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One Housing Group Limited (202000109)

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REPORT

COMPLAINT 202000109

One Housing Group

15 April 2021


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 increase of the service charge year-on-year;
    2. the resident’s ability to acquire an additional portioned percentage of his shared ownership property;
    3. the landlord’s response to the resident’s reports regarding the accuracy of the service charges;
    4. the landlord’s response to the resident’s request to sight the supporting evidence for the service charges;
    5. the landlord’s response to the resident’s reports it miscalculated his monthly direct debit payments;
    6. the landlord’s complaints handling.

Jurisdiction

  1. 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.
  2. Paragraphs 39(a) and (g) of the Housing Ombudsman Scheme note as follows:

39. The Ombudsman will not investigate complaints which, in the Ombudsman’s opinion:

a) are made prior to having exhausted a member’s complaints procedure, unless there is evidence of a complaint handling failure and the Ombudsman is satisfied that the member has not taken action within a reasonable timescale;

(g) concern the level of rent or service charge of the amount of the rent or service charge increase.

  1. The resident has expressed concern at the year-on-year increase of the service charge, however, in accordance with paragraph 39(g) of the Housing Ombudsman Scheme, this complaint is outside of the Ombudsman’s jurisdiction. The complaint may fall within the jurisdiction of the First-tier Tribunal (Property Chamber) as it concerns the amount of the service charge increase.
  2. Additionally, the resident has expressed concern that due to arrears on his service charge account caused by a disputed deficit from previous years’ service charges (discussed below), he is unable to acquire an additional portioned percentage of his shared ownership property (also known as ‘staircasing’). It is not evident, however, that this has been raised as a formal complaint with the landlord, nor has the complaint been progressed through the landlord’s internal complaints procedure. Therefore, in accordance with paragraph 39(a) of the Housing Ombudsman Scheme, this complaint is outside of the Ombudsman’s jurisdiction.
  3. If the resident makes a formal complaint regarding staircasing, progresses it through the landlord’s internal complaints procedure and is dissatisfied with the outcome, he will not be prevented from then bringing the complaint to this service.

Background and summary of events

Background

  1. The resident has been a shared ownership leaseholder of the property since 10 May 2013. The landlord is a registered provider of social housing.
  2. The lease requires the resident to make monthly service charge payments. The service charge amount is determined at the beginning of the landlord’s accounting year as an estimate of the expected expenditure. Following the accounting year, the landlord will determine the actual expenditure, and the resident must pay any deficiency.
  3. The landlord employs a managing agent to carry out its service responsibilities at the property development. The managing agent’s accounting year runs from January – December.
  4. The landlord operates a service charge policy. The policy notes it will provide reports on the estimated service charge calculations each year. The policy also notes that where accounts cannot be finalised by the end of September in a given year, it will issue a ‘Section 20B’ notice.
  5. At the time of the complaint, the landlord operated a single stage complaints policy. If a complaint cannot be resolved informally within three working days, the landlord will provide its formal response within 15 working days.
  6. The landlord operates a compensation policy. The policy notes it can offer between £25-£250 as a gesture of goodwill for “time and trouble.”

