Notting Hill Genesis (NHG) (202311706)

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REPORT

COMPLAINT 202311706

Notting Hill Genesis (NHG)

9 August 2024

 

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 the landlord’s handling of the resident’s application to extend the lease.

Background

  1. The resident is a shared owner leaseholder of the housing association landlord. The resident owns a 60 % share of the property, a one-bedroom flat on the third floor of a residential block. The lease started on 25 April 2003 and was granted for 99 years.
  2. The resident contacted the landlord on 28 January 2022 and asked about the process to extend his lease. The landlord provided written information to the resident on the same day and later had a telephone conversation with him. On 1 February 2022, the resident followed step 1 of the landlord’s instructions and paid the fee for the valuation survey of his property.
  3. On 17 February 2022, the landlord sent the resident a copy of the valuation report together with its proposal to extend the resident’s lease for £5,754. The landlord said completion must be by 15 August 2022, or another valuation would be required, as these are valid for 6 months. The resident accepted the offer, and the parties instructed their respective solicitors on 7 March 2022.
  4. The landlord’s solicitor made initial contact with the resident’s solicitor on 11 April 2022 and outlined the fees and documents it would need to receive from the resident’s solicitor to start the process of extending the lease. On 6 May 2022, the resident’s solicitor wrote to the landlord’s solicitor, asking to confirm whether it had been formally instructed to act on behalf of the landlord. The landlord’s solicitor responded on the same day and said it had no information about the resident’s application, and it asked that the resident’s solicitor send it more details. No further contact was made between the respective solicitors or between the resident and the landlord until 6 July 2022.
  5. On 6 July 2022, the resident urged the landlord to investigate the delay with its solicitor, and subsequently, upon the landlord’s instruction, the landlord’s solicitor reached out to the resident’s solicitor for the undertaking of the fees and the documents required to start the process. The landlord’s solicitor sent the draft documents to the resident’s solicitor on 22 July 2022. In recognition of the delay, the landlord extended the deadline for completion by a month.
  6. On 12 September 2022, the resident’s solicitor contacted the landlord’s solicitor and requested a further extension. The landlord agreed to extend the valuation by another month and said if the transaction was not completed by 15 October 2022, the resident would have to get another valuation.
  7. The resident’s solicitor raised further pre-contract enquiries and amendments, which had been negotiated from late September 2022 through to the Christmas period and the new year. On 25 January 2023, the resident’s solicitor informed the landlord it was ready to complete the transaction on 31 January 2023. However, the landlord’s solicitor reiterated what it had said in September 2022 and requested a new valuation.
  8. The resident raised his formal complaint with the landlord on 26 January 2023 and said that he was ‘shocked and saddened’ by the landlord’s decision to insist on a further valuation at this ‘late juncture’. He said that many of the delays had been caused by the landlord, followed by ‘routine contractual negotiations’. He said he was now ready to complete the transaction, and it would be unfair for the landlord to expect him to pay the cost of another valuation fee. The landlord responded on 27 February 2022 and said it could not accept the original valuation as it was now over a year old.
  9. The new valuation took place on 15 February 2023, which increased the premium from £5,754 to £16,116 because, at the time of the second valuation, the lease had less than 80 years remaining, and, therefore, a different formula was used to calculate the premium.
  10. Throughout the complaint process, and in its 26 April 2023 final response letter, the landlord said:
    1. It recognised it was responsible for the initial delay until 11 April 2022. It had since completed all actions promptly.
    2. It could have been more proactive in progressing the matter on the resident’s behalf.
    3. In recognition of the costs incurred and the distress caused, it offered the resident £1,270 in compensation.
  11. The resident contacted this service on 27 May 2023 and said the landlord should accept a greater share of the responsibility, which was avoidable. He said he had pursued the landlord to do all it could to minimise delays and that he could have only contacted the landlord, not the landlord’s solicitor, due to a conflict of interest, and that the landlord could have done more to assist.
  12. The resident completed the lease extension on 18 July 2023 for which he paid a premium of £16,116.

