Hyde Housing Association Limited (202104715)

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REPORT

COMPLAINT 2020104715

Hyde Housing Association Limited

 

31 March 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. This is about the landlord’s handling of the residents request for an explanation of the difference between the estimated and actual charges for the financial years 2017/18, 2018/19 and 2019/20.

Background and summary of events

  1. The resident lives in a shared ownership property in a building managed by the landlord.
  2. Complaints concerning the level of a service charge increase fall outside the jurisdiction of this Service. The First Tier Tribunal (Property Chamber) can establish whether service charges are reasonable or payable. The Ombudsman can consider a landlord’s administration of those service charges, including its response to requests for information about them.
  3. The landlord has estimated what it was going to spend in the coming financial year and generally based its service charges on those estimates. At the end of the year the landlord has produced a statement of the account including what has actually been spent. This information was sent to the resident in annual statements.
  4. At the end of financial years that were subject to the complaint, the landlord had reconciliated its accounts and found its actual costs for some service charges were above its estimates. When the actual cost is higher than the estimated cost, an additional charge will be made to the resident’s account.
    1. For 2017/18 the final additional amount was £602.62.
    2. For 2018/19 the final additional amount was £450.13.
    3. For 2019/20 the final additional amount was £312.92.

Through this complaint the resident has sought more information on these additional amounts.

  1. Following queries about historic service charges from residents of the building, in 2020 the landlord conducted a review of the service charges for the financial years 2017/18, 2018/19 and 2019/20. It kept residents updated of its actions through a series of letters. The additional charges made for financial years 2017/18 and 2018/19 were reduced and adjustments made to the residents’ accounts. The landlord explained its workings for these reductions in a letter dated 29 October 2020.
  2. On 26 November 2020 the landlord wrote a letter to the resident entitled ‘Service Charge Final Accounts 2019/20’. It explained that following the close of the financial year, actual costs were calculated. It explained that these costs were in the statement under the actual cost heading. This letter provided a breakdown of how each cost was compiled to help explain charges on the statement. Some of the costs had been reduced. Where the costs increased, explanations were given:
    1. From October 2019 the charge for window cleaning was increased to reflect the cleaning of individual flat windows.
    2. The provision of statutory servicing and inspection of communal fire equipment had not been passed to residents in years 2017/18 and 2018/19. In these years the charges for this element showed as significantly lower. The new charge in statement 2019/20 was an accurate reflection of the costs the landlord incurred. These costs were broken down in the attached summary.
  3. On 30 March 2021, the resident wrote to the landlord with a list of queries. He said that he did not believe that the service charge estimate for 2021/22 was justified. This charge had risen from £139.67 to £160.66. He asked for explanation of the new monthly charge and for the landlord to clarify six queries:
    1. Caretaking and other staff costs.
    2. Level of the electricity charges in comparison to another scheme.
    3. Level of the management charge in comparison with another scheme.
    4. Services provided under the fire safety element.
    5. Services provided under the responsive maintenance element.
  4. The landlord responded to this email on 6 April 2021. It said:
    1. Caretaking and other staff costs included the provision of concierge services.
    2. The building’s electricity meter had been faulty so charges had been removed for previous years. The new estimate was based on the size and type of building.
    3. The management charge related to be an industry wide charge of 15% for the cost of providing services to the building. This included the provision of service charge estimates, statements and all associated overheads.
    4. The fire safety costs were for the provision of statutory servicing and inspections of communal fire equipment. This included emergency lighting, automatic opening vents, fire detection system and dry risers.
    5. Responsive repairs and maintenance were  reactive costs for necessary maintenance works, such as battery / bulb replacements.
  5. The resident responded asking for a review of historic service charges. The landlord replied that it had completed a review in 2020. Residents had been updated through monthly letters. These letters and the revised annual statements had been sent to the resident at the time. Further copies were sent out with this response. The landlord confirmed adjustments to individual accounts had corrected any charging errors for the periods 2017 to 2021.
  6. The resident replied that this information did not cross reference the outstanding amount of arrears on his account. He stated that he had always paid the estimated charges and that the arrears were from the additional charge made to him.
  7. On 16 April 2021, the landlord responded with a further breakdown of the adjustments that had been made for each financial year.
  8. The resident responded asking for ‘the remaining arrears amount to be cross referenced to the year that it relates’. The resident was asking for the arrears to be cross referenced with the additional service charge amounts asked for each financial year. The landlord replied that it ‘had cross referenced adjustments’. ‘Any  additional arrears are due to actual costs incurred in the provision of services to the building, liable for payment under the terms of the lease.’
  9. On 10 May 2021 the resident wrote to the landlord. He asked it to ‘cross reference the historic service charge uplifts’. The resident tells the landlord its previous correspondence had not answered this question. The landlord replied to say that it had provided all the information asked for in its previous correspondence.
  10. The resident makes a complaint which was acknowledged on 8 June 2021 about the service charge explanations.
  11. On 18 June 2021 the landlord spoke with the resident. He said that he always paid his rent and service charge payment, as requested. He asked what the arrears were for.  The landlord confirmed it would provide a ‘breakdown of the total amount payable, for the years the amount covered.’
  12. The landlord sent its stage one response on 21 June 2021. It said it had ‘not failed in its service’. It offered the resident £100 for ‘time and trouble in pursuing the matter’. It said that the resident had explained he had been charged ‘for uplifts as far back as 2015/16 and had been disputing the amount as there was no explanation or breakdown given regarding the uplifts’. The landlords responded to this :
    1. It had set up a new Customer Service Charge Team in May 2020. The team had looked at historic service charges for the resident’s building.
    2. A review of actual costs had taken place in 2020. It found some errors had been made and adjustments were made to the end of year accounts for 2017/18, 2018/19 and 2019/20. Residents were kept updated on these amendments through a series of letters.
    3. It explained arrears were ‘due to service charge deficits in the statement years 2017/18, 2018/19 and 2019/20.’ It also explained there had been inconsistent payments to the account to cover the monthly charges. This resulted in the arrears.
    4. It sent two new documents. One showed debits applied for the three year period. The other is a transaction statement which showed that the account payments did not match the amount charged.
  13. On 21 June 2021 there was further contact between the resident and the landlord. The landlord explained that since 2018 there had been £18,774.12 applied by monthly charges and £17,742.30 paid. It sent a screenshot of colour coded account transactions. It explained that:
    1. A payment was missed in week 22 of 2020.
    2. Payments had not matched charges on weeks 31-38 in 2020.

