A2Dominion South Limited (202300917)
REPORT
COMPLAINT 202300917
A2Dominion South Limited
30 September 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:
- Concerns over money missing from a sinking fund.
- Complaint.
Background
- The residents are a husband and wife who have been leaseholders of the property, a 1 bedroom first floor flat, since 1988. The landlord is a housing association, which owns the freehold to the building and manages the sinking fund. When we refer to ‘the resident’ in this report, we are referring to the joint residents. However, as the husband brought the complaint to this Service, we use male pronouns.
- The residents pay into a sinking fund for or towards such of the items contained within the common parts as are likely to give rise to expenditure at intervals of more than one year (such as lifts, boiler and other capital equipment).
- The resident raised a complaint to the landlord on 12 May 2023, in which he said:
- In October 2022, the landlord had taken money from the sinking fund. However, no works had been completed to justify this.
- Following this, he had a meeting with the landlord, during which it told him it would resolve the discrepancy. However, the landlord was yet to complete this.
- He wanted the landlord to return the money to the sinking fund with interest.
- The landlord acknowledged the resident’s complaint on 1 June 2023 and confirmed it would respond within 10 to 20 working days. It sent its stage 1 response on 13 June 2023, in which it said:
- It had returned £1,708.52 to the sinking fund. The remaining amount of £1,336.09 was still in dispute as it had been earmarked for fire risk assessment works.
- It would aim to provide a final response by 20 June 2023 after completing further investigation.
- It apologised for the time taken to respond to the complaint and explained how the resident could escalate to stage 2 of the complaints process.
- The resident submitted a stage 2 escalation request on 26 June 2023. He said:
- He had not received an update by 20 June 2023 as promised.
- He had not received an explanation about why the funds had been moved and what had been done in relation to the fire risk assessment.
- The landlord had not explained how it would avoid this situation from reoccurring or how the residents’ funds would be safeguarded in the future.
- He wanted the landlord to add interest to the sinking fund for the approximate period of 9 months that the funds were missing. He also wanted compensation for the upset and inconvenience caused by his dealing with the complaint.
- The landlord acknowledged the stage 2 request on 26 June 2023 and said it would respond within 20 working days. It sent the stage 2 response on 19 July 2023, in which it said:
- It had reinstated the full amount of £3,044.61 after finding no works had been completed. The reinstatement of funds would be visible in the September 2023 service charge statement.
- It did usually apply interest to the sinking fund balance but the lease did not require this. It would not put its own money into the sinking fund to replace interest not accrued.
- It was implementing a new IT system to include a repair module, which would ensure more accurate reporting on works and costings.
- It agreed it had taken too long to resolve the issue, and apologised for this. It had fed this back to the relevant departments.
- It offered £240 compensation for the delay and inconvenience caused to him.
- The resident could bring the complaint to this Service if he remained dissatisfied.
- The resident contacted the landlord again on 26 September 2023 because the reinstated monies were not showing on the annual statement the landlord sent to him on 18 September 2023.
- The landlord later credited £3,044.61 to the sinking fund on 29 November 2023. It has provided this Service with a transaction history showing this credit.
- The resident duly made his complaint to this Service on 11 January 2024.
Assessment and findings
The landlord’s handling of the resident’s concerns over money missing from a sinking fund
- Clause 5 of the first schedule of the lease agreement gives the landlord the authority to set up “a reserve fund for or towards such of the items contained within the common parts as are likely to give rise to expenditure at intervals of more than one year (as for example such matters as the replacement of lifts, boilers and other capital equipment)”. This is separate to the service charge applicable for other regular services such as cleaning, lighting and litter removal.
- Clause 6 of the first schedule of the lease agreement says that “if the reserved funds accumulated by the landlord exceed the sums required or which the landlord anticipates will be required to meet the expenditure the landlord may in its absolute discretion allocate the whole or part of such reserved funds to any of the costs and expenses to be incurred by the landlord under clause 3”. This confirms the landlord has the discretion to use the sinking fund towards any of the costs associated with running the building. This would include a fire risk assessment, but only where the sinking fund has exceeded the sum needed under it.
- There is no clause in the lease agreement or in the landlord’s service charge policy that says interest will be added to the sinking fund balance. This Service requested a copy of the landlord’s procedure in relation to sinking fund management, but the landlord told us it does not have one. It is evident from the annual service charge statements the landlord sent to the resident on 18 September 2023 and 16 September 2024 that it does, in the normal course of things, apply a small amount of interest to any positive balance in the sinking fund.
- While there appears to be no formal process or procedure stating interest will be added to the sinking fund, it is evident that the landlord does add interest in practice and that the monies would have accumulated interest had they not been removed from the sinking fund by the landlord. In the circumstances, it is fair and reasonable that the landlord should apply a payment of interest in the normal way.
- The landlord has provided internal emails from June 2023 when it was investigating the matter. These show that the landlord took the monies from the sinking fund on the basis of an invoice it received from its contractor. However, the invoice seems to have been inaccurate and too expensive for the actual works completed by the contractor (namely, a fire risk assessment). The landlord only investigated this and disputed the invoice in response to the resident’s complaint about the matter. It is not known if the landlord would have ever looked into this without the resident instigating this. This is concerning, particularly as the landlord told us it does not have a procedure for managing its sinking funds. That the landlord does not have a formal procedure may lead to discrepancies arising.
