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Housing 21 (202210359)

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REPORT

COMPLAINT 202210359

Housing 21

24 November 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

  1. The complaint is about the landlord’s response to the resident’s:
    1. Request to have a full refund of surplus water charges which was billed in error.
    2. Associated complaint.

Background

  1. The resident is a tenant of a one-bedroom property. The landlord is the freeholder of the property.
  2. The water supply to the resident’s property is provided via a communal water meter. Charges for the water are divided between all the properties within the estate based on the size of each property and are paid as part of the service charge.
  3. On 28 June 2022, the landlord established that the water supplier had not billed it correctly for the resident’s site since 2017. The bills used to calculate the service charge contribution had been based on estimated water usage. The landlord did not identify this at the time, as the water supplier had not sent the invoices to the correct address The landlord provided correct meter readings to the water supplier, which identified that there had been a much lower than estimated water usage on the site. This led to a surplus of £6,608 for communal water and £14,318 for resident/domestic water, totalling £20,926.
  4. The landlord held a meeting with residents on 2 August 2022 regarding this surplus. The landlord arranged a further meeting with residents on 15 August 2022. It advised residents that the amounts would likely be carried forward to the service charge for the following year, with the aim of keeping the service charge lower for residents. The landlord noted that the majority of residents were happy with this proposal and wanted the amount carried forward to reduce any negative impact the following year. The resident advised the landlord in this meeting that he had contacted the Ombudsman as he was not happy with this proposal. The resident wanted the amount refunded in full. The landlord advised the resident that it would log this as a formal complaint.
  5. The resident followed this up with the landlord on 21 September 2022 asking that his complaint be logged formally. The resident advised that the landlord had told him that it would not repay the surplus utility amount. The resident advised that his share of this would be £552, not including all interest which was being held by the landlord. The resident advised it was ridiculous that the landlord was not aware of this issue with the water charges being incorrect and it had a duty to ensure that the charges were being correctly calculated. The resident considered that the landlord’s intention to split the overpayment over two years on the service charge was unfair because:
    1. Some newer tenants had not contributed to the service charge.
    2. The resident was 90 and his wife 80, and they would not live long enough to receive the money back.
  6. The resident advised he was concerned about the morality of how this had been dealt with. The landlord acknowledged this complaint on 23 September 2022.
  7. The landlord wrote to all residents on 26 September 2022 regarding the surplus amount. The landlord explained that there was:
    1. Surplus total of £6,608 for communal water.
    2. Surplus total of £14,318 for the individual/resident water.
  8. It confirmed there had been a deficit of £3290 on the gas account and that this amount had been deducted from the service charge surplus leaving a total of £11,039. It said there were two options for resident’s regarding this amount. They were:
    1. All surplus to be applied to the 2023/24 service charge. This would reduce the bill for the next year.
    2. The surplus to be split over two financial years, which would reduce the risk of a significant increase after this period.
  9. The landlord included a form for residents to complete with their preference.
  10. The landlord wrote to the resident on 6 October 2022 to advise due to the complexity of the issue, it would need further time to provide a complaint response. The landlord provided the resident with its stage one response on 14 October 2022. The landlord advised that the site is on a variable service charge, and that any surplus or deficit would be applied to the following years charges in line with current legislation and housing practice. The landlord noted that the large amount was due to historic water bills, and while this had been addressed, the landlord should have identified this sooner. The resident requested that his complaint was escalated.
