London & Quadrant Housing Trust (L&Q) (202123362)

REPORT

COMPLAINT 202123362

London & Quadrant Housing Trust

1 September 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

The complaint is about the landlord’s requirement that the resident sell their caravan prior to exchange of contracts for the purchase of their shared ownership property.
The Ombudsman will consider the landlord’s communication and complaint handling.

Background and summary of events

The residents purchased a shared ownership lease dated 29 April 2022 jointly in or around late May 2023. The residents will be referred to as “the resident” in this report.

Legal and policy framework

The purchase of a shared ownership is overseen by Homes England (HE), the government’s housing and regeneration agency, and is an executive non-departmental public body. Shared ownership is subject to HE guidance. Shared ownership properties are offered to buyers on low income and in housing need.
The guidance states as follows:
1. Shared Ownership purchasers are encouraged to buy the maximum share they can afford from the outset. However, the various costs involved in purchasing and the costs of moving should be taken into account. This will depend on individual circumstances and there may be legitimate reasons why some purchasers should be allowed to retain a higher level of savings than others. For example, to meet future health and care costs or other financial commitments. Providers must encourage purchasers to buy the maximum share they can afford and must sell shares flexibly in accordance with a purchaser’s individual circumstances (e.g. not just to the nearest 10%).
2. Even where customers are registered with a Help to Buy Agent and undergo an initial eligibility check, Shared Ownership providers are ultimately responsible for assessing and confirming the eligibility of applicants. They must ensure that a further rigorous financial assessment is carried out, taking into account savings, access to capital or any other assets, and outgoings, to assess the affordability of the purchase.
3. Capital, access to that capital, and any income generated by it will be taken into account when assessing eligibility for Shared Ownership.
4. ‘Access to capital’ as described above, means that applicants will be expected to liquidate what capital assets they may have. Capital assets could include savings, bonds, shares, land, and any other assets or investments.
5. Owner occupiers can access Shared Ownership subject to the following conditions:
  1. That they are required to have already sold their property or sell their property at the same time as buying through Shared Ownership.
  2. In exceptional cases where an applicant is prevented from accessing or selling their existing home, an application may be considered, but only with Homes England’s prior written agreement. Requests to waive the requirement to sell existing properties in the following circumstances will normally be denied where such properties are:

(1) second homes

(2) holiday homes

The above properties should be sold before it is asked to help someone purchase a property intended to be the applicant’s main residence.

Providers are solely responsible for the final assessment and confirmation of an applicant’s eligibility, the share that they are able to purchase, and the overall affordability and sustainability of any purchase.
HE expects providers to make decisions with regard to eligibility and affordability in a fair and consistent manner. The final decision on the Shared Ownership purchase rests with the provider in light of all the information available to them. This includes a responsibility to protect public funding in any decision they make.
In order to maximise the share purchase, applicants will generally be expected to liquidate what capital assets they may have. Capital assets could include savings, bonds, shares, land, and any other assets or investments.
Whilst applicants are expected to maximise the amount of savings they use to purchase their share, this does not mean that they are not permitted to retain any savings. They should consider the costs of purchasing the share (including Stamp Duty Land Tax if applicable), any upcoming changes in the applicant’s circumstances and appropriate emergency savings.

The landlord’s guidance and procedures regarding shared ownership did not address the issue of capital assets or explain its eligibility criteria, except the website currently states that it does not consider applicants who are already home owners. The landlord did not provide a policy for shared ownership for this investigation.

