Newham Council (202107985)

REPORT

COMPLAINT 202107985

Newham Council

30 June 2022

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 response to the resident’s observations and queries, following the landlord’s Notices of Intention to enter into a Qualifying Long Term Agreement (‘QLTA’) for the Building Insurance Policy.

Background and summary of events

Background

The resident is the non-residential leaseholder of four properties owned by the landlord, a local authority.
Under the lease, the landlord covenants with the resident to insure the premises under a fully comprehensive policy, while the resident covenants to pay a proportionate part of expenses and outgoings incurred by the landlord, including insurance.
The Landlord and Tenant Act 1985, The Commonhold and Leasehold Reform Act 2002 and The Service Charges (Consultation Requirements) (England) Regulations 2003 set out the consultation requirements for QLTAs which exceed certain amounts for leaseholders, and allow the landlord to tender for a QLTA via a notice published in the Official Journal of the European Union. The landlord should give notice of an intention to enter into the QLTA, and state its reasons; explain why it is not inviting nominations for persons from whom it should obtain estimates; and invite observations which it should have regard to. The landlord should prepare a proposal in respect of the proposed QLTA which estimates the contribution; details the intended agreement length; and summarises and responds to observations it has received. It should send a notification of the proposal and invite further observations, which it should have regard to and respond within 21 days of receipt. If leaseholders wish to challenge the reasonableness of service charges, they are able to apply to the First-Tier Tribunal to decide on the reasonableness of the charges.

Summary of events

On 29 September 2020, the landlord wrote to the resident to issue a Notice of Intention to enter into a Qualifying Long Term Agreement for the Building Insurance Policy. The notice advised this was necessary as the current cover was in its last year; detailed how to make observations; and explained it was not inviting nominations of persons from whom it should obtain estimates as it was issuing a notice in the Official Journal of the European Union to invite tenders. It said it would write again ‘shortly’ with details of its proposal.
The resident emailed with observations on 1 October 2020. He asked for three insurance providers to be included on the tender list. He noted the £50 policy excess was historically low; queried when this last increased; and asked for quotes to be obtained with a much higher excess, in line with the retail price index. He said that a letter from the landlord in 2018 had anticipated increased premiums of at least 25%, and it was duty bound to increase the excess. He said low policy excesses encouraged small insurance claims which would adversely affect claims history and the renewal premium; have disproportionately high handling costs; and encourage fraudulent claims.
On 10 February 2021, the landlord responded. It acknowledged the resident’s concern about the excess, but noted it had not received other responses on this from owner occupiers, the population the scheme was primarily designed for. It explained the current excess for sub-let properties was £100 and this was the applicable excess for claims for the resident’s properties. It explained the resident’s nominees were not needed as it was issuing a notice in the Official Journal of the European Union to invite tenders; referred to the paragraph in the Notice of Intention which stated this; and added that it seemed the resident did “not appreciate the scale of the RTB scheme.”
On receipt of this correspondence, the resident asked to make a complaint the following day:
1. He raised concern about the three months that had elapsed since the observations deadline, and requested the timescales in which the landlord would write to residents with its proposal.
2. He restated his concern that the excesses were low, particularly a £50 excess for resident leaseholders, and his query asking when excesses last increased.
3. He noted the landlord said it had not received responses from owner occupiers, and clarified he had not intended his request for an increased excess to be limited to one group. He noted the landlord agreed this had merits, and queried if it would be considered on its merits or ignored if no one else had raised it.
4. He noted the landlord said the scheme was primarily designed for resident leaseholders. He queried why it was not designed for all customers and why non-resident leaseholders were consulted if they had no say; and said all leaseholders would be affected if excesses did not increase.
5. He noted the landlord said nominees were not needed but said the letter did not state they would not be considered, and he nominated another provider. He also requested for alternative quotes to be obtained without ‘extended accidental damage’ cover.
6. He noted the landlord’s comment that it seemed he did not appreciate the scale of the RTB scheme. He asked what point it was trying to make and said this appeared to be out of context and rude.
On 11 March 2021, the landlord issued its stage one response:
