Metropolitan Housing Trust Limited (202009401)

REPORT

COMPLAINT 202009401

Metropolitan Housing Trust Limited

2 September 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

The complaint is about:
1. The landlord’s administration of the resident’s rent and service charge account, including its response to her queries.
2. The landlord’s complaint handling.

Background and summary of events

The resident was the joint leaseholder of the landlord under a shared ownership scheme. The lease began 1 November 1985. The resident had raised a number of issues over her years of ownership in relation to service charges being mischarged, which included an application to the then Leasehold Valuation Tribunal (LVT) in 2009.

Legal and policy framework

The lease provided that the resident must pay a contribution of costs in relation to a shared parking area, a communal aerial and building insurance. The remaining arrangements were a matter of agreement between all the leaseholders of the block where the resident’s property was situated and the landlord. The resident also had an obligation to pay rent monthly.
The complaint policy of September 2020 stated that the landlord would look to resolve a complaint quickly and effectively with local resolution. If it was unable to do so, it would log a formal stage one complaint and investigate the complaint within 10 working days. If it were unable to respond within 10 working days, it would keep the customer informed and agree new response times. If the customer remained dissatisfied with its stage one response, the complaint would be escalated to a formal stage two complaint. If the landlord were unable to respond within 20 working days, it would keep the customer informed, and agree new response times.
The updated version of the complaint policy of October 2020 made escalation of a complaint conditional upon the first stage response being factually incorrect, the landlord not addressing the initial complaint or not considering important information. The investigation would include a full review of system notes, liaising with the relevant departments. Both complaint policies provided to this service were marked “draft”.

Chronology

According to the resident, the resident sought to reconcile her payments with the assistance of the relevant team. In October 2019 through to December 2019, there was correspondence between the parties in relation to the management of the rent and service charge account. There was evidence of one response from the landlord on 9 November 2019 referring to the resident’s request to discuss matters with the director of the relevant team. It promised that the relevant team leader would contact the resident.
On 14 March 2020, the resident wrote to the landlord stating she had not received any response to her communications in December 2019, January 2020 and February 2020 regarding the management of her rent account and service charge payments, therefore she felt that her only option was to make a formal complaint as follows:
1. Since the introduction of service charges in 2010 there had been only two years when the service charge statements have been correct. On the other occasions the charges have either been incorrect or she had been charged for erroneous items. The rent account statements were unclear, inconsistent and almost impossible to understand in that:
  1. Minus figures appeared with both a ‘C’ or an ‘A’ next to them.
  2. Rent and service charges were not shown separately.
  3. Cheques were not set out separately.
  4. The statements listed the most recent transactions first.
  5. The annual service charges and service charge payments were not identified as such.
2. Her rent payments had been applied to her service charges. Her rent was a regular monthly payment whereas the service charge was an additional annual payment. She had made additional payments in order to ensure that her rent account remained in credit.
3. A rent cheque, which had been cashed, had not been credited to her account. While this had been resolved, she was unhappy this had occurred as a) the omission would not have been identified without her having checked the statements carefully and b) she was put to the trouble of reconciling her payments with the account statements. Part of her complaint was that they were difficult to reconcile.
The landlord acknowledged the complaint on 18 March 2020 and stated it would reply by 1 April 2020.
The resident wrote to the landlord on 23 June 2020 asking for progress regarding her complaint.
The landlord wrote to the resident on 8 July 2020 apologising for its delay. It was still in the process of gathering the information internally but would investigate. It provided its formal complaint response on 9 July 2020 as follows:
1. It apologised for the delay in its response. It apologised for not responding to the resident’s communication of December 2019 and explained the delay was due to “internal changes”.
2. It was unable to change how its statements were prepared due to its system but suggested she should email the service charges team regarding refunds and adjustments.
3. It apologised that a cheque payment was not credited to her account for six months due to “human error”. It stated that the landlord had made “vigorous changes” and introduced formal auditing processes to ensure the error did not reoccur.
4. What authority was the landlord relying on it in applying her rent payments to her service charge payments, it was not a matter of the lease but how its systems operated. As service charges were involved in the original LVT decision, any decisions in relation to how charges were applied was a decision for the LVT.
5. It apologised that any further explanation would be a matter for other teams and it would ask the relevant team to respond to her queries.
On 18 July 2020, the resident asked to escalate the complaint. She could not locate the landlord’s complaint policy on the website. While her complaint regarding the unaccounted for cheque was resolved, she said the following had not been resolved:
1. The delay in the response and lack of complaints policy. She suggested the policy should have been attached to its response.
2. The landlord had not explained why the service charge and rent accounts were not provided separately and what was the regulatory or contractual provision that permitted rents being applied to service charges.
3. The statements themselves were not clear and transparent, particularly as there had been errors on the account in the past.
4. Her view was these were not matters for the LVT.
The resident chased the response on 8 October 2020, 22 October 2020 and 2 November 2020. She had identified a complaints policy but it was in draft.
The resident contacted this service as a result of which this service wrote to the landlord on 6 January 2021. The landlord provided its second stage response on 12 January 2021. It referred to its stage one response which stated that the landlord could not change the way statements were drawn and the resident could ask the landlord for further clarification. There was nothing in the lease that prevented the landlord from including service charges and rent charges within the same statement. It was unable to charge these costs in separate accounts. It noted that on 6 November 2020 the resident had informed the landlord that she was happy with the breakdown of service charges. It noted that it was complying with the property tribunal requirements for recharging the actual costs annually. It found that the stage one response was adequate.
The resident provided three examples of the landlord’s statements to this service from 2018 to 2021.