Chronology

According to the landlord’s records, in late November 2020 the resident expressed an interest in buying a 25% share of a lease in a two or three-bedroom property. She was selling a park home. The landlord sent her the requisite forms on 23 December 2020 so that the resident could proceed with an application.
According to a summary of the application history, the application was made on 7 January 2021. The application stated that the resident had been living with family and friends since 2012. They did not own any property in the UK or abroad. The savings just exceeded their capital but not significantly, although the forms referred to different amounts of savings.
On 22 January 2021, the landlord provided a link to the HE guidance. On the same day, the resident wrote to HE that their application for shared ownership was refused because they owned a caravan on a 10-month holiday/non-residential park. Her home address was that of her daughter’s. They were unable to live there as the park was only open for 10 months a year and various other reasons.
HE wrote to the resident on 25 January 2021 as follows:
1. Ownership of a caravan in itself would not necessarily disqualify an applicant from being eligible for shared ownership. It would not constitute the ownership of another home as it does not represent a permanent home and is not able to be occupied throughout the year. However, HE guidance as regards shared ownership applicants includes an expectation that applicants will maximise the use of their ‘capital assets’ in any shared ownership purchase. Examples of capital assets include savings, bonds, shared, land and any other financial investments. Maximising the use of an applicant’s assets is a measure of commitment by the household to maximising the share that they are able to purchase which also forms part of HE’s guidance. It also ensured that Government funding for shared ownership was targeted at those most in need. There was not a full list of what would be considered an asset of an applicant. It was essentially a judgement based on the individual circumstance. For example, it would not advise that households are requested to sell a car that they owned. However, the ownership of a static caravan / holiday home could be considered as a capital asset or financial investment, rather than merely a possession. On balance, and in the absence of any definitive guidance relating to caravans, it would judge this as a financial investment similar to owning land which is given as an example of a capital asset within our guidance. It was only its initial view and not a definitive view. It was not able to provide definitive eligibility advice to applicants directly so it may be that the shared ownership landlord would need to contact HE for clarification.
The resident replied on the same day to HE that it was not an investment and “would be lucky” to get £40,000 for it and if they sold it after 30 June 2021, £10,000.
On 26 January 2021, the resident wrote to the landlord. The caravan was difficult to sell during the pandemic because of the restrictions and estate agents were not allowed on the park. It had to be sold for them to be able to purchase the property as, although they had enough funds for the purchase, they did not have enough funds to purchase furniture. The sale had to be completed by 30 June 2021 when the mobile site contract ended.
On 28 January 2021, HE replied to the resident that, given the resident’s wish to sell the property and the fact that this was restricted currently due to COVID and therefore beyond her control, then its view was that they should be able to be considered for a shared ownership home. It was up to the landlord. Even if not an ‘investment’ as it seemed to have lost value, it would still fall under its guidance in regard to assets that could be used to contribute to a shared ownership purchase.
On 11 February 2021, the resident wrote to the landlord requesting an update. She added that she would be giving the van to their daughter if she could not sell it by the end of June. The owner of the site would only pay the resident £10,000 for the caravan.
The resident forwarded the emails from HE to the landlord on 11 February 2021. The landlord internally reconsidered the matter on 12 February 2021. The landlord took the view, which it considered to be “fair and reasonable”, that it would allow the sale to proceed. This would be subject to the caravan issue being resolved at point of exchange, which had to take place within 28 days, whether sold to an external party, the caravan owner or ownership formally transferred to their daughter. According to an internal email of 16 February 2021, the parties agreed to proceed with the sale on that basis.
The reservation details stated that a condition of sale was that the reservation was subject to a financial interview and the static park home address being sold by exchange of contracts on 23 March 2021. Each resident signed a check list on 16 February 2021 stating that they had read, understood and accepted the conditions set out in the documents, including the reservation details.
The landlord wrote on 24 February 2021 offering the property, subject to a financial interview with a Specialist Mortgage Advisor and to exchange of contracts taking place within 28 days of the contracts being issued. If the resident did not exchange, the reservation would be cancelled.
According to a sale invoice dated 7 March 2021, the resident agreed a sale of the caravan to a mobile home park for £33,850 and received a site refund. The caravan was to be vacated on the same day.
The resident wrote to the landlord on 31 May 2021 as follows:
1. They had reflected on the condition regarding the sale of the caravan. They had always intended selling the caravan as it was nearby their intended home and they could not sublet it.