1. It said it used its best endeavours to secure the most advantageous tender for the benefit of all leaseholders, and would consider use of an increased excess if this offered itself and leaseholders value for money.
2. It said it was unable to nominate a specific company as it was running an open tender under the rules of the Office of the European Journal. It said the process was still live and all leaseholders would be updated in due course.
3. It said no disrespect was intended by its previous response and apologised if this was how this was received, but said it could find no fault in respect to the processes undertaken.
The resident requested escalation of the complaint the same day:
1. He queried a lack of explanation for the three months it took to respond to his observations.
2. He queried a lack of response to his query about when excesses last increased.
3. He acknowledged its apology, and queried if specific staff would apologise and have additional training.
4. He queried what excess levels the tenders were being based on. He said the response did not address his request to obtain quotes with a much higher excess and he had envisaged a reply before the tender process concluded.
5. He queried a lack of response to his comments about the scheme being primarily designed for resident leaseholders and the relevancy of no other responses from owner occupiers.
6. He stated that communication would have been more effective if he had received a reply directly from the insurance department, rather than being insulted, not being given proper answers, and being inconvenienced.
On 22 March 2021, the landlord issued a notification / further Notice of Intention to enter into a Qualifying Long Term Agreement in respect to the Building Insurance Policy, which confirmed it proposed to enter into agreement with a specific insurance provider. The notice detailed that the resident’s estimated annual contribution would be £169.51 and that the excess for the policy would be £50 for occupant leaseholders or £100 for sub-let properties. The notice detailed how to make observations, and provided a summary of the leaseholder observations received for the previous Notice of Intention along with the landlord’s reply (which included the observations the resident had made).
The resident emailed the landlord in reply on 27 March 2021:
1. He noted his observations on 1 October 2020 had been included, but that there was no information on progress of his proposal to increase the historically low excesses. He queried what was being done if the landlord acknowledged he had a point.
2. He queried a lack of response to his query about when excesses last increased.
3. He queried why the estimated contributions were described as estimates rather than tenders or quotes, and said it was unclear whether they were actual amounts that would be charged at renewal or just estimates.
4. He noted timeframes for the proposed agreement but queried a lack of information about when subsequent premiums would be calculated and the amounts.
The landlord replied to the query on 12 April 2021:
1. It restated that it would consider an increased excess if it offered value for money.
2. It said that its records showed that the excesses applicable for the last ten years had been £50 for owner occupied properties and £100 for sub-let properties, which were comparable levels to similar property portfolios.
3. It provided explanation about why the contribution was estimated, including because Insurance Premium Tax, determined by the Government, was subject to change and out of its control; and because cover with the current provider was being extended until 31 May 2021, so the new cover would commence on 1 June 2021 and be for only ten months of the financial year.
4. It explained the approach to subsequent premiums and that there were annual contracts; there were agreed parameters within which quoted prices were held; and that the insurance was reviewed each year at each renewal.
The same day, the landlord issued its final response to the complaint:
1. It acknowledged his concern about the length of time it took to respond to his observations, and explained that this was due to an oversight.
2. It acknowledged the resident’s queries about staff and said it would not be appropriate to discuss staff training.
3. It acknowledged the resident’s request to obtain a higher excess and said market underwriters considered the current excess levels to be appropriate. It said that if the claims experience deteriorated, it would consider negotiating increased excess levels.
4. It acknowledged the resident’s queries about its approach to insurance based on the tenure type. It explained that underwriters make a distinction between owner occupied and sub-let properties, which was reflected in different levels of excess and cover issued. It said that this was standard practice in the insurance market and not unique to the landlord.
5. It acknowledged the resident’s concerns about its communication. It apologised for any upset caused to the resident, and explained that it had consulted with the insurance team to provide answers to his queries.
6. It said its additional answers to the resident’s concerns were believed to address them; its previous response was reasonable; and it apologised for the delay in responding to the complaint. It advised that if the resident did not accept its conclusions, the resident could approach the Local Government and Social Care Ombudsman (LGSCO).

