London Borough of Hammersmith and Fulham (202334879)

Background

1. The resident has complained that the landlord was not transparent about the arrears on her service charges account. She was consistently making payments via standing order but was unaware that the payments were being applied to balances for older invoices. She is unhappy that the landlord did not communicate the arrears for 3 years. She asked us to investigate after receiving responses from the landlord that she remains dissatisfied with. 

What the complaint is about

2. The complaint is about:
   1. The landlord’s communications about an outstanding service charge balance.
   2. The handling of her complaint.

Our decision (determination)

3. We have found the landlord responsible for:
   1. No maladministration in its communications about the outstanding service charge balance.
   2. No maladministration with its complaint handling.

Summary of reasons

The landlord’s communications about the resident’s service charge

4. The landlord notified the resident of the arrears in January 2020, February 2024 and July 2024. It therefore acted reasonably in making her aware of the arrears on her account and her responsibility to pay the service charges.
5. When the resident enquired about the balance of her window replacement costs in January 2021, the landlord confirmed she had a significant balance remaining on her account, therefore reminding her of the debt.
6. By signing the lease, the resident understood that she had to pay the service charges, and any overdue balance would be subject to interest.
7. The resident was responsible for keeping her service payments up to date and ensuring she was making payments towards the charges she was liable for. The landlord has therefore not acted unreasonably in chasing the resident for arrears on her leaseholder account.

Complaint handling

8. The landlord provided its complaint responses within the timescales set out within the Complaint Handling Code and acted reasonably.

Our investigation

The complaint procedure

What we found and why

The circumstances of this complaint are well known by the parties involved, so it is not necessary to detail everything that’s happened or comment on all the information we’ve reviewed. We’ve only included the key information that forms the basis of our decision of whether the landlord is responsible for maladministration.