2. Because the landlord required the sale to take place before exchange, they had no choice but to sell it back to the site owner due to the then lockdown and no viewings being allowed. Owners were allowed to stay on site because of the pandemic. They could not stay with their daughter because of her particular risk from Covid.
3. There was nothing in the exchange contract mentioning the sale of the caravan. They also understood that the sale should have taken place prior to completion, which was scheduled for the end of May.
4. While there were other properties available for purchase that would not have assisted them.
5. She requested a clear explanation as to why this condition was made prior to being accepted onto the Shared Ownership scheme as they felt that this condition was not fair or justified and had put their health at risk.
The landlord replied as follows on 11 June 2021 as follows:
1. It referred and cited the HE guidance in relation to utilising their assets to maximise their share percentage and to contribute toward their purchase. Following a review of the information supplied, it deemed the static park home to be such an asset.
2. The parties had agreed upon the terms and conditions of the purchase.
3. The condition was necessary to ensure it occurred prior to both parties being legally committed to the sale by the exchange of contracts. Otherwise, it would not have been able to ensure that the park home was sold at completion, a potential breach of the guidelines.
4. It had provided the information to allow them to make an informed decision and had offered alternative solutions to consider.
5. It appreciated that the recent pandemic presented numerous issues for purchasers and sellers across the country, the circumstances at the time of the purchase may not have been ideal “in hindsight”.
On 14 June 2021, the resident made a complaint on the same basis and while it was not provided to this service, it was incorporated into the landlord’s response.
The landlord replied with its Stage 1 complaint response on 18 June 2021 as follows:
1. In relation to the reason the resident had to sell the caravan prior to exchange of contracts rather than completion. The delay would have given an additional three months to sell:
  1. It repeated the contents of its email of 11 June 2021.
2. In relation to the reason the caravan condition was not in the exchange contract:
  1. It was not standard practice for it to amend contracts following reservations. Any terms and conditions were agreed prior to reservation and documented within the reservation agreement itself.
3. In relation to the reason the resident had to exchange contracts so soon given the completion date was still months away:
  1. The exchange deadline was agreed at the point of sale, documented in the reservation form and Memorandum of Sale. Its policy stated that new sales were bound by a 28–day exchange deadline from the point at which legal packs were issued, and as standard practice in new home property sales. The anticipated build completion did not affect the requirement to exchange within this timescale.
4. In relation to the reason the landlord “feel that it was ok” for the resident to break Government advice to move to their daughter’s house during the pandemic. The caravan would have been safer:
  1. It was outside the landlord’s remit to offer advice on matters outside of the property sale itself.
5. In relation to the reason the landlord did not contact HE for advice and guidance, as suggested by that body. The guidance suggests that if an asset could not be sold for a valid reason (a pandemic for example) then advice should be sought from them to further clarify the case:
  1. It had considered the HE emails prior to exchange. The first referenced its initial “decline” for shared ownership eligibility as a static park owner. It had retracted its decline and allowed them to proceed with the purchase. No contact was necessary. It had agreed with the second email that HE considered the caravan/static park home as an asset, and thus needed to be utilised toward the purchase. It was not obliged to contact HE to agree the terms of its sales.
6. In relation to whether the resident had owned a property rather than a caravan, this would have had to be sold prior to completion:
  1. It agreed but it would have expected buyers to have exchanged on any existing property prior to exchange on their new home, given that exchange of contract is a binding agreement to complete.
7. It directed the resident to its website for its complaints procedure.
The landlord wrote again on 8 July 2021. The resident’s email to which it responded was not provided to this service but again the points were incorporated in its response. It understood that the resident was requesting compensation in relation to their complaint. It asked whether the resident’s statement that” we were advised not to say or do anything about it prior to moving in as we could have lost the purchase” was their solicitor’s advice. It was not the advice that they would have expected. The timescales related to its policy. Affordability was a separate matter and one which would have been addressed in the financial assessment. The agreed conditions were not financially motivated. It had alternative homes which would have extended the date of exchange of contracts. In relation to their request for £10,000 in compensation, in part for stress, and as partial compensation for a £20,000 loss in the sale proceeds, it had not upheld the complaint.
The landlord wrote in response to the resident’s email of 16 July 2021 as follows: (The email is incorporated in the reply, which is undated):
1. The advice was given to by their solicitor was that up until exchange of contracts either side could pull out of negotiations. Once contracts were exchanged, they could not pull out but the landlord could. The advice was not to say anything before completing as they could lose the house:
  1. If either party pulled out of a sale following exchange of contracts, then the affected party could sue for losses and or damages.
2. If the condition of the sale of the caravan had been in the contract, their solicitor would have raised this point with the landlord’s solicitors. They did not know the condition would not be included in the exchange contract.
3. In relation to all contracts for new builds being in a standard format, the landlord had stated that theirs was a “unique case”, which she had never encountered before, and as such they felt that their contract should have included the sale of the caravan, if it was a legal requirement:
  1. The landlord referred to its email “dated XXX” (sic) and was “not open to further negotiation or review”.
4. The landlord only advised the resident of the timescale after it found out about the caravan. They considered the timing proved that it thought they could not afford the house unless they sold the caravan: timescales and affordability were independent of one another.
  1. Financial assessments served to ensure that the prospective purchase was maximising their share in line with HE guidance.
5. The landlord had not addressed the issue of putting their lives at risk during a pandemic. They referred to their serous health conditions:
  1. It was “truly sorry” that they had previously suffered with ill health. However, there were limitations to its ability to manage matters outside of the purchase and sale of our homes, for example any arrangements required to facilitate the same.
6. They were considering legal action. They would not have had to sell a car. Lockdown was lifted in the middle of April, so they could have easily sold it by completion scheduled for the end of May.
The complaint was escalated on 20 July 2021. There would be a delay. The resident chased the landlord for a response on 19 August 2021 to which the landlord stated on 25 August 2021 there would be a further delay chasing.
The landlord wrote with its Stage 2 response on 14 October 2021 as follows:
1. It referred to its email of 2 July 2021, correspondence in July and August 2021 and referred to a telephone conversation of 4 October 2021.
2. In relation to the resident’s complaint that the landlord should have had further discussion with HE, the resident querying the landlord’s qualifications to interpret the rules around the disposal of assets and that the landlord should have waived the requirement given the pandemic:
  1. The Shared Ownership scheme was government funded and the regulations require that purchasers to use their available assets to maximise their own investment in the home. It referred to the HE emails. The landlord was responsible and accountable to the regulator to ensure that it was compliant with the regulations. It was reasonable and appropriate to require that a major asset was sold prior to a sale. The mobile home was not and could not be a permanent residential address. It was the responsibility of the landlord to make the final decision on this condition rather than HE. It was reasonable to conclude that failure to include the condition that the mobile home was sold before exchange of contracts would have put the landlord in breach of the guidelines.
3. In relation to the resident’s report they had lost £20,000 so should have been allowed to sell before completion, as with a residential asset:
  1. It was unable to comment on the prospective value of the mobile home. There was no obligation to buy the property, there were other properties on site. The resident had said in the call of 4 October 2021 that although they had concerns before exchanging contracts, they had decided not to raise them at that point but to enter into the contract anyway. There was no indication that they would have become homeless as a result. They signed the Reservation Agreement with the clear understanding that exchange of contracts was conditional on the mobile home having been sold first. It understood that they wanted the specific property, but also that the resident had understood and had agreed to the timing implications. If they had not been happy with any aspect, they had the option not to enter the agreement. The landlord did not accept liability for any potential variation in the sales price of the mobile home.
4. In relation to the resident’s report that the landlord made them homeless and/or exposed them to risk of Covid and obliged them to break Covid rules:
  1. The landlord had not obliged or required the resident to buy this particular shared ownership home at that time. As there were alternative options, it did not accept it had made the resident homeless or exposed them to Covid.
  2. It accepted that communication had been poor. It cited the resident’s impression given by a Sales Associate that the resident should “count themselves lucky”. It had not always responded as quickly as it should have done. While Covid had made this a difficult period for everyone, nonetheless it had aimed to respond more quickly and would endeavour to do so in future. It was reviewing its processes with a view to increasing efficiency in future. It awarded £250 as a goodwill gesture, consisting of £100 for poor complaint handling and delays, and £100 in relation to the time and effort for chasing, and £50 for any inconvenience caused.
  3. Staff attitude had been poor. There were lessons to be learnt here, and that the landlord staff needed to be clear and specific when they described the legal requirements of Shared Ownership housing, and any implications that that has for its customers. It apologised for the way that its Sales Associate appeared to have explained this to the resident. It had introduced “Tone of Voice training”. It awarded £50 for any distress caused by the Sales Associate’s choice of language.

