Peabody Trust (202314939)

REPORT

COMPLAINT 202314939

Peabody Trust

14 March 2025

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 landlord’s handling of the resident’s queries about service charges and the resident’s concerns that the landlord had mislaid her direct debit form.
2. How the landlord calculated the resident’s service charges.
3. The landlord’s handling of the resident’s data.

Jurisdiction

What the Ombudsman can and cannot consider is called the Ombudsman’s jurisdiction. This is governed by our Scheme. The Housing Ombudsman Scheme. When a complaint is brought to this service, the Ombudsman must consider all the circumstances of the case, as there are sometimes reasons why a complaint will not be investigated.
The Housing Ombudsman Scheme states that:
1. Under paragraph 42.d, the Ombudsman will not investigate complaints which, in the Ombudsman’s opinion, concern the level of rent or service charge or the amount of the rent or service charge increase.
2. Under paragraph 42.f, the Ombudsman will not investigate complaints which, in the Ombudsman’s opinion, concern matters where the Ombudsman considers it quicker, fairer, more reasonable or more effective to seek a remedy through the courts, a designated person, other tribunal or procedure.
We are satisfied that the following complaint would be better referred to a tribunal or alternative procedure set out in the lease. We deem the following complaint to be out of the Ombudsman’s jurisdiction:
1. How the landlord calculated the resident’s service charges.
This complaint would require a determination of the law which is not within the remit of the Ombudsman to carry out and, in the view of the Ombudsman, is best suited to the jurisdiction of the First Tier Tribunal (Property Chamber – Residential Property) (referred to in this report as the “Property Tribunal”). It remains open to the resident to make an application to the Property Tribunal for a determination.
In addition, the lease provided a means to challenge how the landlord calculates the resident’s share of the service charges.
We also consider that the following complaint is deemed to be out of the Ombudsman’s jurisdiction:
1. The landlord’s handling of the resident’s data.
In her complaint, the resident stated that the landlord had lost her direct debit details.
Under paragraph 42.j, the Ombudsman will not investigate complaints which, in the Ombudsman’s opinion, fall properly within the jurisdiction of another Ombudsman, regulator or complaint-handling. The Ombudsman considers that where the resident has stated that they have suffered a data protection breach, that aspect would be more appropriate for the Information Commissioners Office (ICO) to review.

Background

The resident occupied a one-bedroom property with her husband under a lease which began on 23 March 2023. She had entered into an agreement to buy it in 2021.

Policy and legal framework

Under the lease, the resident had an obligation to pay “a fair and reasonable proportion” of the estate Costs and of the block Costs, as defined in the lease.
If the Landlord and the Tenant could not resolve the issue of what was a “a fair and reasonable proportion” by agreement, it shall be determined by a chartered surveyor with a specified level of experience, to be nominated by the parties, failing which, to be nominated by the President of the Royal Institution of Chartered Surveyors.

