Equity Housing Group Limited (202015743)

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REPORT

COMPLAINT 202015743

Equity Housing Group Limited

6 September 2023

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 around:
1. The landlord’s communication around service charges.
2. The landlord’s proposed increase to service charges and levels of those charges.
3. The landlord’s management of the resident’s complaint.

Jurisdiction

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.
After carefully considering all the evidence, in accordance with paragraph 42(e) and 42(j) of the Housing Ombudsman Scheme, the following aspects of the complaint is outside of the Ombudsman’s jurisdiction respectively.
1. The level of rent or service charge or the amount of service charge increase.
2. Matters raised by a complainant on behalf of another without their authority.
This Service cannot investigate complaints which concern the level of service charges or increases to those service charges. This Service can look at whether the landlord provided an explanation but it unable to determine the reasonableness of service charges or a proposed increase. Complaints that relate to the level, reasonableness or a resident’s liability to pay service charges are within the jurisdiction of the First Tier Tribunal (FTT). The resident should seek further advice on any of these matters with the FTT.

Background

The resident has an assured tenancy which started on 3 December 2001. The property is a ground floor, one bed flat. The landlord said it had no vulnerabilities recorded against the tenancy.
The resident had previously questioned elements of the service charges included as part of his rent in 2019. These were dealt with as enquiries by the landlord.
On 22 September 2020, the resident raised a new complaint with the landlord following it providing a summary of the previous years’ service charges. The landlord and the resident remained in correspondence around these charges but the resident remained unhappy with the landlord’s explanations and management of his concerns.
The initial complaint included a signed petition from other residents at the scheme, however, this did not detail that the resident was managing a group complaint on their behalf. Further to this, the submission to this Service included no evidence of the other residents providing authority for the named resident to raise a complaint on their behalf.

Policies and procedures

The tenancy agreement says that the landlord will provide services detailed in “Appendix A” which includes:
1. Caretaker
2. Landscaped Areas
3. Communal TV Aerial
4. General Repairs
5. External Lightings
6. Window Cleaning
7. Management Costs
8. Central Heating Boilers
The tenancy agreement also says that it “may charge for the services on the basis either of costs incurred during the previous accounting period or of estimates for the current or next accounting period. The difference between any estimate and the actual cost may be carried forward”. It also says that it may establish a sinking fund to cover “unusually heavy cost expected to be borne by the service charge account in the foreseeable future”.
The tenancy says that “the association may increase or decrease the service charge by giving the tenant not less than four weeks notice in writing of the increase or decrease”.
At the time of the complaint, the landlord’s complaint policy said “Complaints about service charge or rent increases” would not be considered a complaint.
The Landlord and Tenant Act 1985 section 20B says landlords can only take into account costs incurred in the previous 18 months when determining a service charge. Further to this, residents should be made aware of those charges, in writing, within that timeframe.
The Landlord and Tenant Act 1985 says that within six months of receiving a service charge summary residents can request “reasonable facilities” for:
1. “inspecting the accounts, receipts and other documents supporting the summary, and
2. taking copies or extracts from them.”

