Metropolitan Thames Valley Housing (202107518)

REPORT

COMPLAINT 202107518

Metropolitan Thames Valley Housing

22 September 2022

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 decision to change how heating and hot water was supplied to the resident’s property and the landlord’s communication in relation to this.
2. The reasonableness of the charges for heating and hot water.

Jurisdiction

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.
The complaint about the level of charges themselves was not a matter of housing management but within the remit of the supplier of heating and hot water.
The Housing Ombudsman Scheme sets out the types of complaints which the Ombudsman can and cannot consider. Paragraph 39 (m) of the Scheme states that – ‘The Ombudsman will not consider complaints, which, in the Ombudsman’s opinion, fall properly within the jurisdiction of another Ombudsman, regulator or complaint-handling body.’ The complaint about the level of charges must be directed to the supplier and then referred to, if appropriate the Heat Trust and Energy Ombudsman.
In the circumstances, after carefully considering all the evidence, in accordance with paragraph 39(m) of the Housing Ombudsman Scheme, the following aspect of the complaint is outside of the Ombudsman’s jurisdiction:
1. The reasonableness of the charges for heating and hot water.

Background and summary of events

The resident occupied a flat purchased from a third party under a lease with the landlord. He moved into the property in April 2018.

Legal and policy framework

Under the lease, the resident was to pay the landlord for the supply of heating and hot water (“communal supplies”). In addition, as long as communal heating and hot water was provided to the property, the resident had an obligation to accept the communal supplies, enter into all agreements for payment of them, to pay for their contribution of the costs whether as part of the service charges or as a separate payment, and was not permitted to enter into an agreement for the supply of heating and hot water other than with the landlord. The landlord had the obligation to provide or procure the provision of communal heating and hot water and was entitled, upon giving reasonable notice to the leaseholder, to cease to supply the communal services and install a suitable replacement.
The resident’s complaint was about the landlord having outsourced the heating and hot water services to a district heating network and that, as a result, his choices were limited and his energy costs increased. The new provider will be referred to in this report as the “Supplier”.
A heat network or district heating network is defined by www.gov.uk as a distribution system of insulated pipes that takes heat from a central source and delivers it to a number of domestic or non-domestic buildings. Heat networks form part of a governmental plan to reduce carbon and cut heating bills for customers (domestic and commercial).
The Heat Network (Metering and Billing) Regulations (2014,2015 and 2020) placed a number of obligations on a heat supplier, including metering where appropriate. The regulations address notification of data to the relevant government department, metering, energy efficiency and transparency within heat networks. However, the supply of heat from the network to homes is not so regulated. In addition, a non-profit organisation called Heat Trust requires its registered members to abide by its standards, although it cannot set requirements regarding pricing. A customer of the network company that has registered with Heat Trust can refer their complaint to the Energy Ombudsman.
According to the literature supplied to the resident in April 2020, the Supplier had applied to be a member of Heat Trust. According to the Heat Trust website, it currently is a registered member.
Under its compensation policy, the landlord would award £51 to £160 for a “medium” service failure, such as a repeatedly having to chase responses and seek correction of mistakes, repeated failure to meaningfully engage with the substance of the complaint and anything between an apology and £150 for poor complaint handling such as poor communication.

Scope of this investigation.

The Ombudsman will not consider whether the landlord had the legal right to outsource the communal supplies externally as this concerns the interpretation of the lease which is beyond the expertise of this Service. In the circumstances, the leaseholder would have to seek legal advice in that regard.

