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Paragon Asra Housing Limited (202015406)

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REPORT

COMPLAINT 202015406

Paragon Asra Housing Limited

09 December 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 complaint is about:
    1. The landlord’s response to the resident’s reports that a service charge should not be payable in respect of the property.
    2. The landlord’s response to the resident’s concerns about the administration of her service charge, including that services she paid for were not being provided.

Jurisdiction

  1. What we can and cannot consider is called the Ombudsman’s jurisdiction. This is governed by the Housing Ombudsman Scheme. When a complaint is brought to the Ombudsman, we must consider all the circumstances of the case as there are sometimes reasons why a complaint will not be investigated.
  2. Paragraph 39(g) of the Scheme states that the Ombudsman will not investigate complaints concerning the level of rent or service charge or the amount of a rent or service charge increase.
  3. The complaint set out at paragraph 1(a) above is outside this Service’s jurisdiction, in accordance with paragraph 39(g) of the Scheme, as it concerns the resident’s liability to pay a service charge in respect of the property. Should the resident wish to pursue this aspect of her complaint, she would need to consider making a claim via the First Tier Tribunal (Property Chamber) (FTT). Further details about the work of the FTT can be found on its website here:

https://www.gov.uk/courts-tribunals/first-tier-tribunal-property-chamber

Background and summary of events

Agreements and Policies

  1. The resident is an assured tenant of the landlord, under a tenancy agreement that was assigned to her on 31 May 2004.
  2. The resident’s tenancy agreement states at clause 1 that a weekly service charge is payable, in addition to the rent. Under clause 1.3 the landlord is required to provide the services set out in Schedule 1, for which the service charge is levied. A copy of Schedule 1 to the tenancy agreement was not available to this investigation.
  3. A management company was established to maintain the estate in which the resident’s property is situated. The landlord has provided a copy of a Management Agreement with a managing agent, dated 1 September 1997. The resident’s property is listed in the Schedule of Properties attached to that agreement.
  4. The landlord has provided a copy of its Service Charge Policy from January 2020, which states at paragraph 4.1 that the resident will be charged a fixed service charge. Paragraph 4.3 notes that costs under a fixed service charge are, ‘fixed for that year regardless of actual costs incurred’. Paragraph 7.3 states that the apportionment of service charge costs will be in accordance with the tenancy agreement or lease. In the absence of such provision, the landlord will ‘adopt a fair, reasonable and consistent approach to apportioning costs, taking into consideration all relevant factors, representations and any legal requirements’.

Background

  1. The landlord has provided copies of a rent increase notice sent to the resident on 24 February 2017, which included a breakdown of the service charge budget for the coming year. This included sums for ‘Security and Health and Safety’, ‘Cleaning and Grounds Maintenance’, ‘Utilities’, ‘Other Communal Services’, and ‘Administration Charges’. The landlord also attached explanatory notes detailing what each charge related to.
  2. In 2017, the resident queried her responsibility to pay a service charge with the landlord, as the property was a house and not a flat, and she had not been receiving any services. The landlord contacted the resident and apologised that, due to an error, the property had been recorded on its systems as a flat. A formal complaint was raised and at stage 1 the landlord confirmed that prior to 2017 her service charges were correct. The landlord confirmed that the property was listed on the contract it held with the managing agents. The landlord highlighted that the resident’s tenancy agreement did state that a service charge would be payable. The service charge contributed to various running costs relating to the estate and was apportioned between all properties.
  3. On 26 February 2019, the landlord wrote to the resident informing her of a rent reduction and a reduction in her service charge from 1 April 2019, from £10.75 per week to £2.11 per week. The service charge would be made up of ‘Cleaning and Ground Maintenance’, at £46.70pa, ‘Other Communal Services’ at £56.25pa and ‘Administration Charges’ at £7.00pa. The budget remained the same for the year commencing April 2020.

