Midland Heart Limited (202315335)

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REPORT

COMPLAINT 202315335

Midland Heart Limited

27 February 2025

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 handling of:
1. The increase in service and rent charges.
2. Notice to attend meetings.
3. The information provided by the landlord related to a telecom switchover.
4. Management of the sinking fund.
5. The complaint process.

Jurisdiction

What the Ombudsman can and cannot consider is called the Ombudsman’s jurisdiction. This is governed by the Scheme. When a complaint is brought to this service, the Ombudsman must consider all the circumstances of the case, as there are sometimes reasons why a complaint will not be investigated.
Paragraph 42(d) of the Scheme says that “the Ombudsman may not investigate complaints which, in the Ombudsman’s opinion: concern the level of rent or service charge or the amount of the rent or service charge increase.”
As part of her complaint to this Service, the resident raised concerns about the level of the service charge she was asked to pay. While this investigation has considered the landlord’s communication and responses to the resident in relation to her service charge, an assessment of the level of charges has not been considered. A binding determination on the level of a service charge is more appropriate for the First-Tier Tribunal (Property Chamber).
After carefully considering all the evidence, in accordance with paragraph 42(d) of the Scheme, the complaint about the level of the service charge is outside of the Ombudsman’s jurisdiction.

Background

The resident lives in a 2-bed bungalow under a lease which began on 13 July 2018. The property is located within a supported living scheme for older people, operated by the landlord.
The resident has not declared any vulnerabilities to the landlord or this Service.
The resident raised formal complaints on 27 and 28 April 2023, in which she said:
1. The landlord’s staff had given insufficient notice of resident meetings. This caused particular frustration as she said that the attendance was low, but that residents were still charged for the hall hire, where the meeting was conducted.
2. The landlord should give at least 2 weeks’ notice of meetings.
3. The landlord’s staff that attended the arranged meetings were not prepared or knowledgeable about the digital switchover process and proposed costs. This included not being able to answer specific resident questions such as:
  1. Which organisation was asking residents to purchase new equipment.
  2. What the landlord meant by ‘equipment’, in the context of the digital switchover.
  3. When the landlord first became aware of the need for the digital switchover.
  4. How the landlord had generated an estimated figure of £50,000 for replacing equipment.
  5. Why the costs were required with little notice and upfront, when the telecom industry was still to confirm elements of the switchover.
  6. Whether the landlord had liaised with other housing associations about the proposed changes and costs.
4. The landlord had given no prior warning of large increases to the payments made into the sinking fund. This was related to a telecom changeover, from analogue to digital telecoms.
The landlord issued its stage 1 complaint response on 19 May 2023. It said:
1. It had taken action to address the conduct of its staff that facilitated the residents’ meetings. It was not able to disclose the specific steps taken due to data protection, but said that this was in line with its policies and procedures.
2. It had experienced an error in its letter printing system which had caused a delay to the invitations to a resident meeting being sent out. It apologised for this, offered £50 compensation and provided the resident with the dates of the next 2 meetings.
3. It had made residents aware of the proposed costs (increase of £59.40 per month) to the telephony systems once it was told about this by BT. In particular, it sent proposals to residents in February 2023 and held a meeting on 27 February 2023 to discuss this further. It said that the formal consultation was still ongoing.
The resident escalated her complaint on 5 June 2023, on the following grounds:
1. The landlord had combined her three complaints into one response. The resident felt that this was contrary to the landlord’s complaint policy. The resident also said that two of her complaints had not been acknowledged within the landlord’s timescales or given a separate reference number.
2. The landlord had failed to respond to her complaint regarding the mismanagement of the sinking fund.
3. Residents were not given adequate notice of two meetings, and the landlord’s response only explained one of these.
4. Many of the residents’ specific questions regarding the digital switchover, which she raised in her stage 1 complaint, had not been answered.
The landlord issued its stage 2 complaint response on 30 June 2023, in which it said:
1. It had sent a letter with adequate notice for the residents’ meeting held in March 2023. It acknowledged the delay in issuing the letter for the April 2023 meeting, but explained that this was due to a technical error with the letters being sent out. In response to this, the landlord had hand delivered letters with 4 days’ notice. Additionally, the landlord noted that the dates of upcoming meetings were published on the minutes of the previous meeting.
2. The digital switchover was not a landlord process, but a requirement from the telecom industry as analogue lines were being phased out. It had provided an initial estimate of costs, but the final costs would be subject to a Section 20 consultation, in which accurate quotes would be obtained.
3. It had based the estimated cost of £50,000 on similar schemes that had required equipment upgrades, where this had cost around £1,000 per property. The landlord said it had provided more detail on the options in a letter on 19 May 2023.
4. The service charge contribution towards the sinking fund would be increasing by £59.40 per property, per month. This was agreed in a budget meeting. The landlord said that any expenditure from this fund would be subject to the normal Section 20 consultation period, which would include obtaining quotes and seeking the opinion of leaseholders.
5. It did not feel that its complaint policy, or Ombudsman guidance required each complaint point to be separated or given a reference number. It said that its stage 1 complaint had been issued late and that the response had acknowledged this. Its stage 2 complaint response identified that there had been a delay in identifying the complaint. It apologised and offered £70 compensation in respect of this.
The resident remained dissatisfied and escalated her complaint to the Ombudsman on 27 July 2023 seeking an admission and apology from the landlord for the mismanagement of the digital changeover, service charge increase and sinking fund. The resident was also seeking proof that the landlord had changed its working practices and an assurance that a further meeting to discuss the changes to the sinking fund would take place.

