Anchor Hanover Group (202304064)

REPORT

COMPLAINT 202304064

Anchor Hanover Group

16 January 2025

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 about service charges relating to the local manager service.
The Ombudsman has also assessed the landlord’s complaint handling.

Background

The resident was an assured tenant and he lived in a studio apartment in a retirement complex at the time of this complaint. The landlord is a housing association which owns and manages the complex and the resident’s apartment.
The landlord charges residents for some services through a service charge. One of those services is the local manager service which consists of a dedicated staff member based at the complex. The landlord also recovers its costs of providing a telephone line and internet connection for the local manager’s office through the service charge.
In November 2022, the landlord issued its budget of service charges for the financial year 2023-24.
On 11 February 2023, the resident complained that:
1. He had raised queries after receiving the service charge budget but no one had answered them.
2. The landlord had arranged resident meetings to discuss the budget but then cancelled them at short notice.
3. It had offered to meet with residents individually but had not done so.
4. There had been no local manager in post for 9 months but he, and other residents, had been paying for the service.
5. The previous local manager had said the charges would be refunded but this was not reflected in the service charge budget.
The landlord gave its stage 1 complaint response on 3 March 2023 which said:
1. It was sorry that resident meetings had been cancelled. This had been beyond its control and it had offered individual meetings instead. It would hold a residents meeting in summer.
2. He paid a variable service charge which changed depending on the landlord’s costs in providing services. It could not change the charge mid-year but would make sure that residents were not charged for the period when there had been no local manager service.
3. It would not know what its actual costs were until after the end of the financial year when its accounts were finalised. It would then confirm if there was a surplus and explain its plans for it.
4. The budget for service charges from April 2023 had been set on the assumption that a local manager would be in post throughout the year.
On 6 March 2023, the resident emailed the landlord saying he was dissatisfied with the response. He said it had not answered all the points he had raised.
The landlord escalated his complaint. It gave its stage 2 complaint response on 24 March 2023 which said:
1. It was sorry that resident meetings had been cancelled and acknowledged the frustration it had caused.
2. It had spoken with him to explain the service charges. It attached the further information it had agreed to give.
3. It set service charge budgets in advance based on its best estimate of what costs would be.
4. The service charge accounts were finalised after the end of each financial year. Any surplus or deficit was applied to the service charge for the following year.
5. It had adjusted the accounts to exclude the charges when a local manager had not been in post. It had only kept the charges where it had provided the service.
6. The accounts had not been finalised so it could not say what the amount of surplus collected was. It could discuss this further with him when the accounts were finalised.
The resident asked the Ombudsman to investigate. He told us that he remained dissatisfied with the landlord’s handling of the service charge and that its complaint process had not resolved the matter. At the time, he wanted the landlord to remove charges for the local manager service until the post was filled and to refund the charges it had collected for the service.
After preparing its final account of services charges made between April 2022 and March 2023, the landlord decided to refund the overall surplus it had collected to residents.
The resident moved to another home towards the end of November 2023 and his tenancy ended on 2 December 2023. He received his service charge refund in January 2024.