Chronology

On 14 May 2023, the resident wrote to the CEO of the landlord as follows:
1. She was “shocked” that the landlord had increased the service charges without prior consultation. The building and facilities were not finished.
2. The landlord had informed her that the initial amount would be refunded and any future amount recalculated to only include the services they were receiving. This had not yet been done.
3. She set out a number of issues with cleaning, decoration and appearance which she felt which justified a refund and reduction.
On 19 May 2023, the resident wrote again with similar points. She added that £3.20 (per square sq ft) would have amounted to £156 per month with the missing facilities. The charges were £179 without the missing services having been deducted. Flats were still being advertised as such. She disputed that the yearly increase was £95.
On 24 May 2023, the landlord wrote to the resident with the following information:
1. The “price per square foot” had increased even though some of the ‘facilities’ charges had been removed. The increase was due to the buildings insurance having increased by £235. The service charge for the year had gone up by “just under” £95 a year which showed that some charges have been removed. It did not expect a “massive jump” when the remaining facilities were completed.
2. The service charge was an estimate. Accounts were reconciled on an 18-month cycle.
On 11 August 2023, the landlord wrote its Stage 1 response as follows:
1. The landlord had explained the service charges on 17 May 2023 and at a meeting on 22 May 2023. Service charges were set in line with the cost of delivering those services. Many of the services were provided by other companies and sub-contractors and those costs were rising. It issued tenders for contractors and services to obtain value for money however increases were not avoidable due to inflation, insurance, additional fire safety requirements and energy.
2. The overall increase for her apartment for that year was £94.57.
3. The increase in the buildings insurance contribution was £253 for her property.
4. It would remove the charges for services on the development that had not yet been completed.
5. The biggest “drivers” of the increase were buildings insurance and utilities. It had confirmed that she was not being charged for the facilities that would not be ready until April the following year. It did not expect a significant increase when those services were in place.
6. It would reconcile the accounts by 6 months from 31 March 2023in accordance with the Landlord and Tenant Act 1985.
7. The block was part of its “high-profile and complex schemes” review. There would be a further level of scrutiny of the accounts by experts. and the relevant service areas before accounts are issued.
8. The resident’s partner had asked the landlord not to set up a direct debit for the account pending the response.
9. If an attempt was not made to clear the arrears, it would pursue its internal arrears procedure.
10. It had not identified a flat the same size as the resident’s which was paying less than £182.59 each month in service charge. It invited the resident to send details and it would provide the figures for both flats.
11. Her concerns around the window cleaning and cleaning of the block had been passed on to the relevant teams.
12. It had asked the Sales Team to make sure that variable service charges were explained to all new shared owners. There was reference in the sales material and should have been explained by her solicitor.
13. New budgets were issued at the start of every financial year.
On 21 August 2023, the resident wrote with her escalation request as follows:
1. There was a discrepancy between the advertised service charge of £3.20 per sq ft and the amount paid upon completion. She had been informed “at point of purchase” that the charges would be based on rate of £3.20/sq ft.
2. Some residents were paying notably more per sq ft than others. Those with larger sq ft were paying as little as £2.29 per sq ft yet the smaller flats were paying £3.73 per sq ft. She attached a spreadsheet.
3. The “arrears” letter showed a monthly payment of £184.30 per month. The increase was more than £94.57.
4. There was a disparity between management charges based on flat size. This was unfair. Residents were paying more for smaller flats. She wanted to know how they were calculated and why they varied for different flats.
5. There has been increases to the monthly charge since completion. The changes in the service charges had not been communicated. The lack of proactive communication regarding service charges had increased had created uncertainty and unease. She did not think services that had not been introduced had been deducted.
