Southern Housing (202314620)

REPORT

COMPLAINT 202314620

Southern Housing Group Limited

28 November 2024

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 landlord’s handling of the resident’s purchase of a shared ownership property.
The landlord’s complaint handling has also been considered.

Background

The resident is a shared owner of the property, the landlord is a housing association. The property is a new build ground floor flat and the resident is the first to occupy it. The resident has been represented by her father, for the purposes of this report, both individuals are referred to as the resident. The landlord records that the resident is disabled but that it was not informed of this until midway through the events in question. The property was sold as shared ownership and was not part of any variant form of shared ownership such as the Home Ownership for people with a long-term disability (HOLD) scheme.
The resident states she reserved the property on 20 November 2022 and paid a reservation fee on 12 December 2022. The purchase price when the property was reserved was listed as £377,500. The landlord sent its offer letter to the resident on 25 January 2023, the purchase price was listed as £387,500.
The resident contacted the landlord to ask why the purchase price had changed. The landlord informed the resident that prices were based on valuations from surveyors from the Royal Institution of Chartered Surveyors (RICS) which were carried out every 3 months. The landlord stated that shared ownership properties must be sold at the current RICS valuation figure because the property was build using grant funding from Homes England. The landlord apologised that the price increase had not been communicated prior to the offer letter being issued. It stated the resident could withdraw from the buying process if she wished, and it would refund her the reservation fee she had paid.
The resident responded to the landlord to express her frustration. She noted that there is a 3 month validity period on each valuation, but assumed that once the property had been reserved it would be sold that the price advertised at the time. The resident noted she had been assured verbally that the purchase price was £377,500 and this was the amount used in the gift letter provided by her parents to fund the purchase. The resident declined to withdraw from the buying process. She noted that she is autistic and if the sale fell through, it would have a “catastrophic effect” on her mental wellbeing.
The resident signed the offer letter on 6 February 2023 and signed the lease on 7 March 2023.
The resident complained to the landlord on 11 May 2023. The resident stated:
1. She had been forced to pay an additional £5775 because the purchase price had increased between the reservation and the offer letter being issued.
2. At no stage had she been informed that the purchase price could, or had, increase after a reservation had been made. She had provided a gift letter to the landlord on 11 January 2023 based on the £377,500 purchase price, and it had not corrected her.
3. The landlord should refund the £5775 price difference, or at least the reservation fee.
The landlord provided its stage 1 complaint response on 1 June 2023. The landlord stated it had received the revised valuation on 22 November 2022, and had passed this to the third party contractor who carried out financial and affordability assessments on its behalf. It apologised that the resident had not been told of the price increase by the third party or by itself. The landlord noted that the resident had been given the opportunity to withdraw at any point until 3 March 2023 but had chosen not to.
The resident responded on 7 June 2023 and 15 June 2023. She stated:
1. While the price list did say that the price was based on a RICS valuation every 3 months, it was not clear that the price could change after an application had been submitted or reservation fee paid.
2. The landlord was aware of her disabilities, the resident felt she had no choice but to continue with the purchase as a result.
3. The resident needed a ground floor flat with a terrace so did not want to risk losing the property.
4. Raising the price goes against the spirit of the Homes England shared ownership scheme.
5. The reservation fee was an agreement to hold the property at the agreed price.
The landlord provided its stage 2 response on 18 June 2023.
1. It apologised that the price increase had not been communicated and stated it should have made this clear to the resident.
2. It has relied on its third party financial assessor to inform the resident when it carried out its 2nd financial assessment based on the increased purchased price, but this did not happen.
3. The property was not built or given as a priority to those requiring an adaptable or adapted home.
4. The valuation had taken place in line with Homes England’s Capital Funding Guide.
5. It has an obligation to ensure that Homes England grant funded properties are sold for market value.
6. The third party financial assessor had advised that the resident could still afford the property at the increased price.
7. The resident could have reduced her share value or withdrawn from the sale to avoid paying the additional sum.
8. It offered the resident £50 compensation for the inconvenience caused, and £15 for its failure to follow process.
The resident remained dissatisfied with the landlord’s response and the matter was referred to this Service.

