Irwell Valley Housing Association Limited (201915656)

REPORT

COMPLAINT 201915656

Irwell Valley Housing Association Limited

16 April 2021

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 reports about:
   1. handling of service charge queries
   2. customer service and staff conduct
   3. complaint handling

Background and summary of events

Background

2. The resident was a leaseholder of the landlord, an housing association, between February 2017 and February 2020. The property is a first floor flat in a block.
3. Section 1 and 5(1) of the lease covenants the leaseholder to pay a reasonable part of the cost of repairs and services. Section 2 outlines this will be a proportion of costs of communal services, utilities, minor works, major works, and an administration cost of 10% of the total amount payable. Section 3 outlines the service charge will be paid in quarterly estimated instalments and that any excess or deficit determined by the landlord will be allowed or paid each year. It outlines that the estimated amount is based on previous years cost of service, and also includes annual contribution towards cost of major repair or maintenance occurring at intervals of more than one year.
4. The landlord’s leasehold policy outlines service charges are set in advance of the service charge year and estimates forthcoming costs based on actual costs. Within six months of the service charge year end, leaseholders are sent audited accounts which identify any difference between estimated and actual costs, which the landlord aims to adjust for any overpayment or shortfall through the following year’s charge. Leaseholders pay set amounts into separate sinking funds to offset future large maintenance costs. The landlord aims for funds to be set at an appropriate level based on a 30 year maintenance plan and stock condition survey and reviewed annually. Where free provision of information is not set out in statute or the lease, the landlord will charge fair and reasonable administration fees to cover costs. The landlord will investigate challenges to charges but where it believes these are calculated correctly, fair and reasonable it directs customers to the First–Tier Tribunal. 
5. The Landlord and Tenant Act 1985 sets out that applications can be made to the First-Tier Tribunal (Property Chamber) to decide the reasonableness of service charges.
6. The Leasehold Advisory Service (LEASE) confirm service charges based on actual or estimated cost of services may change from year to year, but only costs which are reasonable can be recovered, on which the tribunal can decide. LEASE confirm many leases allow creation of a sinking fund, to build up a sum of money to cover irregular and expensive work. LEASE confirm when buying a leasehold, it should be ensured payments are up to date, or a retention arranged for charges that relate to a period prior to purchase, and sellers are normally asked for information about current and future charges. LEASE provide information that service charge balances must be calculated within a reasonable time, however this may not relieve a resident from paying.
7. At the time of the complaint the landlord operated a three stage complaints procedure. At stage one, response was within four working days, and at stages two and three response was within 12 working days. It advised it offered to meet customers at each stage.

