One Housing Group Limited (202102208)

REPORT

COMPLAINT 202102208

One Housing Group Limited

31 July 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

1.     The complaint concerns:

1. The landlord’s response to the resident’s complaint about the accuracy of the service charge estimates.
2. The landlord’s handling of the reconciliation of the resident’s rent account.

Background and summary of events

2.     The resident and his brother are joint shared ownership leaseholders. The lease started on 9 February 2016. The residents moved out on 22 January 2021 when the property was sold.

3.     In early 2020, the landlord sent the resident an annual service charge and rent review booklet advising of the estimated service charge for 2020/21 which was £840.26 per year.

4.     On 14 July 2020, the resident contacted the landlord querying if the estimated service charge for 2020/21 of £70.02 per month was accurate. The resident wanted to give this information to their estate agents. The resident contacted the landlord on two further occasions before it confirmed to the resident on 18 August 2020 that the service charge amount was correct.

5.     On 7 October 2020, the landlord provided the resident with a management pack which included the 2020/21 estimate service charge, as well as the previous three years actual charges from 2016/17 to 2018/19.

6.     In December 2020, the landlord informed the resident that it had incorrectly estimated the service charge for 2020/21 which resulted in an increase from £840.26 per year to £3742.67 per year.

7.     On 6 January 2021, the resident contacted the landlord advising that due to its error in calculating the service charge estimate for 2020/21, their buyer had asked them to reduce the sales price. The resident said they were likely to agree to the dropped purchase price which would be a big loss to them. The resident requested that the landlord cover some of the losses they would incur, suggesting that the landlord should pay the service charge retention of £2300. The resident provided the landlord with the email from their buyer which cited the increase in the estimated service charge as the reason why they were reducing their offer.

8.     In its response of 7 January 2021, the landlord advised it had spoken to its service charge team who have said they are unable to provide compensation of £2300. They can only offer £100 in compensation due to the inconvenience caused.

9.     On 7 January 2021, the resident advised the landlord, he rejected its offer of £100 in compensation and made a formal complaint. He reiterated that the landlord’s error in the service charge estimation for 2020/21 resulted in the prospective buyer of their property reducing their offer by £13,000. The increase in the actual service charge was significantly higher than what they were paying. The resident requested that the landlord pay them £8,827 for the loss incurred by the reduced purchase price. This equated to 70% of the total amount of £13,000 as the landlord owned a 30% share in the property.

10. On 22 January 2021 the sale of the property completed.

11. On 25 January 2021, the resident emailed the landlord referring to the completion of the sale on 22 January 2021 asking about a rent reconciliation for the period 22 January 2021 to 31 January 2021.

12. In its stage one complaint response dated 26 January 2021, the landlord acknowledged the resident’s complaint regarding the incorrect estimate of their 2020/21 service charge having affected the sale of their home resulting in a reduction in the agreed sale price.

13. It said it accepted that its estimated service charges for the 2020/21 were an inaccurate estimate. It explained that it became aware of this issue following contact made by the residents at the end of 2020. It identified that the costs associated with the block were mistakenly apportioned across the estate rather than just to the units in the block resulting in a much lower estimate. It apologised for this error and for any frustration caused and said it was not its intention.

14. The landlord referred to a LPE1 management pack it said it had provided to the resident on 7 October 2020. It said whilst this included the incorrect estimate for 2020/21, this also included the previous three years actuals charges 2016/17 to 2018/19. These accounts show that the actual service charges for previous years were set at the appropriate level. Therefore, whilst it appreciated that the level of the service charges may have been a factor in the buyer’s offer to purchase, this information showed a clear picture of historical costs. 

15. It said that it partially upheld the complaint as it had not provided an accurate estimate of the service charge. However, it could not offer him the compensation amount sought as the information provided in the sales pack would have given an indication to any prospective buyer that the normal service charges were higher than the 2020/2021 estimates.

16. On 27 January 2021, the resident requested the landlord carry out a stage two review of his complaint because:

1. The landlord had listed the property on RightMove with the lower incorrect service charge information.
2. It had confirmed the amount was correct when they had queried this in July/August 2020. They passed this information to estate agents as a consequence.
3. The buyer had cited the increase in the estimated service charge as the reason for the reduced offer.

17. The resident also said he had not received a phone call from the landlord as indicated in its acknowledgement email and the landlord had not mentioned that they wanted 8% simple interest to be added to the settlement figure.