Summary of events

  1. It is not disputed that in or before May 2017, the resident raised a query with the landlord regarding the service charge and that based on his calculations he considered the previous years’ service charge amounts were incorrect.
  2. On 9 June 2017, the landlord advised that prior to the service charge year, it had overestimated the service charges, but that the final calculations of the service charges in previous years had been correct. It advised this was common for new developments and that any overpayments would be credited to the resident’s account.
  3. It is evident that the resident raised a formal complaint at this time and that the landlord provided a response on 23 June 2017, along with an offer of compensation as a gesture of goodwill. A copy of this formal response has not been provided to this service.
  4. On 11 July 2017, the resident queried who was liable for the overestimate of the 2017/2018 service charge. He also noted that the landlord had previously advised him the overestimated charges were “£58 per month,” but that based on what he had expected the service charges to have been, the amount he had overpaid was greater than this. He also queried whether the overpayment would be credited to the deficit for previous years and on what basis the offer of compensation had been made.
  5. On 7 August 2017, the landlord advised that the previous overestimates were due to its previous method of calculating the estimates, but that the future estimates should be more accurate due to its updated method. It also confirmed that the overpayment would be credited to the outstanding deficits for previous years and that the most recent finalised accounts would be available by the end of August 2017. It further confirmed that its previous offer of compensation was a goodwill gesture “made in relation to your interactions with us and not the service charges specifically.”
  6. On 28 March 2018, the resident enquired who was the best contact to discuss the service charge overestimates. It is not evident that the landlord responded and on 13 May 2018, the resident expressed his dissatisfaction at the lack of response and requested an update. On 14 May 2018, the landlord advised that the 2015/2016 and 2016/2017 accounts had now been finalised and that it would provide a breakdown to residents detailing the deficits. The resident replied on the same date and expressed dissatisfaction that the landlord had not acknowledged or addressed his concerns about possible “accounting errors” that lead to the aforementioned deficits.
  7. On 15 May 2018, the landlord replied and advised it understood the resident’s query to have been about the delay to the accounts only. It enquired as to whether he had raised a formal complaint regarding possible accounting errors and requested further information about the complaint. It is evident that following this, the parties attempted to arrange a telephone call in October 2018 to discuss the issue, but that due to availability and a miscommunication no such telephone call took place.
  8. It is evident that on 22 March 2019, the landlord issued a letter to the resident that it was increasing his direct debit payment, however, a copy of this correspondence has not been provided to this service. On 27 March 2019, the landlord also noted that following the service charge adjustments for the 2015/2016 and 2016/2017 financial years, there was a deficit and that the resident’s account was therefore currently in arrears.
  9. On 29 March 2020 the resident noted that the landlord had advised him his direct debit was now £1,302.97. He advised that based on the landlord’s ‘service charge booklet’, he calculated the correct amount to be £1,284.46 and subsequently requested the direct debit to be amended to reflect this. On 2 April 2020, the landlord confirmed that £1,284.46 was the correct amount, and advised that “you have slightly overpaid your direct debit for some time now as you was in high arrears.”
  10. On the same date, the resident expressed his concern that the landlord had been collecting a higher amount and advised that he had not agreed to repay the arrears as he was contesting the deficit. The landlord subsequently advised that “we wasn’t taking more because you was in arrears,” however, it advised it would further investigate the issue.
  11. On 17 April 2020, the resident requested an update and clarification about the landlord’s overcollection. The landlord responded on the same date and advised that there had been a change to the service charge, but that the direct debit was not initially changed to reflect this and therefore “you are not due a refund for these overpayments as you are in arrears.” Regarding the calculation of the service charge, it explained that the managing agent’s accounting year ran from January – December, meaning the invoices did not necessarily line up with the landlord’s accounting year, which used the financial year calendar. As there were subsequently adjustments causing a deficit when the accounts were finalised, the resident was in arrears, and he was “liable to make payments toward this as per the terms of your lease.”
  12. The resident replied on 5 July 2020 and expressed concern that, despite the arrears, the landlord had not explained why the direct debit was calculated too high in the first place. He also queried why there was a discrepancy between the estimated and finalised service charge amounts.
  13. On 6 July 2020, the landlord advised that the rent portion of the direct debit had been miscalculated by £21.73, but this had now been corrected. It reiterated that the resident was nevertheless required to repay the arrears caused by the service charges deficit. On the same date, the resident confirmed he wanted the overpayment and the calculation of the service charge to be considered as a formal complaint.
  14. The landlord provided its formal response on 27 August 2020. It apologised for the delay to its response and noted it was addressing the resident’s concerns about the accuracy of the service charges and its response to the resident’s request for information about the service charges. Regarding the accuracy of the service charges, it reiterated that initially residents pay an estimated service charge. It further reiterated that the managing agent had a different accounting year, and as a result, following the end of the financial year, it issued a ‘Section 20B’ notice notifying residents that the accounts would be delayed. Once finalised, the resident must pay any deficit.
  15. Regarding the resident’s request to sight information about the charges, it noted it had received a request for the 2017/2018 accounts, which it had previously provided. It nevertheless also included a table with a breakdown of figures for that year. It further advised it could provide specific invoices upon request. The response did not refer to the complaint regarding the direct debit.
  16. On 27 August 2020, the resident replied and expressed his dissatisfaction that the landlord’s formal response had not addressed his complaint regarding the direct debit, nor had it addressed his concerns about the level of increase to the service charges year on year. He also noted he had not received any copies of specific invoices to date and requested copies of all invoices for years which had a deficit.
  17. Following its final response, the landlord has provided this service with further correspondence between itself and the resident dated 25 February 2021, in which it acknowledged that the complaint around the direct debit and the causes of the deficit were still issues in dispute and that it would investigate. On 1 March 2021 it also confirmed it had provided the resident with the managing agent’s invoices for the year 2015-2016 and that it would provide the 2016-2017 and 2017-2018 invoices shortly.
  18. The landlord has subsequently advised this service that it has “explained [to the resident] … that there was an administrative error in the set up on the direct debit in relation to the payment amount and was since corrected.” This service has not been provided with a copy of this correspondence. Additionally, while not the subject of this investigation, the landlord has advised this service that it disputes the resident’s position that it must hold a consultation if service charges increase more than 20%, however, it is not evident it has communicated its position to the resident.