  11. The landlord established on 19 October 2022 that it would refund all residents the surplus for the individual water usage, totalling £11,039. The landlord noted it had no legal ground to refuse to issue a refund. The landlord noted that this would be apportioned to everyone on site, and this may increase the service charge for the following year.
  12. Between 21 October 2022 and 24 October 2022, the landlord communicated with the resident and advised that it would be looking to provide a refund for this surplus, but this would take some time to calculate. The resident advised he was happy with this and agreed to hold back with his stage 2 complaint if the refund would be issued to him before Christmas. The landlord confirmed this in writing with the resident on 2 November 2022. The landlord wrote to all residents on 18 November 2022 and stated that it was refunding the surplus of £11,039 for individual water usage. The landlord advised that a further meeting would be held on 25 November 2022 to discuss this.
  13. The resident contacted the landlord on 22 November 2022 advising that it had failed to refer to the £4,824 communal water surplus in its written correspondence to all residents. The resident asked for this to be refunded also. The landlord acknowledged this and advised it was seeking further advice regarding this amount.
  14. On 25 November 2022, the landlord held a further meeting with residents. The landlord reiterated its intention to refund the residents £11,039 pro rata. The resident asked why the £4,824 was not being refunded also. The landlord confirmed that this was communal charge, which included aspects of housing benefit. The landlord felt it was appropriate to carry this amount forward and refund the larger balance to assist in keeping payments lower for the following year. The landlord advised that should it need to refund the additional amount it would work with the DWP to try and establish how payments should be calculated in view of the potential impact on housing benefit for some residents. The resident requested that his complaint be escalated to stage 2 of the complaints process at this point.
  15. The landlord issued its stage 2 complaint response on 22 December 2022. It noted that the resident remained unhappy about:
    1. The delay in receiving a formal complaint outcome at stage one of the complaints process.
    2. The landlord’s response at stage one, which the resident felt was misleading as the resident expected a full refund for the water surplus.
    3. The landlord had been misleading as the communal water surplus of £4,824 was being carried forward to cover the costs of gas supply which he considered fraudulent.
    4. The resident should be given a full refund of the surplus water charge.
  16. The landlord confirmed that the stage one delay was actually a letter that the landlord had promised to issue to the resident after the stage one complaint. The landlord noted that the resident followed this up on 2 November 2022 and a copy was delivered to the resident the same day. The landlord noted that this was 6 days later than promised. The landlord agreed that the wording of the stage one complaint response was misleading. It confirmed there had been a deficit of £3290 on the gas account and that amount had been deducted from the surplus leaving a total of £11,039. The landlord had sought advice regarding this and confirmed that there was no fraudulent activity in this action. The landlord confirmed that part of the surplus was the communal water supply, which is part of housing benefit payments, for those in receipt of housing benefit. The individual water supply is not eligible for housing benefit and was paid in full by residents.
  17. The landlord confirmed that it is normal practice for landlords to carry forward surplus or deficits from one account year into the next as the site is on a variable service charge. The landlord confirmed this is referenced in the resident’s tenancy agreement, which refers to a service charge budget being set and considering a surplus or deficit from the previous year. The landlord advised on this basis it had made the correct decision regarding the refund.
  18. The landlord apologised for its handling of this matter but confirmed that the communal element would be carried forward onto the next year’s service charge. The landlord agreed to compensate the resident £200. This was broken down as:
    1. £100 for failing to handle the stage one complaint in a timely manner.
    2. £100 for failing to clearly communicate the outcome of the stage one complaint.
  19. The landlord had attempted to obtain the resident’s details to issue his refund and compensation, but the resident had refused this and advised the landlord that it was being dealt with by the Ombudsman.
  20. The resident remains dissatisfied with the landlord’s decision because he wants his share of the communal surplus water charge to be refunded as well.