- The landlord first withdrew the money from the sinking fund in October 2022 and it completed the account adjustment over a year later on 29 November 2023. We have seen additional internal emails from the landlord which show it first requested reimbursement of funds from the relevant department in March 2023 following a meeting with the resident. The relevant department agreed to reinstate part of the fund, but not all of it. There is no evidence to show the landlord attempted to trace what work was completed in respect of the outstanding funds until after the resident raised his complaint in May 2023.
- We would expect that the discussions the resident had with the landlord in late 2022 to early 2023 would have allowed it enough time to confirm whether work was done to justify the withdrawal, and to adjust the sinking fund balance if needed. It is concerning that the landlord did not identify the discrepancy and investigate this internally without the need for the resident to raise this himself.
- After the resident had raised the issue in late 2022 and early 2023, the landlord should have taken responsibility for checking that the account adjustment was successful. This would have taken responsibility off the resident and could have avoided the resident raising the complaint. This meant the resident had to spend more of his time trying to put the error right, which was inconvenient.
- Due to the mistake in removing the monies from the fund, and the failure of the landlord to investigate this in a timely manner, the Ombudsman finds maladministration in the landlord’s handling of the resident’s concerns over money missing from the sinking fund.
The landlord’s handling of the resident’s complaint
- Sections 8.1, 10.1 and 12.2 of the landlord’s complaint procedure at the time of the complaint matched the timescale requirements from section 5 of the Housing Ombudsman’s Complaint Handling Code (the Code) at the time. They said the landlord would:
- Log and acknowledge both stages of the complaint within 5 working days of the resident’s request.
- Send a stage 1 decision in writing within 10 working days of acknowledgement, extending this by up to 10 working days if necessary by writing to the resident with an explanation of the delay.
- Send a stage 2 decision in writing within 20 working days of acknowledgement, extending this by up to 10 working days if necessary by writing to the resident with an explanation of the delay.
- The landlord acknowledged and responded to the stage 2 complaint within the correct timescales. However, it took 13 working days to acknowledge the stage 1 complaint. It sent the stage 1 response 8 working days after acknowledging it, but the delayed acknowledgement meant the resident waited 6 working days longer than he should have for the response.
- The stage 1 response the landlord sent was incomplete. It promised to complete further investigation about part of the missing funds and to update the resident by 20 June 2023. However, the landlord did not complete this and there was no further contact until the resident raised his stage 2 request on 26 June 2023.
- The landlord said in its stage 2 response on 19 July 2023 that it had restored the missing monies to the sinking fund. However, the sinking fund transaction evidence shows this to be incorrect, as the funds were not restored until 29 November 2023 following further contact from the resident.
- When investigating a complaint, the Ombudsman applies its dispute resolution principles. These are high level good practice guidance developed from the Ombudsman’s experience of resolving disputes, for use by everyone involved in the complaints process. The three principles which drive effective dispute resolution are to treat people fairly and follow fair processes; to put things right; and to learn from outcomes.
- As noted in this report, the landlord does not currently appear to have a procedure on its management of sinking funds. Section 13 of the landlord’s complaints procedure confirms it always seeks to learn lessons from its complaints. The landlord said in its stage 2 response that it was implementing a new IT system which would ensure more accurate reporting on works and costings. However, we have seen no evidence to show if this has yet been implemented or, if so, what practical difference this has made.
- As such, the evidence seen suggests the landlord has not followed the dispute resolution principles. It did not follow a fair process in relation to the restoration of the sinking fund, as it did not restore the funds until several months after issuing its stage 2 response. It did not put things right by applying the missing interest and nor has it demonstrated learning from the outcome.
- Due to the late stage 1 acknowledgement and response, the failure to follow up on the stage 1 response as promised, and the failure to provide a fair outcome in line with the dispute resolution principles, the Ombudsman finds maladministration in the landlord’s complaint handling.
Determination
- In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration in the landlord’s handling of the resident’s:
- Concerns over money missing from a sinking fund.
- Complaint.
Orders and recommendations
Orders
- It is ordered that, within 4 weeks of the date of this report, the landlord provides the resident with an apology written by a senior member of staff.
- It is ordered that, within 4 weeks of the date of this report, the landlord pays the interest that would have occurred during the normal course of events to the relevant sum into the sinking fund.
- It is ordered that, within 4 weeks of the date of this report, the landlord provides the resident with a payment of £440. This includes the compensation of £240 offered at stage 2 (if not already paid) and comprises additional payments of:
- £100 for the inconvenience caused to the resident in trying to resolve the missing sinking fund monies.
- £100 for the complaint handling failures identified and the resulting inconvenience.
Recommendations
- It is recommended that the landlord produces a formal procedure for its management of sinking funds, including step by step detailed instructions for responsible staff. The landlord should consider what safeguards it can include in the procedure to prevent funds being erroneously removed from sinking funds.