18. On 28 January 2021, the landlord wrote to the resident regarding a review of the service charge account for his block. It reiterated the error with the service charge estimate. It also advised that a credit would be added to his account for £235 due to sinking fund costs incorrectly billed and a further sum of £716.67 for cold water charges.

19. The resident emailed the landlord on 28 January 2021 and again on 2 February 2021 regarding his query about a refund of rent for 22 to 31 January 2021.

20. In a separate email dated 2 February 2021, the resident contacted the landlord chasing it for a response to his 27 January 2021 escalation request.

21. On 3 February 2021, the resident emailed the landlord asking why he had been debited a further monthly payment of £503.87 on 1 February 2021 when the property was sold on 22 January 2021. He asked that it refund this amount within 24 hours. Also, he advised that he had not had a response to his emails asking about rent reconciliation for the period 22 January to 31 January 2021. He asked for the landlord to contact him about these issues by the following day.

22. On 4 February 2021, the landlord provided a response. It confirmed it had incorrectly collected the DD for February 2021 and confirmed it would refund this amount. It said the resident should have been advised during the sale process to cancel his DD instruction with his bank at completion.  It apologised for this not happening.

23. In relation to the completion of his sale, it had not yet received the Notice of Transfer from his buyer’s solicitor, which could take up to four weeks. This would trigger the closure of his account. Once its legal team received the notice, his account would be closed and any credit refunded to him and/or buyer, in accordance with any rent and service charge apportionments that were agreed between themselves on completion.

24. The landlord apologised for not calling the resident about his complaint and said it would be happy to arrange a call for it to discuss this further at a time that is convenient for him.

25. The resident sent a further email to the landlord on 4 February 2021 advising that as the landlord was informed of the transfer on 25 January 2021, it was responsible for informing him to cancel the DD. 

26. On 5 February 2021, the landlord attempted to call the resident and subsequently sent an email to the resident acknowledging his escalation request of 27 January 2021. The landlord advised that it would provide a review of his complaint within 20 working days of this request.

27. On 8 February 2021 the resident emailed the landlord advising that his solicitor had confirmed that the buyer’s solicitors said the relevant documentation to confirm completion of the sale was sent to the landlord on 26 January 2021. The resident also referred to February 2021 rent charges debited from his account and said these issues demonstrated failures in the landlord’s processes.

28. On 15 February 2021, the resident raised a concern about the landlord sending him its letter of 28 January 2021 when he no longer resided at the property.

29. On 18 February 2021, the landlord tried to call the resident however it was unable to reach him so left a message.

30. On 24 February 2021, the landlord provided the resident a stage two final response. Within its response the landlord reiterated the reason for the lower estimate provided for the service charge and said this was an administrative error. It also acknowledged that the resident received a delayed response to his enquiries in relation to this in 2020 and that he was given the incorrect information regarding the service charge. It said it was sorry for both the original error made and the further inconsistences when clarification was sought.

31. It reiterated that it had provided a completed LPE1 information pack which included the previous three years actualised service charge accounts for 2016/17, 2017/18 and 2018/19. It also reiterated that whilst it understood its error may have been a factor in the buyer’s decision to reduce their offer, it was not able to compensate him for a reduction in the agreed sale price of the share of his home in order to conclude the sale. It proposed to pay him an increased compensation amount of £250 in relation to the incorrect estimated charges. 

32. The landlord also acknowledged that the resident had raised concerns about the rent reconciliation. Regarding his query about why his account had not been closed despite the buyer’s solicitor informing the landlord of the completion on 26 January 20211, it explained that following any completion of any sale it required confirmation of the details from the buyer’s solicitor to enable it to fully reconcile the outgoing leaseholders account and to close the account. This usually took a minimum of 2 to 3 weeks and this timeline was provided for in the lease. Its legal team did not receive the fee and notice from his solicitors until 18 February 2021 after it had sent 4 chaser emails at which point it could formally close and reconcile his account. It said it was sorry if he felt this process was not properly explained to him.

33. The landlord referred to the letter it sent to the resident on 28 January 2021  regarding a review of the service charge account for his block which he had queried. It said this letter advised that credits of £235 and £716.67 would be added to his account in respect to sinking fund costs incorrectly billed and cold water charges respectively and it confirmed these amounts would be credit to his account. It said following this it received his complaint of 15 February 2021.  It advised that as his account had not been closed at that time due, its 28 January 2021 letter with relevant information had been issued to him. It also referred to his monthly payment of £503.87 which it had refunded to him on 5 February 2021.

