Midland Heart Limited (202114092)

REPORT

COMPLAINT 202114092

Midland Heart Limited

8 August 2023

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 complaint is about the:

Level of service charges on the property.
Sale of the property by the landlord to the resident.
Landlord’s decision not to purchase the property back from the resident.
Support provided by the landlord to the resident in trying to sell her home.
Landlord’s complaint management.

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 sometimes reasons why a complaint will not be investigated.
Paragraph 42c of the Housing Ombudsman Scheme states that the Ombudsman may not consider complaints which, “in the Ombudsman’s opinion were not brought to the attention of the member as a formal complaint within a reasonable period which would normally be within six months of the matters arising”. Therefore, in accordance with paragraph 42c, the following aspect of the complaint are outside of the Ombudsman’s jurisdiction:
1. Sale of the property by the landlord the resident.
Paragraph 42e of the Housing Ombudsman Scheme states that the Ombudsman may not consider 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”. Therefore, in accordance with paragraph 42e, the following aspect of the complaint are outside of the Ombudsman’s jurisdiction:
1. The level of service charge.

The resident may wish to approach the First-tier Tribunal regarding issues associated with the service charge.

Background and summary of events

The resident entered into a shared ownership lease on 4 July 2004 and ‘staircased’ to full ownership on 21 May 2013. The property is a one-bedroom first floor maisonette, situated above commercial properties. The landlord is the leaseholder of the building and Wolverhampton City Council owns the freehold. The resident lives at the property with her young daughter who is autistic. In August 2020, the resident placed the property on the market.

Relevant policies and procedures

The landlord has a statutory obligation to report safeguarding issues to the relevant local authorities. Reportable issues relate to incidents or suspected incidents of abuse or neglect affecting children or adults, who are deemed as having care and support needs and may be at risk of harm. The management of safeguarding concerns is set out in the landlord’s safeguarding procedure.
The safeguarding procedure, ‘easy guide’ states that “when a safeguarding (SG) concern is identified, a business action (BA) will be raised [sic]. Safeguarding will be managed by tenancy services for general needs properties, independent living officers for supported living and the scheme manager for retirement living”.
The landlord operates a two-stage process for formal complaints. The target timescale for a first stage investigation is 10 working days and for a formal review 20 working days. Where these timescales are not possible, the landlord “will agree an appropriate extension for response with the customer”.
The complaints policy states that “where a councillor or MP makes an enquiry on behalf of a customer [sic] these will be treated as MP or councillor enquiries and will only follow the usual complaints process if explicitly expressed that they are making a complaint on behalf of a customer” (para. 4.7.5).
The ‘leaseholder’s handbook’ sets out a three stage complaints process and associated timelines:
1. Stage one: Investigation by a manager, who will respond within10 working days. If this is not possible, the resident will be told when they can expect a response.
2. Stage two: Investigation by a senior manager, who will respond within 10 working days.
3. Stage three: Appeal to the Executive Board, who will respond within 10 working days.