Summary of events

8. On 29 November 2017 the landlord wrote to the resident in response to queries about the sinking fund. It confirmed that it intended to carry out a stock condition survey in the next 12 months, which would inform a review of the sinking fund charge.
9. On 6 July 2018 the landlord wrote to the resident and advised that a stock condition survey had been used to assess works required to the resident’s block for the next 30 years. It advised the sinking fund had been recalculated and the quarterly contribution had been reduced in revised charges that started in April.
10. On 13 July 2018 the landlord responded to queries from the resident about the sinking fund charge reduction and why it had not occurred sooner. It explained the reduction was because a new assessment of works required over 30 years gave a lower figure, and the charge revision had to occur in April as the lease dictated charges are set once a year. It advised electronic copies of the stock condition survey and a 30 year maintenance plan, on which the sinking fund was calculated, could be sent at no cost however physical copies incurred costs.
11. On 14 August 2018 the landlord logged a stage one complaint from the resident following contact to its leasehold team. On 26 September 2018 the landlord escalated the complaint to stage two, noting he reported he had queried charges for some time; felt good customer service and transparency were lacking; and wished to discuss the complaint prior to its response.
12. On 3 October 2018 the landlord issued its stage two response.
    1. It apologised for delay in response; that the resident was given incorrect information for who would be handling the stage one complaint; that he was not contacted in response to a call, due to a misunderstanding; and that a typing error led to him being provided an incorrect contact number.
    2. It advised a stock condition survey had been carried out in a promised timeframe, sinking fund charges had been adjusted in April, and £8,143.36 was refunded following a sinking fund review. It advised charges could be challenged via the First-Tier Tribunal if not felt to be fair and reasonable.
    3. It explained administration charges for information outside the lease were policy and provided its list of charges for 2018.
    4. It explained a deficit for which the resident’s contribution was £82.20 arose from balances in 2013/14 and 2016/17. It explained deficit prior to purchase remained on the property in line with the lease and that vendors and purchasers usually agree how to handle any deficit or surplus prior to sale.
    5. It asked the resident to detail reasons in writing if dissatisfied with the outcome.
13. Between October and December 2018 the resident emailed the landlord to advise he was unhappy with the outcome. He complained that he was not given opportunity to clarify the complaint before the response, that the response was unclear in many areas, and that he preferred to detail dissatisfaction with the complaint verbally rather than in writing. He highlighted its complaints policy stated complaints can be made by telephone and in person and that the landlord offers to meet customers at each complaints stage. He complained about attempts to speak to senior staff, abrupt termination of calls and how he was spoken to. In response, he was asked to detail reasons for dissatisfaction in writing, and then was invited to do this by telephone. The landlord explained it required further information to discuss the complaint with the relevant department, after which it could meet with the resident. Subsequently the landlord arranged to meet with the resident and a councillor on 9 January 2019, where it went through the stage two response.
14. According to its minutes, the landlord explained that due to its complexity the complaint was escalated rather than handled at stage one, as stage one complaints were single issue complaints or ones easily resolved. It explained that a buyer inherited any charges such as deficits. It explained that the length of time for the stock condition survey was due to one-off surveys having to be fitted around an ongoing stock condition programme. It advised it would look into a previous stock condition report being provided to the resident without charge. The landlord noted the resident raised additional staff and customer service issues, and queries relating to the rental of his property. It also noted that the resident reported lack of response to calls was a regular occurrence, not a one-off as its response suggested, and felt being given a wrong number was deliberate.
15. On 25 February 2019 the landlord met again with the resident and a councillor.
16. According to its minutes, the landlord explained its complaints procedure and that the resident could escalate to stage three if he felt dissatisfied after the meeting. It explained relevant frontline staff were to receive training and it had improved complaints process, monitoring and learning. It apologised about service issues and explained online feedback forms could be completed after staff interactions. It advised charges for paper copies of information could be waived on that occasion. It explained the lease allowed a deficit on the property to be carried over and the resident’s solicitor should have received information about the deficit. It explained variable adjustments during the year were due to the service charges and sinking funds being based on estimates, which the lease allowed for. It explained that charges could be challenged via the First-Tier Tribunal.
17. On 4 April 2019 the landlord met with the resident, a councillor and other leaseholders where it answered queries and gave a presentation that included explanation about leases, legislation and policy; life cycles of service charges; how the service charge is variable and based on previous year’s costs; how deficit and surplus is applied; how the sinking fund is calculated; how a recent increase was partly due to application of a 15% rather than 10% management fee in error; and how £8,000 had been refunded to the sinking fund for not following Section 20 consultation requirements.
18. On 17 July 2019 the landlord held a conference call with the resident, where he raised service charge issues and contended that older charges should be written off or paid out of the sinking fund rather than raised to leaseholders.
