weeks of the date of this determination, the landlord should:
1. Write to the resident to apologise for the complaint handling failure identified by this investigation.
2. Pay the resident £50 for the inconvenience caused by the delay in issuing the stage two response.
3. Confirm to the Ombudsman that the above orders have been complied with.