Summary of Events

  1. In 2020 the resident again queried her service charge with the landlord. She asked for a breakdown of the charges, which it confirmed related to communal cleaning, communal parking and communal gardening. She again informed the landlord that these charges should not be payable, as her property was a house and her garden was not communal. The resident states that at this time she was made to feel like a liar, as the landlord stated that it would need to visit the property to confirm that it was not a flat.
  2. In an email dated 16 October 2020, the landlord informed the resident that its records showed that the property was not a flat and that the charges were for ‘estate costs’. It confirmed that the resident was ‘not being charged to maintain any areas within or the area immediately outside [her] property’. The landlord stated that it was still looking into the resident’s query that she had been incorrectly charged in previous years. It noted that it, ‘would not normally amend previous charges unless there is a specific situation’, for example a charge relating to a lift that did not exist, as the resident paid a fixed service charge.
  3. The landlord emailed the resident on 3 November 2020 and confirmed that costs had been incorrectly charged. It was in the process of completing recalculations and would provide official confirmation by the end of the following week.
  4. On 11 November 2020 the resident emailed the landlord asking it to confirm which properties had been incorrectly charged. It responded stating that it was unable to provide service charge information for other properties but confirmed that an error had been identified whereby houses were charged for communal services that they do not receive. The apportionment had been adjusted for April 2021. It estimated that the resident’s service charge would reduce to £1.08 per week.
  5. The resident made a formal complaint to the landlord on 24 November 2020. She stated that she had made a number of enquiries over the years about why she was paying a service charge when she lived in a house that ‘does not require or ever received any services’. She noted that she had continued to pay the charge to avoid any worry and stress, as she had young children to look after and health issues. The resident described the history of the complaint she had raised in 2017. She stated that following some back and forth all communication stopped and her emails and calls were not responded to. The resident did not pursue the issue due to the stress it was causing her and the impact this was having on her health.
  6. The resident had recently re-raised her concerns with the landlord and she stated that it had agreed that she should not have been paying a service charge. The resident was dissatisfied that the landlord had refused to look back beyond 2014 and she also disputed some individual charges that the landlord had confirmed it would not refund. The resident had been informed on 23 November 2020 that these charges all related to the third party managing agent fee, which she did not agree with. The resident had spoken to CAB and Shelter, who advised that she should be entitled to a refund from the date she began paying a service charge, as she had raised her concerns in the past. The landlord acknowledged the complaint on 25 November 2020.
  7. The landlord telephoned the resident on 9 December 2020 to advise that its investigation had been delayed as it was awaiting final accounts. The landlord confirmed that the resident was required to pay a service charge in respect of services provided by a managing agent, although the landlord was currently unable to confirm what services were provided. The resident stated that the charges listed did not state that they were a management fee. The landlord accepted that this had historically been unclear. The resident stated that she was happy to pay £56 per year and considered that this should be backdated to 2011. The landlord advised her that service charges would fluctuate annually. The landlord provided a further update by email on 16 December 2020.
  8. The landlord provided a stage 1 response to the complaint on 22 December 2020:
    1. The landlord explained that under the resident’s tenancy agreement, she paid a fixed service charge for services provided by a managing agent. This was because the resident lived in a scheme that receives estate services that she benefits from.
    2. It had audited the service charges to date and concluded that between 2014 to 7 December 2020 it had charged the resident for a number of services that she had not received, due to an error in its systems. The landlord confirmed that the managing agent fee and the landlord’s management fee were still chargeable, although it had identified an error in the management fee in 2016, resulting in an overcharge of £6.45.
    3. The landlord acknowledged that it had failed to manage the services appropriately and to provide the resident with accurate information, therefore it removed its management fee for the period 2014 – 2020.
    4. A breakdown was provided of service charges since 2014. The landlord identified several errors in the service charge calculations, including that it had failed to charge the third party managing agent fee in 2015, and that there was a further overcharge in 2017. It stated it would not seek to recover the 2015 managing agent fee.
    5. The landlord would not be refunding any service charges for the period between 2011 and 2013 as the amounts charged were, ‘lower than the third party management fee’ and therefore correct.
    6. The landlord explained that the managing agent fee covered maintenance of the estate, including hard and soft surfaces, bulk refuse collection and general ground maintenance within the communal areas.
    7. An undercharge of £185.60 for 2019-20 was identified, as it had based the service charge cost on a 3 month invoice rather than the annual charge. It would not seek to recover this underpayment but the resident would be charged for the current year, and in line with historic charges in the coming year.
    8. The landlord accepted that, on several occasions, it had failed to inform the resident that she was being charged a third party managing agent fee, which had caused confusion. It stated that the lack of communication was being addressed and overall communication around service charges was under review ‘for improvement’.
    9. The landlord confirmed it would honour the £919.44 refund to the resident’s rent account that it had previously calculated.
  9. The resident emailed the landlord on 23 December 2020 and confirmed that she was unhappy with its stage 1 response. The landlord then telephoned the resident, who stated that she wanted it to explain what a charge for a ‘Resource Centre’ related to, and confirmation of what services had been provided and in what area. She stated that she had made enquiries with the council, who stated that they had provided some of the services she was being charged for.
  10. The landlord acknowledged the resident’s request for the escalation of her complaint and stated that it had sought confirmation of the Resource Centre charge and a more detailed breakdown of the charges from the managing agent. The landlord noted that although a charge for the Resource Centre was included in the budget, the resident had not been charged. The landlord provided a summary of the resident’s request for escalation and the outstanding issues on 31 December 2020.