Assessment and findings

Scope of investigation

  1. The Ombudsman is not able to consider the resident’s request that a landlord issue a refund of surplus from an overpayment on service charge as this falls outside of the Ombudsman’s jurisdiction. Paragraph 42(e) states the Ombudsman may not consider complaints which, in the Ombudsman’s opinion concern the level of rent or service charge or the amount of the rent or service charge increase.
  2. The resident may wish to raise this at a First Tier Tribunal. The resident can find further information about the First Tier Tribunal service which considers disputes around service charges online at https://www.gov.uk/courts-tribunals/first-tier-tribunal-property-chamber.
  3. This Service also cannot make orders or recommendations that may affect the service that they receive from the landlord and/or their service charge without their permission. The resident has asked for a refund of the communal service charge. If the landlord did this, it would affect other residents as the landlord would need to apply the same approach to all residents affected by the surplus charge. The refund would affect the amount all the residents would need to pay in service charges for the following year. The Ombudsman will not tell the landlord to do this as we do not have permission from the other affected residents to amend their service charge in this way.
  4. However, this Service can investigate how the landlord responded to the resident’s request for a refund of the surplus water charge, and it if had acted reasonably and in line with its own policies, industry best practice and current legislation in communicating its decision to the resident.

The landlord’s response to the resident’s request for a full refund of surplus water charges

  1. The tenancy agreement states that the service charge for the site is variable. This means that it varies according to the costs the landlord incurs in providing the services. The landlord reviews the service charge each year according to the income it receives. The new service charges each year is based on an estimate of expected costs for the next 12 months, adjusted to take account of any credit or shortfall arising from the previous 12 months.
  2. The landlord’s service charge policy states that it calculates service charges by dividing them equally by the number of units on a site. Utility costs are apportioned by the number of bedrooms in a unit, if they are not separately metered. The landlord uses variable service charges across its stock. The policy advises that in March, the landlord will produce end of year statements for residents. In April, it will adjust budgets to take into consideration any surplus or deficit from the previous year. The landlord will ensure that costs of supply services is always competitive and offers the best value for money, with affordability being a key priority.
  3. There had been errors from the landlord in the management of the water charges for the site. The landlord should have been aware that it had not received bills from the water provider to the site, as this was a significant aspect in its service charge budget setting. However, it is clear that when the landlord identified there was an issue with the water bills, it addressed this immediately and was able to establish the correct costs of water for the site. This was reasonable from the landlord. It demonstrated that while it had made an error, once this had been identified, it acted quickly to resolve this. It is also clear that from identifying the surplus, the landlord had actively liaised with residents regarding this. It wrote to all residents to advise of the surplus, arranged meetings with residents to explain how this situation arose and what the available options were for the landlord and residents. This was reasonable from the landlord and demonstrated that it recognised the importance of liaising with its residents regarding this matter, as well as allowing residents to have input on how to move forward with this.
  4. The landlord had initially offered residents 2 options regarding the service charge surplus. These being:
    1. The amount would be carried forward onto the next service charge period.
    2. The amount would be carried forward and split between the next two service charge periods.
  5. The landlord had confirmed that the general consensus from residents was for either of these options, to assist in keeping service charges lower. The resident had expressed that he was not happy with this option and wanted the surplus to be refunded. It is clear from this that the landlord had been reluctant to proceed with this option stating it had concerns over the potential rise in costs of utilities. However, the landlord advised the resident that it was considering all available options and evidenced that it had met internally to discuss the option of refunding the surplus amount. The landlord confirmed to the resident on 24 October 2022 that it would refund the surplus payment, with this being shared out amongst all residents. This was reasonable from the landlord. It demonstrated that it had listened to the resident’s concern and had taken into consideration all available options regarding the surplus before arranging for this amount to be refunded to residents.
  6. The landlord had explained to the resident that the additional amount of £4,824 for the communal water surplus was not being refunded, and this was being carried forward, in line with its variable service charge management. The landlord had explained that elements of the communal water charge may be paid as part of housing benefit, and it would not be refunding this on that basis. It is also clear that there had been a general consensus amongst residents that this amount would be carried forward, with the landlord noting that the vast majority of residents were in favour of this. The landlord had clearly explained its decision to the resident and the reasons for this, as well as acting in line with its own service charge policy. The landlord would also be expected to accept the decision of the majority of residents regarding the surplus service charges being refunded.
  7. Although its administration of the surplus service charge was reasonable, the landlord had failed to be clear with the resident in its correspondence of 2 November 2022, in which the landlord confirmed that it was looking to issue a refund for the surplus amount to all residents. The landlord arranged for correspondence to be sent to all residents on 18 November 2022 stated that only the individual water usage surplus would be refunded to the residents. This led to the resident escalating his complaint to stage 2. It is clear that the correspondence sent to the resident on 2 November 2022 does not specify that the landlord was only seeking to refund part of the surplus. This was unreasonable from the landlord. It should have clearly indicated to the resident at that point that it was only issuing a refund for part of the surplus. Not doing so caused confusion and frustration for the resident. The landlord acknowledged this in its stage 2 complaint response. The landlord accepted its failing in relation to this and offered the resident £100 compensation. This was a reasonable approach from the landlord. It demonstrated that it had understood the concern raised by the resident and suitably compensated him for this error.
  8. This offer is in line with this Service’s published remedies guidance, which sets out the Ombudsman’s approach to compensation. The remedies guidance states that offers of this amount may be awarded when there had been a minor failure by the landlord in the service it provided, and it did not appropriately acknowledge this and/or fully put them right. The landlord’s compensation policy states it will award compensation of this amount for medium impact when there has been a succession of service failures and it had not been resolved within a reasonable timescale. Therefore, the landlord does not need to do anything further in this regard, as its offer is in line with what the Ombudsman would have awarded had the landlord not already made an offer and it is appropriate redress for the landlord’s errors in this aspect of the case.

