London & Quadrant Housing Trust (202114456)

REPORT

COMPLAINT 202114456

London & Quadrant Housing Trust

24 April 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

This complaint is about the landlord’s:
1. Response to the resident’s service charge concerns;
2. Complaint handling.

Background and summary of events

Background

The resident is an assured tenant. The information seen indicates his tenancy began in 1999. No information was seen to show there were any subsequent variations to the original tenancy agreement. The property is a one-bedroom flat on the ground floor of a converted building. The information seen suggests the resident has been paying service charges since around 2009.
The resident has provided several pages of his tenancy agreement. Section three of the general terms page shows the landlord is obliged to provide the services listed in appendix A. Further, the resident is obliged to pay charges for the services listed. The corresponding entry in appendix A, under the heading “schedule of services”, reads “none”.
Sections four and five show the landlord is obliged to keep the building’s installations in good repair and working order, in addition to keeping its common parts in reasonable repair and fit for use. The landlord provided a sample tenancy agreement but the resident’s documents were more relevant.
The landlord operates a two-stage complaints procedure. Its complaints policy shows it aims to respond to complaints within ten working days at stage one. At stage two, it aims to respond within 20 working days. A further ten working days is available at each stage providing the resident is kept informed.

Summary of events

The information seen indicates the resident disputed his liability for service charges around March 2021. Correspondence between the parties suggests he initially sought clarification in relation to the landlord’s February 2021 service charge documentation. However, his concerns developed after he made a number of additional enquiries.
The Ombudsman has seen undated correspondence from the landlord’s local manager. It was apparently issued around April 2021. It referred to the resident’s concerns as a complaint and said he could discuss matters with the Ombudsman. The correspondence was not a formal complaint response. The evidence suggests it prompted the resident to contact this Service. Further, we advised he needed to obtain a formal response.
On 3 October 2021 the resident raised an online complaint. He said the landlord failed to respond to his previous complaint and the Ombudsman was now involved. With reference to sections three, four and five of his tenancy agreement, he said he was not obliged to pay service charges. Since they were the landlord’s responsibility, he said they should be removed from his rent charge.
The landlord’s complaint records show it issued a stage one response on 6 October 2021. It recommended the resident read its February 2021 documentation again. This was because it included information around rent increases. This suggests the landlord misinterpreted his concerns. However, the landlord also said it would forward the complaint to its service charge team. This was on the basis the team was better placed to respond.
In an email to the Ombudsman on 24 October 2021, the resident said his complaint was acknowledged on 7 October 2021. However, to date, the landlord had not responded. We subsequently asked the landlord to contact the resident within 15 working days. No information was seen to show the landlord complied with this timescale.
During an informal email on 6 January 2022, the landlord’s service charge representative responded to the resident’s concerns. They disputed his interpretation of the agreement based on other wording contained in his tenancy documents. In summary, they said the resident had agreed the charges. As a result, they would not be removed and he was obliged to pay them. The resident disagreed the same day. He asked the landlord to escalate his complaint.
On 15 February 2022 the landlord’s service charge team issued another stage one response. This was around 19 weeks after the resident’s online complaint. The response was issued by another of the landlord’s service charge representatives. They apologised for the delay, which was attributed to a backlog of enquiries. The resident’s complaint was not upheld. The main points were:
1. In 2011 the landlord sent the resident a letter which explained he was required to pay service charges. It had reviewed the amount annually to ensure the charges were correct.
2. There was nothing on the landlord’s file to indicate the resident was not liable. The landlord was happy to review his tenancy agreement and make any changes deemed necessary.
On 1 March 2022 the landlord’s initial service charge representative issued another informal response. They reiterated their previous findings and advised there was nothing further to add. This response prompted the resident to approach the Ombudsman again in April 2022. From the information seen, it is unclear whether he ever received the service charge team’s official stage one response.
On 11 April 2022 we asked the landlord to contact the resident by 27 April 2022. The landlord issued the resident a stage two acknowledgement the following day. It agreed to respond in line with the Ombudsman’s deadline. Two days later, it told the resident it had sought legal advice in relation to the disputed service charges.