  11. The landlord called to update the resident on 7 January 2021. It noted that some information had been received but it had not had a response from the managing agent. It would provide a further update on 12 January 2021.
  12. On 12 January 2021 the landlord wrote to the resident stating that it was still in the process of investigating her complaint. The letter explained that it was awaiting information from the managing agent so it could provide a breakdown of what their charges meant. The landlord would provide a further update on 19 January 2021 and if it was still awaiting information it would arrange an online meeting with the resident to discuss the information that had been made available.
  13. The landlord responded at stage 2 of its complaints process on 27 January 2021. It responded to each aspect of the complaint as follows:
    1. Between 2011 and 2017 a different Housing Association was responsible for the resident’s property. It used 2 different systems to manage service charge accounts during this period, with a changeover taking place in 2014. Following a merger, the landlord continued to use the previous system, however, it was unable to obtain records prior to 2014. It was therefore unable to provide the resident with a breakdown of charges prior to that time.
    2. The landlord explained that management fees were charged to cover the cost of administering the service charge account, including staffing and other overheads. This was common practice amongst Housing Associations.
    3. The landlord was awaiting an update as to what the service charge relating to ‘Resource Centre’ was for. The landlord explained that the charge for ‘Other’ services usually related to communal services that were not contained under the other main headings. The landlord agreed that these should have been described under more appropriate headings and apologised for the confusion that this caused. The landlord stated that these charges were correct for the services supplied.
    4. The landlord confirmed that the resident had been overcharged on her service charge account for every year since 2014. In addition, she had been incorrectly charged for services provided by the landlord directly, as well as charges correctly issued by the managing agent. The landlord provided a breakdown of the amounts that would be refunded to the resident in respect of each year since 2014, which totalled £890.45. The landlord noted that this was less than the figure of £919.44 that was previously advised, but confirmed that the higher amount would be honoured.
    5. Having reviewed the invoices, the landlord listed the services that the resident may have been charged for. The landlord acknowledged that it had not been able to provide details of the charge relating to ‘Resource Centre’ and that the resident was not aware of any other services being provided by the managing agent.
    6. The landlord agreed that the resident’s complaint had not been dealt with adequately in 2017. It apologised for the service she had received. It also recognised that things ‘had not gone as smoothly as they should’ in relation to the current complaint and that this had contributed to the resident’s frustration. The landlord stated that it was extremely sorry that things had not been resolved more quickly.
  14. The landlord’s case records state that it discussed the resident’s complaint with her by telephone on 29 January 2021. It noted that it would update the resident on the outstanding matters regarding the managing agent within 8 weeks, following which she could refer her complaint to this Service. The landlord provided a further update to the resident on 3 February 2021.
  15. The landlord emailed the managing agent on 5 and 10 February 2021 requesting an acknowledgment of its request for information relating to the provision of services to the resident. The landlord then emailed the resident to provide her with an update.
  16. The landlord and the resident exchanged emails about the agreed refund between 10 February 2021 and 15 February 2021.
  17. The landlord exchanged emails with the managing agent between 15 February 2021 and 18 February 2021. It provided a further update to the resident on 17 February 2021.
  18. The landlord received an update from the managing agent on 23 February 2020 and telephoned the resident on 24 February 2020. It stated that it hoped to receive a response by the next contact date of 3 March 2021 and that the date the complaint could be referred to this Service was 8 March 2021.
  19. The landlord emailed the resident on 3 March 2021 and telephoned her on 5 March 2021. It had received no further update from the managing agent. The resident informed the landlord that she intended to refer her complaint to this Service, and the landlord confirmed that it would write to her on 8 March 2021 confirming its position with regard to the outstanding enquiries.
  20. On 8 March 2021 the landlord wrote to the resident to confirm that it had lodged enquiries with the managing agent with regard to the service charge for the Resource Centre and the services that had been provided in the last 12 months. The resident was advised that she could now refer the complaint to this Service, although the landlord would follow up when it received a response to its enquiries.
  21. The resident responded to the landlord on 9 March 2021, clarifying that the complaint was about charges for as long as she had lived in the property, and not just for the last 12 months. She asked the landlord to correct its enquiry and resend. The landlord replied stating that the reference to 12 months was not intended to reflect the time period to which the complaint relates. The landlord stated that it had intended to start a conversation and that if the managing agent confirmed that no such services had been provided, it could then make further enquiries.
  22. The landlord wrote to the resident on 15 March 2021, stating that due to the demand on its service, it would not be in a position to respond to her query until 16 April 2021. It apologised for the delay and inconvenience caused. This Service then wrote to the landlord to advise it that it should not have raised a second complaint and that this should be closed. The landlord confirmed on 25 March 2021 that subsequent correspondence related to a delay in providing a response to 2 outstanding queries that the resident had raised during the complaints process. The landlord noted that it had advised the resident on 8 March 2021 that it had provided a final response and she could now refer her complaint to this Service.
  23. The resident referred her complaint to this Service on 26 March 2021. This Service telephoned the resident on 26 April 2021 to obtain details of her outstanding concerns. She stated that:
    1. CAB and Shelter had advised her that the landlord should refund overpayments back to 2011 if she had first raised a complaint in 2017.
    2. She did not believe she should be charged for use of a Resource Centre, which was a 15 minute walk away. She was unsure what this charge was for.
    3. She wanted a breakdown of the charges for the years prior to 2014. The resident believed the landlord was withholding this as it had overcharged other residents.
    4. She is still paying £120 a year in service charges and is unsure what services this charge relates to.

