London & Quadrant Housing Trust (L&Q) (202102186)

REPORT

COMPLAINT 202102186

London & Quadrant Housing Trust

22 November 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. This complaint is about:
   1. The level of a service charge, following the time taken to set up a service charge account.
   2. The redress offered to the resident, following a complaint about the time taken to set up the service charge account.

Jurisdiction

2. 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.
3. After carefully considering all the evidence, the complaint about the level of the service charge, following the time taken to set up a service charge account will not be investigated by the Ombudsman under paragraphs 39(g) and (i) of the Housing Ombudsman Scheme,
4. Paragraph 39(g) of the Scheme states

“39. The Ombudsman will not investigate complaints which, in the Ombudsman’s opinion: g. concern the level of rent or service charge or the amount of the rent or service charge increase”

5. Paragraph 39(i) of the Scheme states:

“39. The Ombudsman will not investigate complaints which, in the Ombudsman’s opinion: i. concern matters where the Ombudsman considers it quicker, fairer, more reasonable or more effective to seek a remedy through the courts, a designated person, other tribunal or procedure;”

6. The resident states that the service charge should be renegotiated in light of the delays in this case. That is ultimately a question of what the level of the service charge should be.
7. The Ombudsman does not investigate complaints about the level of service charges under paragraph 39(g) of the Scheme so will not investigate this aspect of the complaint.
8. The resident is also entitled to test the fairness of a service charge and whether it is payable. Under section 27A of the Landlord and Tenant Act 1985, the First-Tier Tribunal has the jurisdiction to make this determination and not the Housing Ombudsman. It would be fairer, more reasonable and more effective for the resident to seek a binding answer of whether the service charge should be reduced from the tribunal, under paragraph 39(i) of the Scheme.

The scope of the Ombudsman’s investigation

9. The Ombudsman’s investigation has focussed on whether the level of redress offered was fair in all the circumstances of the case.

Background and summary of events

Introduction

10. There are several parties in this complaint, such that it shall be prudent to set them out here:
    1. The sales agent sold the lease on behalf of the landlord. They are not a member of the Housing Ombudsman Scheme. They will be referred to in this report as ‘the Sales Agent’.
    2. The landlord under the lease is not a member of the Housing Ombudsman Scheme.
    3. The resident (who has brought this complaint to the Ombudsman).
    4. London & Quadrant Housing Trust is the managing agent of the building including the flat. It is named in the lease and is a member of the Housing Ombudsman Scheme. The Ombudsman can consider complaints about managing agents if that agent is a member of the Scheme (Paragraph 25 of the Scheme). London & Quadrant Housing Trust shall be referred to as ‘the Managing Agent’ in this report. This investigation focusses on the actions and omissions of the Managing Agent.

The background to complaint

11. The resident purchased a second floor flat in a new build purpose-built block. The sale was completed on 30 September 2019.
12. The lease places an obligation on the Managing Agent to provide several services. In addition, the Managing Agent is responsible to calculate the service charge for the following accounting year. Under clause 4.21 and the Third Schedule of the lease, the resident is required to pay the service charges in advance on the first of each month starting with 1 April each year.
13. The Managing Agent’s service charge policy states:

“Service charge estimates for the forthcoming year are sent out a minimum of one calendar month before the first payment is due.”

 

“The Service Charge Team will issue statements of actual service charge expenditure and balancing charges to those customers who are on variable service charge following the close of each financial year. Final statements must be sent within six months after the end of the financial year (i.e. by 30 September). They will include details of any refunds/non-charged items identified.”