Assessment and findings

Administration of the service charge and rent account.

While it was inappropriate of the landlord not to allocate the resident’s cheque in April 2019 to her account, it apologised for its error and stated that it had strengthened its systems. The resident stated that she was reassured. That aspect of the resident’s complaint was resolved by the landlord. However, the resident disputed that she said she was happy with the breakdown of the service charges, and there was no evidence that she did so. To that extent, the resident’s complaint regarding the administration of her complaint was not resolved.
It was unreasonable of the landlord not to provide clear explanations of its statements and not to contact the resident as it promised it would in its email of 9 November 2019 This led to the resident feeling she had no alternative but to make a formal complaint. The lack of responses was inappropriate in the context of its complaint policy which promised to resolve issues informally without the need of a formal complaint.
The landlord’s explanation that the landlord was unable to separate its rent and service charges account due to its systems was reasonable. The Ombudsman would not have expected it to change its systems at the resident’s request. However, it was unreasonable of the landlord merely to decline her request without considering the underlying issues she was raising. She wished the landlord to allocate her payments in a particular way, and she found the landlord’s statements unclear and that they required explaining. As well as putting questions to the landlord, the resident had asked for explanations in relation to specific aspects of the landlord’s statements. It could have provided clear explanations that were both accessible and transparent.
The landlord’s explanation that it offset the rent against the service charges because of its accounting systems was reasonable. It was a matter for the landlord how it presented its accounts. The system would suit some residents and not others, as some residents may wish to see monies being allocated across both the rent and service charges, without the need for cross-referencing. It clearly explained that its accounting was not a matter of the lease provisions, or statutory regulation, but that it was the method it used to its accounts.
The resident had chosen to ensure her rent account was in credit but not her service charge account. While the resident wished to ensure her rent account did not go into arrears, the resident did not explain why she objected to the payments being allocated to the service charges as they fell due. If she was, for example, concerned that payment of her service charges indicated acceptance and might deprive her of the ability and right to challenge the service charges, then she would be able to make this clear. It would be unreasonable of the landlord to deprive the resident of her rights to challenge the service charges because of the way it managed its accounting systems. It could therefore have considered reassuring the resident that she should not be prejudiced by how it allocated her payments.
It was inappropriate to refer the resident to the LVT in relation to this issue of having a single rent and service charge account, as not only does the LVT no longer exist, the equivalent forum being the residential property tribunal, but also, as the landlord had itself explained, its accounting method was a matter for the landlord, and not for either the lease or statutory regulation. The decision in 2009 of the then LVT did not address the landlord’s accounting methods in any event. Rather than suggest an unnecessary formal process, the landlord should have sought to resolve the matter itself and offer to provide clarification of its methods, rather than refer the resident to a tribunal.
While the accounting methods and systems were a matter for the landlord, it should have recognised the difficulties the resident was experiencing and addressed those difficulties, it should have provided clear explanations and a ‘glossary’ as suggested by the resident. In the Ombudsman’s view, the landlord’s statements were not transparent. Balances were marked as a credit, yet against a minus sign, while in other instances, it was difficult to see how the figures were arrived at. The term “recharges” were used against debits and, equally, against credits. While, whether figures were in descending or ascending order may be a matter of adaptation by the reader, the landlord should have considered whether the statements were self-explanatory, and offered explanations for what was not clear.