Assessment and findings

Scope of investigation

Paragraph 42(d) of the Scheme says that “the Ombudsman may not investigate complaints which, in the Ombudsman’s opinion: concern the level of rent or service charge or the amount of the rent or service charge increase.”
As part of her complaint to this Service, the resident raised concerns about the level of the service charge she was asked to pay towards the sinking fund, used for capital expenditure, both responsive and planned. The landlord proposed to increase this to take account of works it had identified as being necessary over a 30 year period, following a stock condition survey. It also said that additional contributions would be required to fund equipment and infrastructure needed for the warden call point system, following the digital switchover.
This investigation will consider the landlord’s wider management of the sinking fund, including its communication and responses to the resident’s queries. It will not, however, assess the level of the service charge and whether any of the proposed increases were reasonable in relation to the costs.
A binding determination on the level of a service charge is more appropriate for the First-Tier Tribunal (Property Chamber). If the resident remains dissatisfied with this element of the complaint, she may wish to seek independent legal advice on this matter.

Notice to attend meetings

The resident said that the landlord did not provide sufficient notice of resident meetings on 27 February 2023 and 17 April 2023. She said that this impacted the attendance at the meetings and that the landlord should give at least 2 weeks’ notice of meetings.
The resident also felt that residents should not have been made to pay £20 per meeting for the hall hire used to facilitate these short-notice meetings.
In response to this, the landlord said:
1. It had sent a letter on 23 February 2023 which advised of the meeting on 27 February 2023. This was reasonable notice of the meeting.
2. It acknowledged that there was a technical error that delayed a letter being sent advising of the meeting on 17 April 2023. The letter was first sent on 6 April 2023, but was not delivered to residents. Once notified of this, the landlord’s staff hand-delivered letters on 13 April 2023 and apologised for the delay. This was reasonable given the technical error.
3. In addition to the letters, the dates of future meetings were published on the previous meeting minutes. The evidence supports this position and this was reasonable, as it gives residents several weeks’ notice of upcoming meetings.
While the Ombudsman acknowledges that the resident may have wished to have longer notice of meetings, the landlord took reasonable steps to give notice to residents, particularly with the minutes showing the next date. The landlord’s policy does not require it to give a set amount of notice and therefore there has been no fault in this element of the complaint.
Additionally, the landlord was entitled to charge the residents for the hall hire to conduct these meetings, as it was a direct cost incurred by the landlord. The landlord has provided evidence of the costs. The resident’s lease and the landlord’s rent and service charge policy permitted it to reclaim these costs.
Overall, the landlord provided sufficient notice to allow residents to attend the meetings and it was entitled to recover the costs it incurred in hiring a hall to facilitate these meetings. On this basis there has been no maladministration in the landlord’s handling of this element of the complaint.
The landlord should however consider the resident’s suggestion that 2 weeks’ notice be consistently given of upcoming meetings and provide its position on this.