The landlord’s complaint handling

  1. The landlord has a 2 stage complaints policy. At stage one, the landlord will acknowledge formal complaints within 5 working days and respond within 10 working days. Where it is not possible to provide a response in this timeframe, the landlord should contact the complainant and agree an extension period. This will generally be up to 10 working days unless there are extenuating circumstances. If the resident remains dissatisfied with the stage one response, they can request it be escalated to stage 2. At stage 2, the landlord will acknowledge the complaint within 5 working days and provide a full response within 20 working days.
  2. The resident initially raised a formal complaint with the landlord in person at a residents’ meeting on 15 September 2022. The resident followed this up via email on 21 September 2022. The landlord acknowledged this on 23 September 2022 It contacted the resident on 6 October 2022 to advise that due to the complexity of the matter, it would require further time to provide a response to the resident’s complaint, with a new date of 20 October 2022 agreed by both parties. The landlord provided its stage one response to the resident on 14 October 2022, 20 working days after the resident’s initial complaint. It had failed to log the complaint in the first instance, which led to the resident emailing to follow up his complaint. This delay meant that the landlord did not provide a stage one response until 20 working days after the resident’s initial complaint. This was not in line with its complaint policy timescales and is also outside of timescales set out in the Ombudsman’s complaint handling Code (published on our website) which sets out the Ombudsman’s expectations for landlords’ complaint handling. While there was a delay, the landlord was able to fully respond to the resident’s complaint within 20 working days. The landlord had maintained contact with the resident during the complaint process, and this delay did not affect the resident addressing the points raised by the resident. Therefore, although any delay would have caused some level of inconvenience to the resident, overall, this would not have had a significant impact.
  3. The resident requested that his complaint be escalated to stage 2 on 14 October 2022 as he was not satisfied that the landlord would not refund him his share of the surplus. The landlord contacted the resident on 24 October 2022 and advised that it would be refunding the water charge surplus to all residents. The resident agreed to withhold his stage 2 complaint if the landlord confirmed this in writing to him. The landlord provided the resident a written confirmation of this on 2 November 2022.
  4. The resident requested that his complaint be escalated to stage 2 of the landlord’s complaints process on 25 November 2022, as the landlord advised that only the individual surplus was being refunded, and not the communal amount. The landlord provided a full response to this on 22 December 2022. The landlord fully responded to all aspects of the residents complaint and offered the resident £100 compensation for its failure to handle the resident’s stage one complaint in a timely manner. The response was issued 20 working days after the resident escalated his complaint, in line with the landlord’s complaints policy and the Code.
  5. The landlord’s offer of £100 compensation is in line with the Ombudsman’s remedies guidance, as referenced above. Therefore, the landlord does not need to do anything further in this regard, as its offer is in line with what the Ombudsman would have awarded had the landlord not already made an offer and it is appropriate redress for the landlord’s errors in its handling of the resident’s complaint.

Determination

  1. In accordance with paragraph 53(b) of the Housing Ombudsman Scheme, the landlord has made an offer of redress prior to investigation which, in the Ombudsman’s opinion, satisfactorily resolves the complaint about its handling of the resident’s request for a full refund of surplus water charges.
  2. In accordance with paragraph 53(b) of the Housing Ombudsman Scheme, the landlord has made an offer of redress prior to investigation which, in the Ombudsman’s opinion, resolves the complaint about its handling of the associated complaint satisfactorily.

Recommendations

  1. The landlord is to pay the resident total compensation of £200 compensation as offered as part of the stage 2 complaint response if it has not done so already. The Ombudsman’s finding that there has been reasonable redress by the landlord is based on the understanding that this compensation will be paid.