Assessment and findings

Accuracy of the service charges

  1. The Ombudsman does not have forensic accounting expertise and an assessment of the accuracy of the charges is better suited to the First-tier Tribunal (Property Chamber). The Ombudsman can, however, determine if the landlord’s communication and explanation of its calculation of the service charges was reasonable.
  2. The lease agreement notes that the landlord will initially estimate the annual service charge at the beginning of the year, and that the resident must make monthly payments based on this estimate. The landlord will then subsequently calculate the actual expenditure at the end of the year and request additional funds to cover any deficit.
  3. It is evident that as part of the resident’s previous complaint he had queried why there had been a discrepancy as to the service charge payments and the final service charge accounts, to which the landlord appropriately advised that the monthly charges had been based on an estimate, and that the estimate had been too high in this instance resulting in a credit at the end of the year. It was also appropriate for it to provide the context of its overestimate by noting the development was new and so it was difficult to accurately estimate the running costs.
  4. Following the resident’s request for further information about the overpayments, the landlord appropriately clarified that they would be credited to the resident’s account to pay off the previous years’ deficits. Additionally, it was appropriate that the landlord explained it had changed its method of calculating the estimated charges which it hoped would avoid a repeat overestimate.
  5. It is not, however, evident that the landlord addressed the resident’s query that the landlord’s stated overpayment amount was not in line with his calculations. This would have left the resident unclear about how the landlord reached its figures and caused him time and trouble in needing to further chase up the issue.
  6. It is evident from the resident’s communication on 28 March 2018 that he wished to continue querying the overestimates and the landlords subsequent delay to respond to him would have caused him further frustration and further delayed the resolution of his issue. Additionally, given his previous communications on the issue, the landlord’s failure to address the issue in its communication on 14 May 2018 and its subsequent query as to whether the resident had previously raised this issue would also have caused him further frustration. While it was appropriate that the landlord sought to arrange a telephone conversation to discuss the issue, it is not evident that this took place. It is not evident that the issue was subsequently returned to by either party until April 2020, however, and in the Ombudsman’s opinion, the onus is on both parties to communicate in order to resolve an issue.
  7. As part of the resident’s concerns regarding his direct debit payment (discussed below), the resident again disputed the accuracy of the service charge deficit. It is not evident that the resident gave any details as to the basis on which he disputed the accuracy of the service charges, and so it was reasonable that the landlord addressed his concerns by clarifying how the managing agent’s accounting year affected how the estimates and final accounts were calculated. It was also reasonable that it clarified that under the terms of the lease, the resident was liable to make payments towards the deficit.
  8. Following the resident’s further query on 5 July 2020 regarding the discrepancy between the estimated and final service charge amounts and his subsequent request that it be considered a formal complaint, it was appropriate that the landlord addressed the issue in its final response. Given that it is not evident that the resident had highlighted any specific discrepancy, it was reasonable that the landlord reiterated that the process it used to initially collect and subsequently finalise the service charges and explain the resident’s responsibility to pay any deficit as per his lease.

