Notting Hill Genesis (NHG) (202200270)

REPORT

COMPLAINT 202200270

Notting Hill Genesis

18 August 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

1. The complaint is about:
   1. The landlord’s response to the resident’s concerns about the service charge account; and
   2. The landlord’s handling of the complaint.

Background

2. The resident is a shared ownership leaseholder. The property is a one-bedroom flat in a block maintained by the landlord. 
3. In 2021 the landlord sent the resident a breakdown of the estimated service charge from 1 April 2021 to 31 March 2022. The resident and the landlord corresponded about some of the charges.
4. The resident submitted two complaints to the landlord in August 2021. She was dissatisfied that the service charge accounts for 2019/2020 had been delayed. The resident believed the landlord was not being upfront or transparent about the service charge costs, raising some concerns around certain charges for 2019/20 and 2020/21.
5. The landlord issued its stage one response to both of the resident’s complaints. It said:
   1. In September 2020, the resident had been issued with a notice under Section 20(b) of the Landlord and Tenant Act 1985 which advised that the accounts would be delayed as they needed further investigation. The landlord clarified that this meant there was no deadline to provide the accounts, so long as this was served within 18 months of the costs being incurred.
   2. As the property was a new build, the initial service charge estimates were based on assumptions, as well as contractual costs. It confirmed that the accounts for 2019/20 were still under review, so it could not provide these. However, it said when the actual accounts were received, it would answer any queries the resident may have. It said the increased costs could be due to a number of reasons, such as inflation.
   3. It confirmed that residents in the block would receive two sets of accounts, an estimate for the year ahead, and an actual for the previous year. It apologised for sending the estimated accounts for 2020/21 late, and that the accompanying letter contained some wrong information, which was later corrected.
   4. It had entered into a contract in December 2016 with a company to service and maintain the plant rooms across its entire stock of sites. It explained how this cost had been reflected in the 2019/20 budget and apologised for this not being clearer, but it said some of the remaining cost still needed to be recovered.
   5. It offered the resident £9.71 for a rent charge overpayment, plus £250 compensation for the delay in providing the 2019/20 accounts.
6. The resident escalated her complaint to stage two, and was also unhappy that the landlord had addressed her two separate complaints as one.
7. The landlord issued two separate stage two responses. It provided a fuller explanation about some of the particular concerns raised by the resident in relation to the costs included under the service charge.
8. The resident referred her complaint to this Service. She asserted that the landlord was avoiding providing the requested information by relying on the Section 20(b) notice. She also believed some properties in the development would reach the yearly threshold for charges and this would require consultation, but the landlord had not consulted. The resident said she wanted sufficient explanation from the landlord for its estimated charges, with a minimum of two to three comparisons, and an accurate spend from previous years for a further comparison (plus inflation).

Assessment and findings

The landlord’s response to the resident’s concerns about the service charge account