Assessment and findings

Handling of concerns about charges for the local manager service

It is not disputed that the landlord is obliged to provide a local manager service or that the resident is obliged to pay for services provided. The dispute is whether the landlord was entitled to continue charging when there was no manager in post and whether it acted reasonably in dealing with the surplus charges it had collected.
The landlord’s service charges were variable. This meant that charges for different services changed depending on the landlord’s actual costs of providing them.
The landlord’s service charge policy explained how it administered the variable service charges:
1. It would set a budget before the start of each financial year with estimated costs of providing each service. The estimates would be based on its previous costs and reflect any anticipated increase or decrease.
2. It would share the budget with residents and, “where possible”, discuss the planned charges with residents to consider their views.
3. After the end of each financial year, it would prepare final accounts of its actual expenditure on the services provided. It would share the final accounts with residents.
4. If it had spent less overall on providing services than its budget had anticipated, it would carry the surplus forward to the next year.
5. Similarly, if it had spent more overall than its budget had anticipated, it would carry the deficit forward to the next year.
The resident’s tenancy agreement also set out the same approach.
The landlord’s approach is accepted practice and is used by many landlords. The benefit of the approach is that underpaid charges are spread across a whole year, avoiding the need to ask residents to pay a lump sum to recover any deficit.
The drawback of the approach is the time lag in deficits and surpluses being applied to the following years’ service charge. For example, any surplus or deficit on charges paid between April 2022 and March 2023, would be applied to the charges made from April 2024 to March 2025.
This can make it difficult to explain the charges to residents. It also means that, if residents leave, they do not benefit from surpluses carried forward to the following year’s charge. Nor would they have to pay any deficit carried forward to the following year.
The landlord’s tenancy handbook explains the role of the local manager as being the “first point of contact” for residents and their main link with the landlord. It says that part of the manager’s role is to help set the service charge budget each year. The handbook also says that the landlord holds meetings with residents to discuss the budget and explain how charges had been calculated.
The evidence shows the landlord moved the local manager temporarily to a different role from March 2022. We have seen the landlord’s final statement for the service charge year from April 2021 to March 2022. It shows that the landlord had appropriately reflected that it had not provided the service for 1 month when reconciling its actual costs against its service charges.
Overall, there was a deficit in the service charges the landlord had collected between April 2021 and March 2022. This was due to higher than anticipated spending on other items within the service charge. The landlord later applied the deficit to the budget for service charges it would collect from April 2023. This was reasonable and was in line with its service charge policy and the terms of the resident’s tenancy agreement.
The local manager position at the resident’s complex remained vacant from April 2022. It was reasonable that the landlord continued to charge for the service from April 2022. Had it not done so, it would not have been able to attempt to recruit a replacement manager to continue the service.
Given the importance of the local manager’s role in being the first point of contact for residents, we would have expected the landlord to have communicated with residents about interim contact arrangements while it attempted to fill the post. We have seen no evidence that it had done so at this point.
When the landlord sent its budget for service charges for the financial year 2023-24 in November 2022, the local manager post was still vacant. The landlord should have made sure that residents still had an opportunity to be consulted about the budget. It should have had adequate arrangements in place to ensure that it answered any queries that residents had.
The evidence seen suggests that adequate arrangements were not in place as the resident later complained that there had been no meetings and that his questions had not been answered. The landlord apologised for this in its complaint responses.
The landlord may have avoided the resident’s complaint if it had answered his queries after sending the service charge budget in November 2022.
We have seen evidence that the landlord was expecting the local manager to return to their role from January 2023. As such it was reasonable that the landlord had included charges for the local manager service in the budget for service charges it intended to apply from April 2023.
The local manager did return to their role in January 2023 but moved to another temporary role from February 2023. We saw evidence that the landlord continued attempts to recruit a temporary replacement.
From March 2023, through its complaint process, the landlord gave explanations of why it had continued to charge for the local manager service, how it set the service charge budget and how it dealt with surpluses and deficits. It also sent the resident additional information and, in April 2023, offered to meet with him. This shows that the landlord wanted to resolve the resident’s concerns.
However, we have seen no evidence that the landlord explained what it was doing to try to fill the vacant post at any point. Doing so would have reassured the resident that it intended to resume the service and was taking reasonable steps to recruit a local manager.
Around June 2023, the landlord prepared its final statement of service charges it had collected between April 2022 and March 2023 compared with its costs of providing the services. It sent copies of the final statements to residents which was in line with its service charge policy.
The statement showed a significant surplus in the charges made for the local manager service compared with what the landlord had actually spent. This was consistent with the fact that that the local manager post had been vacant for 11 months of the year between April 2022 to March 2023.
However, there had been higher than anticipated spending on other services. This had reduced the overall surplus of charges made against the landlord’s actual costs.
The landlord would have been entitled to apply the surplus when setting the budget for service charges it planned to make from April 2024 to March 2025. Doing so would have been in line with the terms of the resident’s tenancy agreement and the landlord’s service charge policy.
The resident wrote to the landlord on 6 September 2023 and 16 October 2023. We have not seen copies of his letters but understand they were asking about the charges the landlord made for the local manager service while the post had been vacant. The evidence suggests that the landlord had not received the first letter but it was not clear why that had been the case.
After receiving a copy of his initial letter and his second letter, the landlord spoke with the resident on 25 October 2023. It emailed him on 31 October 2023 to confirm the discussion and explain how it dealt with service charge surpluses and deficits.
The landlord confirmed that it had decided to give residents a refund of the surplus charges it had collected between April 2022 and March 2023. It explained that it decided to give the refund because the circumstances leading to the surplus were “exceptional”. This was a reasonable decision by the landlord and suggests it had considered the resident’s views.
Between 4 November 2023 and 25 November 2023, the resident and landlord exchanged further emails. The resident questioned the landlord’s entitlement to continue charging for the local manager service while the post had been vacant. He also asked the landlord to explain how it had calculated the refund in an “understandable” way.
In its responses, the landlord explained it had intended the local manager post to be filled from January 2023, confirmed the overall surplus of charges at the end of March 2023 and explained what proportion of the charge was eligible for housing benefit. It had also offered to discuss the matters further with the resident, which was reasonable.
However, it again missed the opportunity to explain what it had done to try to fill the vacant post. This left the resident feeling that the landlord was content to charge for services it was not providing.
The landlord had also arranged a resident’s meeting to discuss its budget for service charges that would be applied from April 2024. The resident emailed the landlord on 25 November 2024 saying he had decided not to attend the meeting because he would no longer be a tenant. He said he still wanted to receive the refund the landlord had agreed to make.
Further emails were exchanged between 15 December 2023 and 12 January 2024. The resident asked the landlord to explain how it was calculating the refund and, again, questioned the landlord’s entitlement to continue charges for the local manager service. In its responses, the landlord had confirmed the overall service charge surplus for the year April 2022 to March 2023 and how much the refund to each resident was.
The landlord paid the refund to the resident in January 2024. We understand that it had explained how it had calculated the refund during the meeting with other residents on 5 December 2023.
The resident had not attended and had previously asked for an explanation of the refund. It would have been reasonable for the landlord to have given him a separate explanation of how it had calculated the refund.
We have seen no evidence that the landlord gave any explanation other than confirming the total surplus and the amount of refund. This left the resident feeling that the landlord had not given a sufficient refund.
We have carefully considered the evidence including the landlord’s service charge budgets and final accounts for the financial years’ 2021-22, 2022-23 and 2023-24. We are satisfied that the landlord has administered the service charge in accordance with the terms of the resident’s tenancy agreement and its service charge policy.
However, the landlord did not have adequate arrangements in place to consult with residents after it sent the service charge budget in November 2022. This meant that the resident’s questions about the budget were not answered until he complained in February 2023.
The landlord also missed opportunities to explain what it was doing to recruit a manager and did not adequately explain how it had calculated the refund it gave.
This amounts to service failure in the landlord’s handling of the resident’s concerns about the charges. The landlord’s failings caused the resident time and inconvenience in having to pursue answers to his concerns. We have ordered the landlord to apologise and pay compensation.