Post complaint

The resident responded to the landlord’s response to his query on 30 June 2021:
1. He noted on receipt of the insurance policy schedules that the excesses had not increased; said this was done without consultation or explanation; and queried why increasing the excess was not considered value for money.
2. He noted information provided about the excesses applicable for the last ten years, and said this did not answer his query about when they last increased.
3. He queried the cover timeframes the landlord had provided and why the period of insurance was for only ten months. He also queried who had the authority to increase the excesses.
4. He queried why it stated the insurance contracts were only for a year when the contract was for three years.
5. He noted the landlord said there were agreed parameters within which quoted prices were held and he requested the document that set this out.
6. He restated his query about how subsequent premiums would be calculated and the amounts.
The landlord responded on 16 July 2021:
1. It said it had carried out an open tender and the award was made based on the most economically advantageous one after evaluation of the bids, including excesses. It said the portfolio was under constant review and excesses could change if more economically advantageous options emerged.
2. It said it had responded to when excesses last increased based on available information, and noted there being no requirement to keep information beyond seven years.
3. It explained the ten month period of insurance was because the new contract was designed to align with the financial year and other cover.
4. It advised specific staff could negotiation changes in excesses in certain circumstances.
5. It said that it had arranged a QLTA of three years but each of the three years were a separate contract. It said general insurance contracts were annual contracts and there was a renewal date when the duty of disclosure was revived, which it explained was universal insurance practice.
6. It explained parameters included claims experience but it was not able to disclose documents because they were commercially sensitive.
7. It advised that it did not have premiums information for subsequent years. It restated that factors such as insurance premium tax which would affect leaseholders was outside its control, but advised that if an increase level triggered statutory consultation it would consult before decisions were made.
The resident responded around 17 July 2021:
1. He expressed disappointment that the landlord could not answer when excesses last increased, and said they had clearly not changed for several decades.
2. He requested evidence that tenders based on higher excesses were invited; requested the tenders; and requested the tender report that set out why these were rejected.
3. He queried where the seven year period referred to came from.
4. He requested clarification in relation to the dates the current cover was extended and the new contract started, and queried why the current cover was extended to 31 May 2021 when the council tax year ended on 31 March.
5. He queried the name of the insurance manager and requested the information that they would base changes in applicable excesses on.
6. He queried if the insurance contract contained provisions about increases in the sum insured.
7. He noted the landlord said insurance contracts were generally annual, and highlighted that it had negotiated the current contract for 14 months / more than a year.
8. He disagreed that information that set out parameters the price was held at could not be supplied, and restated his request for this.
9. He clarified that he had not asked what subsequent premiums were, but had requested the documents that set out how future premiums were calculated.
The landlord held a video call with the resident on 12 August 2021, after which it emailed and acknowledged his concern about risk of increased premiums, due to experience of rising premiums with another local authority, and his view that excesses should be reviewed to mitigate the risk. It noted that it had set out the approach it had taken to procure the current insurance contract, and would take in future, to achieve the best possible deal for its leaseholders. It confirmed that this may include a review of excesses if it was believed this was necessary to achieve the best value-for-money insurance.
The resident thanked the landlord for a constructive discussion. He noted aspects that had been discussed and said while his issue was not with current insurance premiums, there was no room for complacency. He stated that he felt the justifications for reduced insurance cover and higher excesses for sub-let properties (such as tenants not having a stake in the property) was based on outdated bias rather than data. He requested the data that justified this or for sub-let properties to be treated the same as resident leasehold properties where insurance was concerned. He referred to having previously won a case determined by the Ombudsman about discriminatory overcharging. The landlord responded to confirm it would liaise internally in respect to the request for data.
On 17 August 2021, the resident emailed the landlord with correspondence between him and another local authority. He detailed claim statistics for the other local authority which he advised did not support that private tenants were responsible for a disproportionate number of claims. He noted that the other local authority had been willing to share data while the landlord had been unnecessarily secretive, and asked if it would share claims history and tendering documents with him. Following this, the landlord confirmed it would look into if it could provide similar information to answer his outstanding queries.
On 21 September 2021, the landlord responded and apologised for the delay. It said:
1. It noted he had requested information about its building insurance policy for leaseholders, and had provided information shared by another local authority, and said this request had been reviewed.
2. It noted the subject of the complaint had moved from building insurance excesses being too low, to discriminatory practices by leasehold insurance providers against non-resident leaseholders.
3. It said it had obtained the current insurance via a competitive process and the current contract was not open to renegotiation.
4. It said it did not believe it was appropriate to comment on another local authority’s approach to buildings insurance or the information they had disclosed to the resident. It noted its correspondence and meeting in relation to the complaint and stated that it believed it had disclosed to him the information that leaseholders are entitled to.
The resident responded that he had not asked the landlord to comment on the local authority’s approach but to make it aware of “the looming premium crisis.” He expressed disappointment that it had not justified the maintenance of the low excesses and ‘discriminatory practises, such as excesses being double for non-resident leaseholders and ‘extended accidental cover’ only being available for residential leaseholders.
The resident contacted this Service and restated issues he had raised to the landlord about the excesses, when the excesses last increased and the rudeness of one response. He stated the non-resident insurance excess of £100, double the resident amount of £50, was discriminatory, unfair, unjustified and possibly unlawful. He asked this Service to decide if it is right and proper to impose ‘less favourable’ insurance terms on non-resident leaseholders than other tenures.

