Torus62 Limited (202100229)

REPORT

COMPLAINT 202100229

Torus62 Limited

14 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

The resident’s complaint is about:
1. The valuation of the property carried out during the staircasing process.
2. The landlord’s handling of her request to purchase an additional share in the shared ownership property.

Jurisdiction

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 reasons why a complaint will not be investigated.
After carefully considering all the evidence, in accordance with paragraph 39 (i) of the Housing Ombudsman Scheme (the Scheme), the following aspect of the complaints are outside of the Ombudsman’s jurisdiction:
1. the resident’s complaint about the valuation of the property carried out during the staircasing process.
In her formal complaint dated 13 March 2021 the resident said she was “shocked” at the £9,000 increase in the valuation of the property which had been arranged by the landlord in response to her staircasing application. She disputed the valuation as she said it was based on the price of her neighbours’ houses and that her type of house had not been taken into account.
In raising this complaint, the resident is disputing the amount of the valuation of property an additional share in the property. Any dispute regarding a valuation carried out by a Royal Institute of Chartered Surveyors (RICS) valuer would be more appropriately considered by another body such as the Districts Valuers’ service, which is a specialist property arm of the Valuation Office Agency. As they have the expertise and remit to consider disputes about valuations. For this reason, this aspect of the resident’s complaint is outside of the Ombudsman’s jurisdiction as it would more appropriately be considered by the District Valuer.