Assessment and findings

The sale of the caravan

While the landlord did not provide a copy of its decisions on the resident’s application for a shared ownership lease, the evidence indicated and it was not disputed that the initial application for the shared ownership property was refused on the basis that it had treated the caravan as the resident’s home or second home. It was reasonable that, on the basis of the resident’s account and the guidance from HE, that the landlord accepted that ownership of the caravan did not constitute home ownership, it was a holiday home and that it reconsidered its decision to refuse the resident’s application. Given it had accepted HE’s reasoning on that point, it was reasonable that the landlord did not contact HE to discuss that aspect further.
A shared ownership landlord has an onerous responsibility in making decisions about who it can accept, or reject, as applicants for shared ownership. Their decisions involve the use and application of public funds and the responsibility is solely theirs. This was as expressed in the landlord’s Stage 2 response. The HE guidance was explicit in referring to the expectation that applicants should maximise funds and that the caravan was likely to represent a capital asset. It also explicitly excluded holiday homes as an asset where a requirement to sell would not be waived. It was reasonable of the landlord to consider the caravan as a capital asset, whether it appreciated or depreciated in value. That is because the caravan had a value, whether its worth was £10,000 or £80,000. A caravan is not the same as a car, given the relative levels of necessity, and there is precedent for not treating it as such.
The resident’s own assessment of its value was £40,000, “if they were lucky”. If they sold it after 30 June 2021, they anticipated getting £10,000. The evidence indicated they received approximately £33,000. In the circumstances, it is not understood how the resident’s loss was valued at £20,000.
The evidence showed that the resident agreed to sell the caravan prior to exchange. They had had a discussion with the landlord and on 16 February 2023 they signed the reservation documentation stating that they understood that was a condition of the sale.
While the resident’s complaint was about the timing of the sale of the caravan, and they would have sold the caravan in any event, the Ombudsman has considered whether, from the landlord’s point of view, it was necessary to sell it all, as this would have a bearing on the requirement it was sold prior to exchange. The reason for the requirement to liquidise assets was to show commitment and to maximise the shares the resident was buying. There was no evidence that maximising the share was the reason why the asset had to be sold. The resident bought the same size share that they had always intended to buy.
However, while the resident’s concerns and frustration at potentially losing any funds were understandable, there were a number of reasons why the Ombudsman has concluded that the landlord did not act unreasonably.
It was reasonable in the circumstances, that the landlord took the decision to follow the guidance of HE. There was no reason not to. The landlord was not aware of the various issues that the resident raised in their complaint so the landlord could not have possibly considered the matter any further or sought further guidance from HE in the light of concerns it was not aware of. Indeed, the information the landlord had was that the caravan was (categorically) not a home. That said, it is not possible to speculate what decision the landlord would have made if it had been presented with those concerns as there would have had to be very good, if not insurmountable, reasons for the landlord to set aside the HE guidance. In any event, the resident had alternatives open to them, which, while less preferable for the resident, were options for the resident to weigh up against their circumstances at time.
There was no evidence that the landlord would have pulled out of the sale if the resident had raised these concerns with the landlord prior to exchange, after which event, both parties would have been committed. Nevertheless, the resident made a decision not to raise their concerns. Again, that was the resident’s decision in which the landlord played no part.
In relation to facing any risks by not having a safe base during the pandemic and being homeless, the landlord’s response was reasonable that, while it understood that the resident had a particular property in mind, it was, ultimately, a decision for the resident themselves to weigh up. The Ombudsman does not consider that the landlord, while expected to act reasonably and proportionately, had a responsibility, legal or otherwise, that extended so widely.
The Ombudsman has also noted that the landlord made its decision in the context that the resident wanted to sell the caravan prior to June 2021 in any event. This was because the resident required funds for furniture, they would not need the caravan, and also because they expected the caravan to fall in value after 30 June 2021. Their argument was that they could have got more money if they had waited till completion of the sale. It was not clear when completion took place. The resident stated it was to take place at the end of May. Elsewhere they referred to it being a matter of three months, presumably from the application for shared ownership was accepted. There was no evidence either way whether they would have got a better price in that time and was a matter of speculation. This also applies to the resident essentially asking why the exchange date could not have been deferred. Moreover, there was no evidence they ever asked the landlord to do so. There was no reason for the landlord to depart from its policy and practice.
The landlord’s explanation why it required the caravan to be sold prior to exchange was reasonable. It would need to be sure it was sold. The process of selling one home to buy another differs in that it is a two-stage process. Generally, exchange of contracts on a sale and purchase occur at the same time, whereas the sale of a caravan is a one stage process. Once the parties had exchanged, the landlord would not have been able to insist it was sold, or not without a complex and unusual procedure of a conditional exchange, which may not have even be possible in the circumstances. It was reasonable that the condition was not in the exchange contract, given that pre-dated the sale of the caravan. This did not disbenefit the resident who could have sought advice from their solicitor in any event, and either provided, or could have provided, their solicitor with the reservation documents.
The Ombudsman did not identify a policy in relation to its decision making on eligibility, which HE expected to be consistent. This investigation will make a recommendation that the landlord considers amending its policy, procedure and guidance in order to promote clarity, consistency and transparency and that it is easily accessible on its website.