The landlord explained the arrears ‘are the deficit of monthly charges’.  A table provided showed the service charge adjustments made during the 2020 review.

  1. On 12 July 2021, the resident requested a clearer explanation of the arrears. He had not found the previous response ‘very professional’. He said the colours had not helped. The explanation did not make ‘sense to anyone who doesn’t work in the accounts department’.
  2. On 26 July 2021 the landlord wrote to the resident attaching two sets of data. It explained these needed ‘viewing independently to give a full view of the balance.’ It had banded the charges and payments together. It said this showed that most weeks the payments equalled the amount of charges applied. In week 22 2020/21 there was no payment received . After this the landlord said ‘payments did not match the charges applied (with two exceptions)’. This response also set out a further description of the adjustments, in table format.
  3. On 14 October 2021 the landlord issued its final response. It said it had not changed its decision. It had sent out all the necessary breakdowns and clarifications about the resident’s service charge account. In the letters summary it said that it had responded by explaining the deficit and further explanations on the statement were given. An offer of £100 was repeated for the time and trouble the resident had taken.

Assessment and Findings

the residents request for an explanation of the deficit between the estimated and actual charges for the account years 2017/18, 2018/19 and 2019/20.

  1. It is evident from the service charge statements that the resident had been paying the estimated charge for these financial years. When the landlord reconciled its accounts and completed the actuals there was an outstanding amount which it debited to the resident’s account. This resulted in a deficit which the resident would be obliged to pay under the terms of the lease.
  2. The landlord initially wrote to the resident on 26 November 2020 to explain the service charge statement for 2019/20. In this letter the landlord does explain why the service charge had increased for that financial year. The explanations were that communal cleaning and fire safety elements were now being charged whereas previously they had not been. The final account statement was sent with a breakdown of costs, to support this letter. This was sent to the resident again on 6 April 2021 as part of the landlords response to the residents query about the service charge ‘uplifts’. These documents do provide reasons for the higher costs for the period 2019/20, the landlord provided the statement overview, detail of charges it had received and a covering letter explaining where there had been an increase in charges.
  3. During correspondence through March and April, prior to a formal complaint being made, the resident continued to ask for an explanation of the increased actual costs for the previous three financial years. The landlord’s responses do not answer this question. It does refer to the final account statements and breakdowns that had been sent out for 2017/18 and 2018/19 in October 2020 but there is no explanation for the additional costs it has asked for in these financial years. In this it has not responded to the residents request for more information and an explanation of the charges it expected him to pay.
  4. During April’s correspondence the landlord explained in detail the adjustments made during its 2020 review. It is the case that these adjustments significantly reduced the overall additional amount charged at the end of the 2017/18 and 2018/19 financial years. Whilst it is helpful to explain the adjustments, this did not directly answer the resident’s question, so the landlord missed the opportunity to understand and answer the resident’s request for more information on the remaining additional amounts.
  5. The resident made a formal complaint. He was asking for explanation on the actual costs debited for each financial year. He asked it to explain where the ‘uplifts’ have come from. By this the resident was asking for the deficit between the actual cost and the estimated cost to be explained. The landlord’s approach at stage one and two focused on explaining the arrears on the account.It provided detailed transaction and payment summaries. It cross referenced the charges made and the payments received with the adjustments that had been made as part of its 2020 review. By doing this it explained the arrears themselves and how they had accrued but not why the final account actuals for 2017/18 and 2018/19 were above the estimated amount.
  6. The landlord has, through this complaint not demonstrated that it has understood the resident’s question. In its complaints handling it also missed the opportunity to respond by setting out the statement year’s deficit and seeking to explain the main cause of the additional charges. In its letter dated November 2020 it does explain window cleaning and fire safety measures that caused the additional costs for the financial year of 2019/20, but there is not a similar summary explanation given for financial years 2017/18 and 2018/19. There has been a service failure by the landlord, in it not providing these explanations.

Determination (decision)

  1. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was service failure by the landlord in respect of landlord’s handling of the residents request for an explanation of the difference between the estimated and actual charges for the financial years 2017/18 and 2018/19.

Reasons

  1. The landlord has not set out its reasoning for the increase in the actual service charge costs for the financial years 2017/18 and 2018/19.

Orders and recommendations

  1.  It is ordered that the landlord pays the resident £150 compensation in addition to the £100 it has already offered, for distress and inconvenience that occurred. This amount is payable in four weeks.
  2. It is ordered that within eight weeks the landlord provides an explanation on the additional amounts debited to the resident’s account.
    1. £602.62 in 2017/18.
    2. £450.13 in 2018/19.
  3. It is recommended that the landlord considers making the same information available for year 2020/21 as necessary.