The landlord’s complaint handling.

The landlord treated the complaint as if it had been made in October 2019, whereas the complaint was made in March 2020. Even by using the later date, a delay of four months to respond was inappropriate, particularly without any communication with the resident, or reasonable explanation beyond the delay was due to “internal changes”. The further delay of six months with the second response, which response was only forthcoming after intervention by this service, was also inappropriate, in particular as, again, there was no meaningful communication or any explanation, despite the resident chasing. The response times at each stage according to the complaints policy should have been 10 and 20 working days respectively. Moreover, the landlord had promised to respond to the first complaint by 1 April 2020. As the resident stated, it was also inappropriate not to have an accessible complaints policy, not to have appended a copy to its first response or not to have set out its procedure for escalation in the first response. It was also inappropriate for the landlord not to have followed up its promises to contact the resident. Finally, it was not reasonable for the landlord to declare that the first response was adequate. The first response had itself stated that it had been unable to address all of the resident’s questions (despite having had ample time to investigate). It had promised the resident the relevant team would contact her, which there is no evidence of it doing.
The delays in the complaint handling were significant, and despite delay being part of the complaint, got worse not better. Despite the delay, the landlord had not liaised with the relevant departments as to address the resident’s complaints fully, or ensure the relevant team contact the resident. Moreover, it did not address the underlying issues : that the resident had difficulty in interpreting the statements. The delays would have caused frustration and inconvenience for the resident who had to chase the landlord as a result.
It was not reasonable that the second response referred the resident back to the relevant team. The relevant team had not responded to the resident in October to December 2019, not did it respond after she had made her complaint, as the complaints team promised it would. Such a suggestion would have been frustrating for the resident.

Determination (decision)

In accordance with the Housing Ombudsman’s scheme, there was service failure in relation to the administration of the resident’s rent and service charge account to the extent it did not provide clear explanations in relation to its statements.
In accordance with the Housing Ombudsman’s scheme, there was service failure in relation to the landlord’s complaint handling given its significant delays.

Reasons

While the landlord was entitled to manage its accounting systems and was limited by its accounting systems, it should have ensured it provided clear interpretations of its statements. The impact was frustration and inconvenience for the resident.
The delays to the landlord’s complaint responses were significant and did not fully address the underlying issues of the resident’s complaints and also resulted in the inconvenience of chasing the landlord and not having the issues of the accounts resolved.

Orders

The Ombudsman orders the landlord to pay the resident a total amount of £250 within 28 days as follows:
1. £150 in relation to the resident’s report of the landlord’s administration of the resident’s rent and service charge account.
2. £100 in relation to the landlord’s complaint handling.
The landlord is also ordered to provide the resident with, within 28 days, a clear written explanation of its rent and service charge statements, by labelling an example demand and statement and a glossary setting out the meaning of the terms used, including the use of minus signs.
The landlord is to confirm compliance to the Housing Ombudsman with the above orders, to include providing the Ombudsman with a copy of the landlord’s explanation of its rent and service charge statement.

Recommendations

The landlord should ensure that it complies with its complaints policy in terms of timescales and communication.
The Ombudsman has noted that the final, rather than a draft, complaints policy is included now on the website. It should also ensure that it appends the complaints procedure to its first response, and/or explains the resident’s right to escalate their complaint and how to escalate a complaint, as set out in the Ombudsman’s complaint handling code.
The landlord should ensure that it responds to a resident’s queries regarding the interpretation of its rent and service charge statements and the landlord shares this report with the manager responsible for rent and service charges administration, and that they consider the contents and consider any improvements that could be made in its presentations of its statements.