19. The landlord explained how the maintenance plan informed the service charge contribution for the next 30 years and that this would be looked at in the next budget review and reduced if over collecting. It confirmed the management fee would be corrected from 15% to 10% in September 2019. It explained how accounts function and about the estimate process. It explained £8,000 had been returned to the sinking fund, rather than credited, as it came from the sinking fund, and benefits would be seen after the recalculation of this. It provided explanation about where a deficit came from and that it had taken legal advice on this, after which it is noted the resident accepted this was a legitimate cost. It informed the resident he could look at further information in relation to accounts and invoices at no cost. It explained the service charge and the sinking fund contribution were separate and pursued in line with the lease.
20. On 21 October 2019 the resident contacted the landlord about financials he had received, following which it met with him on 25 November 2019. On 13 December 2019 the resident contacted the landlord to query when he would hear back about issues including a lighting cost, and to also query receipt of a letter about a £230.20 deficit, which was later reversed. Subsequently, the resident was updated that he would be contacted in the New Year, where the landlord further updated that staff involved were out of the office and would pick the case up on their return. The resident later advised sale of his property would complete and he had service, management and sinking fund charge queries, which were referred to the leasehold team. On 4 February 2020, according to its records the landlord confirmed balance left to pay on completion to the purchaser’s solicitors, and on 5 February 2020 the sale of the property completed.
21. On 25 February 2020 the resident acknowledged receipt of a statement from the landlord that showed payments he had made. He advised some disputed charges, specifically the charge of a 15% management fee instead of 10%, had not been resolved. On 27 February 2020 the landlord confirmed that to correct this, the management fee from 2017 to 2018 was credited by £53 so that the charge from 2016 to 2018 totalled 10% of the expenditure for that period. It confirmed the management fee in 2019 was 10% of the expenditure and there were no further sums owed by or to the landlord. On 3 March 2020 the resident advised the letter was unclear and did not match previous correspondence on the matter. Subsequently, the resident contacted this Service to complain about incorrect service charges and being signposted to the First-Tier Tribunal, which he felt was unfair due to the cost. 
22. On 23 March 2020 the landlord texted the resident that 2019/20 accounts would not be completed until September 2020, so it was unable to identify if there had been an overcharge overall. The landlord offered £100 in recognition of inconvenience the resident experienced and to conclude the matter.
23. On 23 June 2020 the landlord wrote to the resident after contact from this Service:
    1. It noted he felt his experience had not been taken on board and was concerned other customers could face similar issues. It assured him his feedback would be used to improve service departmentally and more widely.
    2. It noted it understood that several account adjustments had required clarification and errors had occurred which required correction. It noted this was compounded by the lengthy time accounts are managed over an 18 month period. It recognised his frustration that he would not benefit from adjustments identified the previous year, due to the accounting cycle and selling the property. It noted the account was cleared at the time of sale and no funds were owed by him to the landlord or vice versa.
    3. It noted he was unhappy with treatment by staff and apologised for this. It explained all staff had recently completed customer relations training, which would be used to ensure his experience would not be repeated with other customers. It also noted his experience with the leasehold team and explained matters raised would be addressed and monitored.
24. Following this, the resident informed the landlord that its response did not resolve leasehold charges and he wished to discuss matters with a senior manager.
25. On 24 July 2020 the landlord wrote to the resident. It noted the resident raised queries in relation to his meeting with the landlord on 25 November 2019. It explained that if there were adjustments, they would not take effect until the account was finalised around September 2020. It advised the account was settled by the purchaser in February 2020 and any adjustments that resulted in a credit or deficit would affect the incoming owner. It acknowledged communication to leaseholders should be clear and confirmed this would be discussed internally.
26. On 26 August 2020 the landlord wrote to the resident after contact from this Service, and issued what it advised could be taken as its final response. It advised that it believed it had addressed all aspects of his complaint in a stage two response on 3 October 2018. It noted that while it had a third and final stage, he had not provided specific reasons to escalate the complaint and made requests which fell outside the complaints process. It noted it had met and had calls with him and written to him on 23 June 2020. It noted he made a recent request to meet with specific staff and advised this was not in line with its complaints policy. It apologised for failures in service previously identified and assured measures had been put in place to prevent them occurring again.
27. The resident advises he remains unhappy with raising of inexplicable service charges; complaint handling; staff conduct such as putting the phone down; and inaccuracies in the landlord’s response about wanting to meet senior staff and charges being passed to the new owner, as disputed amounts were paid to progress the sale and taken from proceeds. He feels the £100 offered by the landlord is inadequate as it does not accept wrongdoing or commit to improve systems and procedures.
28. The landlord informs this Service that prior to the resident’s purchase, neither buyer nor vendor requested a ‘leasehold property enquiries’ form, which clarifies service charges; level of outstanding arrears; and the level of reserve/sinking fund to cover planned works. It advises that for the resident’s own property sale it waived a £175 fee for a ‘leasehold property enquiries’ form.