34. As part of learning from his complaint the landlord said it would review whether the information it provided through the home purchase process should be reviewed, particularly in relation to the provision of information about the timetable for account reconciliation and the cancelling of direct debits.

35. In conclusion, the landlord said it was partially upholding his complaint in acknowledgement of his frustration with the sale process, that he was not told to cancel the direct debit for his monthly payment and that it incorrectly estimated his service charge for 2021/22. However, in terms of the closing his account and subsequent reconciliation, this was completed in line with the lease terms following its contact his buyer’s solicitor for the required information.

36. On 3 February 2022 the landlord advised the Ombudsman that following its receipt of the notice and appropriate fee for the certificate of compliance on 18 February 2021, it closed the resident’s account and amended the charges back to 21 January 2021; refunds were actioned on 5 February and 24 February 2021. It provided an Account statement. It also said on page 8 of its booklet ‘Resales, selling your shared ownership property’ which its home purchase team emailed to the resident by link on 15 September 2020, this states that the resident should cancel their rent and service charge standing order or direct debit with their bank.

37. On 22 March 2022 the resident told the Ombudsman that the landlord’s error with the estimate charges as well as the poor level of communication provided in relation to his queries about the estimate service charges and during the complaints process caused significant stress. He also said they had not yet received the rent refund for the timeframe 22 January to 31 January 2021.

Assessment and findings

The landlord’s response to the resident’s complaint about the accuracy of the service charge estimates

38. The lease states that the service charge provision in respect of any account year shall be calculated before the beginning of the new Account Year and shall consist of a sum comprising the expenditure estimated by the landlord for costs reasonably incurred as specified in the service provision. Such costs include in connection with the repair, management, maintenance and provision of services for the building. 

39. The estimate of the service charge for 2020/21 as provided by the landlord in the service charge booklet sent to the resident in early 2020 was £840.26 per year -£70.02 per month.

40. In July 2020, the resident queried with the landlord the accuracy of the service charge estimate as he intended to sell the property and wanted to ensure the information given to his estate agent was correct. The landlord in its August 2020 reply confirmed the accuracy of the estimate service charge for 2020/21. The same estimate was supplied within the management pack which the landlord provided to the resident’s buyer on 7 October 2020.

41. In December 2020, the landlord informed the resident that it had incorrectly estimated the service charge for 2020/21 due to an error in apportioning the charges which resulted in an increase from £840.26 per year to £3742.93 per year resulting in a difference of £2,902.67. Therefore, the inaccurate estimate service charge provided by the landlord and its subsequent failure to correct this when queried, was a failure in the service provided to the resident.

42. By the time the landlord identified the error in calculating the estimate, the resident had received an offer from a buyer and was part way through the sales process. The resident contacted the landlord on 6 January 2021 with evidence of a £13,000 reduction in the purchase price offered from the buyer who had said it was due to the increase in service charge estimate. The resident advised the landlord they were intending to accept the reduced purchase price offered and requested for the landlord to cover their loss incurred of £8827 and to pay him 8% simple interest on this sum from the date of his request.

43. On 7 January 2021, the landlord rejected this request and reiterated this position in its stage one and stage two complaint responses to the resident. Within its responses the landlord highlighted that the management pack provided had included accounts for 2016/17, 2017/18 and 2018/19 which it said showed the actual service charges for previous years at the appropriate level. The Ombudsman has seen these accounts which confirm this, as such the buyer would have been made aware of actual service charges for the previous three years.

44. Understandably the reduced offer from the resident’s buyer made following confirmation of the increased service charge estimate caused significant distress to the resident. Nevertheless, it was the resident’s decision whether to accept the amended offer, in the circumstances, the landlord cannot be held responsible for the acceptance of the reduced sale price. However, it was reasonable to expect the landlord to offer redress for inconvenience caused by the inaccurate service charge estimate and its delay in correcting this particularly when it had an opportunity to do so in July 2020 when queried by the resident.

45.  In its 7 January 2021 communication to the resident, the landlord offered £100 in compensation in recognition of the inconvenience caused by the inaccurate service charge estimate. It increased this offer to £250 in compensation in its final response when it also apologised for the original error, for its delay in responding to his July 2020 query in relation to the service charge and for not identifying its error at that time.  On balance the landlord’s apology and compensation offered in acknowledgment of the issues reasonably resolved this aspect of the resident’s complaint.

The landlord’s handling of the reconciliation of the resident’s rent account.