Chronology

The landlord had initially supplied the heating and hot water through a communal system. In April 2020, the landlord outsourced the supply to an external operator, which will be referred to in this report as the Supplier. The landlord informed this service that, but did not state when, it sent out a “consultation leaflet”. While the landlord provided a number of documents to this service, it was not clear, except as specified below, when these were provided to the resident.
The landlord wrote in an undated letter to the resident that it had appointed the Supplier. The landlord would no longer charge leaseholders for contributions. It offered drop–in sessions in April 2020 and enclosed FAQs. The FAQs included information about the landlord’s reasoning for its decision and an explanation of the charges, and that the resident may pay more as the landlord had been undercharging. It set out that the lease permitted the landlord to outsource the services. It also included reassurance about how the landlord could bring the Supplier to account and that the landlord offered a financial inclusion service, and how the resident could make a complaint to the supplier. The FAQs referred to the Supplier’s “welcome pack”.
The Supplier’s “welcome pack” included an information leaflet regarding the supplier and a residential supply agreement, both dated April 2020. This addressed how it set its charges, its charges and service standards and other matters.
On 14 July 2020, the resident wrote to the landlord as follows:
1. He had received a letter earlier that year informing him that the Supplier would supply the communal heating and hot water. The landlord would write to the resident to confirm which charges relating to communal heating had been removed from his service charges. He had not received that letter. He queried when a £30 charge by the Supplier would be removed from the service charges.
On 19 July 2020, the resident queried what were the heating charges in 2019/2020.
The landlord replied on 21 July 2020 that neither year’s service charges had included charges for heating and hot water. It attached an extract (not provided to this service).
On 22 July 2020, the resident asked that, given he was being charged £30 per month by the Supplier, whether this was a new charge and had not been charged previously.
The landlord replied on 28 July 2020, that it had “not been consistent the way the heating and hot water was charged”. This is one of the reasons why the landlord outsourced the service of supplying heating and associated costs, as it was not managing this effectively, accurately, and consistently.
The resident wrote again on 3 August 2020 querying the charges. On 5 August 2020, the landlord acknowledged receipt of the resident’s complaint dated the same day and said it would respond by 19 August 2020. The complaint itself did not appear to have been provided to this service. It warned that there may be a delay to its response due to the pandemic. Internally, it noted there had been no update letter but that it had sent literature letters to all its residents regarding the contracts in March 2020.
The landlord wrote on 15 September 2020 with its first stage response as follows:
1. Its intention had been to address individual queries during the proposed drop-in sessions in April 2020 but they were cancelled due to the pandemic. It was planning on hosting them when it was safe to do so.
2. It was aware of the communications sent by the Supplier and was working with them on their communications approach to ensure that this was “carried out collaboratively”.
3. It attached “further” background response which included:
  1. an explanation for its decision-making, including why it selected the Supplier, costs being a factor, the reason for its lack of consultation, namely it considered that it had a right to change supplier pursuant to the lease.
  2. Information about a leaseholder’s recourse to the Heat Trust and that the Supplier “would be” registered with the Heat Trust.
  3. Reassurance that the “the overall cost of heat charged would be capped to be at least 10% less than the equivalent market cost of heating for a typical customer with a standard gas boiler”.
  4. A “brief” explanation of the charges and comparator chart.
  5. A copy of the “general information boards” it had intended to use at the drop-in sessions, which was a document about the Supplier including an explanation of the charges and the tariff for 2021.
  6. A comparator chart March 2020.
4. It did not uphold the complaint on the basis that it had provided the information in a timely manner and although the attachments may elaborate further, it had responded to the resident’s initial query with the appropriate information at the time.
The resident wrote to the landlord on 11 October 2020 stating that he had received a letter dated 17 September 2020 stating that he had a £246.58 credit in relation to his service charges and his service charges would be reducing to £72.62 for 6 months. He had understood that the service charge would be lowered permanently as the fee for heating/hot water was being supplied through a third-party provider. He requested an explanation.
On 14 October 2020, the landlord replied that the credit of £246.58 related to the 2019/20 financial year account. The heating/ hot water element for 2020/21 estimated service charge was not charged and had not been previously been charged. It referred the resident to another team.
On 4 November 2020, the landlord wrote to the resident. It assured the resident that the councillor representing the residents “was left satisfied with the tariff”. It organised a virtual drop in sessions for that month. The letter enclosed a Supplier information leaflet and FAQs. These FAQs, if different, were not provided to this service.
The councillor wrote to the resident on 18 November 2020 stating that he had written to the landlord and he had not authorised it to state that he was satisfied “with the arrangement”.
On 19 February 2021, the resident wrote to the landlord as follows:
1. He was concerned about the level of his heating costs. He was not confident that the charge for usage was accurate and he considered the standing charge to be extortionate. He had compared the costs to other suppliers. He queried the level of charges, given he lived in a well-insulated 5th floor flat. Communication had been an issue.
2. Heat networks were unregulated and there was a lack of competition.
3. He thanked the landlord for the £75 gesture of goodwill. However, he was still faced with high charges. (It was not clear from the evidence when this had been offered to the resident). He asked what the landlord could do to assist leaseholders.
On 23 February 2021, the resident asked to make a formal complaint which the landlord treated as a review of his original complaint.
On 23 February 2021, the landlord replied, referring to previous emails, including one of 17 February 2021, and set it out a summary of one of the attachments to its letter of 15 September 2020, adding that “…this meant residents were charged a flat rate for their heating irrespective of their individual usage and in some cases residents were not charged for heating and/or maintenance at all”.
On 23 February 2021, the resident replied that, although he had bought his flat in 2018, he had been informed of the outsourcing process, despite it having begun in 2016. The Heat Cost Calculator estimated he was paying £50 per year too much. The standing charge did not include all costs. He noted the complaint was being moved to stage two.
The landlord wrote its final response as follows (the version sent to the Ombudsman was undated).
1. The Stage Two Review looked at two specific issues: The way it managed the resident’s complaint regarding the Supplier and its stage one complaint response.
2. It summarised the complaint that the resident was dissatisfied with the manner in which the landlord managed the tendering process with respect to his heating and hot water and the bills he had incurred with no option to change providers.
3. It considered that it provided an explanation in its letter of 15 September 2020 as to how the tendering process was undertaken and why. It also provided a further explanation as to how the Supplier won the tender.
4. The issues raised regarding the charges was not something that the landlord would manage.
5. The resident would need to contact the Supplier directly as previously advised.
6. It had been very informative throughout and provided him with meaningful updates and attachments of information, to ensure he had all the information he required to redirect his complaint to the Supplier.
7. The complaint was not upheld.
The landlord closed the complaint on 10 March 2021.