Assessment and findings

Shared Ownership is a Government scheme which is governed by Homes England for Homes England’s Capital Funding Guide states that valuations must be undertaken my a RICS registered valuer and initial sales must be based on the full market value of the property.
The landlord’s shared ownership policy states that it will sell shared ownership homes at the value determined by a RICS registered valuer and it cannot sell above or below this figure. Reservation fees have a cooling off period of 14 days, after this time the fee is non-refundable if an individual decides not to purchase the property. The landlord’s price lists states that properties are subject to valuation every 3 months. RICS valuations are valid for 3 months.
The evidence provided suggests that the landlord followed its own policy and guidance from its governing bodies by revaluing the property after 3 months.Good practise would be to make sure that residents are aware that the price may change up until an offer is made.
The resident paid £500 on 12 December 2022 in order to reserve the new build property. Reservation agreements mean that the landlord cannot sell the property to another buyer during that period. The fees are deducted from the purchase price once the property is sold. The resident expressed frustration that she was not told that the property could be revalued after the property had been reserved, or that the price had increased by £10,000 between reservation and offer.
The landlord has accepted that it failed to inform the resident of the change in price for 2 months. Internal correspondence provided to this service does suggest that the landlord asked its third party financial advisor to inform the resident, but this did not happen. The landlord did not appropriately manage its third party contractor or provide sufficient oversight to ensure that it was keeping the resident up to date. This represents a failure of service.
The landlord should have informed the resident of the price increase at the earliest opportunity. That it did not, is a failure. The resident was evidentially distressed by finding out the price had increased and reported feeling like she had no choice but to continue with the purchase. The resident disclosed to the landlord that she was autistic and that withdrawing now would have a “catastrophic impact” on her mental health.
The landlord provided the resident with the opportunity to withdraw from the sale and offered to refund the reservation agreement when the resident expressed frustration with the increased price. It also stated that the resident could reduce her share purchase if she could not afford the new price. This response was appropriate. The resident chose to continue, paid the increased price, and signed the lease for the property.
The landlord has accepted its failings and has been candid with the resident about why these failings happened. It has demonstrated learning and reflection. When it was alerted to the error, it provided the resident with the opportunity to withdraw and refund the reservation fee which is normally non-refundable.
In its complaint responses, the landlord offered the resident £65 compensation, this was made up of £50 for the inconvenience caused and £15 for the landlord’s failure to follow its process. In the Ombudsman’s opinion, this is insufficient to redress the failures identified in this report for the following reasons:
1. The time taken for the landlord to inform the resident the price had increased.
2. The failure to make sure the resident understood that a valuation could increase the price of the property after it had been reserved.
3. The distress and inconvenience caused to the resident.
This services finds service failure in the landlord’s handling of the resident’s purchase of a shared ownership property. The Ombudsman awards £200 compensation. Given the resident’s disabilities and the increased distress caused as a result, this amount is higher than the recommended award set out in the remedies guidance for service failures.

The landlord’s complaint handling

The Ombudsman’s Complaint Handling Code (the Code) states that landlords must have an effective complaint process to provide a good service to their residents. An effective complaint process means landlords can fix problems quickly, learn from their mistakes and build good relationships with residents.
The landlord’s complaint policy states it will acknowledge 1 complaints within 5 working days and provide a response within 10 working days. Where it cannot meet these time frame, it will inform the resident and work to agree a new time frame. Stage 2 complaints will be responded to within 20 working days.
The resident first complained on 11 May 2023 and the landlord responded on 1 June 2023. The resident requested her complaint be escalated to stage 2 on 7 June 2023 and the landlord responded on 18 July 2023. These time frames are outside of those in the landlord’s complaints policy.
Failure to adhere to timeframes for responses is a failure of service. This Service acknowledges that on occasions there will be circumstances that mean a complaint response cannot be provided by the initial time given by the landlord. In these cases, it would be reasonable to expect that a landlord would contact the resident to explain in detail the reasons for the delay. The landlord is also expected to provide a new timeframe whereby the resident would expect 7 to receive a response. However, the landlord did not provide any updates nor reasoning for why it had exceeded the promised timeframe. This response was inappropriate.
In its complaint responses, the landlord was apologetic and sympathetic towards the resident’s situation. It set out its understanding of the resident’s complaint, explained the findings of its investigation in detail, and outlined its decision to the resident clearly. It outlined in depth why a valuation of the property had been required and the framework it needed to follow in these circumstances. Where it had identified failings, it apologised and set out what should have happened.
This service finds service failure in the landlord’s complaint handling. This is because its responses were outside of its timeframes and it did not provide updates to the resident. The Ombudsman awards £75 compensation to acknowledge and redress the service failure identified, this is in line with the remedies guidance available on the website.

Determination

In accordance with paragraph 52 of the Scheme, there was service failure by the landlord in its handling of the resident’s purchase of a shared ownership property.
In accordance with paragraph 52 of the Scheme, there was service failure by the landlord in its complaint handling.

Orders and recommendations

Orders

Within 4 weeks of this determination, the landlord is ordered to pay the resident a total compensation of £275. £65 of the landlord’s previous compensation offer can be deducted from this total, if already paid. The compensation is broken down as follows:
1. £200 to acknowledge and redress the failures identified in relation to resident’s shared ownership purchase.
2. £75 in recognition of the complaint handling failures.

Recommendations

The landlord should update its sales literature to ensure future purchasers are aware that shared ownership properties will continued to be revalued every 3 months until an offer is accepted.