Summary of events

On 17 September 2020, the resident received a service charge summary from the landlord for the period 2019-2020.
On 22 September 2020, the resident wrote to the landlord to raise a complaint around several aspects of the variable service charge that formed part of his tenancy. The complaint letter detailed his concerns around the following elements of the service charge:
1. The “Appendix A” referred to in his tenancy, which should provide detail about the charges, was not adequate in providing clarity around the charges and why the tenant was responsible for them.
2. The apportionment method for elements of the service charge. The resident said it was unfair that costs were divided between schemes, as some were larger schemes than others.
3. Charges for services that the resident believed were not being received, or were not up to standard, by the scheme. These included:
  1. Gardening services
  2. Window cleaning
  3. Scheme equipment replacement.
  4. Communal electricity
4. A lack of access to inspect the accounts, receipts and other documents relevant to the service charge information.
In response to the complaint, the resident requested:
1. A backdated refund of the disputed charges, for the entirety of the tenancy.
2. A schedule of services to be provided each year, including when he should expect those services.
3. “We would like to exercise our right to ask for a management audit, and under the Housing Act 1996 we have the right to appoint a surveyor”.
4. To inspect the documents related to the service charges summary it had issued on 17 September 2020.
The landlord responded to the resident’s complaint on 2 November 2022. Within its response it provided a summary of the costs and copies of invoices related to the service charges it applied. It also addressed questions raised in the resident’s complaint. It said:
1. The “Appendix A” linked to the tenancy detailed the kind of charges that would be included and its annual summaries included a more detailed breakdown of them.
2. Costs for the scheme were shared equally between each of the residents and were based on the actual costs of providing them.
3. Gardening services were provided in the previous year and it provided an example of works it had undertaken and their associated cost. It said the costs for that year were less than its initial estimate and the underspend would be accounted for in that year’s charge.
4. It provided examples of scheme equipment that would be covered by the charge. It said maintenance of surface flooring, fencing, a lamppost and TV aerials would be covered by this charge. Further to this, it said that it would review the charge again in the next year’s budget.
The resident emailed the landlord on 6 November 2020 and said he felt that parts of the complaint had not been answered. The resident asked for further “original” invoices, letters detailing planned works and several fire and electrical test reports for the scheme. He also asked whether the cost of escalating the matter to a tribunal could be deducted from the “sinking fund” or if it could be recovered after the proceedings.
The landlord responded to the resident on 17 November 2020. It said that it did not issue original invoices, as it did not retain physical copies. It advised that the residents service charges did not include costs for electrical tests or fire risk assessments, as none were carried out during the period in question. It said that service charge summaries had been provided each year and that if the resident had any other questions around works completed at the scheme, it would be able to provide details. It also said that any tribunal costs would need to be met by the residents.
On 22 December 2020, the resident responded to correspondence around underpayment of his rent. He said he would make up these underpayments if the window cleaning services had been provided. He requested “confirmation these services have been provided”. He followed this up on 5 January 2021 and said that he would continue to withhold payment, until he was provided with the information he had requested.
There were two other emails on 18 January 2021 and 21 January 2021 around the window cleaning charges and his dispute that he received those services. The resident stated in these emails that he considered this a separate issue to those raised in the complaint raised in September 2020.
During January and February 2021 there were numerous other emails between the landlord and the resident around a previous complaint with this Service and other rent related issues.
On 10 February 2021, the resident emailed the landlord to ask that it provide the service charge summary for 2020-2021. He said “it is my understanding this information should be provided at least 6 months before the costs are incurred”.
On 22 February 2021, the landlord issued a “notice of rent variation and service charge” for 2021-2022 to the resident. This detailed an increase to the weekly service charge included in the rent, to start in April 2021.
The resident emailed the landlord on 8 March 2021 to raise a formal complaint. Within the complaint, he requested that the service charge increase proposed for 2021-2022 not be applied to the rent account, as he did not agree with it. Within the complaint, he said that the landlord had not addressed several requests and questions previously made around the service charges, these included:
1. An explanation of why the service charge was described as fixed but the landlord applied variable charges.
2. Why communal charges such as gardening, electricity, scheme replacement equipment etc were included as it was not a communal scheme. The resident asked that these be removed from the service charges.
3. A refund of any overpayments and any funds within the sinking pot.
4. Allow visibility of the associated receipts and to be provided the ability to take copies.
5. Provide confirmation of the apportionment method used to divide costs between schemes.
6. Provide a copy of “Appendix A” for the tenancy agreement.