Assessment and findings

Scope of investigation

  1. It is recognised that lease extension is a complex legal process. Specific rules and regulations must be followed by all involved parties to ensure that all legal requirements are met. Solicitors play an important role in advising and guiding their clients throughout the process. This investigation will focus on whether the landlord’s overall communications with the resident were appropriate, whether it had taken reasonable actions to assist, and whether it acted fairly.

The landlord’s handling of the resident’s application to extend the lease

  1. When investigating a complaint, the Ombudsman applies its Dispute Resolution Principles, which include treating people fairly, following fair processes, putting things right, and learning from outcomes. The Ombudsman must first consider whether a failure on the landlord’s part occurred and, if so, whether this adversely affected or caused detriment to the resident. If a failure by the landlord adversely affected the resident, the investigation will then consider whether the landlord took enough action to ‘put things right’ and learn from the outcome.
  2. Shared ownership leases do not have an automatic statutory right for lease extension. The landlord determines the process according to an agreed-upon policy.
  3. The landlord’s website sets out the process for an extension of long leases, including shared ownership leases, as follows:
    1. The leaseholder pays the fee for a property valuation survey, which the landlord would appoint. Each valuation is valid for 6 months.
    2. Once completed, the landlord calculates the cost of the premium and sends its proposal to the resident.
    3. If accepted, the resident and the landlord would appoint their respective solicitors to handle the legal process.
    4. If the transaction is not completed within 6 months, a new valuation report will be required, which the resident will pay for.
    5. Residents need to seek “in-depth legal advice”.
  4. Once the time remaining on a lease drops below 80 years, the property’s value decreases. The Leasehold Reform Act 1993 states that when a lease with less than 80 years remaining is extended, the increase in the property’s value resulting from the extension would be shared between the landlord and the resident. As a result, the premium of extending a lease after the 80-year mark would increase.
  5.  In its complaint responses, the landlord accepted responsibility for the 35-day delay, from 7 March 2022, when it instructed its solicitor, until 11 April 2022, when its solicitor made the initial contact with the resident’s solicitor. It said the delay was “unacceptable”. It was appropriate that the landlord acknowledged where things had gone wrong and that it apologised to the resident.
  6. The landlord did not accept responsibility for the delay after 11 April 2022, as it said its solicitor responded promptly. According to the evidence:
    1. On 11 April 2022, the landlord’s solicitor wrote to the resident’s solicitor, setting out the fees and documents it would need to receive to progress the lease extension. It highlighted that the valuation was valid until 15 August 2022; therefore, this was the target completion time. The resident’s solicitor did not send the guarantee to pay the legal fees until July 2022.
    2. On 6 May 2022, the resident’s solicitor wrote to the landlord’s solicitor, asking to confirm whether it had been formally instructed to act on behalf of the landlord. This was after it had acknowledged the April 2022 email from the landlord’s solicitor.
    3. The landlord’s solicitor responded on 7 May 2022 and said it had no records of the resident’s application. This was despite the letter it had sent the resident’s solicitor 2 weeks earlier. This was not appropriate.
    4. There is no evidence of any communication between any of the stakeholders in this case from 7 May 2022 and 6 July 2022, including any communications between the resident and the landlord.
  7. It is understandable that the resident was frustrated by how long the process was taking, the lack of information about the likely timescale involved, and whether the target time for completion could still be achieved. The landlord could have been more proactive in attempting to obtain further information from its solicitor about the nature of the delay. Equally, the resident’s solicitor also had a part to play in keeping the resident up to date and progressing the case according to the resident’s best interest.
  8. When the resident contacted the landlord on 6 July 2022 and asked that it speak with its solicitor, the landlord did so without delay. It discussed the reason for the delay with its solicitor and the measures it would need to take to learn from the outcome. This resulted in the draft lease being sent over to the resident’s solicitor on 22 July 2022. The landlord acknowledged its shortcomings and apologised to the resident in its final response letter. In recognition of the delay, the landlord extended the valuation by a month, bringing the new deadline to 15 September 2022. It was appropriate that the landlord extended the property valuation by a month to account for the delay it had accepted responsibility for.