Summary of events

On 20 March 2021, the resident contacted the landlord explaining that she was unable to live in her flat, unable to sell it and asking “for help and advice as to what [she] can do”. The resident forwarded an email from the estate agent that was selling the property on her behalf, in which the estate agent said:
1. There had been three offers made on the property.
2. The first two potential purchasers could not obtain a mortgage. The estate agent said this was due to negative comments from surveyors’ [acting on behalf of the prospective lender].
3. The third potential purchaser was told by their broker that they would require specialist lending. They made a [low] cash offer.
4. The property was now being marketed again, “in the hope of either a cash buyer or a buyer that will do their mortgage [with the current mortgage provider]”.
The resident called the landlord on 20 March 2021. A landlord note drafted after this date, states that it told the resident that she would have to speak with the local authority about obtaining written confirmation that the commercial premises beneath her property are not cooked food outlets. The note says that the resident was advised that the landlord would not purchase her property. This investigation has not seen contemporaneous records of this conversation.
On 22 March 2021, the resident asked the local authority for information about the “use category or class for the shops beneath [her] flat. On 24 March 2021, the local authority said that “the shops come under the E Class if they are retail, restaurants, cafes and do not have a use class if they are hot food takeaways. Any change to a hot food takeaway would require planning permission”.
A landlord note drafted after the event, states that on 23 March 2021 the resident contacted it by phone and by email. A subsequent internal email states that resident “cannot understand why [the landlord] won’t buy back the property”.
A landlord note states that on 27 April 2021, it received a request from the resident’s solicitor. The landlord contacted the solicitor advising that once the required payment was received it could provide the [sales] ‘pack’. This investigation has not seen contemporaneous records of this communication.
On 10 May 2021, the resident emailed the landlord saying:
1. Since her previous email, which the landlord had yet to respond to, she had sold her flat for the fourth time and “once again the lender won’t lend on the property due to it being declared an unsuitable security”. The resident said this was due to “the property having a low demand for owner occupation and there being no satisfactory demand for flats in the area”.
2. She was “at breaking point”, having struggled for seven years in a one-bedroom flat with an autistic child. The resident told the landlord that she was having panic attacks and experiencing suicidal thoughts.
A landlord note states that the resident also called the landlord on 10 May 2021. A sale had again fallen through and that she was upset and depressed. This investigation has not seen a contemporaneous record of this conversation.
A landlord note states that the resident called the landlord on 25 May 2021 to inform it that she was contacting her MP. The landlord advised the resident that her emails had been passed to senior managers. This investigation has not seen a contemporaneous record of this conversation.
On 24 May 2021, the resident contacted her MP about the issues she was experiencing. The email summarised the situation and said that [the resident] “had emailed and called [the landlord] as I feel that they should take responsibility for what is happening [sic] to which they have not replied”. On 26 May 2021, the MP forwarded, with the resident’s permission, her email to the landlord and asked it to respond.
On 28 May 2021, an internal landlord email said that two other properties in the block had “tried selling their property over the last few years and could not sell”. A third property had “been on the market since last year and still not sold”. A separate landlord email on 28 May 2021, states “I’m not sure what we can do to help support her [the resident] or the other leaseholders who are struggling to sell”. The email goes on to say, “we have 23 apartments of mixed tenure on this site, nine GNs, six shared ownership and eight outright. We do not have a buy back policy but I didn’t know if this [was] something we could consider here?”.
On 28 May 2021, an further internal landlord email sought confirmation, “if we would buy back this property, or if there was any other support we could offer”. On 7 June 2021, an internal landlord email sought an update on whether it could buy back the property, or provide the resident with any other support.
On 8 June 2021, an internal landlord email said that it “can understand the frustration here”, but it was “not sure what we can do to alleviate the situation”. “As for a buy back, we don’t have a budget per se for this”. The email asked for clarification if there was any requirement for it to buy back and if not, would there be any value in the landlord purchasing the property “and looking at this for a rental”. The email also asked if there was any restriction on the resident renting the property out herself.
On 11 June 2021, an internal landlord email said that there was no obligation for the landlord to buy back the shared ownership from the resident. It was understood that some other residents on the site had experienced issues selling their properties. The “the issue [at the block] has been explored previously with very limited options available [to the landlord] to assist the situation. Something that was discussed was selling [the landlord’s] head-lease interest to a developer”, but nothing came of this. “Given this our options and ability to assist here are limited”. The email went on to say “that an issue also seems to be the general area” and it asked if the MP could assist in seeking funding to make the place more desirable. The landlord would speak to the resident to explore any other viable options, which could include looking at whether renting her property would be an option for the resident.
On 11 June 2021, the landlord responded to the resident’s MP, stating:
1. It was aware that prospective buyers [of the resident’s property] have been unable to secure a mortgage on the property due to the commercial properties. The landlord did not own the freehold on these properties, rather it had a long lease from Wolverhampton City Council.
2. It would contact the resident to explore other options, such as renting the property.
3. The resident might want to seek advise from an independent mortgage adviser or specialist lender.
4. The landlord was under no obligation to buy back the property.
On 15 June 2021, the landlord told the resident that “when the scheme was set up, the property market, lenders and indeed shared ownership market was subject to very different environmental factors”. It went on to say that “in a bid to support you and your family we have escalated this to our senior management team and following review it would be in touch. The landlord said that it would “work with you as much as possible to understand if we can propose further solutions”.
On 15 June 2021, an internal landlord email states, “this situation seems incredibly unfair and difficult for the customer. We have responded to the MP but there is so little we can do…. Not sure if we need to escalate to SMT [senior management team] to discuss?”. A further internal email states that the landlord had asked if there were any part-exchange schemes in the area and that a meeting was scheduled tomorrow to look at the development “in general as I gather there are wider issues which have been explored in the future but weren’t viable”.
