Notting Hill Genesis (202345197)

Background

1. The resident complained about the landlord’s decision to contact her mortgage lender in relation to service charge arrears. The landlord had informed the resident about arrears on her account in April 2023. The arrears remained outstanding, and the landlord said the resident had not cleared the balance or formally agreed to a payment plan. In December 2023, the landlord contacted its solicitors to progress recovery action. The resident said the landlord did not tell her that it would contact her mortgage lender. She also said she had agreed a payment plan with her property manager and had been making the agreed monthly payments. She asked us to investigate after receiving responses from the landlord that she remained dissatisfied with.

What the complaint is about

2. The complaint is about:
   1. The actions taken and communications from the landlord in relation to the resident’s service charge arrears.
   2. The landlord’s complaint handling.

Our decision (determination)

3. We have found:
   1. There was no maladministration with the actions taken and communication by the landlord about the resident’s service charge arrears.
   2. The landlord made an offer of redress in recognition of its handling of the complaint, which, in our opinion, resolved the complaint satisfactorily.

We have not made orders for the landlord to put things right.

Reasons

4. As part of our investigation, we have considered the terms of the resident’s lease. The resident signed the underlease on 17 October 2008, which stated that she is contractually responsible to pay the service charge for the whole term of the lease. We understand the resident was subletting her property. The underlease does not mention that subletting will remove or change the leaseholder’s obligation to pay the service charge to the landlord. We note the resident has not disputed her obligation to pay the service charges.
5. The resident complained about the landlord’s decision to contact her mortgage lender in connection with her service charge arrears. The underlease sets out actions the landlord may take if the service charge is unpaid, including charging interest on arrears and recovering legal and professional costs from the leaseholder. It does not state that the landlord must offer instalment plans or mandatory repayment arrangements before taking enforcement action.
6. The landlord also has an income collection policy, which states that leaseholders are expected to pay service charges. Where arrears arise, the policy says the landlord will keep residents informed about their account balance and make prompt contact if a payment is missed. It states that the landlord will work with residents to agree an affordable repayment plan. It also states that if arrears continue, the landlord may approach the mortgage lender. We are therefore satisfied that the lease terms and the landlord’s income collection policy allow the landlord to take enforcement action where service charge arrears remain outstanding.
7. We have also considered the actions that led to the landlord contacting the mortgage lender. The evidence shows the landlord wrote to the resident on 28 April 2023 about her outstanding service charge arrears. The landlord sent the letter to the resident’s overseas address, which was reasonable, as it was aware she was subletting the property. The letter stated that the lease required the resident to pay monies owed on the first day of each month. It asked her to clear the outstanding balance of £13,347.53 within 7 days. The letter also said that if this was not possible, the resident should respond as the landlord may be able to arrange payment plan. This was a reasonable communication, as it gave the resident an opportunity to engage with the landlord and discuss payment options.
8. We have not seen any evidence that the resident responded to the landlord’s letter of 28 April 2023. The landlord sent a further letter to the resident on 15 May 2023. This was sent to the property address. As it had not received a response to the earlier letter, it was reasonable for the landlord to write to the property address. The letter stated that the service charge account remained in arrears and the resident had not contacted it to discuss repayments or set up a payment plan. It said it was important to understand whether the landlord could assist the resident to avoid further action, such as contacting the mortgage lender. The letter also stated that the landlord would not take enforcement action where arrears had arisen due to the impact of COVID-19. This communication reasonably focused on offering support while explaining potential actions if the arrears remained outstanding.
9. The resident responded on 19 June 2023 and asked the landlord to provide a statement of her account. The landlord responded the following day and provided service charge demands, invoices, a statement of account and answers to the resident’s queries. As the resident had not made any payment towards the arrears, the landlord emailed her again on 5 July 2023. It said the outstanding balance was £14,450.11. It recognised this was a significant amount and offered a repayment plan over up to 11 months. It proposed monthly payments of £1,313.64 from 1 August 2023, alongside upcoming charges. The landlord said it would consider alternative repayment arrangements if the resident wished to discuss a different payment plan.
10. The resident responded on the same day and asked the landlord to provide a statement of account and audited accounts. The landlord provided this information promptly. It also advised that if it could not agree to a payment plan, it would need to refer the matter to its legal representatives, as part of its arrears collection process.
11. In July and August 2023, the resident continued to raise queries about the service charge accounts and invoices. The landlord responded to the queries promptly. On 22 August 2023, the landlord confirmed that the outstanding service charge balance was £12,137.28, following a payment of £2,312.83 in July 2023. It said new service charges were due to be applied in October 2023 and that it needed to discuss a payment plan to clear this balance. It said it could only offer a payment plan up to 6 months. It also said that if the resident did not respond within 2 weeks to agree a payment plan or clear the balance, it would refer the matter to its solicitors. The landlord said that any additional costs associated with this action would be charged to the resident.
12. The resident responded on the same day and said she could agree to the previously offered 11-month payment plan. The landlord reiterated that it could only offer a payment plan of up to 6 months. It said that if a payment plan could not be agreed, it would refer the matter to its legal representatives.
13. On 25 September 2023, the resident said she had followed the payment plan offered by the landlord on 5 July 2023. She said the plan required payment of £14,450.11 over 11 monthly instalments of £1,313.64 from 1 August 2023. The resident said she made a lump sum payment of £2,312.83 in July 2023, which reduced the balance and formed part of the agreed 11-month payment plan. The resident said she made further payments covering August and September 2023, totalling £2,206.00, paid on 11 September 2023. She said she proposed monthly payments of £1,103 until June 2024 to clear the remaining balance. Taken together, she said these payments followed the 11-month plan originally offered by the landlord.
14. On 11 October 2024, the landlord accepted that it had made an error in offering the 11-month payment plan. As such, it was willing to compromise and accept payment of the remaining balance through monthly instalments until June 2024, as the resident had proposed. It said it could only agree to the proposed payment plan if the resident signed a memorandum of agreement. At that time, the outstanding balance was £9,931.28 and it was willing to accept 9 monthly payments of £1,103.47 to clear the balance by June 2024. It said that as the resident’s lease required payments to be paid on the first day of each month, it asked the resident to make an immediate payment of £1,103.47 and subsequent payments on the first day of each month. It said it would send the memorandum of agreement separately for the resident to sign electronically. It said that if the resident did not sign the memorandum, it would refer the matter to its solicitors.
15. We have seen evidence that the landlord sent the memorandum of agreement to the resident by email on 11 October 2023. As there was no further contact from the resident, the landlord instructed its solicitors on 12 December 2023. The landlord received confirmation from its solicitors on 16 February 2024 that the resident’s mortgage lender had made payment. Following this, the resident made a formal complaint on 22 February 2024. She said the landlord had not told her it would take this action and that she had agreed a payment plan with her property manager.
16. In its complaint acknowledgement, the landlord said it required the resident to sign a memorandum of agreement. It said the resident had not returned the memorandum and it had previously explained it would refer the matter to solicitors if it remained unsigned. The landlord said it did not take immediate legal action while the resident maintained payments under the proposed repayment arrangement. It said it wished to provide the resident with additional support, which allowed her to pay over a set period of time. The landlord said this was despite its income collection policy excluding leaseholders who sublet their properties. It said that when it reviewed the account in December 2023, it noted no payments had been made for that month. The landlord said it referred the matter to solicitors at that point, when the arrears totalled £10,317.51.
17. The resident responded on 23 February 2024, she said she did not receive the memorandum of agreement and asked whether the landlord had checked that she received the email. She said she missed one monthly payment due to personal circumstances, which was an oversight. She said she made a payment on 2 January 2024 and a further payment in February 2024, showing she was generally following the agreed repayment schedule.
18. The landlord issued its stage 1 complaint response on 6 March 2024. It said its solicitors contacted the resident’s mortgage lender, who responded on 12 January 2024 and said it would contact the resident to discuss payment. The lender told the resident it would make payment if none was received by 5 February 2024. As these were emails from the mortgage lender, we have not seen these communications. The landlord said it could not confirm how communications between the solicitors and lender were handled. It confirmed it had warned the resident that legal action could follow if a repayment plan was not agreed. The landlord issued such warnings in emails dated 5 July 2023, 22 August 2023, 11 September 2023, and 11 October 2023.
19. The landlord said it decided not to take legal action in October 2023 because the resident was making payments. However, when no payment was made in December 2023, the landlord said it instructed solicitors. The landlord said it did not send a further warning email at that stage because it had already explained the consequences of missed payments. The landlord apologised that correspondence from the mortgage lender did not reach the resident in time. It said it had no legal control over how the lender managed communications with its customer.
20. As the resident remained dissatisfied with the response, she escalated her complaint. The landlord issued its stage 2 complaint response on 24 May 2024. It noted that the resident agreed on 25 September 2023 to pay £1,103 per month, and it did not escalate the account while payments were being made. It said it considered it reasonable to refer the matter to solicitors after the resident missed the December 2023 payment.
21. Based on the evidence, we consider the landlord gave the resident advance warning of possible recovery action if the account remained in arrears. It also responded promptly to the resident’s queries. The landlord reiterated that it would refer the matter to its solicitors if the resident did not sign the memorandum. We have also seen that the landlord allowed around 2 months between sending the memorandum and instructing its solicitors. However, when a payment was missed, the landlord decided to take recovery action due to the outstanding arrears. It gave the resident reasonable opportunities and options to provide assistance. This action was in line with the options available to the landlord under the resident’s lease. We have therefore found no maladministration by the landlord in its actions and communications relating to the resident’s service charge arrears.