Request to sight the supporting evidence for the service charges

  1. The landlord’s service charge policy notes that it will make reports on its estimated service charges available to residents. The landlord has also provided this service with copies of its annual service charges booklet which include tables of charges relating to the service charges, but not copies of the original invoices. While this service has not been provided with evidence to show how this information was made available to the resident, it is evident from the correspondence between the parties that copies of the service charges booklets have been sighted by the resident.
  2. Following the resident’s correspondence in May 2018 with the landlord regarding his concerns about the accuracy of the service charge, the landlord advised it had finalised the 2015/2016 and 2016/2017 accounts and would make these available. It is not evident if this meant it would provide only its service charge booklets for these years, or if it would provide him with all the necessary invoices as well. Given the resident had raised a dispute, it would have been helpful for the resident had the landlord clarified in more detail what it would provide him and how else he could request any other documents.
  3. Based on the evidence provided to this service, it is not evident when the resident requested to sight specific information about the charges, however, as noted in the landlord’s formal response, it is not disputed that he did so. The landlord appropriately advised that it had provided information in response to his request and provided a table of the financial information in its formal response. It was also appropriate that it advised him that he could request any further specific invoices he required.
  4. Following the resident’s subsequent request for copies of specific invoices, it was appropriate that the landlord provided invoices for the year 2015-2016 and that it advised it would provide the 2016-2017 and 2017-2018 invoices in due course.

Direct debit payments

  1. The lease agreement notes that the resident is liable to make payments for any deficit in the service charge following the finalisation of the accounts. It is not disputed that the resident entered into a direct debit agreement to make monthly payments towards the estimated service charge and that the direct debit amount can be varied by the landlord following it providing notice to the resident.
  2. Following the resident’s concerns that the amended direct debit amount was in excess of what he calculated to be the correct monthly payment, the landlord advised that as he was in arrears, he had not paid in excess of what he owed. Whilst the landlord considered there to have been arrears, it did not initially explain how it had calculated the direct debit amount to be higher than expected, which was the focus of the resident’s concerns.
  3. While it was reasonable that the landlord subsequently explained that as per the lease agreement, the resident was liable to pay any service charge deficits, it is not evident whether the direct debit amount can be amended specifically for the purpose of reducing any arrears caused by a deficit. It is also not evident that the landlord communicated to the resident at any point prior to amending the direct debit amount that it would be increasing it to repay any arrears. Indeed, based on its communication on 6 July 2020, it is evident that the new direct debit amount was based on a miscalculation of the rent component, and not an attempt to reduce any deficit.
  4. Given that the resident had already raised concerns about the accuracy of the service charge, the Ombudsman would expect the landlord to be transparent about requests for payments regarding the deficit, which it did not initially do in this instance which would have caused the resident confusion and distress.
  5. It was clear from the resident’s communication on 6 July 2020 that his concerns about the direct debit amount remained and that he explicitly wished for it to be considered a formal complaint. The landlord’s complaints policy notes that following an initial attempt to resolve a complaint informally, it will provide a formal response. It is evident that the resident was unsatisfied with the initial explanation and so its failure to address the issue in its formal response would have left the resident unsure about how his complaint would be resolved and caused him trouble and inconvenience in needing to chase up a further response.
  6. While it was appropriate that the landlord has subsequently explained its “administrative error” regarding the calculation of the account to the resident, its failure to initially address the complaint in its formal response caused an unreasonable delay to the resolution of the resident’s complaint, and in the Ombudsman’s opinion, amounts to service failure, for which an amount of compensation is appropriate. Based on the landlord’s compensation policy, and in the Ombudsman’s opinion, an amount of £50 is appropriate in the circumstances.