  9. On 12 September 2022, the resident’s solicitor contacted the landlord’s solicitor and advised that it was still awaiting consent from the lender. The landlord agreed to a further one-month extension, bringing the deadline to 15 October 2022. The landlord said that a new valuation would be required after this date. The landlord’s agreement to extend the valuation for the second time demonstrated that it was resolution-focused and treated the resident fairly. The second extension meant that its delay of 35 days, the landlord extended the valuation by 62 days. it also provided the resident’s solicitor with sufficient warning that it would require additional valuation had completion continued to be delayed.
  10. Negotiations on the lease terms then concluded on 23 January 2024. The resident’s solicitor asked to complete the transaction on 31 January 2023. The landlord’s solicitor reiterated what it had said on 12 September 2022 that a new valuation report would be needed after 15 October 2022. This was reasonable. The landlord explained that the previous valuation had been carried out 12 months earlier.
  11. It may be helpful to explain that the landlord’s policy requesting a new valuation after 6 months was a standing policy covering all contract amendments the landlord might engage with, including staircasing and change of ownership. Had the remaining term of the lease been above 80 years at the time of the second valuation, the premium would have been calculated using the same formula as the first valuation which would have resulted in a negligible difference. The second valuation was based on the lease having less than 80 years left, and the premium was calculated as £16,888. The formula used to calculate the lease extension is set out in schedule 13, part 2 of the Leasehold Reform, Housing and Urban Development Act 1993.
  12. The resident had legal advice when the property was purchased (This is Home England’s requirement for shared ownership leases). Therefore, it was reasonable to assume the resident would have had legal advice when he entered the lease, as well as when he instructed his solicitor to represent him during the lease extension.
  13. The resident started the process on 1 February 2022. At that time, his lease had 80 years, 2 months and 28 days remaining. The landlord’s written process provided to the resident specified that the process would take between 3 and 6 months. This meant that there was no margin for delay given the proximity to the 80-year point, where the “marriage value” premium would be triggered.
  14. It would be unreasonable to hold the landlord accountable for the application not progressing in time and, subsequently, the resident’s increased costs. This is because a number of factors were involved which were beyond the landlord’s control. For example, the mortgage lender was responsible for its own decision.  The resident’s solicitor was responsible for advising and guiding the resident through the process. The resident was also responsible for maintaining his lease and was entitled to decide when to initiate the application process.
  15. Nevertheless, there were failures by the landlord, as the landlord acknowledged within its internal complaint process. In line with the Ombudsman’s Dispute Resolution principles, it was obliged to put it right for the resident. In assessing whether the landlord’s offer of redress was reasonable, the Ombudsman would look to see that the level of compensation was reasonable and proportionate to the failures identified:
    1. The landlord accepted responsibility for the initial delay. It apologised to the resident. It also identified learning and took action with its solicitor to prevent future failures. Evidently, the landlord took the opportunity to learn and improve its service delivery.
    2. The landlord extended the valuation report by 2 months to account for the initial delay of 35 days, as well as the recognition it should have been more proactive on behalf of the resident.
    3. In recognition of the resident’s incurred costs, it offered £1,020 to cover the full legal and surveyor fees incurred by the resident.
    4. It offered £250 in compensation for the distress and inconvenience caused.
  16. When considering all these measures together, the landlord’s package of redress was reasonable and proportionate to its failures and put things right for the resident.
  17. Notwithstanding, the Ombudsman acknowledges the difficult situation the resident was in regarding progressing his lease extension and the significant increase in the associated costs he had incurred. It is evident that the process of extending his lease caused him significant distress.
  18. Overall, the landlord has taken appropriate steps to acknowledge and apologise for the shortcomings identified. It was flexible in extending the initial valuation twice and offered appropriate compensation, which was proportionate to the failures identified. The landlord’s recognition and acknowledgement that the resident’s experience fell short of its standard, together with its apology, financial redress and learning identified, formed a package of redress that adequately put things right for the resident and resolved the complaint reasonably.

Determination

  1. In accordance with paragraph 53 (b) of the Housing Ombudsman Scheme, the landlord has offered redress which, in this Service’s opinion, resolves the complaint about the landlord’s handling of the resident’s application to extend the lease reasonably.

Recommendation

  1. As it had not done so already, the landlord is recommended to pay the resident £1,270, which it offered in compensation in its final response letter.