On 23 June 2021, the resident called the landlord as she had not been contacted about the situation.
On 24 June 2021, the landlord spoke with the resident to “discuss options again”. A subsequent internal landlord email noted:
1. The resident had considered renting the property out while she is selling it, but could not do so “due to affordability”. She works part-time and requires a two-bedroom property to rent.
2. The resident had “looked at [a] few developments for part exchange”, however affordability and support issues had precluded this route. The resident needed to remain in the area due to work, childcare and her daughter’s support needs.
3. The resident’s estate agent had engaged specialist lenders. “Seven people have put in an offer to buy and five offers were accepted but advised banks were not lending”. “It was usually the valuers’ [for prospective lenders] comments that the area is not viable for investment and [the] service charge is too high”. The resident’s last option was to sell at auction, however this would incur a loss and she would be unable to clear the mortgage.
4. The resident could continue living in the property if she was single, however she had a child and a one-bedroom flat was not suitable for their needs. The resident was “mentally, physically and emotionally broken and cannot live like this anymore”.
5. The service charge was increased in 2017 following a review of the sinking fund. Work undertaken in 2016 had caused “a huge deficit”. The sinking fund per property was £72.86 per month and service charges £57.94, totalling £130.80.
On 29 June 2021, an internal landlord email addressed the service charge at the property, “as that has been identified as a possible reason why lenders will not lend to buyers”. It asked if there were any components of the charge that could be reduced. It questioned if the sinking fund could be reduced, noting that contribution “is high to cover the anticipated cost and to factor in the lack of contribution from the commercial units owing to the defective lease on those properties”. The response confirms that “the fee for the sinking fund is the largest” [component of the fees paid by residents]. It states that “unfortunately, we would not be able to reduce sinking fund as future works would need to be covered by this fund”.
On 28 July 2021, the landlord wrote to the resident. It said:
1. There was “nothing unusual about the lease or the construction of the building that should cause a concern to any potential purchaser”.
2. “The service charges mainly relate to the sinking fund for future building maintenance and for the maintaining and servicing of communal facilities”. It considered £130 per calendar month “to be reasonable and to be expected”.
3. The resident’s MP could raise the issue of why a mortgage provider would not be prepared to fund the purchase of the property, directly with the company(ies).
4. “People in the past had been able to secure mortgages to buy these homes”.
5. The Executive Board had “decided it cannot agree to purchase the property [sic] as we have limited funds for building new homes and the biggest need is for 2 and 3 bedroom houses”.
6. It needed to ensure “any new home we build or buy for rent is very energy efficient. As [the resident’s] home is a listed building and an older construction type it would not meet [the landlord’s] criteria.
7. It could provide copies of any building safety certification the resident required, “to demonstrate that the building is safe and has proper fire safety measures in place”.
8. The resident could discuss with their estate agent if any non-high street mortgage providers would fund a purchase and provide this information to prospective buyers. Alternatively, the property could be promoted to cash buyers, or sold at auction.
On 28 July 2021, the landlord completed a safeguarding recording form. The landlord had called the resident to inform her that the executive board had considered the request for the landlord to buy her property back, but were unable to do this. The form was triggered by comments the resident had made during the call. The resident subsequently rang back to ask why it had taken the landlord three months to provide this outcome and at that stage the landlord told the resident it intended to report a welfare issue. The form notes that immediately after speaking to the resident for the second time, the landlord called ‘101’, who called the resident.
On 7 October 2021, this Service contacted the landlord noting that its letter to the resident on 28 July 2021 was not a formal complaint response. It did not give the resident the right to escalate their complaint, nor did it give reasons for closing the complaint and did not include referral rights to this Service. The landlord was asked to consider the resident’s complaint under its ‘formal investigation stage’ and provide a written response within 10 working days.
On 15 October 2021, the landlord acknowledged receipt of the complaint.
On 26 October 2021, the landlord issued a formal investigation complaint response. It did not uphold the resident’s complaint, saying:
1. It wrote to the resident on 28 July 2021 and that the information was “accurate and thorough”.
2. The Executive Board had confirmed the landlord was unable to purchase the property from the resident.
3. It would provide copies of any building safety certificate, if it helped the sale.
4. The resident could discuss with her estate agent if there were non-high street mortgage providers that would fund a purchase and provide this information to prospective buyers.
5. It found no service failure.
On 5 November 2021, the resident asked for her complaint to be escalated, stating:
1. Her initial complaint was not dealt with correctly, “from the very beginning”. It was only when this Service alerted the resident did she know that her issues she had reported to the landlord had not been treated as a formal complaint. She had understood that the letter from the landlord on 28 July 2021 was a final response.
2. The landlord’s response to the problems she was experiencing in selling the property was inadequate. She had already tried the suggestions proposed in the landlord’s letter on 28 July 2021.
The landlord acknowledged receipt of the request to escalate on 18 November 2021. It apologised for the delay, which it attributed to “staff changes” and said it would “keep this in to consideration when we provide our final outcome to you by 3 December 2021”.
On 6 December 2021, the landlord provided its stage two response. It did not uphold the resident’s complaint, saying:
1. That the information provided to the resident was correct and that it had not failed in its services to the resident.
2. It did not offer a buyback scheme. As a goodwill gesture, the Exec Board was asked if it could consider buying the resident’s property. This was not something the landlord could offer. As a charitable organisation it had limited funds and needed to focus its investments on areas of greatest need.
3. When the shared ownership lease was signed all liabilities were considered by both parties’ legal representatives. As a homeowner, the resident was also required to sign the contract.
4. The landlord still wanted to help the resident in the sale of the property. It reiterated the suggestion of finding alternative mortgage providers and asking the MP to query why lenders would not provide funds. It also offered to “write to any lenders asking why they are refusing to lend against your property, as there is nothing [it] can identify as a reason for this”.
5. It repeated the offer to provide building safety certification and the suggestion that the property be sold at auction.