Handling of the resident’s complaint

The landlord has a 2 stage complaints process. Its complaints policy said it would acknowledge complaints within 5 working days. It would respond to complaints within 10 working days at stage 1 and within 20 working days at stage 2.
The landlord appropriately recognised the resident’s email of 11 February 2023 as a complaint. It acknowledged it promptly within 1 working day.
The landlord should have given its stage 1 response within 10 working days of its acknowledgement. Its response of 3 March 2023 was 4 days later than this timescale. This was a short delay but there was some inconvenience to the resident as he had chased for a response when he had not received one by the expected date.
The landlord’s stage 1 response did not address all the points raised in the resident’s complaint. It did not address his point that no one had answered his queries on the service charge budget or that the individual meetings offered had not taken place.
While the landlord apologised for the cancellation of resident meetings, it did not explain the reasons or why the cancellations had been out of its control.
The landlord should also have explained what it was doing to fill the local manager post. Doing so may have reassured the resident of its commitment to providing the service.
As such the landlord’s response was inadequate and it suggests the landlord had not thoroughly considered the resident’s complaint.
When the resident replied saying he remained dissatisfied, the landlord appropriately escalated his complaint. It also gave its stage 2 response of 24 March 2023 within the 20 working day timescale of its policy.
It was reasonable that the landlord acknowledged the frustration caused by it cancelling the resident meetings. It was also positive that the landlord acknowledged that it needed to rebuild the resident’s trust in it.
The response gave a reasonable explanation of how it administered service charges. Given the accounts had not been finalised, it was reasonable that the landlord said it could not confirm the amount of surplus collected.
The landlord handled the resident’s complaint appropriately at stage 2. However, its stage 1 investigation and response were inadequate and missed the opportunity to resolve the complaint at that stage.
This caused inconvenience to the resident in having to escalate his complaint and amounts to service failure in the landlord’s complaint handling.
On 8 February 2024, the Ombudsman issued the statutory Complaint Handling Code. This code sets out the requirements landlords must meet when handling complaints in both policy and practice. The statutory Code applies from 1 April 2024.
The Ombudsman has a duty to monitor compliance with the statutory Code. We will assess landlords using our Compliance Framework and take action where there is evidence that the requirements of the Code are not being met.
In this investigation we found failures in complaint handling. The landlord should consider the findings highlighted in this investigation when reviewing its policies and practices against the statutory Code.

Determination

In accordance with paragraph 52. of the Housing Ombudsman Scheme, there was service failure in the landlord’s handling of the resident’s:
1. Concerns about the service charges relating to the local manager service.
2. Complaint.

Orders

Within 4 weeks for the date of this report, the landlord must provide evidence that it has complied with the following orders:
1. Write to the resident to apologise. The landlord must acknowledge the failings we have identified and the impact they had on the resident. The landlord must send us a copy of its letter.
2. Pay the resident £100 compensation for the time and trouble it took him to pursue answers to his concerns about the service charge. This must be paid directly to the resident and not offset against any arrears.