Assessment and findings

Scope of the complaint

29. The Ombudsman’s remit in relation to complaints are limited by the Housing Ombudsman Scheme (‘the Scheme’), which sets out the type of complaints which the Ombudsman will and may not investigate.
30. Paragraph 39(g) of the Scheme sets out that the Ombudsman will not investigate complaints which in its opinion concern the level of service charge. The appropriate body that has jurisdiction to consider complaints about the level of the service charge is the First-Tier Tribunal (Property Chamber), which can determine the appropriate level and amount of service charges recoverable by a landlord; decide if the charges were reasonably incurred; by whom they are payable, and when.
31. It is therefore not within the Ombudsman’s authority or expertise to decide on matters such as service charges in the same way as the courts, but it can assess whether the landlord has followed proper procedure, followed good practice, and behaved reasonably, taking account of all the circumstances of the case. The Ombudsman can only take a view on the position by reference to law and the lease agreement. While the resident confirmed to this Service that he had not queried charges with a solicitor, if this is disputed, independent advice would be recommended, as only a legal procedure can offer a definitive and legally binding decision on the appropriate level and amount of service charge.

Handling of service charge queries

32. It is a buyer’s responsibility to satisfy themselves about the extent of legal obligations they undertake when they accept assignment of binding contractual obligations under a lease agreement. Many of the resident’s enquiries, requests and expressions of dissatisfaction relate to terms in the lease or leasehold policy, which the landlord demonstrates it sought to explain.
33. In the Ombudsman’s opinion, the landlord responded reasonably about addition of charges. It confirmed this was in accordance with the resident’s lease and provided calculations and accompanying explanation, which reflected agreement in the lease for it to recover differences between estimated and actual costs of services. While it is unclear an adjustment from 2013/14 was in line with the landlord’s leasehold policy to identify differences within six months of a service charge year end, it was noted the landlord took legal advice on this and the resident was noted to have accepted this was a legitimate cost in a call in July 2019. If now disputed, the First-Tier Tribunal is the appropriate authority to decide if it is fair and reasonable.
34. The landlord responded reasonably about the sinking fund and the contention that service charges should be charged against the fund. The landlord was inconsistent at times about reasons for return of £8,000 to the sinking fund, however its explanation for refunding to the fund rather than leaseholders was reasonable and consistent with the purpose of the sinking fund to fund future major work rather than to subsidise the regular service charge. While it did not affect obligation to pay the charge, the landlord also acted fairly and reasonably by reviewing the level of the charge and information on which the charge is calculated. This reflected the lease, which covenants quarterly estimated payments towards service charges and future maintenance costs, and the landlord’s leasehold policy, which confirms the sinking fund is regularly reviewed.
35. The landlord responded reasonably about a management fee overcharge. According to the landlord’s contemporaneous records, it acknowledged a management fee overcharge in April 2019 and explained in July 2019 that the fee would be corrected in September 2019. In February 2020, the landlord confirmed a correction had been made so that the management fee charged was 10% rather than 15% of expenditure, which was consistent with what it previously said it would do. For a deficit of £230.20 the resident queried, the landlord swiftly reversed this the same month. This Service recognises errors can happen, and the landlord’s action to recognise and put right mistakes was in accordance with the lease and what this Service expects to see when mistakes are made.
36. The landlord responded reasonably about administration charges for provision of information. The list of applicable charges it provided did not include surveys and plans and so did not necessarily demonstrate charges for those were valid. However, the landlord’s offer to freely email but charge for printed information reflected its policy, which states it will charge administration fees to cover costs where provision of information is not set out in statute or the lease. The landlord’s subsequent offer to waive charge for printed copies went beyond this.
37. As the landlord acknowledged, it would have been helpful for clear communication to the resident following a meeting on 25 November 2019. However, the landlord provided reasonable explanation that any adjustments that resulted in a credit or deficit would not take effect until after the property sale and would affect the incoming owner, and there is no evidence of a commitment to refund charges outside of the aim to make adjustments within six months of the service charge year end. As a consequence, while the resident raises inaccuracies about his wanting a meeting and settling the account, the impact of these are, in the Ombudsman’s opinion, minor. It is not unreasonable to define a request to discuss issues as a request for a meeting, even if not in person. Arrangements for account settlement and any credit or deficit that affect incoming owners would be expected to be made during the conveyance process, therefore the resident would be expected to contact his solicitor or seek independent advice about any concerns about settlement of the account.
38. According to a statement supplied by the landlord, in 2017/18 the resident paid a quarterly service charge of £141; in 2018/19, £149.45; and in 2019/20, £189.68. In 2017/18 deficits of £82.20 and £0.22 and surplus of £0.78 were applied to the account; in 2018/19 a surplus of £159.65 was applied; and in 2019/20 a deficit of £230.20 was applied, then reversed. The statement reflects that the lease allows a variable service charge that is not set and which may vary from year to year, due to estimates based on previous years costs of service. The statement also reflects that the lease allows credits and deficits to be applied to the account and show credits (surplus) to the account exceed deficit.
39. The above overall demonstrates that the landlord’s responses to the resident’s queries were appropriate. Its responses were in accordance with mutual obligations under the lease agreement, it took a customer focused approach to provide detailed explanation and engage with residents in a number of ways, and it put right any issues/mistakes in a reasonable and timely manner in accordance with the lease and accounting practices.