On 26 April 2022 the landlord issued a stage two response. It said it was unable to find the resident’s original tenancy agreement in its archives. It thanked him for providing key pages from the document. The landlord also said there was cause for further investigation based on their contents. It had therefore asked its legal department to consider whether the resident was liable for the charges. However, it needed additional time to issue a full response. The main points were:
1. The landlord found a relevant letter from 2008. It said the resident did not have to pay a management fee service charge. The information indicated the resident had incorrectly paid this charge from 2009 to date. The landlord’s legal team would consider whether any refunds were warranted.
2. The landlord’s complaint handling fell below required standards. It was noted the resident chased a response on a number of occasions in October and November 2021. There were also delays at both stages and the Ombudsman’s intervention was needed to progress the complaint.
3. The resident was awarded £220 in compensation comprising £160 for any distress and inconvenience caused, and £60 for the delays at both stages. The landlord’s customer service and service charge teams had been asked to provide additional training to improve the landlord’s performance.
The landlord updated the resident by email on 4 May 2022. The update indicated it was in the process of calculating a service charge refund.
The landlord’s complaint records show the below events occurred on 5 May 2022:
1. The landlord’s service charge leader said the complaint had implications for other residents. This was on the basis they felt service charges were likely introduced to other tenancies under similar circumstances.
2. The landlord’s legal leader said the landlord’s legal advice was privileged information. As a result, it should not be shared with third parties including the Ombudsman.
3. In a separate email, the legal leader said the resident’s partial tenancy documents showed he was not required to pay any service charges. Further, though service charges were later introduced, it was not typically possible to change a tenancy’s terms unilaterally.
Subsequent records confirm the landlord ultimately obtained further legal advice from a property barrister. The Ombudsman has not seen any of the landlord’s legal advice first-hand.
During internal correspondence on 16 May 2022, the landlord’s legal leader said the barrister’s opinion had confirmed their initial advice. As a result, an acceptable solution should be negotiated with the resident. The landlord’s offer would be based on a refund of charges paid over the previous six years. The legal leader said they would draft a variation to the tenancy agreement in due course.
On 1 June 2022 the landlord issued a revised stage two response. It accepted the tenancy agreement “(did) not currently allow” the landlord to charge for the services provided. It said, to resolve the complaint, a refund was due and the tenancy agreement should be varied to include chargeable services going forwards. Further, it was important the landlord could recover its costs, including those associated with maintenance and fire protection equipment. The key points were:
1. “It was clear” the resident’s tenancy agreement should have expressly detailed the property’s chargeable services. Further, this information was omitted in error when the agreement was created. The agreement should therefore be varied to “regularise the position”.
2. The landlord’s calculations showed the resident had paid £2,269.35 in service charges since 2016. This calculation reflected the six-year limitation period in the Limitation Act (1980). The landlord intended to rely on this legislation to cap the extent of the refund.
3. The landlord increased it previous complaint handling award by £20. This brought its total compensation award to £2,509.35. In return for the compensation, the landlord wanted the resident to agree to vary the tenancy agreement. A draft deed of variation was enclosed which included the proposed terms.
4. The landlord would arrange a cheque payment on receipt of the resident’s agreement to the proposed terms. The service charge refund “(would) need to be credited to (the resident’s) rent account in the first instance and before a refund (was) sent by cheque.”
5. The terms of the landlord’s proposal and any admissions of liability were confidential. The resident should not disclose them to any third-party except his professional advisors. The resident should seek legal advice if he was uncertain as to his rights.
6. The landlord hoped its proposal was acceptable. Its service charge lead would amend the resident’s account and issue a new service charge letter for 2022/23. This may take several weeks but the landlord would advise the resident if any further refund was due. The resident should not worry if he received automated arrears alerts. The landlord was aware of the situation but it could not prevent them from being issued.
The resident wrote to the landlord on 12 June 2022. He declined to accept the proposed variation agreement or the landlord’s compensation offer. This was on the basis “changing the tenancy agreement to perpetuate the error (was) unacceptable”. He implied the landlord should stick to the terms of the existing agreement. He said its explanation, around an error of omission, was “not credible” given around 11 years passed before the landlord began charging for services. He said he would obtain legal advice and pursue his concerns through the Ombudsman.
During an email to the Ombudsman in April 2023, the resident confirmed there had been no further developments and the landlord’s position remained the same.

