MHS Homes Ltd (202001013)

REPORT

COMPLAINT 202001013

MHS Homes Ltd

5 July 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

1. The resident complains about the landlord’s handling of her concerns about service charge and lift maintenance costs.

Background

2. The resident’s property was built in 2016, and the terms of the tenancy agreement set the weekly service charge at £20.79, stating ‘The service charge shall be increased at the same time as the Rent and using the same procedure’. It detailed the service charge as covering caretaking, cleaning, grounds maintenance of communal areas, communal utility supplies, and inspection and maintenance of communal equipment.

Summary of events

3. On 28 February 2020 the resident emailed the landlord requesting a breakdown of the service charge from 2016 onwards. The landlord replied explaining that this information did not exist prior to the 2019/2020 financial year as the service charge was not broken down during that period. More recently it had carried out an exercise breaking down the individual elements, and it provided details of this to the resident, which included a lift maintenance charge of £5.45 per week.
4. The resident replied explaining that there was no lift. She said that as the figures were not broken down in previous years, she had not been aware that this had been erroneously included. She asked the landlord to review and refund the overpayments from the start of her tenancy in August 2016.
5. The landlord responded saying that the lift charge had been removed for the coming financial year, but it would not offer refunds on the previous charges ‘…as the initial combined service charge detailed on your tenancy agreement was validly served for the specified amount and is legally binding.’
6. The resident argued that there was no reference to a lift charge in her tenancy agreement, otherwise she would have disputed this at the time. She felt that these charges had been hidden within the communal charge and were not made clear.
7. The landlord provided a ‘review stage’ formal complaint response on 14 April 2020. In this it noted that the tenancy agreement referred to the service charge as covering caretaking, cleaning and grounds maintenance of communal areas, communal utility supplies, inspection and maintenance of communal equipment, and that this was shown as a combined service charge figure of £20.79 per week. The landlord said that this figure was calculated during the construction of the building and commenced at the beginning of the tenancy using the following:
   1. Caretaking Other Safety equipment (Man safe)
   2. Glass cleaning
   3. Communal TV aerial maintenance
   4. Grounds maintenance
   5. Door entry phone line rental
   6. Communal electricity
   7. Door entry maintenance
   8. Communal water
   9. Contribution to access road
   10. Water pump inspection and maintenance
   11. Bins
   12. Fire safety inspections and maintenance
   13. Management fee
8. The landlord confirmed that no costs for lifts were included in the service charge and the elements listed had not changed. The letter explained ‘In preparation for this year’s rent increase, we moved from showing a combined service charge figure in our system, to showing the individual elements such as “caretaking” as separate lines and cost, with the aim of improving transparency. At this time, we incorrectly distributed some of the costs which should have been against other charges such as “caretaking” to “lift maintenance”.’
9. The landlord acknowledged that there was no lift and confirmed that it had removed the ‘lift maintenance’ charge before it came into effect in April 2020. It concluded ‘Furthermore, we have not sought to correct undercharging in other elements as a result of this error. I consider that this was a reasonable offer of resolution and that as there is no evidence lift costs were ever included in previous calculation.’

Assessment and findings

10. In her complaint to this Service the resident pointed out that that initially the landlord said it would remove the lift charge, but it did not say that it had been incorrectly listed as something else: This was not stated until the April 2020 letter. The resident explains that her service charges are now £15.31 a week due to the £5.60 lift charge being deducted when she raised the issue. She states, ‘Surely if it was incorrectly listed and should have been under caretaking as the letter states, then it wouldn’t have been taken off?’
11. The Ombudsman understands the resident’s contention here. The landlord’s response to the complaint does not appear to fully explain how the service charge had reduced to £15.31 per week if lift costs had never been included, or how this related to ‘undercharging in other elements’. This Service therefore sought further information on the matter.
12. The landlord has now explained that in August 2016, at the point the property was built and first occupied, there were no lift maintenance costs included in the service charge calculation, and the charge was set as a combined single figure, with no breakdown of the costs for each element, as follows:

13. By the financial year 2019/2020 the service charge had decreased to £20.37 and was still presented as a combined single figure. Again, at this point there were no lift maintenance costs in the calculation.
14. In order to be more transparent over service charges, for 2020/2021 the landlord split the service charge into the individual nine elements. However, in doing so it made an error: The resident’s block has a lift which is only used by half of the tenants, not including the resident, and so should not have been detailed in her service charge breakdown. Mistakenly, when splitting out the costs, the landlord included this as a tenth element to the resident’s calculation. This had the effect of reducing the amount apportioned to each of the remaining nine elements (the Ombudsman understands that this is because these are calculated as a percentage of the overall cost). This is shown in the table below:

15. The landlord has stated that had it not included the erroneous lift charge, and calculated correctly, then the correct service charge figure would have been £20.37. However, in recognition that it had made an error, and rather than reapportion the costs across the nine correct elements, it simply removed the lift charge, meaning the resident paid £15.31 for 2020/2021 financial year, as shown in the table below:

16. The Ombudsman considers this to be a reasonable explanation. The landlord has accepted that it made a mistake, and in light of this has borne the shortfall of £5.45 per week itself to rectify this, meaning that the resident pays less than she otherwise would have.
17. It is regrettable that the detailed explanation that the landlord has provided to the Ombudsman was not set out during the complaint process, as this may have reassured the resident that the calculation was correct and that she had not been charged for lift maintenance since 2016, which was understandably worrying for her. Having said this, the resident was accurately advised by the landlord that there had been no lift maintenance charge applied in the preceding years.
18. Following on from contact with this Service, the landlord has reviewed its handling of the matter, and has recognised that there had been errors in the handling of the complaint, namely that no stage one investigation took place, rather the matter went straight to ‘review stage’. The landlord has said ‘Our error was not in overcharging [the resident] but in failing to respond to her question and appropriately clarify the position. The landlord has offered its apologies for this and a gesture of goodwill of £100, to compensate for the confusion and stress the resident experienced in thinking that she had overpaid her service charge.’
19. The Ombudsman finds this to be a reasonable resolution to the time and trouble the resident has taken in pursuing the matter.

Determination (decision)

20. In line with section 55(c) of the Housing Ombudsman Scheme, the landlord has made an offer of redress following the Ombudsman’s intervention which, in the Ombudsman’s opinion, resolves the complaint satisfactorily.

Reasons

21. The resident had not been charged for lift maintenance from 2016. An error was made when providing the breakdown of costs, but the landlord has rectified this, resulting in the resident paying £5 less per week than she would have had the landlord calculated correctly.
22. It would have been better had a more detailed explanation of this been provided during the complaint process, but this has now been done, along with an offer of £100 compensation for the confusion and stress the resident experienced. The Ombudsman considers that this resolves the matter satisfactorily.

Recommendations

23. The landlord should pay the resident the £100 it has offered by 31 July 2021.