7. The resident claimed that the landlord had not provided adequate notice of the service charge increase for 2021-2022 in its recent letter dated 22 February 2021.
8. The landlord said that the service charge summary for 2018-2019, provided on 20 September 2019, was late as it should have been provided “between October 2017 and March 2018”.
The resident contacted this Service on 10 March 2021 and included a copy of his complaint dated 8 March 2021.
The landlord responded to the resident’s complaint on 15 March 2021. Within the response the landlord answered questions from the complaint, its responses are as below:
1. The landlord confirmed that the service charges were variable, not fixed. It included a copy of the tenancy agreement and the a copy of “Appendix A” which was referenced in it.
2. It explained that the service charges were split between the residents of the scheme only. It said in regards to the landscaping contract, an additional sum was charged to cover “any one-off landscaping works which fall outside of the contract”. It explained that residents paid for window cleaning, street lighting, TV aerials and “any one off costs to help keep the area clean and tidy (eg removal of fly tipping)”. It said scheme equipment replacement was a long term fund towards replacement of roads, external lighting etc for unadopted roads. It explained this charge was collected for high value items at the resident’s scheme only, and this was to save on larger requests being made when those items were needed.
3. It explained that “any service charge under or over spend would be taken into account when calculating the charges for the next financial year”. It said there was an overspend in the last year, which led to an increase in service charges for the coming year. The landlord said it had provided details of this in the previous years summary and that other increases to the charges were due to inflation in contract values.
4. The landlord explained that it in line with the Landlord and Tenant Act 1985, it had 18 months to provide residents with details of the service charges being incurred. It said it complied with this by sending out year-end accounts in September.
5. The landlord said it had reviewed the service charge calculations again and were satisfied that it was correct. It signposted the resident to a government website if the resident still believed the charges to be unreasonable or incorrect.
The resident responded to the landlord on 20 March 2021. Within his response, the resident:
1. Questioned why the landlord provided the service charge summary for 2018-2019 on 20 September 2019, rather than in March 2018.
2. Raised questions about increases to the service charges in 2018-2019 and 2019-2020.
3. The resident said his requests to attend the landlord’s office to view and take copies of receipts relating to 2021-2022 service charges had not been accommodated. He said that previous requests had also not been accommodated by the landlord. He requested that the landlord allow him to attend and proposed dates for the visit.
4. Said that the “Appendix A” provided by the landlord did not provide adequate detail around the service charges.
5. Expressed concern that the letter dated 22 February 2021 detailed the service charges as fixed.
6. Requested a refund of the scheme equipment replacement charges he had paid.
7. Questioned communal electricity costs, as there was no communal lighting, only street lights.
8. Raised concerns around the condition of the TV aerial boxes, given the associated charges that are included in the service charge.
9. Requested a refund of 40% of the overall gardening and window cleaning charges as “we only receive this service 60% of the year”. He also requested a refund of any charges towards “trees, plants and shrubs”, as any at the scheme were purchased by the residents.
10. The resident repeated his concerns that the service charge account had not been managed correctly.
The landlord responded to the resident on 14 April 2021 to address the remaining concerns. It included his questions and provided answers to them, as below:
1. The landlord said that it had provided a service charge account summary each September and a service charge budget in February each year.
2. The landlord said that the budget sheets showed how charges were calculated.
3. It said that all relevant receipts and invoices had been provided to him in November 2020. The response included further copies of them. It said that it did not maintain original copies of the invoices, as they were held electronically and due to COVID-19 protocols, he would not be able to attend its office.
4. It explained that although the “Appendix A” did not have a full cost breakdown of the service charge, this was provided in its budgets and summaries. It also confirmed that the charges for the scheme were apportioned between the households at that scheme only.
5. The landlord said that the use of “fixed service charges” in its recent letter was an error and that the service charge was variable.
6. It explained that the scheme equipment replacement budget was only setup in 2016 and that no works had been funded by it during that time. It said as the scheme had not been adopted by the council, the landlord was responsible for certain costs that would usually be included in council services. It gave examples of street lighting and tarmacking that would be covered by the scheme equipment replacement budget.
7. As the scheme had not been adopted by the council, it advised that the communal electricity costs were towards the street lighting.
8. The TV aerial boxes were to be changed due to their condition.
9. It acknowledged some services were not provided monthly. It explained that the total gardening and window cleaning charges were averaged out over a twelve month period. It explained that the “plants, trees and shrubs” charges were for landscaping at the scheme and a recent charge had been applied that year for an overhanging tree. It provided an invoice for this work.
10. The landlord reiterated its confidence in the accuracy of the service charge accounts and that it had provided all relevant information to the resident.