Telecom switchover

At the time of investigation, the UK is part-way through a changeover from the Public Switched Telephone Network (PSTN, ‘analogue’ telecoms’) to Voice-Over-Internet-Protocol (VOIP, ‘digital telecoms’). This is part of a nationwide and international change, being led by the telecoms industry. It is due to be completed in the UK by January 2027.
Landlines support telephone lines, but are also used by the landlord and residents within the scheme to operate a warden call system (sometimes referred to as a ‘lifeline system’) for vulnerable residents. This operated on the analogue telecom system.
The Government website notes that “if you have other devices connected to your phone line, such as alarm systems, telecare devices or fax machines, you should take steps to ensure they will continue to function correctly following the migration to a digital phone line. You might need to upgrade your device to make sure it is compatible, check if it needs to have its own battery and network back-up, or purchase an adaptor to ensure it continues to function correctly.” This position is also replicated in guidance from Ofcom and telecom providers.
Given this position, it is likely that the resident and other leaseholders within the scheme would be affected by the digital changeover, in particular in relation to the provision of the warden call system, which relied on analogue technology.
After becoming aware of this changeover, the evidence shows that the landlord:
1. First advised residents of the digital changeover on 23 February 2023 by letter. This included an invitation to attend a resident meeting.
2. Subsequently arranged residents’ meetings on 27 February 2023 and 12 April 2023 to discuss the matters further. Further meetings have been held beyond the conclusion of the complaints process.
3. Wrote to the residents on several occasions with information regarding the changeover generally, along with specific changes to its service charge arrangements in preparation for the change.
4. Undertook formal consultations on the proposed costs, as part of the Section 20 process under the Landlord and Tenant Act 1985. This is discussed in more detail in the next section of the report. Elements of these consultations were continuing after the complaint process.
The resident said that the landlord’s staff were not prepared for resident meetings where the digital switchover were discussed. The minutes reflect that discussions were held regarding the switchover and that further details would be provided in due course when quotations had been obtained and further information received from the telecom industry. It is not possible for this Service to determine the conduct of staff during these meetings or any shortcomings in the information that they provided. From the evidence seen, the landlord appears to have provided reasonable information given the early stage of the process.
Within its initial communication with leaseholders, the landlord provided an estimated cost of £50,000 for equipment that would be needed to ensure the warden call system worked following the digital changeover. It said that it had based this figure on similar upgrades in other schemes. This was based on an estimated cost of £1,000 per property.
The resident queried how this figure had been calculated and how this might be impacted if residents chose not to have a digital broadband connection installed. The landlord responded and indicated that this would reduce the overall cost, but that it recommended the call system was maintained for the benefit of its vulnerable residents. The landlord said that it would provide further costings (backed with appropriate quotations) during the formal Section 20 consultation process. On this basis, the landlord provided adequate information given the early stage of the process. It had not, at this time, entered into formal consultation and was providing initial information to residents. This was reasonable.
Within the complaint process the resident raised several specific questions related to the digital switchover. This included:
1. Who was asking residents to pay for new equipment?
2. What did ‘equipment’ mean in the context of the changeover?
3. How had the landlord arrived at a cost of £50,000 and did that include installation costs?
4. Why residents were being asked to pay for the costs of new equipment up front, given that the digital switchover had not been confirmed for over 70s and, in any event, no set timescale had been published by the industry.
The evidence shows that these queries were not addressed in the landlord’s stage 1 complaint response. The landlord said that the consultation was still ongoing. The resident raised these queries again in her stage 2 complaint escalation and the landlord’s response answered these points. Additionally, the landlord held a residents’ meeting on 22 May 2023 in which these matters were discussed further.
Following the conclusion of the complaint, the evidence shows that this matter continued to be debated and consulted upon. The evidence shows that the landlord:
1. Held a consultation with residents about whether they wished to keep the warden call system or remove it.
2. Held further residents’ meetings, including one on 14 February 2024 in which it acknowledged the ongoing concern around the increased costs related to this scheme and noted that it had provided the residents the option to keep or remove the system, thereby reducing the cost. The minutes also show that the landlord noted that residents had felt there was a lack of communication and had therefore reviewed the proposal and had temporarily reduced the level of service charge payable.
3. Provided a revised service charge forecast in May 2024 which included different pricing based on whether the residents’ consultation opted to keep or remove the warden call system.
Overall, the evidence shows that the landlord provided clear information and notice of the proposed industry change at an early opportunity. It also provided residents with proposed costs and undertook the required consultations to obtain fuller quotes and proposals for consideration.
It is acknowledged that there was a delay in responding to some specific questions raised by the resident, however the landlord did provide its position on these in its stage 2 complaint response. On this basis there has been a service failure in the landlord’s handling of the telecom switchover for which it must apologise and pay the resident £100 compensation for the resident’s time and trouble spent pursuing the same questions to stage 2 to be provided with an answer.