Assessment and findings

This investigation was hampered by incompleteness of the evidence provided by the landlord for this investigation. It omitted to provide a copy of the initial documents, including its undated letter to the resident pre-April 2020, the “consultation” documentation, its email of 17 February 2020, and its letter of 4 November 2020, an extract of which was provided by the resident.
By entering into his lease with the landlord, the resident agreed to, and was obliged to accept, the communal supply of heating and hot water. This meant the resident did not have a choice as to the supplier in any event. In that regard, outsourcing the supply did not change the position as regards the resident’s choice of supplier.
In terms of the landlord’s communication prior to the resident entering into the lease, this was a matter for his solicitor to have advised upon and made enquiries about, in particular as the evidence indicates that the resident purchased the lease from another leaseholder and not directly from the landlord.
The outsourcing of the supply meant that the billing shifted from the landlord to the Supplier. It meant that the resident’s complaint about the level of costs should be directed to the Supplier, in the first instance.
In terms of the landlord’s decision to outsource the supplier without any consultation, whether statutory or otherwise, the resident would need to seek legal advice as to whether, as was the landlord’s view, the landlord had a right under the lease to outsource the heating supply to the Supplier.
However, in any event, the Ombudsman would expect the landlord to act reasonably and appropriately in its decision making and how it communicates and carries out its decisions, as suggested by the following report: Housing Ombudsman Spotlight report on heating, hot water and energy in social housing (housing-ombudsman.org.uk) including:
1. Provide clear information about the heating arrangements before the start of the tenancy or lease.
2. Ensure that its contracts with providers and maintenance companies are robust and focused on delivering a good service to residents.
3. Consider including break clauses and penalties in contracts.
4. Monitor performance and take action to enforce the terms of the contract if necessary.
While the landlord did not provide a copy of its letter offering compensation to this service, the evidence showed that the landlord offered the resident £75 in recognition of its poor communication. The resident’s response indicated, if not conclusively, that he was satisfied with the level of compensation in that regard but his complaint regarding the level of costs remained. This investigation will, nevertheless, consider whether the level of compensation was reasonable and whether the landlord acted reasonably in managing the outsourcing of the heating and hot water supply.
While the Ombudsman is unable to comment on the level of information in its “consultation pack”, the Ombudsman considers that the level of information in the FAQ’s and the “welcome pack” provided prior to April 2020 was reasonable, as well as the documents sent to the resident in November 2020 and information provided in its letter 15 September 2021. Its explanation for not providing more detailed information due to the pandemic was also reasonable. The landlord reasonably arranged a further on-line drop-in session in November 2020. While the landlord could have considered doing so sooner, the Ombudsman is mindful of the impact of the pandemic, including in terms of uncertainty and staff levels, on all working practices. The Ombudsman would expect the landlord to have made similar arrangements for the digitally excluded and host repeat sessions.
The evidence indicated that the landlord did not update the resident in relation to the service charges, as it said it would in the undated letter sent prior to April 2020. It was also confusing, given that in the resident’s case, it transpired he had not been paying any charges for his heating costs, so that once charges were passed onto him, he would be seeing an increase.
While the landlord explained that the resident had not been charged for communal heating since at least April 2019, the landlord could have made it clearer that the reason the resident was paying more for his energy costs, was that he had been undercharged in the past. Its July 2020 responses did not address the resident’s actual concern about an apparent cost increase compared to his previous service charges. It also could have referred the resident to the more appropriate team at the outset of his queries.