Events following completion of the internal complaints process

On 3 April 2023, the landlord offered the resident £150 in recognition of “a delay in raising a formal complaint [sic] and delay in acknowledging [the resident’s] escalation to stage two request”.

Assessment and findings

Landlord’s decision not to purchase the property back from the resident.

The landlord has confirmed to this Service that there was no Section 106 notice in place regarding the resident’s property, nor was there any contractual obligation for it to purchase the property back from the resident. The landlordtherefore acted reasonably in not purchasing the property back from the resident.
Taking all factors into consideration, there was no maladministration in regard to the landlord’s decision not to purchase the property back from the resident.

Support provided by the landlord to the resident in trying to sell her home.

The resident contacted the landlord on 20 March 2021, requesting “help and advice”, as her property was no longer suitable and she had been unable to sell. She emailed and called on 23 March and 10 May 2021, and having not received a response, on 24 May 2021, she sought the assistance of her MP. After contact from the MP, the landlord provided a response on 11 June 2021. It was not acceptable that the resident had to wait this long. The resident had told the landlord that she was at “breaking point” and the length of time the landlord took to respond exacerbated the resident’s distress.
In its response on 11 June 2021, the landlord said that it would contact the resident to discuss other options. It did not do so until after the resident had contacted the landlord on 23 June 2021 to flag that it had not contacted her.
On 28 June 2021, a phone conversation with the resident caused the landlord to complete a safeguarding recording form. It is unclear why a safeguarding concern was not raised earlier, in particular following the landlord’s conversation with the resident on 10 May 2021, when the resident said that she was experiencing suicidal thoughts.
As set out previously, the landlord was not obligated to buy back the property. There was however, a lack of clarity within the landlord as to whether it could do so, and this appears to have contributed to the delay in responding to the resident. The landlord has said that it told the resident verbally on 23 March 2021 that it would not buy the property. The landlord has said that on 25 May 2021, it told the resident that her emails had been forwarded to senior managers. This investigation has not seen any contemporaneous records of these conversations. On 28 May 2021, an internal landlord email states that it did not have a buy back policy, but asked if in this case it could purchase the property. On 8 June 2021, a landlord email sought clarification if there were any obligation to purchase the property and if there were any value in doing so. On 15 June 2021, a landlord email stated, “not sure if we need to escalate to SMT [senior management team] to discuss”. Had the landlord had a policy in place, a process for considering requests and an effective route to obtain the engagement of senior management, the resident would have had clarity on the landlord’s position much sooner.
The landlord is not responsible for the actions or decisions of lenders. Whereas previously lenders had been willing to mortgage the property, the resident’s experience was that prospective buyers were unable to secure a mortgage. One factor cited was the service charge. The landlord sought to establish what this comprised and how it compared to other buildings. An internal email stated that the “SF [sink fund] contribution is high due to the defective lease on those properties”. The landlord has told this Service that the commercial units below the resident’s property are not required to contribute to the cost of the roof. The resident’s solicitor would have had sight of these lease agreements and the ability to challenge them at the point of purchase. The landlord is not the freeholder of the property and is not required, nor would it be able to amend the leases on the commercial units.
Landlord internal emails indicate that other residents in the building had experienced issues when trying to sell their properties. It was noted by the landlord that “the issue [at the block] has been explored previously with very limited options available [to the landlord] to assist the situation. Something that was discussed [but not progressed] was selling [the landlord’s] head-lease interest to a developer”. Evidence seen by this investigation states that a meeting was due to take place on 16 June 2021, as there were “wider issues” at the development. It is not clear if this meeting occurred, or what the outcome was. Although the landlord is not the freeholder of the building, it could have engaged with the freeholder in order that all parties had a clear understanding of the issues. This may not have materially affected the resident’s ability to sell her property, but it is reasonable to expect the landlord to liaise with the freeholder regarding the “wider issues” and document these interactions.
Taking all factors into consideration, there was maladministration in regard to the support offered by the landlord to the resident in trying to sell her home.