Assessment and findings

  1. As stated in the jurisdiction section above, the resident’s complaint relating to her liability to pay a service charge is outside the jurisdiction of this Service. This investigation is therefore focussed on the landlord’s administration of the resident’s service charge, and the steps it took to investigate her concerns.
  2. Paragraph 9.6 of the landlord’s Complaints Policy states that the landlord’s complaints process will only deal with matters brought to its attention within a reasonable timeframe, which will usually be within 6 months of the event occurring ‘unless there is a good reason for not making a complaint at the time’. This is in accordance with paragraph 39(e) of the Scheme, which states that the Ombudsman will not investigate matters that were not brought to the landlord’s attention within 6 months. The Ombudsman will also normally only investigate complaints referred to his Service within 12 months of completion of the landlord’s internal complaints process, in accordance with paragraph 39(d) of the Scheme.
  3. The scope of this investigation is limited to consideration of the action the landlord took following the issues raised in October 2020 and the resident’s formal complaint of 24 November 2020. The fact that the resident had previously raised concerns about her service charge in 2017 is important context, and the landlord acknowledged in its complaint response that the complaint was not adequately dealt with at that time. However, the Ombudsman will not make findings in relation to the landlord’s handling of the complaint in 2017 and will instead look at the steps the landlord took to investigate the resident’s concerns and to put things right when the issue was re-raised in 2020.
  4. As part of its complaint response the landlord explained why it would be unable to review records pre-2014. In looking back at all available records, the landlord has made reasonable efforts to investigate the resident’s concerns and has explained why information is not available from before that time. The stage 1 complaint response confirmed that, based on the available information, the service charge between 2011 and 2013 appeared to be accurate, although it could not access all records relating to the services provided.
  5. The Ombudsman does not have the authority to reach a binding determination on whether or not any overcharges prior to 2014 are recoverable, as this involves consideration of whether the resident is ‘out of time’ to make a claim, which is a matter for the court. This does not mean that the resident would not be entitled to claim for overcharges prior to 2014, however, she would need to seek independent legal advice and consider bringing legal proceedings to recover any sums prior to that date.
  6. As part of the landlord’s complaints process the Ombudsman would expect it to conduct a reasonable investigation into the issues raised, to provide a response within the timeframes set out in its Complaints Policy, and to make a detailed report of its findings in the complaint response. The Ombudsman appreciates that in this case the landlord needed to obtain additional information from a third party, however, it is of some concern that the landlord did not already hold sufficient information to explain the service charges being levied by the managing agent for services provided on its behalf, or have processes in place for obtaining this information within a reasonable time.
  7. The resident first raised a query about the sum charged for a ‘Resource Centre’ in her email of 23 December 2020. The landlord had been unable to obtain a substantive response from the managing agent by the time the complaint was referred to this Service on 26 March 2021, which is unreasonable. The resident indicated to this Service during a telephone call on 26 April 2021 that she was still unclear what this charge related to. This raises further concerns about the processes the landlord has in place for communicating with the managing agent about service charges. The Ombudsman is not satisfied that the landlord has demonstrated that it has adequate oversight of the managing agent, and considers that this amounts to service failure by the landlord in its administration of the resident’s service charge.
  8. The landlord took some appropriate steps to address the complaint, including reviewing the history of charges, identifying overcharges and undercharges, and acknowledging where it had failed to clearly inform the resident of charges, or where the description could have been clearer. The landlord’s investigation appears to have been thorough, and it provided a detailed response addressing the resident’s concerns, although it is noted that its recalculation produced a different sum for reimbursement at stage 2, which indicates that there were some inaccuracy in the calculation made at stage 1.