While the Ombudsman considers that there were flaws in the landlord’s communication, it also considers that the information that it did provide was clear. While the landlord unreasonably maintained its communication handling was adequate, even after it had paid compensation, the offer of compensation reasonably acknowledged its failings in that regard.
In the circumstances, the Ombudsman considers that the level of compensation in relation to its communication was reasonable, in the context of the landlord’s own compensation policy and of the Ombudsman’s own Remedies guidance. If the landlord had not recognised its communication failures and offered compensation, the Ombudsman would have found service failure in that regard.
The Ombudsman has noted the comments by the Councillor in relation to his apparent endorsement of the landlord’s choice of supplier. The resident, while he highlighted this to this service, did not include the issue in his complaint to the landlord. While the Ombudsman has not investigated this aspect, it raises concerns and the Ombudsman will make a recommendation in that regard.
The landlord’s literature provided a reasonable explanation for its decision and choice of Supplier. It set out appropriate criteria it had applied in order to ensure, as far as it was able to, the resident would have a reasonable service and path for redress. The landlord had, according to the evidence available, taken steps so that the contractual terms provided that the Supplier would be accountable to the landlord. The landlord also offered a financial inclusion service, although it did not specifically direct the offer to the resident, despite his concerns about affordability.
While the resident had real concerns about the landlord’s choice, in particular as regards the pricing levels, and he was now paying for services he was initially receiving for free, there was no evidence of actual detriment to the resident by the landlord’s outsourcing of the heating supply. The landlord had reasonably considered the various pitfalls, such as pricing criteria and level of accountability. In any event, the resident had agreed to enter into an agreement for communal heating supply when signing the lease.
In the circumstances, the Ombudsman does not consider there was a service failure as far as the landlord’s decision to outsource the heating itself was concerned, and the landlord offered reasonable redress in terms of its communication.

Determination (decision)

In accordance with Paragraph 55(b) of the Housing Ombudsman Scheme, in the view of the Ombudsman, there was reasonable redress offered in relation to the landlord’s decision to change how heating and hot water was supplied to the resident’s property and the landlord’s communication in relation to this.
The resident’s complaint about the reasonableness of the charges for heating and hot water was, in the Ombudsman’s opinion, outside the jurisdiction of the Ombudsman.

Reasons

The landlord provided reasonable explanation for its decision and choice of supplier and explained how the resident could raise his queries regarding the level of his costs. It also explained that while there had been an increase for the resident, this was because he had been undercharged or not charged at all in the past, which was a reasonable explanation. While aspects of the landlord’s communication had been poor, it made reasonable redress in the circumstances.
The complaint about the level of charges themselves was not a matter of housing management but within the remit of the supplier of heating and hot water.

Recommendations

The Ombudsman makes the following recommendations:
1. The landlord should offer the resident a referral to its financial inclusion service.
2. The landlord should provide an explanation or clarification to the resident regarding its comment in its letter of 4 November 2020 that the Councillor was left satisfied regarding the tariff.
3. The landlord should ensure that it dates its correspondence and documents so as to provide a clear and transparent audit trail of its actions and decisions.
4. The landlord should ensure that it provides all relevant documentation to the Ombudsman for the purposes of investigations. The landlord is reminded that the Ombudsman can consider a complaint handling failure order where there is a failure to provide documents and that it could draw adverse conclusions due to lack of full documentation.