9. Under the terms of her lease, the resident is required to pay the service charge. If charges are overdue by more than 21 days, the landlord could charge interest at 5% above its bank’s base rate, which would accrue daily until the balance is cleared. The lease also requires the landlord to provide an annual service charge statement at year-end, showing total charges and any adjustments. 
10. The landlord had previously identified arrears on the resident’s account and agreed to a payment plan as an exception, as she was experiencing financial difficulties. The plan ran from 13 January 2020 to 13 January 2022 and required 47 equal monthly payments of £90.74. This was a reasonable action by the landlord, as it showed it was understanding of the resident’s situation.  
11. We requested evidence of when the resident was first informed of the debt. The landlord provided an email dated 8 January 2020 stating she owed £4,355.59 for 6 service charge invoices relating to April 2017 to September 2019. The resident responded on the same day. Her response confirms that she received the email.  
12. However, the resident has complained that the landlord failed to inform her promptly and frequently about arrears on her account. She has said the issue arose on 2 January 2024 when she asked the landlord if her Major Works balance was cleared. The landlord confirmed the Major Works invoice had been paid, but highlighted that she owed £7,084.19, with accrued interest of £931.23 on her leasehold account. This was because she had not paid subsequent service charge invoices since the earlier agreement.
13. The landlord’s letter on 5 January 2024 demanded full payment of the arrears. The resident responded by explaining that she believed the deductions from her account covered service charges. She questioned why those payments had stopped and why the landlord did not contact her to resume them. We have not seen that the landlord responded to these queries directly, which it should have done as this was a fair question by the resident. It should have made it clear that the previous debt had been paid but also clarified the status of the account.
14. By signing the lease, the resident would have been aware that she must pay service charges and that failure to do so would incur interest and breach the lease, potentially leading to further action. We have also seen that it notified the resident of arrears in January 2020 and as the resident responded to the email, this demonstrates that the resident received the reminder about the arrears. We recognise that it also confirmed to the resident on 14 January 2021 that the resident was paying £260 a month for the window replacement, for which she had made 10 payments. However, this left a balance of £9,857.89, which reminded her of the debt.
15. On 22 February 2024, the landlord wrote to the resident, confirming the overdue debt was £6,564.19 for 10 service charge invoices, with 8 of them incurring £1,028.80 of interest which was accruing daily. It sent a further reminder to the resident on 30 July 2024, which said that her account balance was £7,875.75, of which £6,796.16 was overdue. This indicates that the resident was notified of the arrears on various occasions, which was reasonable.
16. We have also seen evidence of service charge invoices, including estimates and final bills, every September and March from 2020-2024. The resident has not disputed receiving these invoices. This would have notified the resident of her obligation to pay the ongoing service charges and a reminder that the resident was liable to pay. However, we recognise that this would not have alerted her to the balance of the outstanding debt, but rather her obligation to pay the ongoing service charges.
17. During our investigation, the resident has confirmed that she does not recall receiving details for an online leaseholder account when she moved into the property and she did not log in or actively use any online account during 2020-2021. She confirmed that she was not made aware of any way that it enabled her to access or monitor her service charge account and she relied on correspondence sent to her directly. While we appreciate this, we are satisfied that the landlord had notified of her debt in other ways, for example by email in January 2020 and January 2021.
18. The resident complained that she did not realise her payments excluded current service charges. She believed all payments were being taken by direct debit and said the landlord failed to inform her about the arrears. In its stage 2 response, the landlord stated that the payment plan agreed in January 2020 covered only old invoices, not ongoing bills. It has reiterated that this was explained at the time, but the agreement letter did not confirm this.
19. We find that on balance the agreement letter was for the resident’s past debts, and it was not unreasonable that it did not mention future or ongoing invoices. As she continued to receive service charge invoices, and due to the terms of her lease, the resident should have expected a payment to cover her ongoing service charge liabilities.
20. We recognise that in the service charge invoice dated 1 April 2023, it stated that direct debits would appear as one combined payment where another payment plan exists or if the resident had more than one property. This could have led the resident to assume her monthly payments covered all charges.
21. We recognise that the resident is now facing arrears of over £7,000, which would understandably be distressing, given she thought she was paying towards her service charges each month. However, as she had previously built-up arrears, it would have been reasonable for her to monitor her account and check she was paying towards all of the charges she was liable for.
22. As part of the resident’s complaint, she included that she did not think it was fair that the landlord continues to charge interest while her complaint is with us. The resident’s lease includes that if any payments are overdue for 21 days, interest will accrue. The evidence provided to us demonstrates that the landlord notified the resident of the arrears from January 2020 and that it would charge interest. We therefore do not consider the landlord to have acted unreasonably by continuing to charge interest on the overdue balance. We also recognise that the resident’s liability to pay costs is not paused by her decision to access the Ombudsman service.
23. Based on everything we have seen, we have found no maladministration by the landlord in its communications about the resident’s outstanding service charge balance. The landlord acted reasonably by notifying the resident about the arrears in January 2020 and January 2021. The lease does not require the landlord to chase payments beyond issuing invoices and the resident was contractually responsible for paying the service charges. It reminded the resident of her ongoing service charge liabilities through regular invoices and ultimately acted in line with the terms of the resident’s lease.

24. The Ombudsman’s complaint handling code (“the Code”) sets out when and how a landlord should respond to complaints. The resident formally complained on 12 January 2024, and the landlord acknowledged the complaint on 15 January 2024, which was within the timeframe set out in the Code. It said it would aim to provide the resident with a written response by 26 January 2024. It was reasonable that it gave the resident a timeframe for when it intended to respond. 
25. The landlord provided its stage 1 complaint response on 26 January 2024, which was within the timeframe set out in the Code and within the timeframe it stated to the resident. The resident requested for her complaint to be escalated to stage 2 of the landlord’s complaint process on 29 January 2024, but we have not received any evidence of the landlord’s acknowledgement to this. Nevertheless, it provided its stage 2 complaint response on 26 February 2024, which was within the 20-working day timeframe set out in the Code.
26. From reviewing the landlord’s complaints process, we are pleased to see that the landlord responded within the timescales set out in the Code and therefore acted reasonably. We have found no maladministration in the landlord’s complaint handling.

Learning

27. The landlord acted reasonably by providing an agreement letter that clearly stated the amount and duration of payments. However, it should consider including a payment breakdown when residents pay for multiple items, such as debt and ongoing service charges.

Communication

28. Where a resident has an outstanding balance for rent or service charges, it may be helpful for the landlord to send a reminder to them with the annual statement, which sets out any outstanding balance which is accruing interest.