Complaint management

The landlord did not consider the resident’s 20 March 2021 email under its complaints process. The resident did not state explicitly that it was a ‘complaint’, albeit she was complaining about her situation. The fact that the email sought “help and advice”, could explain why the landlord did not treat this initial correspondence as a complaint.
It was however, unreasonable that subsequent contact from the resident did not trigger the complaints process. Paragraph 1.2 of the Complaint Handling Code defines a complaint as “an expression of dissatisfaction, however made, about the standard of service, actions or lack of action by the organisation, its own staff, or those acting on its behalf, affecting an individual resident or group of residents”. The landlord noted on 23 March 2021 that the resident could not understand why the landlord would not buy back her property. On 10 May 2021, the resident highlighted to the resident that it had yet to respond to her. These and subsequent communications saw the resident expressing her broad dissatisfaction with the landlord. As such they were complaints and should had been treated accordingly.
The response provided by the landlord on 28 July 2021 did not give the resident the right to escalate her complaint, nor did it give reasons for closing the complaint, or include referral rights to this Service. Following intervention by this Service asking the landlord to consider the resident’s complaint under its ‘formal investigation stage’, the landlord provided a written response on 26 October 2021. This was seven months after the resident’s initial email.
On 5 November 2021, the resident asked for her complaint to be escalated, saying that her complaint had not been dealt with correctly, “from the beginning”. The landlord provided a stage two response on 6 December 2021. The response did not demonstrate that it had investigated the issues around complaint management and these issues were not covered whatsoever in its response.
There is a discrepancy between the landlord’s complaints policy and the leaseholder’s handbook. The landlord’s complaints policy sets out two stage formal process, whereas the handbook sets out a three stage complaints process. A landlord should not have two different processes in operation.

The Complaint Handling Code is clear that a complaints process “should not be unduly long” and that a two stage process is ideal. The landlord’s subsequent offer of compensation was entirely outside of the internal complaints process (ICP).

Taking all factors into consideration, there was maladministration in regard to the landlord’s complaint management.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration in respect to the landlord’s decision not to purchase the property back from the resident.
In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was maladministration in respect to the support provided by the landlord to the resident in trying to sell her home.
In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was maladministration in respect to the landlord’s complaint management.

Reasons

The landlord responded too slowly to the resident’s request for assistance. The delay in responding exacerbated the resident’s distress.
The landlord was unclear about its position on buying back the resident’s property. The absence of a policy and a procedure for considering requests contributed to the delays in communicating with the resident.
The landlord was too slow to raise safeguarding concerns regarding the resident.
The landlord failed to take a proactive approach to the issues that the resident and others were experiencing. It failed to demonstrate that it had engaged with the freeholder.
The landlord did not handle the issues reported by the resident under its complaints code. It was only after the intervention of this Service that the landlord conducted a formal complaint investigation.
The landlord failed to investigate the resident’s concerns about its complaint management.

Orders

Within four weeks of the date of this report the landlord is ordered to:

Apologise to the resident.
Pay the resident £400 for the distress and inconvenience caused as a result of the failures associated with the support provided by the landlord to the resident in selling her property.
Pay the resident £400 for the distress and inconvenience caused to the resident as a result of the failures in the landlord’s complaint management.

Within three months of the date of this report, the landlord must:

Undertake and complete a review of the information in its leaseholder’s handbook and ensure the complaints process set out there mirrors that in its wider complaints policy. It should ensure that all information is compliant with the Complaint Handling Code. The landlord should write to this Service to confirm that updated documents have been published.
Conduct staff training to ensure when communications from residents should be treated in accordance with the Complaint Handling Code and enter into the ICP. The landlord should write to this Service setting out how the training will support all staff, including senior managers to identify when correspondence should be handled under its complaints process and what this entails.
Conduct staff training regarding its safeguarding policy and procedures and ensure all staff understand when and how to instigate safeguarding referrals.

Recommendations

The landlord should:

Formulate and publish a ‘buy back’ policy and procedure. This information should at a minimum, set out:
1. How residents can submit requests.
2. The process and timeframe under which requests are considered.
3. The factors the landlord will take into consideration in making its decision.
Enter into exploratory discussions with the freeholder as to possible means to regularise the lease management, so as to remove the disproportionate levels of service charge and advise the resident(s) as to the outcome of these discussions.
Review its due diligence procedures regarding to ensure it does not enter into partnership arrangements that may result in disproportionate service charge levels on its residents.