Sovereign Network Group (202432828)

Background

1. In September 2024, the resident contacted the landlord to query the External Management Costs (EMC) included in their 2023 to 2024 service charge actuals. The resident said they had been charged twice for this service. They said the landlord had incorrectly paid the 2024 to 2025 EMC invoice within the 2023 to 2024 financial year. The resident was not satisfied with the landlord’s response and so raised a formal complaint. The resident remained dissatisfied at the end of the landlord’s formal complaints process and asked us to investigate. The resident has been represented by their mother in their interactions with both us and the landlord.

What the complaint is about

2. This complaint is about the landlord’s response to the resident’s concerns they had been charged twice for External Management Costs (EMC) in their 2023 to 2024 service charge actuals.

Our decision (determination)

3. We have found there was service failure by the landlord in its response to the resident’s concerns they had been charged twice for External Management Costs (EMC) in their 2023 to 2024 service charge actuals.

Reasons

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.

What we have not considered

4. We cannot consider complaints about the level of service charges, the amount of any increase, or whether the charges are reasonable. We also cannot determine legal liability or the legal correctness of the landlord’s accounting process. If the resident wants to pursue their concerns about these matters, they may wish to challenge the charges by applying to the First-tier Tribunal (Property Chamber)(FTT) or the court, which have the authority to make binding decisions on these issues.

What we have considered

5. Whilst we cannot determine the legal correctness of the accounting process, we can assess the landlord’s response to the resident’s query. Specifically, we can assess whether it has provided clear and consistent information to explain why it considered the treatment of the 2 invoices queried by the resident to be appropriate.
6. We would expect the landlord to explain, and provide supporting documentation to evidence, what the invoices paid in 2023 to 2024 related to and when the associated costs arose. In addition, we would expect the landlord to provide the resident with reassurance that the invoice relating to 2024 to 2025 would not be charged again within the resident’s subsequent actual service charge accounts.
7. The landlord has provided us with copies of the following EMC invoices for the resident’s property:
   • invoice for ‘Estate in Advance’ 2023 to 2024 of £252.38. Invoice date 31 March 2023. Payment due date 1 May 2023
   • invoice for ‘Estate in Advance’ 2024 to 2025 of £249.86. Invoice dated 4 March 2024. Payment due date 1 April 2024
   • invoice for ‘Estate in Advance’ 2025 to 2026 of £245.18. Invoice dated 26 February 2025. Payment due date 1 April 2025
8. The resident’s September 2024 service charge (actuals) statement includes both the 2023 to 2024 (£252.38) and 2024 to 2025 (£249.86) EMC invoices for ‘Estate in Advance’. The statement confirms the accounts had been independently verified by Chartered Accountants, and a copy of the relevant certification was provided to the resident.
9. The certification confirms the figures in the statement of account had been correctly extracted from the underlying accounting records. It also states the entries checked were supported by receipts or other documentation that had been inspected.
10. In its complaint responses, the landlord explained it had received 2 EMC invoices within the 2023 to 2024 financial year. It stated these invoices related to 2 separate periods: 1 for 2023 to 2024 and another for 2024 to 2025. It also explained the EMC had moved from billing in arrears to billing in advance. These explanations are consistent with the invoice and due dates set out above.
11. The landlord further explained it included all service chargeable costs paid within a financial year within that year’s actual expenditure. It stated this approach was intended to ensure compliance with Section 20B of the Landlord and Tenant Act 1985, which requires service charge costs to be demanded within 18 months of being incurred.
12. On the basis that the 2024 to 2025 invoice was paid by the landlord during the 2023 to 2024 financial year, its explanation for including both invoices within the 2023 to 2024 accounting period is not, on the face of it, unreasonable. As noted above, it is for the First-tier Tribunal (Property Chamber) or a court to determine whether this accounting treatment is strictly correct in law.
13. However, the landlord fell short of the standard we would expect in its communication with the resident. At no point did it provide, or offer to provide, copies of the disputed invoices to the resident in response to their concerns. Providing this information at an earlier stage would have enabled the resident to see for themselves what each invoice related to, when it was issued, and when payment was due. This would have supported transparency and may have resolved the concerns without escalation.

Putting things right

Where we find service failure, maladministration, or severe maladministration we can make orders for the landlord to put things right. We have the discretion to make recommendations in all other cases within our jurisdiction.

Orders

Landlords must comply with our orders in the manner and timescales we specify. The landlord must provide documentary evidence of compliance with our orders by the due date set.