Assessment and findings

The landlord’s response to the resident’s service charge concerns

The Ombudsman cannot determine whether service charges are reasonable or payable. However, in this case the landlord ultimately accepted its service charges were contrary to the resident’s existing tenancy agreement. This acceptance was based on legal advice from a specialist property barrister. The landlord offered the resident a total of £2,269.35 in related compensation. Its offer was contingent on the resident’s acceptance of a both a variation agreement and the landlord’s confidentiality requirements.
It is recognised the dispute has significant implications for both parties. For example, accepting the variation agreement will oblige the resident to pay service charges going forwards. In contrast, the landlord could be prompted to confront similar issues with other tenancy agreements. This assessment will consider the landlord’s response in conjunction with both the Ombudsman’s Dispute Resolution Principles, Be Fair, Put Things Right and Learn from Outcomes, and the applicable Housing Ombudsman Scheme (the Scheme).
Given the resident’s concerns, it was fair for the landlord to obtain specialist legal advice. The information seen indicates the advice recommended the landlord to rely on the Limitation Act (1980) in respect of its compensation calculation. The landlord was entitled to rely on the opinion of a relevant qualified expert. The Ombudsman is unable to establish whether the above provisions have been correctly applied. In contrast, it was unclear whether the landlord’s confidentiality requirements also arose from the barrister’s advice.
Having identified an error, the onus was on the landlord to put things right with due regard for fairness. However, the conditionality attached to its compensation offer is contrary to the principles Be Fair and Put Things Right. For example, the landlord has not disputed that its charges breached the tenancy agreement or that compensation is necessary. Nevertheless, it appears to be withholding the resident’s incorrectly charged funds. The landlord cannot compel the resident to accept its proposed variation.
The landlord’s approach also appears contrary to the principle of Learning From Outcomes. For example, in May 2022 its service charge leader accepted the resident’s concerns likely had significant implications for tenants with similarly worded agreements. However, no information was seen to show the landlord conducted any further investigation with a view to putting things right. Its confidentiality condition was noted. Overall, the above shows its response to the resident’s concerns was inappropriate. This amounts to maladministration.
In addition, the landlord is a member of the Scheme and has agreed to be bound by its terms. Paragraph 54(f) of the applicable Scheme, effective 1 September 2020, confirms treating “the complainant personally in a heavy-handed, unsympathetic or inappropriate manner” is sufficient to warrant a finding of maladministration. As a means to resolve an identified error, it is reasonable to conclude a conditional compensation offer coupled with a confidentiality condition can be fairly characterised as both heavy-handed and unsympathetic.
In summary, the landlord’s response to the resident’s service charge concerns was contrary to the both the Ombudsman’s Dispute Resolution Principles and the applicable Scheme. The landlord cannot compel the resident to accept its proposed offer or withhold due compensation. Its conditional offer and confidentiality condition were heavy handed and unsympathetic. These were significant failings that compromised the resident’s rights. As a result, the landlord’s response amounted to severe maladministration overall.

Complaint handling

The landlord recognised it was responsible for a number of complaint handling failures. It awarded the resident £220 in related compensation to put things right. It also requested additional staff training based on his experience. Whilst this was appropriate action given the circumstances, the timeline suggests the landlord failed to recognise, and therefore redress, the full extent of its failures. Further, these additional complaint handling issues should have been reasonably apparent to the landlord during its complaint investigation.
For example, the resident’s October 2021 complaint said the landlord previously failed to respond to a related complaint. The timeline shows he was referring to events around March 2021. The complaint also said the Ombudsman was now involved. His comments clearly referenced a previous failure by the landlord. It is reasonable to conclude they were intended to ensure the complaint was progressed accordingly on this occasion. Nevertheless, no information was seen to show the landlord investigated this aspect of his complaint.
Instead, its responses between October 2021 and March 2022 focussed solely on his service charge concerns. Though the landlord considered its complaint handling at stage two, its 26 April 2022 response focussed on events after October 2021. Given the above, the evidence points to an unreasonable delay of around six months which the landlord failed to address. This was based on the period between 1 April and 3 October 2021. Given the delay period, compensation would have been appropriate to redress any associated distress and inconvenience.
The landlord’s failure to consider the resident’s above comments was contrary to the Housing Ombudsman’s Complaint Handling Code (the Code), as published in July 2020, which said “Landlord’s shall address all points raised in the complaint…”. It also represents a missed opportunity to put things right and learn from outcomes. This was inappropriate complaint handling. Since the evidence suggests the landlord’s previous award was disproportionate, the Ombudsman will order increased compensation to put things right for the resident based on the information seen.
It was noted the timeline suggests a degree of confusion at stage one of the landlord’s complaints process. For example, its response on 6 October 2021 indicates the landlord initially misinterpreted the resident’s complaint. Referring him to previous documentation may have been frustrating in these circumstances. In retrospect, given the complaint’s content, it may have been better to issue an acknowledgement at this stage. The landlord could have then allowed its service charge team to issue the response.
The timeline shows that, between October 2021 and March 2022, two formal stage one responses were issued in addition to the landlord’s informal correspondence. It suggests the resident was corresponding with two service charge representatives simultaneously. Further, one of them tended towards informal complaint handling and failed to act on a February 2022 escalation request. It also suggests the resident was acting on the informal correspondence. No information was seen to suggest he received the service charge team’s official response.
The above also represents inappropriate complaint handling, which appears to stem from the landlord’s allocation/stage one processes. Whilst its efforts to learn and improve were welcome, it was unclear whether the landlord recognised the extent of these problems. As a result, we will order the landlord to review its stage one processes with a view to avoiding similar confusion for other residents. The landlord is free to incorporate its previous learnings into this review. However, it should ensure that steps are taken to address the identified issues in full.
Overall, there was maladministration in respect of the landlord’s complaint handling. Contrary to the Code, it failed to investigate the resident’s October 2021 concerns in full. The evidence suggests it therefore failed to redress the resident for an inappropriate delay of around six months. Its stage one complaint handling included informal correspondence and was confusing overall. An escalation request appears to have been unfairly overlooked.