Summary of events

14. Following completion of the sale, the Sales Agent produced a ‘Completion Notice’. The copy provided to this Service for our consideration is dated 30 September 2019 – which is the same date as the lease started. It states that the Service charge was £2,589.87. The resident was responsible for £219.96 for the service charge for 31 calendar days from the start of the lease. Whilst there is evidence that this was sent to the Managing Agent on 4 October 2019 and later on 30 July 2020 by email from the Sales Agent – there is no evidence it was sent to the resident at all.
15. The parties largely agree (and the documentary evidence confirms) that the Managing Agent did not send the resident any subsequent information about his ground rent and service charges until 18 November 2020.
16. On 24 January 2020, four months after the lease began, the resident contacted the Managing Agent to query the service charge, he says, to avoid the shock of a large bill at year-end. The written records show that the Managing Agent made enquiries internally and commented that the resident’s details were not recorded on its internal systems at that time. The resident accepts he was informed his details were not yet on the system.
17. The resident contacted the Managing Agent again on 29 July 2020 by email and further enquired about the service charge. He asked the Managing Agent if there was any action he needed to take. The Managing Agent in turn sent an email on 30 July 2020 to the Sales Agent to say it had not received the ‘necessary paperwork’. The Managing Agent did not set out what paperwork was required. There is no evidence to show why the Managing Agent had not chased this sooner following the resident’s contact in January 2020.
18. Having not received a response, the resident contacted the Managing Agent by email again on 25 October 2020 to say he had not received a response to his previous queries. An internal email was sent by a Team Leader in the Rent Account Department of the Managing Agent which stated that the resident now had an account, but that the relevant team had not contacted the resident to request a payment.
19. The Managing Agent contacted the resident on 18 November 2020, around 11 months after his initial contact, and notified him the service charge account was in arrears of £2,808.62 together with £103.53 for a parking space.
20. The resident raised a complaint with the Managing Agent on 22 November 2020. He stated that the Managing Agent’s delay in sending a bill for the account had caused the arrears to build up. He asked that the bill be negotiated.
21. On 1 December 2020, the Managing Agent responded to the complaint. It accepted it was at fault for the delay in setting up the service charge account – but that it could not reduce the service charge.
22. The resident requested a stage 2 response on 12 January 2021.
23. The Managing Agent issued its final response on 15 February 2021, in which it explained:
    1. A service charge account could only be set up by the Managing Agent where it had all relevant documents on file from the Sales Agent. It had not received the correct full information until July 2020.
    2. It could not offer a discount on the service charge for the period, as the resident had received the services billed for.
    3. It would award £100 compensation for the distress and inconvenience caused.
24. The resident contacted his MP, who in turn, contacted the Managing Agent to make enquiries about the handling of the service charge. The Managing Agent responded on 11 April 2021 maintaining its final decision (of 15 February 2021). It added further that:
    1. The service charge and ground rent were payable under the legal terms of the lease.
    2. The total bill was set out to the resident in the completion statement and the enquiries pack provided to his solicitor. It was down to the resident to budget for the costs.
    3. There were delays in receiving plot sale documents.

Assessment and findings

25. The resident states that in light of some of the delays that the Managing Agent should be prepared to negotiate some of the level of the service charge. If the resident received the services billed – he is obliged to pay the cost of them under the terms of the lease. That was the agreement the parties reached when they signed the lease, and it would not be fair for the Ombudsman to change that now.
26. If the resident considers that the level of the management fee is not ‘fair’ based on the service he has received, then as already set out, he can refer this to the First-Tier Tribunal to make a finding on this point. The focus of this investigation is whether the level of compensation awarded by the Managing Agent was fair in light of the Managing Agent’s errors.
27. The purpose of compensation for distress and inconvenience is to recognise the impact of the Managing Agent’s act or omission on the resident.
28. The Housing Ombudsman expects landlords and managing agents who are members of the Scheme to give clear information in a consumer-friendly format about rent and service charges, at the outset of a tenancy or lease. Based on the information presented to this Service, there is no evidence that the resident was provided with a copy of the Completion Notice or any information about the service charge within a reasonable time of the lease being signed.
29. After moving into the property, the resident reasonably waited from October 2019 to January 2020 before requesting details of the service charge and rent. This information was provided to the resident some 13 months after the lease had started. That was an unreasonable delay. The Managing Agent has produced no evidence to demonstrate this delay was outside of its control or unavoidable.
30. That will have been exacerbated by the resident chasing to avoid the very thing that happened; a large bill and arrears. In light of the overall delay and failure of the Managing Agent to put things right at the earliest opportunity, the level of compensation is not commensurate to the distress and inconvenience likely experienced by the resident.
31. For that reason, the Ombudsman considers the Managing Agent was at fault for failing to consider the time taken to put things right and the upset and frustration caused. The compensation was too low, and a fairer level of compensation would be £350, which is an increase of £250.

Determination (decision)

32. Having carefully reviewed all the evidence I have determined that, in accordance with paragraph 54 of the Housing Ombudsman Scheme, there was service failure by the Managing Agent in the award of compensation, following the complaint about the handling of the service charge account.

Reasons

33. Paragraph 54 of the Scheme states:

“When investigating, the Ombudsman is concerned to establish whether the member has been responsible for maladministration (which includes findings of service failure, maladministration and severe maladministration). This may include, but not exclusively, circumstances where the member:

a. failed to comply with any relevant legal obligations;

b. failed to comply with any relevant codes of practice;

c. failed to apply its own policies and/or procedures;

d. delayed unreasonably in dealing with the matter;

e. behaved unfairly, unreasonably or incompetently; or

f. treated the complainant personally in a heavy-handed, unsympathetic or inappropriate manner.”

34. The Ombudsman finds that the Managing Agent unreasonably delayed providing information to the resident about the service charge. This was even though the resident chased the Managing Agent for the information.
35. Even though the Managing Agent recognised its failures, the compensation it offered was too low to fairly recognise the full extent of the delays (13 months) and the impact and frustration on the resident of receiving a large bill when he hoped to avoid this.

Orders and recommendations

36. It is ordered that: within 28 days of the date of this determination, the Managing Agent:
    1. pays the resident £350 compensation (less any amounts already paid) to recognise the impact of the service failures. The Managing Agent should ask the resident if he would like this to be set off against any service charge, fees for the parking space or ground rent; and
    2. contacts the resident to agree to an interest-free repayment period for the service charge from the start of the lease if it has not already been paid.