Affordable Housing Communities Limited (202216923)

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REPORT

COMPLAINT 202216923

Affordable Housing Communities Limited

30 April 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

  1. The complaint is about:
    1. The landlord’s response to the resident’s concerns regarding service charge calculations.
    2. The service charge increase.

Background

  1. The resident is a shared owner leaseholder of a 2 bedroom flat with the landlord. He is required to pay service charges in addition to the rent in line with the lease.
  2. At the time of purchase in November 2021 the resident was informed that the service charges payable related to the square footage of the property. The evidence shows that the property was measured at 1042 square foot.
  3. In April 2022 the landlord issued its annual service charge invoice. The resident queried the charges as he felt they were incorrect and suspected that an error had been made regarding the square footage of his property.
  4. Following a residents’ meeting in June 2022 it was agreed that all properties within the development would be re-measured to clarify the apportionment of service charges for 2022/23. This was subsequently carried out and the square footage of the resident’s property was confirmed at 1045.
  5. The resident continued to query his invoice on several occasions before raising a complaint in September 2022. The invoice referred to a percentage rather than a measurement therefore the resident did not know how the landlord had arrived at a figure of £2244.36. By the resident’s calculations his bill was £35.32 too high.
  6. The landlord responded on 17 October 2022 and said that the resident had been billed for 2.404% of the overall budgeted service charge for the development, equating to £2244.36. It continued to say that following 2 further re-measurements requested by the resident, his percentage share had increased to 2.411%. The landlord, however, agreed that he would not be charged the difference owing to the misunderstanding.
  7. The resident escalated his complaint as he felt that the calculations were still incorrect. A final response was issued on 13 March 2023. Within this response the landlord said that the invoice was correct. It clarified that ‘service charge bills are calculated based on the total square footage of the development, this is then split out between the apartments or houses within that area relative to their percentage share. It is that percentage share that is based on the actual square footage of each property, rather than the square footage directly’.
  8. The resident approached our Service as he felt that the landlord’s calculations were still incorrect. He has since sold his interest in the property and is no longer a resident of the landlord.

Jurisdiction

  1. 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.
  2. After carefully considering all the evidence, in accordance with paragraph 42(d) of the Scheme, the Ombudsman may not consider complaints which concern the level of rent or service charge or the amount of a rent or service charge increase. This is because the Ombudsman cannot make a binding decision on complaints about the level of or increase to service charges or determine whether service charges are reasonable or payable.
  3. Complaints related to the level, reasonableness, or liability to pay service charges are within the jurisdiction of the First-Tier Tribunal (Property Chamber). The First-Tier Tribunal can look at whether a refund of service charge should be given. The resident may wish to contact the First Tier Tribunal if he wishes to pursue this aspect of his complaint further. This Service can however consider the landlord’s communication around the service charges and whether it followed its policies and procedures.

Scope of investigation

  1. In his communication with this Service the resident reported the impact this issue has had on his physical health. The Ombudsman does not dispute this; however, we are unable to make a determination about the causal link between the dispute and the residents health. However, we will take into account the overall distress and inconvenience that the issues in this case have caused. A determination relating to damages caused to the resident’s health is more appropriate for the courts, and the resident has the option to seek legal advice if he the wishes to pursue this.

Assessment and findings

  1. The lease agreement states that the service provision will be calculated before the beginning of the financial year, and it shall consist of a sum comprising the estimated expenditure likely to be incurred. The lease is silent on how this is calculated and apportioned. However, it is not disputed by the resident that he was informed his service charge would relate to the square footage of his property.
  2. Throughout the landlord’s correspondence with the resident, it is clear that a lack of effective communication contributed to unnecessary confusion. There was a lack of clarity and transparency surrounding the methods used to apportion and calculate service charges.
  3. When the landlord issued its service charge invoice in April 2022, the document showed a total sum due and a percentage share. It provided no breakdown of the square footage or how this related to the apportioned percentage. It would have been appropriate for the landlord to provide a detailed breakdown at the initial invoice stage explaining what square footage was used to calculate the percentage share and how it did this. Had the landlord provided this information it is reasonable to conclude that the resident may not have spent such a considerable amount of time and trouble seeking clarification.
  4. Within its final complaint response, the landlord accurately explained that service charges are calculated based on the overall square footage of the entire development. The individual property sizes were used to calculate and apportion each resident’s percentage share. The landlord concluded that the resident’s invoice was correct, however, it failed to address his substantive concern that an incorrect measurement was used to calculate his percentage and therefore in his opinion the bill was incorrect.
  5. The landlord did acknowledge that it could have explained its calculation process better, however, it did not reasonably recognise the time, trouble and inconvenience this caused the resident, nor did it provide an appropriate resolution. The resident was left frustrated and still of the belief that he had been overcharged.
  6. Furthermore, the invoice was accompanied by a ‘costs explained’ factsheet. The factsheet said that ‘the service charge payable is budgeted to be £2.56 per square foot of your property’, it then proceeded to give an example ‘if the total property size is 1100 sq. ft – £2.56 x 1100 = £2816.00’. It is therefore reasonable that the resident found this to be ‘particularly confusing’. Based on this example, the calculation would be the square footage of his property x £2.56. This, however, did not equate to the total amount payable on the invoice and was not an accurate description of how the landlord calculated its charges.
  7. In addition, there is conflicting information regarding the measurements throughout the landlord’s correspondence with the resident. For example, an email sent to him in May 2022 stated that the square footage was 1057.13, a further email in August 2022 said 1044, yet the surveyor’s report carried out on 14 July 2022 states that it is 1045. Although several re-measurements took place, the fact remains that when the resident purchased the property the measurement was 1042. Furthermore, some emails and letters say that the cost per square foot was £2.12, and others refer to £2.56. These discrepancies further demonstrate a lack of accurate and transparent communication.
  8. The evidence shows that sometime in 2023 a new FAQ document was published clarifying that individual apportionments are based upon the square footage of the property. This demonstrates that the landlord learnt lessons from this complaint and understood that it needed to be more transparent in its explanation of how it calculates service charges. However, it is evident that its initial failure to explain this clearly resulted in confusion and distress for the resident.
  9. In summary, the landlord provided misleading information about service charge calculations resulting in unnecessary confusion. This has caused distress and inconvenience for the resident. The landlord’s communication was confused and contradictory throughout. While it is recognised that the landlord did attempt to provide responses to the resident’s concerns, it failed to respond in a clear, concise and thorough manner. Therefore, it did not appropriately resolve the substantive complaint, this has resulted in a finding of service failure.

Determination

  1. In accordance with paragraph 52 of the Scheme, there was service failure in the landlord’s response to the resident’s concerns regarding service charge calculations.
  2. In accordance with paragraph 42(d) of the Housing Ombudsman Scheme, the increase in service charges and their reasonableness, is outside of the Ombudsman’s jurisdiction.

Orders and recommendations

Orders

  1. The landlord is ordered to do the following within 4 weeks of the date of this report:
    1. Pay the resident £100 in recognition of the time, trouble and distress caused by its failure to appropriately respond to the resident’s complaint.
    2. Provide to the resident a clear written breakdown of the service charge invoice for 2022/23. Including the square footage of the property, the overall square footage of the development, the percentage and the cost per square foot.
    3. Provide evidence of compliance with the above to this Service.
  2. The landlord must review its annual service charge invoices to ensure that the above information is included in order to avoid similar complaints in future.