  9. The landlord’s communication with the resident throughout the complaints process has been good, providing updates within the promised timeframes and seeking to provide explanations in response to her additional queries. The landlord has demonstrated a genuine desire to put things right for the resident and a willingness to learn from the complaint.
  10. The resident has informed this Service that she remains confused about what services the charges she is paying relate to. There are no full, contemporaneous records of all advice given to the resident during phone calls where the complaint was discussed, however, it is clear that the resident would benefit from a written breakdown of the current service charge that clearly sets out which services have been included in the budget, with reference to the area of the estate that these charges relate to. This will equip the resident with the information she needs to challenge any aspects of the service charge that she feels are unreasonable or have been levied in error, and to seek legal advice in relation to her complaint that no service charge should be payable.
  11. The landlord has apologised for the errors it identified and, although it did not offer compensation under its Compensation Policy, it used its discretion to remove its management fee for the period of 2014 – 2020 in recognition of its failure to adequately manage her account. The landlord also indicated in the stage 1 response that its processes for reporting to residents on service charges were under review, although it did not give an indicative timeframe as to when this would take place, or provide further details.
  12. In calculating a reasonable level of compensation the Ombudsman has taken into account that the landlord has removed its management fee for 2014 – 2020, that it has stated it will not seek to recover some identified underpayments, and that it has agreed to honour the reimbursement figure set out in the stage 1 response. The Ombudsman considers that an additional award of compensation is appropriate, to reflect the stress, inconvenience, time and trouble that the resident was put to in pursuing her complaint and in recognition of the length of the period over which the failings occurred.

Determination (decision)

  1. In accordance with paragraph 39(g) of the Housing Ombudsman Scheme, the Ombudsman has concluded that the resident’s complaint that a service charge should not be payable is outside the jurisdiction of this Service.
  2. In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was service failure by the landlord in its administration of the resident’s service charge.

Reasons

  1. The complaint that a service charge should not be payable in respect of the resident’s property is outside the Ombudsman’s jurisdiction, as this falls within the jurisdiction of the FTT, as only the court can provide a binding determination on the resident’s liability to pay a service charge, or the level of that charge.
  2. The landlord identified failings in its administration of the resident’s service charge between 2014 and 2020. It offered some redress, in the form of the removal of its management fee, but in the Ombudsman’s view this was insufficient to adequately compensate the resident. The landlord has also failed to demonstrate that it has adequate processes in place for communicating with its managing agent about the charges made to residents for services provided on its behalf, or that it has reasonable oversight over the managing agent’s processes.

Orders and recommendations

  1. Within 4 weeks of the date of this report the landlord is ordered to:
    1. Pay the resident £200 compensation in recognition of the stress and inconvenience she has experienced and the time and trouble she has expended in bringing the complaint.
    2. Conduct a review of its processes for overseeing the work of the managing agent and implement any necessary changes identified as a result of that review. The landlord should write to the Ombudsman, setting out its findings and the action it intends to take.
    3. Write to the resident providing a detailed description of each of the charges included in the breakdown of her current service charge, including the area of the estate to which those services relate. If it has not already done so, the landlord should confirm what the charge for a ‘Resource Centre’ relates to.