The landlord concluded its response by signposting the resident to this Service or to a tribunal if he remained unhappy with its response. As the landlord did not follow its internal complaint process in addressing the resident’s complaint, this letter was considered the final response to it.

The resident made a request to the landlord on 18 April 2021 for copies of service charge summaries for the previous 25 years. The landlord responded to this request on 30 April 2021. It said that it was obligated to provide summaries for the previous three years, which it had provided on 8 April 2021. It said it included a copy of those summaries again within its response.

Assessment and findings

The landlord’s communication around service charges

There were elements within the complaint, where the resident had questioned the level of reasonableness of the charges, however, this would need to be referred to FTT for review.
The resident made requests for explanations of several charges included in the annual service charge summary in September 2020. Some of these concerns were understandable, given that those services would usually form part of council services, such as street lighting and roads maintenance. However, this Service considers that the landlord has provided adequate explanations of the charges within its responses to the resident. It advised that the road the resident lived on was unadopted and therefore the council was not responsible for certain parts of its upkeep. The landlord also provided specific examples of one off charges that had formed part of its service charge summary.
Throughout the complaint, the resident expressed concerns that the “Appendix A” referenced in the tenancy agreement was not adequate in detailing the associated service charges. Although this does not provide a detailed breakdown of the service charges linked to the property, it does provide an indication of the types of charges that are included. In terms of providing further detail, this Service considers that within each annual service charge budget and its year-end summaries, the landlord provided a breakdown of the charges included in the service charge accounts. There is no obligation on the landlord to provide a detailed breakdown of the associated service charges within a tenancy. Given that the landlord provides detailed breakdowns within its summaries and budgets, “Appendix A” can be considered adequate, as it is a reasonable indication of the charges that are included in the overall service charge.
It is evident that the method of apportionment used for certain charges was under scrutiny throughout the landlord and resident interactions. The landlord explained that the annual charges for the scheme were shown on its annual summaries and that the costs themselves were then divided equally between residents at the scheme. This provided a clear breakdown of how much the scheme was charged and how much each resident paid towards it.
The resident asked further questions around apportionment after receiving invoices for some of the service charges, as they detailed the total charge for that service across all of the landlord’s schemes. As this does not match the figure on the annual summary information, this could raise questions. However, it is understandable that contractors would not provide an individual invoice for each scheme, when there are numerous schemes within that contract. Although the invoice provided to the resident would not match with the service charges on the summaries provided, the landlord has still provided a breakdown of the cost to both the scheme and the resident.
When addressing the resident’s request to inspect original receipts, it was reasonable for the landlord to refuse access to its office to do so, given that COVID lockdown protocols were in place at the time. In addition, it provided an adequate and reasonable alternative to the resident’s request, in line with the Landlord and Tenant Act, by providing digital copies of the relevant receipts, as it did not keep originals.
It is evident that the landlord provided both annual budgets and service charge summaries between 2018 and 2022. Despite concerns that overpayments were not carried forward, it was clear that both overpayments and underpayments were taken into account on them. Although the resident hade concerns around the management of the accounts, this Service has seen no evidence of examples of mismanagement of the accounts presented to the landlord.
The resident made reference to the dates at which the landlord provided its summaries and its budgets. There appeared to be confusion over when each of these should be, and were, provided. The landlord provided its budget, which detailed changes to the rent amount, for the year 2020-2021 on 18 February 2020 and on 22 February 2021 for the year 2021-2022. This meant that the landlord had provided notification of a change to the service charge with at least four weeks’ notice, in line with the tenancy agreement.
The landlord has also met its obligations in line with the Landlord and Tenant Act 1985 in providing its summaries of the previous years’ service charges. The summary for 2018-2019 was provided on 20 September 2019 and the summary for 2019-2020 was provided on 17 September 2020. It is evident from those summaries that it has met its obligations around including those charges within the residents service charges.
In disputing some of the charges, the resident claimed that some of the services included in the charge had not been provided. There was evidence of the resident raising these concerns historically, and during the complaint. Window cleaning, specifically, was questioned around the time of this complaint. In response, it is evident the landlord provided a list of dates, times and the registration of the vehicle that attended between April 2020 and March 2021. Historically, it had provided evidence of other service visits to the scheme upon request. This was reasonable and proportionate response to the resident’s concerns.
Given that the landlord would have agreed a schedule of services within its contracts, it would be beneficial to provide this to the residents. This would allow the residents to assist the landlord in monitoring contractor performance if they knew when and how often those services should be provided for.
Having reviewed the correspondence provided, this Service considers that the landlord has provided adequate explanations of charges when requested by the resident. Sufficient notice of increases to the service charges was provided each year and when concerns were raised around those services not being received, it has responded accordingly. The landlord did incorrectly refer to the service charge as being fixed in one of its letters but later acknowledged this error. The landlord provided a breakdown of the charges, evidence of those charges and explained the apportionment used. In considering the landlord’s management of this process, there was no maladministration.