9. The Ombudsman’s remit in relation to complaints are set out by the Housing Ombudsman Scheme, which sets out that the Ombudsman may not investigate complaints which in its opinion concern the level of service charge. The appropriate body that has jurisdiction to consider complaints about the level of the service charge is the First-Tier Tribunal (Property Chamber – Residential Property), which can determine the appropriate level and amount of service charges recoverable by a landlord; decide if the charges were reasonably incurred; by whom they are payable, and when.
10. This means that it is not within the Ombudsman’s authority or expertise to decide on matters such as service charges or breach of a lease in the same way as the courts, including if service charges are value for money or if a landlord has breached the lease contract. However, this Service can assess whether the landlord followed proper procedure, and responded reasonably to the concerns the resident raised, taking account of all the circumstances of the case, which this assessment goes on to do.
11. It is appreciated that the resident was frustrated with the delay in the landlord providing the actual accounts for 2019/20. However, the landlord was entitled to serve a Section 20(b) notice to inform residents that payment of the service charge would be required once the accounts had been finalised. The landlord explained to the resident that the accounts were delayed as they needed more investigation, and would be provided once audited. It was preferable for the landlord to provide delayed accounts if there were concerns over the accuracy of the accounts, rather than provide inaccurate accounts and need to adjust these later on. It was reasonable for the landlord to offer to address any concerns the resident had about the service charge after she had received the actual accounts.
12. The resident raised a number of particular concerns with the landlord about some of the charges. It is considered that the landlord addressed each of the resident’s concerns, as this Service would expect. There had been some errors made by the landlord in the accounts, for example, with the way it applied the plant room charge, and the communal gas charge of £71,813.75. However, the landlord provided sufficient explanation about these issues to the resident, and the communications between the parties does not suggest the landlord attempted to conceal any errors made. It is noted that the landlord also took action to notify residents where necessary, for example, where there was a change in calculation due to a system error.
13. Having said that, this Service acknowledges why the resident had concerns about the service charges, given the landlord had made errors in the first two years of accounts. The errors in its 2019/20 estimate were quite significant in respect of the plant room maintenance amount and the communal gas charge. The landlord explained that because the development was a new build, the initial service charge was largely based on assumptions. As the development is now more established, with a few years of service charge accounts, it is expected that the landlord should provide residents with accurate information in relation to their service charges going forwards.
14. The resident advised she wanted the landlord to obtain two to three comparisons when estimating the service charge, and provide an accurate spend from previous years for comparison. However, it is not for this Service to tell a landlord how it should estimate service charges. The lease explains that the service charge should consist of the expenditure estimated by the landlord as likely to be incurred. The landlord’s service charge policy says that it will ensure estimated service charges are calculated with an understanding of previous costs incurred and a forecast methodology applied to account for any known charge increases or decreases. It is noted the landlord consults with residents on proposed service charge budgets, in line with its service charge policy. This allows the residents in the block to raise any concerns about proposed service charges.
15. Under Section 20 of the Landlord and Tenant Act 1985 a landlord is required to consult with a leaseholder before undertaking any work which will cost any leaseholder more than £250 (or £100 if the work/service is going to continue for longer than 12 months). Although the resident accepts that the costs have not gone above the threshold for her property, she believes this might be the case for some of the properties in the block. However, the landlord has advised it has not engaged the Section 20 consultation procedure as none of the increased costs have exceeded the threshold. This Service has not been provided with any evidence to indicate otherwise.
16. It is understood that the plant room maintenance was a cost of over £100 for each property. However, the landlord entered into that contract in 2016 across all its sites, which was before the resident’s development was completed. It is therefore accepted that the landlord did not need to consult with the leaseholders about this cost, as the contract predated the residents moving into the properties.
17. Overall, it is considered that the landlord has responded reasonably to the resident’s complaint. It has provided the resident with explanations to address the concerns raised, acknowledged and apologised for errors made, and taken action to put matters right. Although errors were made by the landlord which would have caused the resident frustration, the issues appear to have been largely caused by the fact that for some time the landlord was working without any prior history, given the property was a new development.
18. It is noted that the resident was overcharged by £9.71 for a rent charge in 2021 by the landlord, but the landlord has offered to reimburse this, which was appropriate.
19. It is considered that the compensation of £250 that the landlord offered the resident for the delay in providing her with the 2019/20 accounts was reasonable and recognised the inconvenience she was caused as a result of this.

Complaint handling

20. The resident has expressed concerns about the landlord addressing both her complaints in its stage one response. Given that both concerns were about service charges, and were raised at a similar time, this Service finds that it was not unreasonable for the landlord to consider both complaints in its stage one response. However, when the resident expressed dissatisfaction with this, the landlord did then provide two separate stage two responses as the resident wanted. That was reasonable, to reflect that the landlord had taken on board the resident’s comments.  
21. The landlord’s complaint policy states that it has a two-stage formal complaints process. At stage one, it should acknowledge the complaint within two working days and respond within ten working days of receipt. If the resident is still dissatisfied with the landlord’s response, they can escalate their complaint to stage two. At stage two, the landlord should respond within 20 working days of receipt.
22. The landlord provided its stage one response within its timescale of ten working days. However, the landlord issued its stage two responses 29 working days and 43 working days after the resident requested these, which were both outside its stated timescale of 20 working days. It is considered that this caused the resident some inconvenience, and it is noted that she chased the landlord for its second stage two response. Whilst providing the responses, the landlord did not adequately acknowledge the delay which amounted to a failure in service. The landlord should pay the resident £50 compensation for the delay.

Determination

23. In accordance with Paragraph 53b of the Scheme, the landlord has offered reasonable redress in respect of its response to the resident’s concerns about the service charge account.
24. In accordance with Paragraph 52 of the Scheme, there was service failure by the landlord in respect of its handling of the complaint.

Order

25. The landlord is ordered to pay the resident £50 compensation for its handling of her complaint.
26. The landlord should confirm compliance with the above, within four weeks.

Recommendations

27. The landlord to pay the resident the £9.71 owed for the rent charge overpayment, plus £250 compensation previously offered, if it has not already done so, as this is the basis on which reasonable redress was found.
28. The landlord to review the Complaint Handling Code, available on the Housing Ombudsman Service website, to remind itself of the Ombudsman’s expectations in respect of responding to complaints.