Complaint handling

22. The resident raised her complaint on 22 February 2024. The landlord acknowledged the complaint on the same day, which was within the timescales set out within the Service’s Complaint Handling Code (“the Code”). It said it would provide its stage 1 response by 6 March 2024.
23. The landlord provided its stage 1 complaint response on 6 March 2024, in line with the timescale it had set. We are satisfied this complied with the requirements of the Code. The resident subsequently escalated her complaint to stage 2 on 21 March 2024, which the landlord acknowledged the following day. This was reasonable.
24. The Code says that stage 2 responses should be issued within 20 working days of acknowledgement, or an extension must be agreed before the deadline. The landlord should have issued its stage 2 response by 22 April 2024 or agreed a revised deadline. However, the landlord requested an extended deadline on 26 April 2024 and said it would issue the stage 2 response on 17 May 2024. We have seen that the landlord issued its stage 2 complaint response on 24 May 2024.
25. From the evidence, the landlord did not comply with the requirements of the Code. It delayed updating the resident about the need for an extension and failed to meet its revised deadline. It therefore caused unreasonable delays throughout its complaints process. We note the landlord has offered £125 compensation during its complaints process for the delays caused. As the landlord has admitted its failings, we have considered whether the redress offered by the landlord puts things right. The landlord’s offer of £125 is in line with what the Ombudsman would typically award for the failings identified. We therefore think the landlord has taken reasonable steps to put things right and made an offer of redress which resolves this element of the complaint satisfactorily.

Recommendations

Our recommendations are not binding, and a landlord may decide not to follow them.