The landlord’s handling of the resident’s complaint.

This Service considers that through the period in question, the landlord has not managed the resident’s complaint in line with its complaint policy.
At the time of the complaint, the landlord’s complaint policy said it would not consider “complaints about service charge or rent increases” as complaints. The landlord said that it treated the matter as an information request. However, it is clear from the first email in September 2020 that the resident considered it complaint. It is evident that throughout the period in question, the resident continued to believe the matter was being addressed as such, as the landlord failed to make it clear within its responses that it was not.
Although elements of the resident’s complaint related to service charge increases, this was not the basis of the entire complaint. There were concerns around the communication of service charges, the provision of services and the administration of the accounts. These points should have been recorded and addressed as a formal complaint. In managing this complaint, the landlord was in a position to respond to the resident and signpost him to the FTT, in order to request a review around any concerns it could not address, such as the reasonableness of charges.
The landlord should have identified the valid complaint points and managed them in line with its complaint policy. This would have provided a clear framework for both the resident and the landlord to follow, in line with the dispute resolution principles set out by the Ombudsman. Following a two-step complaint process the landlord could have established the exact nature of the complaint, addressed it in a stage one response and allow the opportunity for review at stage two. Instead, there have been numerous emails back and forth with no fixed end to the process.
It is worth noting that in most cases, the landlord provided timely responses with detailed answers to the resident’s questions. However, this approach left the process open ended and delayed the resident’s access to review with this Service. Therefore, it is a failing on the part of the landlord that it did not use its complaint policy to address the resident’s complaint.
It is evident that the landlord updated its complaint policy in May 2021. This Service is pleased to note that within its definition of what would not be considered a complaint, it has now removed any mention of service charges.
The landlord answered and provided explanations to the resident’s questions throughout the period in question. However, use of its complaint policy would have benefitted both parties throughout. Individual complaints should have been recorded with a clear definition of the reason for each complaint and the resolution sought by the resident. This would have ensured that responses between both were clear, in which complaints were being addressed, and where they were up to. The landlord failed to make the resident aware of its position around managing his complaint which meant that his expectations were not set correctly. Further to this, the decision not to use the complaint process caused an unnecessary delay in the final decision being made and impeded the residents ability to seek a review by this Service. In considering the landlord’s management of this process, there was maladministration in its handling of the resident’s complaint.

Determination (decision)

In accordance with paragraph 52 there was no maladministration in the landlord’s communication around service charges
In accordance with paragraph 52 there was maladministration in the landlord’s handling of the resident’s complaint.

Reasons

The landlord’s communication around service charges

The landlord provided reasonable responses to the resident’s questions around service charges, including explanations of the associated charges, examples of additional charges and access to evidence of those charges.

The landlord’s handling of the resident’s complaint

The landlord addressed the complaint outside of its normal process, despite the resident making it clear he considered it a complaint. However, in managing the resident’s concerns, it provided most responses in a timely manner and provided clear responses to his questions and concerns. Had it managed the complaint in line with its policy, this could have led to it being finalised sooner and the resident being aware of the framework in which his complaint was managed.

Orders

The landlord’s handling of the resident’s complaint

The landlord should make a payment of £100 directly to the resident within four weeks of the date of this report due to the inconvenience of the landlord not having managed his complaint in line with its complaint policy.

Recommendations

The landlord should consider providing a schedule of services to residents, where possible, to allow effective monitoring of those services by residents. This would ideally include details of expected standards and frequency of those services.