6. She asked whether they were paying more because the insurance also covered buildings with cladding issues.
7. She was paying three times more for insurance than her parents were for their 4-bedroom house, despite the relative buying power.
8. She requested the building insurance certificates with details including whether the distribution is based on sq ft and whether it covered cladding issues.
9. The landlord has lost her direct debit details that their solicitors had sent to the landlord’s solicitors. This had led to arrears notices. This was a breach of GDPR. She wanted confirmation of the current status of the direct debit mandate and the steps being taken to rectify any discrepancies.
On 16 September 2023, the landlord provided answers to queries on a sheet including as follows:
1. Amenities that were not yet operating were not included in the service charges.
2. Estate service charges were apportioned across the estate based on the number of units on the estate. There was an equal share per unit in each block contributing to the estate services, regardless of the size of the home.
3. Block service charges were calculated based unit size.
4. A service charge schedule was sent as part of the legal pack.
5. Estate service would change as more residents moved in.
6. Block specific services would be be recharged to the block they related to
On 19 September 2023, the landlord wrote with its Stage 2 response as follows:
1. The information about service charges on the fact sheet was for guidance only and not contractual.
2. It had shared information by email and at a meeting on 7 September 2023. It apologised she had not received a “booklet”.
3. The landlord issued the yearly rent and service charge statements every March including information about any increases.
4. The increase for her flat was less than £10 per month.
5. The management fee was a “flat fee”.
6. It stated “disputes about the level of rent or service charge or the amount of the rent or service charge increase fall outside our jurisdiction. Such disputes may be for the First Tier Tribunal (Property Chamber) who have the expertise and authority to make binding decisions on rent level disputes”.
7. The estimates were compared to the actual costs and would be adjusted.
8. The variance between flats was because different properties completed at different times.
9. It insured all its leasehold properties under a block building insurance policy with one total reinstatement value. It attached a copy of the summary of cover 2023/24 providing details on cover and exclusions.
10. The cover was based on all potential risks.
11. Cladding issues did not affect the cover in place for leasehold properties.
12. It had tendered for the building insurance. it set out its tendering process and reasons why insurance had “significantly risen” in recent years.
13. It set out its reasons why a “block policy was the best and common practice to obtain best value”. This may not necessarily bring lower premiums but would create lower admin costs. The policy would cover the whole building and grounds not just the demised leasehold spaces. Leaseholders were consulted in December 2022 and updated in June 2023. While the risks varied across the properties, insuring all of them under one policy enabled it to approach the whole market and make the risks more acceptable to the insurers..
14. It awaited the insurance certificate from the insurers.
15. It apologised that the Direct Debit has not been set up. It had not lost the Direct Debit details. They had been received on 12 April 2023. It had been through a “remodelling” but that was no excuse for the failure to set up the direct debit which in turn led her account to fall into arrears. It apologised.
16. The issues giving rise to this complaint was its inability to respond to her enquiry within a reasonable time frame. It apologised.
17. It offered £175 as follows: £75 for her time, trouble and inconvenience and £100 for poor complaint handling, including £50 for the delay in its Stage 1 response.
On 18 December 2023 the resident wrote as follows:
1. At a meeting on 7 September 2023 an officer of the landlord had attributed the discrepancy to “terms and conditions”. It had not provided those.
2. The resident stated the landlord had misled her during the sales process.
3. It was not clear why certain items, such as the management fee and cleaning fee, were charged at a flat rate, while others were not.
The landlord replied on 23 February 2024
1. Service Charges for any new development were estimated and subject to change. There were “fixed fees” for certain elements regardless of the size of the property as those services were “standard”.
2. The mechanism for increase was set out in the lease.
3. If he had misunderstood, it invited the resident to call him.

