Regenda Limited (202405086)

Background

1. The landlord sent a letter to the resident on 20 February 2024 outlining that from 1 April 2024 the service charges would increase from £194.23 to £237.79. It provided a breakdown of the charges. The resident then raised a complaint on 26 February 2024 as she thought the increase in service charges was unfair and unjust. She raised several concerns about the standard of service provided.

What the complaint is about

2. The complaint is about:
   1. The increase and reasonableness of the service charge.
   2. The resident’s concerns about the service charge and the level of service provided.
   3. The complaint handling.

Our decision (determination)

3. The complaint about the increase and reasonableness of the service charge is outside of our jurisdiction.
4. There was no maladministration in the landlord’s handling of:
   1. The resident’s concerns about the service charge and the level of service provided.
   2. The complaint.

Summary of reasons

The level and reasonableness of the service charge

5. The tribunal or court would be better placed to consider the complaint about the reasonableness and increase of the resident’s service charge. This matter is outside of the Ombudsman’s jurisdiction.

The resident’s concerns about the service charge and the level of service provided

6. The landlord clearly explained the reasons for the increase in service charges. It also confirmed that the contracts remained a good value within the market.
7. The landlord confirmed that the defects had not impacted the level of service charge.
8. The landlord acknowledged shortcomings in the cleaning service due to a new contractor and agreed to not charge the resident for any missed visits. It also took steps to improve the service.
9. The landlord recognised the resident’s concerns about the high staff turnover in the property manager role and explained the steps it was taking to improve staff retention.

Complaint handling

10. The landlord handled the complaint in line with our complaint handling code.

Putting things right

Recommendations

Our recommendations are not binding, and a landlord may decide not to follow them.

Our investigation

The complaint procedure

What we found and why

The circumstances of this complaint are well known by the parties involved, so it is not necessary to detail everything that’s happened or comment on all the information we’ve reviewed. We’ve only included the key information that forms the basis of our decision of whether the landlord is responsible for maladministration.

11. We do not investigate complaints about the level of rent or service charge or the amount of the rent or service charge increase. As such we will not investigate the elements of the resident’s complaint about the increase or reasonableness of the service charge.
12. If the resident wanted to pursue her concerns about these matters, she may wish to apply to the First-tier Tribunal (Property Chamber) or the court.