Communication and complaint handling.

The resident raised their queries on 31 May 2021. The landlord took two weeks to reply. There was an exchange of emails in June and July 2021. While it could have better explained the reasons for its decision to make the sale of the caravan a condition of sale, the responses were comprehensive. There was a long delay to the second stage response. The landlord reasonably took responsibility for the nature of the communication by the sales associate, which would have been hurtful for the resident. The Ombudsman considers that the apology, action plan and offer of £300 compensation constituted reasonable redress.

Determination (decision)

In accordance with Paragraph 52 of the Housing Ombudsman Scheme, there was no maladministration in relation to the landlord’s requirement that the resident sell their caravan prior to exchange of contracts for the purchase of their shared ownership property.
In accordance with Paragraph 53(b) of the Housing Ombudsman Scheme, in the Ombudsman’s view, there was reasonable redress in relation to the landlord’s communication and complaint handling.

Reasons

The landlord was subject to stringent guidelines in relation to shared ownership in regards public funds. The resident had agreed to the landlord’s condition and there was no evidence that in the circumstances of this case, that this was unreasonable.
The landlord recognised its delay in the complaint handling and took responsibility for the impression given by its staff.

Recommendations

The Ombudsman makes the following recommendation:
1. The landlord should considers amending its policy, procedure and guidance to explain its approach to eligibility for shared ownership and that it is easily accessible in its website.
2. The landlord ensures that its decision making is clear and recorded.
The landlord should notify the Ombudsman of its intentions regarding this recommendation within four weeks of this report.