Assessment and findings

It is clear from the resident’s complaint that he has concerns about the cost implications of matters in relation to the insurance. This investigation should note that it is not in this Service’s expertise to make definitive decisions about levels of insurance excess, or the way a landlord or its insurer chooses to apply excess. The Ombudsman has however considered whether the landlord has kept to the law, followed proper procedure and good practice, and acted and responded in a reasonable manner.
The resident’s lease confirms that the landlord should insure the property, but makes no provisions in respect to the premium or excesses, while the law confirms that the landlord should give notice in writing of an intention to enter into a QLTA, invite and have regard to observations; then provide a proposal which it should again invite and have regard to observations for. The correspondence issued in September 2020 and March 2021 demonstrates that the landlord did follow proper process and procedure to consult leaseholders before the QLTA, to allow the resident to provide formal feedback for the landlord to consider in conjunction with other leaseholders’ views. The resident expressed dissatisfaction with the length of time it took to respond to the observations, however there does not appear to be a set timeframe the landlord is obligated to give regard to these. However, this investigation does note that the landlord said it would write again ‘shortly’ with its proposal which may have not managed resident expectations, and so a recommendation is made in this regard.
The evidence shows that the landlord gave regard to the resident’s observations, and has set out its positions on his queries in its complaint responses, email replies, and in a conference call. This demonstrates that the landlord has sought to address the resident’s queries in a positive and customer focused way.
This investigation notes the resident’s concerns about the excess, and the landlord has set out its position and provided reasonable explanation and confirmed that its decision-making is based on insurance experts’ views, as well as provided reasonable assurance that if the claims experience changed, excesses would be reviewed. The landlord is entitled to rely on the professional opinion of its staff and insurance contractors when reaching such decisions, and this investigation can see no specific obligation for it to set the excess at a level the resident wants, particularly when no other leaseholders raised this in their observations. It is not in this Service’s expertise to decide what the excesses should be, but this investigation does note from an initial review that there are other social landlords that impose similar excess amounts.
This investigation notes the resident’s concerns about the differences in the excess levels based on whether there is a resident or non-resident leaseholder. The landlord has again set out its position and provided reasonable explanation, and confirmed that its decision-making is based on insurance experts’ views. The landlord is entitled to rely on the professional opinion of its staff and insurance contractors when reaching such decisions, and this investigation again can see no specific obligation for the excess to be defined any differently, particularly when no other leaseholders have raised this in their observations. It is not in this Service’s expertise to decide how excesses should be applied, however from an initial review, sub-let properties do appear to present a higher risk, and require additional or specialist insurance, so there is some basis for the landlord’s insurance excess to reflect this in some way and for sub-let properties to have a higher excess. This investigation does note that many landlords do not apply the higher excess seen here based on the tenure type, but instead on the claim type such as water damage. This investigation therefore makes a recommendation for the landlord to consider, in future tenders, differentiating the excess by claim type rather than tenure type.
This investigation notes the resident’s concerns about accidental damage cover not being offered. This investigation notes that other social landlords exclude non-residential leaseholders from accidental damage cover or have other exclusions for sub–let properties. It is not in this Service’s expertise to decide what the buildings insurance should and should not exclude, however the landlord’s own exclusions from its insurance offer appears in line with standard practice.
This investigation notes the resident’s concerns about the landlord’s responses to his requests for information. This investigation notes that the landlord has set out its position and provided explanation about various requests he has made, which initially demonstrates it rightly considered and responded to them. It is not in this Service’s jurisdiction to make definitive decisions about a landlord’s response to an information request such as the ones the resident made. The Information Commissioner’s Office (ICO) considers complaints about an organisation’s response to requests for information, and therefore it is recommended for the resident to contact the ICO in respect to dissatisfaction in this area.
Finally, this investigation notes the resident’s concerns about staff, which mainly relates to the tone of its response to his observations. The landlord responded reasonably to the resident by acknowledging and apologising to him. The evidence provided to the investigation demonstrates that the landlord considered this and ways it might do things differently in future, which shows it responded to the concerns in an appropriate way.
Overall, the landlord has addressed the resident’s queries and complaint in an appropriate way, as it followed Section 20 procedure; responded to resident observations; and considered and responded to the resident’s many queries in a number of ways. This investigation notes that the resident refers to a previous decision, however this Service’s expertise, the nature of this particular complaint, and the level of detriment caused, makes it hard to make a finding against the landlord. If the resident continues to have dissatisfaction with the landlord’s approach to matters in respect to insurance, this Service would recommend that he seek legal advice on further challenging the issue via channels such as the First-Tier Tribunal. This investigation does note that the landlord signposted the resident to the LGSCO rather than this Service, and therefore makes a recommendation in this regard.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration in the landlord’s response to the resident’s observations and queries, following the landlord’s Notices of Intention to enter into a Qualifying Long Term Agreement (‘QLTA’) for the Building Insurance Policy.

Reasons

The landlord has addressed the resident’s queries and complaint in an appropriate way. It followed Section 20 procedure; responded to resident observations; reasonably responded to the complaint; and considered and responded to the resident’s many queries in a number of ways.

Orders and recommendations

Recommendations

The landlord to consider, in future tenders, differentiating the excesses by claim type rather than tenure type.
The landlord to ensure that correspondence for Section 20 Notices manage expectations in relation to timeframes for next steps, in light of the finding at paragraph 25 of this report.
The landlord to ensure that it signposts complainants to the Housing Ombudsman Service rather than the Local Government and Social Care Ombudsman (LGSCO) where the complaint relates to the management of housing.