Background and summary of events

The resident is a shared ownership leaseholder.
The resident purchased a 25% share in the property valued at £176,000 in June 2020, paying £44,000.
On 7 January 2021, the resident made an enquiry with the landlord in regard to buying an additional 25% share in the property. She confirmed that she had paid the £180 valuation fee.
The landlord arranged for a staircasing valuation of the property. The surveyor inspected the property on 11 February 2021.
In its letter to the resident dated 12 February 2021, the landlord advised the property had been valued at £185,000 and therefore a 25% share was valued at £46,250. It enclosed the valuation report dated 12 February 2021.
On or around 16 February 2021 the resident disputed with the landlord the valuation that it had provided as part of the staircasing process. There was a series of exchanges between the resident and landlord on 16 February 2020. The landlord advised that it had relayed the specific points she had raised to the surveyor who had now agreed to lower the valuation to £180,000 although it said the valuer had pointed out that the area had seen an increase of 9% (average) over the last twelve months.
In a further response of the same date, the resident said she was concerned about the process followed by the landlord as it appeared it had negotiated with the valuer. She said the assessment had not been independent nor was it fair.
The parties discussed the issue during a phone call on 16 February 2021. The landlord followed up the phone call with an email to the resident in which it advised it was offering her the following two options to resolve the situation:
1. It could instruct and pay for a second market valuation to be carried out by different independent surveyor.
2. It would arrange for her valuation fee to be refunded to her and she could obtain a RICS market valuation. Whilst the lease did not allow for it to use her valuation in the staircasing application, it would provide a comparable for the valuation it had done.
The resident responded advising its process was flawed as initially when asked to appeal the valuation she was told the lease did not allow this however when she pursued this with the landlord, then the price came down by £5,000. She acknowledged it said that no negotiation or mistakes had been made, yet the price came down once the valuer was made aware of the differences between her property and the comparable properties. Nonetheless, she said that she would like to proceed with the purchase of the 25% additional share for £45,000.
The landlord sent the resident details of the amended valuation and report on 17 February 2021 confirming that the new valuation of property was £180,000 therefore the purchase price of the additional 25% share was £45,000.
On 13 March 2021, the resident raised a formal complaint about the landlord’s handling of her request to purchase an additional share in the property. She said when she disputed the staircasing valuation the landlord had “cut and pasted” her contract which pointed out that she could not appeal and had to accept this valuation. The resident said that when she pointed out concerns about how the price was arrived at, the landlord had then gone back to the surveyor who had consulted the builder who had recognised that her property was the cheaper property with a poorer finish and different roof type. This led to the value being reduced.
Within her complaint, she said that the lease agreement effectively allowed the landlord to set its own price for staircasing, without appeal which she considered to be unbalanced and unfair. She said she believed it to be unenforceable because it was “an unconscionable article”. The resident also said that the process followed was not independent and that the price was rather a negotiation, and not a proper assessment.
She said she did not expect the landlord to refund the £1,000 she felt it had overcharged her for the 25% additional share but requested that it thoroughly examined its systems and the contract and amend them to reflect the tenants’ interest rather than its or the surveyors they used. She said she hoped it would put in place a transparent and fair system as the way her stair-casing price was arrived at was wrong.
On 19 March 2021 the landlord issued a stage one complaint letter to the resident which said:
1. The process for purchasing additional shares was laid out within her shared ownership lease. Landlords and shared owners were obligated by Homes England to follow the set process as per the lease. On a request to purchase additional shares, the landlord share would be valued by an independent Royal Institute Chartered Surveyor (RICS) valuer, instructed by the landlord and paid for by the shared owner. A market valuation was carried out as per the RICS guidance.
2. When she queried the valuation with its Leasehold Services Officer (LSO), he spoke to a manager who correctly confirmed that whilst it was not allowed to negotiate on the valuation figure under the Home England guidance, it could query the RICS valuation figure with the valuer if the resident had specific points to raise. Having relayed her points to the valuer, they agreed to reduce the valuation figure. This is standard practice where valid points are made to the valuer.
3. The Manager then called the resident to discuss her complaint.
4. As she was still unhappy, it gave her two options: for it to instruct another surveyor at a different company to see if this highlighted any difference in market value or; it could refund her the surveyor’s fee for her to instruct her own surveyor which it could use as a comparable.
5. After she considered both options she made the decision to proceed with the purchase based on the reduced valuation.
The landlord advised it was not upholding the resident’s complaint as it was satisfied it had followed the correct process for dealing with staircasing as it was laid out within the lease and within the Homes England guidance document, Capital Funding Guide. As landlord, it was obliged to obtain market value, as determined by a RICS valuer, for any share it sold and this money was repayable back to Homes England. It was unable to change the process for dealing with staircasing, but it was satisfied it listened to her concerns and offered options to resolve the issue which she declined and made the decision to proceed. It said it did however acknowledge her feedback and that it would revisit the process internally to ensure it provided as much information as possible to the valuer about properties.
On 19 March 2021, the resident requested the landlord escalate her complaint to stage two of its complaints process.
She said in her case there must be an onus on the landlord to give the surveyor comprehensive information about the property’s value however the landlord had neglected to do this and their instruction to the surveyor was incomplete. It had not shared the information it had about her property with the valuer. She reiterated her dissatisfaction with the lease agreement and the process followed.
The resident explained that she did not accept the first option offered as the landlord had said it would give to the replacement valuer the same information it had given to the original valuer. She explained that having secured a reduction, she was afraid that the original price might be re-imposed, so she decided to proceed with her stair-casing and complain about the process later, which she was now doing. She reiterated that the resolution she expected from the landlord was a proper review of its processes.
On 30 March 2021, the landlord provided a stage two complaint response. Within this it explained that it had not provided the valuer with information about the value of her initial share as it was requesting a current market valuation. It said that it was the role of the valuer to assess this by researching house prices including by reference to Land Registry. In her case it understood why she would question this as her property was assessed at a higher value only seven months later, but this was the nature of the house market. Previous valuations could only ever be a guide and part of the market picture that the valuer assesses. As a property transaction, the price she paid seven months previously would have been registered with Land Registry and accessible to the valuer.
The landlord said that its process for valuations was transparent and fair. It appointed an independent RICS valuer who assessed the market including Land Registry information. For the reasons above, it provided the property description and address only.
It reiterated that when she raised her concerns about the valuation, it relayed these concerns back to the valuer and that this was not a negotiation rather the reduction this was because her home was a different specification to those used for comparison. Further, that when she remained dissatisfied, the options offered were reasonable options. It also reiterated that it was unable to change the process for dealing with staircasing, as it was prescribed by Homes England.
On 3 December 2021, the landlord told the Ombudsman that it did not currently have a staircasing policy and that its practice is to process applications in accordance with the lease and in line with Homes England Capital Funding Guide, section 7.2.7. Further it advised in the case of a dispute over the valuation, Schedule 5 of the lease allowed for either party to appoint an independent RICS qualified valuer to carry out a further valuation. This option was offered to the resident.