Customer service and staff conduct

40. In its responses the landlord acknowledged and apologised for the resident’s dissatisfaction, detailed changes and training implemented to improve customer service, and provided assurance his experiences would be used to widely improve service. It is appropriate for a landlord to acknowledge issues in its service and to provide details on how it would remedy this. This demonstrates the landlord responded sympathetically to the resident and provided reasonable apology and assurances that feedback would be used for future service improvement. Overall, the landlord demonstrates it responded appropriately to the resident’s complaint about customer service and staff conduct in accordance with what this Service would expect to see.

Complaint handling

41. In this case the Ombudsman notes that the landlord identified and acknowledged service failures in its management of this case. The Ombudsman will not make a finding of maladministration where a landlord has offered suitable redress to resolve a complaint. This further assessment considers whether the landlord has offered reasonable redress for its acknowledged failings.
42. The Ombudsman’s Dispute Resolution Principles are:
    1. Be fair – treat people fairly and follow fair processes
    2. Put things right
    3. Learn from outcomes
43. Following the resident’s original complaint, the landlord took seven weeks to respond, which exceeded the overall timeframe of its complaints procedure and was not appropriate. The landlord then acknowledged and apologised for delays in its stage two response. The landlord’s response to the resident’s request to meet or detail reasons verbally was also not appropriate, as it was not following its stated policy. While this will have caused frustration, written explanation can help to provide clearer understanding of complex issues, and when the resident wrote to the landlord it may have been beneficial to include detail about the charges complaint.
44. However, the landlord subsequently met with the resident on several occasions, including 25 February 2019, where it apologised about service issues and explained complaint and staffing improvements, staff feedback opportunities and how to escalate the complaint if he remained dissatisfied afterward. Later, the landlord offered to waive administration charges and waived a £175 fee normally payable for a ‘leasehold property enquiries’ form. This demonstrates that the landlord exercised reasonable discretion to provide remedy for acknowledged service issues, and took effective steps which led to no further request to escalate the complaint for over a year.
45. Following the resident’s complaint in March 2020, the landlord delayed in a formal written response, however in the meantime the landlord offered the resident £100 in recognition of inconvenience. It then provided responses in June, July and August 2020 which outlined position on service charge issues; acknowledged and apologised for frustrations and experiences with staff; outlined customer service training that had taken place; and offered assurances that the resident’s experiences were being used to improve service.
46. While some of the landlord’s complaint handling and delays were not appropriate, this Service recognises the impact of Covid-19 on landlord resources and services, and the landlord’s subsequent responses were in accordance with this Service’s Dispute Resolution Principles to ‘put things right’ and learn from outcomes.
47. In its Remedies Guidance the Housing Ombudsman Service sets out three compensation ranges which this Service takes into account when determining cases. The financial remedy provided by the landlord totalling £275 falls in the second highest range, where there has been considerable service failure or maladministration. Accordingly, the financial remedy provided by the landlord was in accordance with the Service’s Remedies Guidance and, considering all of the circumstances of the case, the landlord has responded reasonably to the resident’s complaint.

Determination (decision)

48. In accordance with paragraph 54 of the Housing Ombudsman Scheme there was no maladministration by the landlord in its response to the resident’s reports about handling of service charge queries.
49. In accordance with paragraph 54 of the Housing Ombudsman Scheme there was no maladministration by the landlord in its response to the resident’s reports about customer service and staff conduct.
50. In accordance with paragraph 55(b) of the Housing Ombudsman Scheme, and in the Ombudsman’s opinion, there was reasonable redress by the landlord in its response to the resident’s reports about complaint handling.

Reasons

51. The landlord appropriately responded to queries in accordance with mutual obligations under the lease agreement; took a customer focused approach to provide detailed explanation; and it addressed any issues/mistakes in a reasonable and timely manner in accordance with the lease and accounting practices.
52. The landlord responded appropriately to the resident’s complaint about customer service and staff conduct, by providing appropriate acknowledgement and apology for service issues, and by providing assurances about service improvements.
53. While there were issues in the landlord’s handling of the complaint and some delays in its responses, the landlord’s apologies, responses and financial remedy provide, in the Ombudsman’s opinion, an appropriate level of redress in accordance with this Service’s Dispute Resolution Principles and remedies guidance.

Orders and recommendations

Recommendations

54. The landlord to re-offer its compensation of £100 to the resident.
55. The landlord to review service needs to ensure it responds to complaints in a timely fashion, and in line with its complaints policy and the Complaint Handling Code.