Management of the sinking fund

As previously noted, the Ombudsman may not consider the level of contributions to the sinking fund, as part of the service charge, nor can we comment on the reasonableness of this amount in relation to any proposed or actual costs.
The resident’s lease agreement requires her to contribute a proportion of service charge costs related to the scheme. This includes “the provision of and maintenance of a suitable lifeline, CCTV and door entry system”.
The landlord operates a sinking fund to “accumulate in advance the expected cost of the Sinking Fund Works”. The lease further allows for the landlord to charge “such sums as we consider desirable to retain, by way of a sinking fund, in respect of the Sinking Fund Works”. These works specifically include the major repair, replacement or renewal of the lifeline system.
The evidence shows that the landlord gave notice of increases to the sinking fund on 2 March 2023 by £14.11 per property, per month. This notice appears to fulfil its obligations under the lease. The landlord had deferred a further increase until 1 June 2023, in response to feedback from residents.
The resident raised dissatisfaction about a lack of consultation on the matter. While further consultation would have been customer focused, the landlord is not obligated under the lease to carry out any wider consultation ahead of the notice, nor is it evident that the level of consultation here removed the resident’s obligation to pay the increased contribution.
The resident felt that the increase in the sinking fund contribution meant that the sinking fund had been badly managed. While this Service understands the resident’s point of view, the lease allows for the adjustment of the sinking fund contribution based on changing assessments of the fund’s requirements. This shows that an increase of the fund contribution is a possible occurrence under the lease and does not necessarily equate to there having been failings in respect to the management of the fund.
It is not within the Ombudsman’s jurisdiction to make definitive decisions about the level or increase to contributions, however the landlord had reasonable considerations when it increased the contribution and provided reasonable explanation about this. It is also reasonable that as time passes the landlord may need to update its assessments about its stock’s requirements, considering any newer information considered relevant, including factors such as the upcoming digital changeover.
The resident made several enquiries and requests for information, and she was unhappy with the proposed costs for services, including the digital switchover, which contributed to the increase in the sinking fund service charge. This Service recognises the impact of such increases and how these may cause concern and worry. It is evident that the landlord was sympathetic to this. It gave regard to the resident’s enquiries and information requests, and set out positions in resident meetings, email replies and complaint responses.
Additionally, the evidence shows that the landlord regularly provided the contact details for its money advice service for any residents who were concerned about financial hardship following the proposed increased costs.
Overall, the landlord has addressed the resident’s queries and complaint in an appropriate way, as it provided notice of the increased contribution to the sinking fund in line with the lease and considered and responded to the resident’s queries in an appropriate and reasonable way. There has been no maladministration in the landlord’s handling of changes to the sinking fund.
If the resident continues to have dissatisfaction with the landlord’s increase of the sinking fund service charge level, this Service recommends that she seeks legal advice on further challenging the issue via the First-Tier Tribunal (Property Chamber). The landlord should consider proactively providing information related to the First-Tier Tribunal (Property Chamber) in complaints related to the level or increase of service charge, in the interest of transparency.