Assessment and findings

Clause 4 of the resident’s shared ownership lease under the section titled ‘Staircasing provisions’ states that: ‘the parties agree that the decision of the valuer be final and binding on the parties to this lease’.
Clause 7.2 of the Homes England Capital Funding Guide, as provided by the landlord refers to: ‘The lease making provision for the resolution of disagreement or dispute that may arise, between the landlord and the leaseholder, in respect of choosing a valuer’.
In relation to the resident’s complaint about the fairness or enforceability of a term in their leasehold agreement regarding staircasing, the Ombudsman cannot make a finding on the terms of a lease where they are in dispute. It would be for the resident to seek independent legal advice in regard to varying the terms of her lease agreement if required. Furthermore, it is more appropriate for disputes regarding legal contracts to be considered by a court or tribunal for a binding determination on the terms of the lease. Therefore, this aspect of the complaint will not be addressed further.
In regards to a leaseholder’s request to purchase an additional share of the property, the Ombudsman would expect the landlord to follow the process laid down in the lease agreement, staircasing policy and any government guidance where relevant when processing any such request.
In the resident’s case, following her request to purchase an additional 25% share in the property, the landlord appointed a valuer after she paid the valuation fee. This was in line with the lease which states under ‘Staircasing provisions’ that the landlord will appoint the valuer and the leaseholder will pay the valuation fee. The valuer instructed by the landlord was a RICS valuer indicating a professional and qualified valuer was used, bound by the RICS code of conduct. As such the landlord’s appointment of the valuer on this basis was appropriate.
Following the resident disputing the valuation, the landlord relayed her concerns to the valuer who then amended the valuation to a figure £5,000 lower than the original valuation. In response to the resident’s subsequent concern expressed about this process constituting a “negotiation” rather than a “proper assessment”, the landlord then offered her two options:
1. It could arrange for a second market valuation to be carried out by an alternative valuer from a different surveying company which it would cover the fee for or;
2. It would refund the resident the fee so she could obtain her own market valuation for comparison purposes.
In its stage one response the landlord told the resident that the process for buying additional shares was set out in her lease and within the Homes England guidance document, Capital Funding Guide. It said having reviewed events, it was satisfied the process was followed correctly and therefore it was not upholding her complaint. The landlord reiterated this position in its final response.
Clause 4 of the resident’s lease under the section titled: ‘Staircasing provisions’ states that: ‘the parties agree that the decision of the valuer be final and binding on the parties to this lease’. It does not make any provision in the event of a disagreement between the parties regarding the valuation. It is noted that the Homes England Capital Funding Guide extract provided by the landlord refers to: ‘The lease making provision for the resolution of disagreement or dispute that may arise, between the landlord and the leaseholder, in respect of choosing a valuer’. Therefore, this suggests the lease will make provision for any dispute. On seeking clarification from the landlord, it told the Ombudsman that Schedule 5 of the lease allowed for either party to appoint an independent RICS qualified valuer to carry out a further valuation. However, based on the available evidence, this does not reflect the terms of the resident’s lease.
Therefore, as the lease does not set out any process in the event of a dispute arising about the staircasing valuation and because the landlord does not have a staircasing policy, it is clear there was no formal process for the landlord to follow when the resident disputed the staircasing valuation. Understandably this caused the resident concern. In this circumstance, the Ombudsman would expect the landlord to take reasonable steps to resolve her concerns raised about both the initial valuation and the process it followed. In the resident’s case, the landlord highlighted the points the resident raised to the valuer which resulted in a lower valuation. It then offered the resident further options when she remained unhappy. In view of the further options offered by the landlord, it is evident that it was taking reasonable steps to respond to her concerns about the valuation and passed on the information provided to the valuer, therefore, overall the approach taken by the landlord was reasonable.
Nonetheless in the absence of the landlord having any formal process in place to accommodate where a staircasing valuation is disputed by a resident, it is appropriate to include a recommendation below for it to review its policy and processes so that where a resident’s lease makes no provision for disputes regarding a stair casing valuation, it has in place an appropriate process to follow.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration by the landlord when handling the resident’s request to purchase an additional share in the shared ownership property.

Reasons

The lease agreement set out the staircasing process however it made no provision in the event of a dispute between the parties regarding the valuation. Due to this and because the landlord had no staircasing policy, there was no formal process for the landlord to follow when the resident disputed the valuation provided by the landlord appointed valuer. However, as the landlord took steps to resolve the concerns raised by the resident which resulted in her proceeding with the purchase of an additional share in the property, the landlord’s approach was reasonable.

Orders and recommendations

The Ombudsman recommends that the landlord review its policy and processes to ensure where a resident’s lease makes no provision for disputes regarding a stair casing valuation, it has in place an appropriate process to follow.