Determination (decision)

In accordance with paragraph 52 of the Housing Ombudsman Scheme there was:
1. Severe maladministration in respect of the landlord’s response to the resident’s service charge concerns.
2. Maladministration in respect of the landlord’s complaint handling.

Reasons

The landlord’s response to the resident’s service charge concerns was contrary to the both the Ombudsman’s Dispute Resolution Principles and the applicable Scheme. The landlord cannot compel the resident to accept its proposed variation agreement or withhold due compensation. Its conditional offer and confidentiality condition were heavy handed and unsympathetic. The landlord’s significant failings compromised the resident’s rights.
Contrary to the Code, the landlord failed to investigate the resident’s October 2021 concerns in full. The evidence suggests it therefore failed to redress him for an inappropriate delay of around six months. Its stage one complaint handling included informal correspondence and was confusing overall. An escalation request appears to have been unfairly overlooked.

Orders and recommendations

Orders

The Ombudsman orders the landlord’s senior leadership to issue the resident a written apology for the inappropriate conditions it attached to its compensation offer. The apology should recognise the landlord attempted to pressure the resident into varying his tenancy agreement and accepting its confidentiality requirements. The apology should be issued within four weeks and this Service should be given a copy.
The landlord to remove its service charges from the resident’s tenancy records to ensure they cannot be incorrectly charged going forwards. The landlord should evidence its actions to the Ombudsman within four weeks. Screen shots of its amendments will be acceptable.
The landlord to pay the resident a total of £3,139.35 in compensation within four weeks. This figure assumes no additional service charges were applied since the landlord issued its compensation offer in June 2022. If the resident has since paid more charges, the landlord will need to provide us the correct calculations to date. Compensation should be paid directly to the resident and not offset against any arrears. The compensation comprises:
1. £500 to address any distress and inconvenience the resident was caused by the landlord’s inappropriate response to his service charge concerns.
2. £130 to address any distress and inconvenience the resident was caused by the above identified complaint handling failures.
3. £2,509.35 which the landlord awarded in its stage two responses. Any amount the landlord has already paid should be deducted from the above total.
The landlord’s leadership to review the issues highlighted during this report. Within four weeks, the landlord should provide the Ombudsman a report summarising its response and any identified improvements. The landlord should cascade its improvements to relevant staff for learning and improvement purposes. Topics for inclusion include: the decision-making that led to the landlord’s heavy-handed approach, the estimated number of residents similarly affected by incorrectly applied service charges; the landlord’s proposal for redressing any impacted residents; the landlord’s stage one processes, including allocation and responses from specialist teams and handling formal complaints accordingly.

Recommendations

The landlord to proactively consider its own complaint handling during every complaint investigation. This is view a view to ensuring any complaint handling failures are identified and addressed accordingly.
The landlord to ensure it promptly acts on any escalation requests to avoid them being unfairly overlooked.
The landlord should provide evidence of compliance with the above orders and confirm its intentions with regards to the recommendations within four weeks.