Complaint handling

The landlord operates a 2-stage complaint process in which it commits to acknowledge complaints within 5 working days and issue responses in the following timescales:
1. Stage 1 – 10 working days.
2. Stage 2 – 20 working days.
The Ombudsman’s Complaint Handling Code (‘the Code’) sets out a number of key principles that landlords are required to adhere to in the management of complaints. This includes the following:
1. Landlords must respond to complaints within the timescales in the Code. This is 10 working days at stage 1 and 20 working days at stage 2. This is to avoid extending the complaint process or delaying access to the Ombudsman.
2. Landlords must not extend the timescales for responding to complaint by more than 10 working days. In cases of extensions this must be clearly explained to the resident and the Ombudsman’s details must be provided.
3. Landlords must set out their understanding of the complaint and address each point, giving clear reasons for any decisions.
4. Where residents raise additional complaints during the investigation, these must be incorporated into the stage 1 response if they are related, and the stage 1 response has not been issued. If the stage 1 response has been issued, these matters should be raised as separate complaints.
The evidence shows that the landlord’s stage 1 complaint response was issued after 14 working days, however it had previously agreed an extension with the resident. This is compliant with its policy and the Code, and this was reasonable in the circumstances.
Within her complaint, the resident said that she had raised three distinct elements: notice of meetings, management of the sinking fund and handling of the digital switchover. She said that these should have been acknowledged separately, given individual reference numbers and each provided with an individual complaint response. The evidence shows that the resident submitted two complaints which encompassed these issues, with several overlapping elements.
The landlord issued one response to the complaints raised. Its complaint policy does not make provision for or against combining complaints in this manner, however the Code does require landlords to incorporate related complaints into its complaint responses, if it has not yet issued its response. On this basis, there is no fault in the landlord’s handling of the combined complaint response.
The landlord’s stage 2 complaint response noted that the resident’s initial complaint had been raised 10 days earlier than first identified. The landlord apologised for this and offered the resident £70 compensation in respect of this. This was reasonable and proportionate redress for the level of delay experienced by the resident.
As discussed in paragraphs 32-33 of the report, the resident’s complaint escalation to stage 2 she said that the landlord had not responded to her complaint regarding its management of the sinking fund. She said that she had raised specific questions which it had not addressed. The evidence shows that:
1. The landlord did provide a basic response in its stage 1 complaint response, however it did not answer the resident’s specific questions.
2. The landlord provided full answers to the resident in its stage 2 complaint response on 30 June 2023, however this was after the time that the charge had become effective, on 1 June 2023.
3. The landlord’s complaint responses did not acknowledge or provide any explanation or redress for this omission.
The Code requires landlords to respond to all parts of a complaint and provide reasons for its findings. The landlord’s failure to do this caused the resident additional distress, inconvenience, time and trouble in pursuing the complaint to completion. This was a service failure.
Taking these factors together, there has been maladministration in the landlord’s complaint handling. The landlord must now apologise and pay the resident £150 compensation for the failure to respond to her complaints at the earliest opportunity. This replaces the landlord’s previous offer of £70 compensation for complaint handling. If the landlord has paid this compensation (or any part of it) it is entitled to deduct this from the amount ordered.

Determination

As noted above, in accordance with paragraph 42(d) of the Scheme, the complaint about the level of the service charge is outside of the Ombudsman’s jurisdiction.
In accordance with paragraph 52 of the Scheme there has been:
1. No maladministration in the landlord’s handling of notice to attend meetings.
2. No maladministration in the landlord’s handling of the sinking fund.
3. A service failure in the information provided by the landlord related to a telecom switchover.
4. Service failure in the landlord’s complaint handling.

Orders and recommendations

Orders

Within 28 days of the date of this determination, the landlord is ordered to:
1. Apologise to the resident for:
  1. Failing to respond to all of the resident’s questions related to the digital switchover in a timely way.
  2. Failing to respond to all of the resident’s complaint elements in a timely way within its stage 1 complaint response.
2. Pay the resident £250 compensation, comprised of:
  1. £100 for the resident’s time and trouble spent pursuing queries related to the digital switchover.
  2. £150 for poor complaint handling, which caused the resident additional time and trouble in pursuing the complaint to completion.

This compensation replaces the landlord’s previous offer of £70 compensation. If the landlord has previously paid this compensation (or any part of it), it is entitled to deduct this from the total ordered.

Recommendations

The landlord should:
1. Consider the resident’s request for 2 weeks’ notice of resident’s meetings and provide its position on this in writing.
2. Consider proactively providing information related to the First-Tier Tribunal (Property Chamber) in complaints related to the level or increase of service charge, in the interest of transparency.