46. On 25 January 2021 the resident contacted the landlord asking for a partial refund of the rent paid for January 2021 to cover the timeframe from 22 to 31 January 2021 as he had moved out on 22 January 2021 when the sale concluded. The resident contacted the landlord again about this on 28 January and 2 February 2021 as he had not received a response. The resident had also contacted the landlord on 3 February 2021 after he discovered on 1 February 2021 that a DD payment of £503.87 had been collected by the landlord for February’s rent despite him having moved out.

47. In its response of 4 February 2021, the landlord confirmed it had incorrectly collected the DD for February 2021 commenting that the resident should have been advised to cancel his DD for which it apologised. It advised it would arrange for a refund to his rent account within 48 hours. It refunded this amount by BACs payment on 5 February 2021 and the landlord confirmed this had been done in its final response. As the landlord promptly refunded the rent amount incorrectly collected for February, the step it took to rectify this was reasonable. It also told the Ombudsman that information that it sent to the resident in September 2020 regarding the sales process, had contained advice for the resident to cancel the DD when a sale concludes however the Ombudsman has not seen this communication to the resident.

48. Regarding the resident’s request for a refund of the rent for timeframe from 22 January to 31 January 2021, there is no evidence of the landlord directly responding to this in its communications or complaint responses. In its final response it referred to reconciling his rent account explaining that it could not do this until it had received the Transfer Notice and fee from the buyer’s solicitors which it had only received on 18 February 2021. This is set out in the lease.   Given the resident’s query about this, it would have been helpful if the landlord had explained when to expect a refund if one was due.

49. The landlord told the Ombudsman in February 2022 that rent charges were refunded back to 22 January 2021 in two payments made on 5 and 25 February 2021.  The landlord has supplied evidence showing that in addition to the BACs payment of £503.87 made on 5 February 2021, a further BACS payment was made to the resident of £961.99 on 25 February 2021. This amount corresponds with the final credit balance on the resident’s rent account which was closed by the landlord on 25 February 2021 following its receipt of the notice and fee. Within this account it indicates credits of £132.37 and £22.59 were added on 22 January 2021 for rent and service charges.  These amounts made up part of the £961.99 closing credit balance as at 25 February 2021 which the landlord refunded to the resident on the same day. As these amounts equate to approximately 9 days rent and service charges, this demonstrates the landlord had refunded the resident’s rent from 22 to 31 January 2021.

50. Therefore, there was a lack of clarity by the landlord in its communications and final response to the resident in relation to his request for the refund of rent/service charges for the timeframe from 22 to 31 January 2021 which was a service shortcoming by the landlord. Nonetheless, it has demonstrated that it processed the resident’s rent refund on 25 February 2021 after it was able to close his rent account on receipt of the relevant documents from the buyer’s solicitors.

Determination (decision)

51. In accordance with paragraph 55b of the Housing Ombudsman Scheme, there was reasonable redress by the landlord when responding to the resident’s complaint about the accuracy of the service charge estimates.

52. In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration by the landlord when handling the reconciliation of the resident’s rent account.

Reasons

53. The landlord incorrectly calculated the service charge estimate for 2020/21 due to the costs associated with the block mistakenly being apportioned across the estate rather than just to the units in the resident’s block resulting in a much lower estimate. It stood by this estimate when queried by the resident. The landlord however subsequently acknowledged the error and confirmed that the correct estimate service charges were significantly higher. When the resident complained that this change had resulted in his buyer reducing the amount offered, the landlord would not agree to pay the compensation sought by the resident which equated to the loss incurred due to the lower sales price agreed. However, it offered £250 in compensation in recognition of the inconvenience caused by its error. On balance, the offer of compensation was proportionate to the landlord’s failures in service provided therefore it reasonably addressed the resident’s complaint.

54. The landlord promptly refunded the rent payment for February 2021 it had received in error from the resident after he had moved out of the property on 1 February 2021. Whilst the landlord did not provide sufficient clarification to the resident about the rent reconciliation requested for the timeframe from 22 January to 31 January 2021, evidence it provided to this service confirms the landlord also credited a total of £154.96 to the resident’s rent account which equates to a refund of rent for the timeframe requested from 22 January 2021 to 31 January 2021. As the closing credit balance of the resident’s rent account was paid to him on 25 February 2021, this is evidence of the landlord acting appropriately.

Recommendation

55. Provide a clear written response and breakdown to the resident as to how the total refund was calculated making reference to the account statement, ensuring the resident fully understands the breakdown and has the opportunity to ask questions if required.