13. The landlord is entitled to pass the costs incurred in managing the property to the resident through the service charge. The lease states the service charge will comprise of all expenditure reasonably incurred in connection with the repair, management, maintenance and provision of services for the building.
14. The resident raised several concerns with the level of service charge. The landlord explained the reasons for the increase within its complaint responses. It said:
    1. There was a 10% uplift in cleaning costs. It completes 52 visits a year which cost £52.80 each.
    2. It completes 19 gardening and grounds maintenance visits per year which each cost £107.41.
    3. There was a 5% increase in the pest control costs.
    4. It increased the electricity budget by £400. Its broker switched suppliers in September 2023, and it was in contract for 12 months. It predicted costs based on the amount it was currently paying.
    5. Fire alarm maintenance had increased by £48 per service. It completes 2 fire panel services a year.
    6. Weekly fire alarm testing, monthly emergency lighting testing, weekly automatic opening vents testing, and weekly lift line testing each increased from £7 to £8.40 plus VAT per visit. It said the contractor had not applied an inflationary increase in the past 3 years. It assessed the costs and found they still represented value for money in the market.
    7. The fire extinguisher contracts cost £308.40 comprised of £236.40 for the dry riser inspection and service and £72 for the annual automated opening vent service.
    8. It increased the day-to-day repairs budget due to an overspend in 2022/23. It advised residents in January 2024 that the scheme was placed on an emergency works only regime to reduce the overspend. It recognised a significant increase but said that most of the scheme was no longer covered by a warranty or defect liability period.
    9. There was a significant increase in insurance costs. It retendered the insurance policy as the previous insurer had withdrawn from the market. It said insurance premiums had increased for all properties due to the inflationary increases to the reinstatement value of properties.
    10. It had increased the cyclical reserve from £7.14 to £14.28 per month. This covers major works that recur every 7-10 years. It said if the reserve funds were insufficient for necessary works, it would bill leaseholders separately, so it increased contributions to prevent this.
15. It was reasonable that the landlord provided a comprehensive explanation of why the service charges had increased. Service charges are likely to rise with inflation as maintenance costs and supplier prices increase over time, which is outside of the landlord’s control. The landlord also highlighted changes caused by a change in suppliers. The landlord explained that it had budgeted in line with the contracted costs. Therefore, it does not make a profit from the service charges. It was reasonable that the landlord explained that despite the increase in costs, it had ensured the contracts still represented good value for money within the current market.
16. Repair costs were a main contributing factor to the service charge increases. The landlord said there was an overspend in 2022/23 responsive repairs. It would have been helpful to explain the reasons for the overspend. Nonetheless, it took practical steps to reduce the following year’s budget by placing the building on an emergency repair regime. It should ensure this is not to the detriment of the resident’s property or the building and it has an appropriate system for prioritising and managing the works. It is also likely that the repairs costs may increase due to the expiry of the defect and warranty periods. It was reasonable that the landlord increased the reserve fund contribution to prevent high one-off bills, to provide more long-term financial stability to the resident.
17. The resident was concerned that previous defects impacted the level of service charge. We have not seen full records of the defects or when they were identified, but in her complaints the resident referred to issues relating to water ingress, damp, and lift breakdowns. The landlord’s defects process document states there is a 12-month defect liability period, and a 2-year NHBC defects period will apply to shared ownership properties. It states, “During this period, residents will be able to report defects that arise and genuine defects (i.e. caused by a failure to comply with relevant standards) will be addressed by the contractor.” As a result, there is no indication that if the issues were identified within the defect period, it would detrimentally impact the resident’s service charge. The landlord would typically be entitled to charge the resident for any works that were not identified within the defect period.
18. Further to this, the landlord confirmed day-to-day repairs was the only budget where there was potential for defects to have been charged. It said this element of the budget was scrutinised for accuracy and checked throughout the financial year, so she had not been negatively financially impacted by building defects. It would have been helpful for the landlord to have further explained how it handled any repairs resulting from defects to offer the resident assurance that she had not been billed for it. The landlord did also confirm that the building insurance was not affected by the water ingress or any claims made by the developer or residents of the block.
19. The resident also raised concerns with the level and frequency of gardening, maintenance, and cleaning provided. In its complaint response, the landlord said it completed 52 cleaning visits a year and 19 gardening and grounds maintenance visits per year, consisting of 2 visits a month in growing season and 1 visit a month in the winter season. This gave the resident sufficient information about what level of service would be provided and could be expected.
20. It was appropriate that the landlord said it would not charge the resident for any missed visits, which would be reflected in the end of year statement in September 2024. The landlord has provided a copy of the statement sent to the resident on 17 September 2024, which showed it spent £15.36 less per property than budgeted on the cleaning contract. The difference in window cleaning and grounds maintenance was negligible. It therefore appears the landlord has taken appropriate steps to fulfil the actions agreed in its complaint response.
21. Following the completion of the complaint, the landlord told us that it ended the cleaning contract early due to poor performance and a new contractor started in May 2024. It also said it had introduced digital noticeboards to survey residents about communal cleaning and gardening. This was a practical step to monitor the level of service.
22. The resident raised concerns about high staff turnover for the property manager role and its impact on service delivery. Staff changes can occur for various reasons, which can often be outside of the landlord’s control. Nonetheless, landlords have a responsibility to ensure that any staff changes do not negatively affect the quality or continuity of services provided to residents. It was reasonable that the landlord recognised the resident’s concerns, explained the reasons for high staff turnover, and outlined the steps it was taking to improve staff retention. The landlord also told us that it has reviewed its interview and onboarding process to reduce staff turnover. It is positive to note it has learned from the outcome of the complaint. There is no evidence that the landlord raised any specific concerns about the impact on service delivery which needed to be addressed.
23. Overall, the landlord reasonably addressed the resident’s concerns. It provided appropriate reasons for the increases in service charge. It also recognised shortcomings in the cleaning service and high property manager staff turnover and took appropriate steps to remedy the issues. There was no evidence of maladministration in the landlord’s handling of the issues.

24. The Ombudsman’s complaint handling code (“the Code”) sets out when and how a landlord should respond to complaints. The Code states that the landlord must acknowledge complaints within 5 working days of being received. Once it acknowledges the complaint, it then must respond to stage 1 complaints within 10 working days and stage 2 within 20 working days. The landlord’s complaints process states it will respond to stage 1 complaints within 5 working days and stage 2 complaints within 15 working days.
25. The resident raised a complaint on 26 February 2024, and the landlord sent its stage 1 response on 5 March 2024. This slightly exceeded the landlord’s response timeframe by 1 working day. However, it still adhered to the Service’s complaint handling code. If the landlord is unable to meet its own response timeframes, it should amend its policy to be in line with our guidance. This would ensure it better manages residents’ expectations about when they can expect a response.
26. The resident then escalated the complaint on 14 March 2024, and the landlord sent the stage 2 response on 27 March 2024. This was within the response timeframe.
27. Overall, there was no maladministration in the landlord’s handling of the complaint as the landlord acted in line with the Code.

Learning

28. It is positive to note that the landlord learned from the resident’s concerns about high staff turnover levels and took steps to resolve the issue.