Assessment and findings

The forum for ruling on service charge disputes is the Property Tribunal. In addition, the lease provided a mechanism for challenging the method of apportioning the costs, calculations. However, we would expect, in the first instance, the landlord to be fair and transparent and to respond to the resident without the need to refer the case to the Property Tribunal or a formal process. It was open to the resident to consider whether to refer her case to a more formal process if she still felt dissatisfied.
The landlord did not provide us with the full correspondence between the resident and the landlord. However, it was clear from the evidence that there had been an ongoing discussion between the parties about the level of service charges since May 2023 and possibly earlier..
The evidence showed that the landlord responded to the resident’s queries in a number of ways. In addition to email correspondence, the landlord arranged residents meeting including on 22 May 2023, 7 September 2023 and December 2023. We have seen a question-and-answer sheet of 16 September 2023. Both parties referred to telephone conversations including on 17 or 18 May 2023.
The landlord stated early on it would not charge for services that were not provided that service charge year. It would, in any event, be reasonable to wait until the accounts were reconciled as it would not know in advance which services would be ready that year. The monthly cost was based on an estimate not the actual costs. In any event, the landlord explained those costs would not make a significant difference to the payments on account. We note that the monthly payment decreased for 2024/5.
While the landlord responded to a number of the resident’s queries within a reasonable time, there was a significant delay to the landlord explaining how it apportioned the service charges to residents. The landlord acknowledged that the resident would not have had to make a complaint if the landlord had responded sooner to her queries. The conclusion was that that it used a different calculation to work out the charges that applied to the block and those that applied across the estate. We note from the March 2024 that the landlord applied a different proportion to the estate as to the block costs. We assume that is because the number of residents would have been different. The landlord stated that the estate costs would reduce for the residents as more properties were sold. It also appeared to use a different way to apportion the insurance costs and management fees.
There was no evidence that the way the landlord apportioned the service charges to residents was contrary to the lease. The lease itself stated that the resident’s share of costs was to be a “fair and reasonable proportion” of the estate and block costs respectively. The lease also stated that the proportions themselves may be subject to variation from time to time This gave the landlord significant discretion. However, there were an opportunities for oversight. In addition to the Property Tribunal and the review mechanism provided in the lease, on 11 August 2023, the landlord explained that the block was subject to special scrutiny.
We did not see evidence that increasing the service charges was contrary to the lease. It would be normal practice as costs rise. We note that the resident accepted this. The resident would have had the benefit of her solicitors explaining the position on service charges and the terms of the lease to her. We would expect residents to make enquiries about how service charges worked. According to the landlord there was an outline in the sales information.
The resident raised that the sales materials misrepresented the position on service charges. Misrepresentation is a legal concept. We cannot make findings in law. However, it was confusing for the resident that the sales information referred to a price per square footage when that was not how all the service charges were calculated. We note that there was no evidence that the landlord addressed this or acknowledged that had caused confusion.
We did not see evidence that the landlord properly explained why the service charges items were calculated differently. Its explanation was that management and insurances costs were “fixed” or “flat” fees. They were “fixed” in that they were set at the beginning of each year. They did not vary according to the demands on service that might arise from time to time, as do repairs. We are not satisfied that is a reasonable explanation why the basis of allocating the costs was different. However, whether it was lawful to have different methods of calculation would be a matter for the property tribunal or arbitration suggested in the lease.
We did not see evidence that the landlord addressed the resident’s questioning of the landlord’s calculation that the increase represented £95 a year.
We saw no evidence that the landlord provided the “terms and conditions” it referred to in its correspondence and the resident requested in September 2023. It did not explain what it meant. If it was referring to the lease, it was not clear or specific. We will make a recommendation that the landlord clarifies this, if it has not done so already.
There was no evidence that the landlord lost the direct debit details. It admitted quite candidly that it had overlooked setting it up because of its merger with another landlord and that was not acceptable. It did not clarify whether the resident’s husband had asked the landlord to postpone setting up the direct debit. However, it accepted that not setting up the direct debit had caused the account to go into arrears. This had caused some distress and frustration for the resident.
We noted the resident raised a complaint about the standard of services such as the cleaning and the lifts. This aspect of the complaint was not escalated to Stage 2 and so we have not investigated it. We only investigate complaints that landlords review at the conclusion of its internal complaints process.
It was not clear when the landlord considered the resident had made her complaint. A complaint is an expression of dissatisfaction. We consider that the resident’s email addressed to the CEO of 14 May 2023 should have been addressed as a complaint. The landlord responded on 11 August 2023 some 3 months later. The landlord acknowledged its delays to its complaint responses and offered compensation which we consider to be reasonable.
Its explanation in its Stage 2 response “that disputes about the level of rent or service charge or the amount of the rent or service charge increase fall outside our jurisdiction” was confusing. While it was reasonable to refer the resident to the Property Tribunal, a landlord does not have “jurisdiction”. It may have been referring to our Scheme. However, the landlord did reasonably spend time seeking to explain its position and calculations.
The landlord took a number of steps to address the resident’s queries. It explained early on that service charges were variable, that it would not charge for services that had begun that year, and that the amount she was paying was an estimate. It investigated whether a flat of similar size to the resident’s was paying less. It invited the resident to provide more details. It provided a reasonable level of explanation about its approach to insurance. The landlord recognised its delays in providing information. In all of the circumstances, we find reasonable redress in the resident’s complaint.

Determination

In accordance with Paragraph 53.b of the Housing Ombudsman Scheme, in the Ombudsman’s view, there was reasonable redress in relation to the landlord’s handling of the resident’s queries about service charges and the resident’s concerns that the landlord had mislaid her direct debit form.
In the opinion of the Ombudsman, in accordance with paragraphs 42.d and 42.f of the Housing Ombudsman Scheme, the complaint about how the landlord calculated the resident’s service charges is outside of the Ombudsman’s jurisdiction.
In the opinion of the Ombudsman, in accordance with paragraph 42.j of the Housing Ombudsman Scheme, the complaint about the landlord’s handling of the resident’s data is outside of the Ombudsman’s jurisdiction.

Recommendations

The Ombudsman makes the following recommendations:
1. If it has not done so already, within 4 weeks of this report, the landlord should:
  1. set out how it apportioned “fixed” costs such as insurance and management fees and why the calculation was different to the other estate and block costs.
  2. provide to the resident the copy of its “terms and conditions” it referred to in its correspondence or explain what it was referring to.
2. While the information does not form part of the contract of sale, the landlord should ensure that its sales information about service charges is as accurate as it is reasonably possible.
The landlord should feedback to the Ombudsman of its intentions regarding these recommendations with any relevant copy correspondence within 4 weeks of this report.