Complaints handling

  1. The landlord’s complaints policy notes that it will initially attempt to informally resolve complaints within three working days or provide a formal response within 15 working days. While the Ombudsman understands there is a difference between reports and a formal complaint, it is evident that in his correspondence dated 6 July 2020, the resident requested that his concerns about the service charges and the direct debit be responded to as a formal complaint. Given that it had previously offered explanations to the resident on these issues, it was reasonable that it did not again seek to informally resolve the issue following the formal complaint, however, the Ombudsman considers it best practice to formally acknowledge a complaint and set out a timeline for a formal response, which the landlord did not do in this instance.
  2. Following the request that the complaint be responded to formally, the landlord did not respond until 27 August 2020, 38 working days later, which is in excess of the timeframes in its complaints policy. This caused unreasonable delay to the resolution of the resident’s complaint, which given that the disputed arrears have prevented him from staircasing his ownership of the property, would have caused him significant distress and inconvenience. The delay to the formal response, in the Ombudsman’s opinion, amounts to service failure, for which an amount of compensation is appropriate. Based on the landlord’s compensation policy, and in the Ombudsman’s opinion, an amount of £50 is appropriate in the circumstances.

Determination (decision)

  1. In accordance with paragraph 54 of the Housing Ombudsman Scheme there was no maladministration by the landlord in respect of the complaints concerning the landlord’s response to the resident’s:
    1. reports regarding the accuracy of the service charges;
    2. request to sight the supporting evidence for the service charges.
  2. In accordance with paragraph 54 of the Housing Ombudsman Scheme there was service failure by the landlord in respect of the complaints concerning the landlord’s:
    1. response to the resident’s reports it miscalculated his monthly direct debit payments;
    2. complaints handling.

Reasons

Accuracy of the service charges

  1. The landlord gave reasonable explanations of how its collection of the service charges operated, explaining that as per the lease, it initially made an estimate, before finalising the accounts at the end of each accounting year and requesting any deficit form the resident. It also reasonably explained why this was delayed due to the difference in its managing agent’s accounting year. Given that the resident did not highlight any particular element of the service charge, it was reasonable that the landlord reiterated these explanations in its formal response.

Request to sight the supporting evidence for the service charges

  1. It is evident that the landlord has provided the resident with its service charges booklet outlining its breakdown of charges, along with a table of specific charges in its formal response. It was also reasonable that the landlord offered to make available to the resident any specific invoices upon request, and it is evident that it has subsequently done so. 

Direct debit payments

  1. The landlord failed to initially explain why its calculation of the resident’s monthly direct debit was higher than expected. It also failed to set out its position on whether it could increase the direct debit to repay arrears. Following the resident’s request that it formally respond to the issue, the landlord omitted to mention the complaint at all in its formal response.

Complaints handling

  1. Following the resident’s request that his concerns be treated as a formal complaint, the landlord failed to initially acknowledge the complaint, and subsequently significantly delayed in providing its formal response, which would have caused distress and inconvenience to the resident.

Orders and recommendations

Orders

  1. The Ombudsman orders the landlord to pay compensation of £100, comprising:
    1. £50 for any distress and inconvenience caused to the resident by its failure to address the complaint regarding the direct debit;
    2. £50 for its ineffective complaints handling.
  2. This amount must be paid within four weeks of the date of this determination.
  3. The landlord to write to the resident within four weeks of the date of this determination and provide (if it has not already done so) a formal response in line with its complaints policy relating to the resident’s complaint about the direct debit payments and include in that response its position on whether it can recover arrears by way of the direct debit.

Recommendations

  1. The landlord to write to the resident within four weeks of the date of this determination and include the following (if it has not already done so):
    1. its position on when it is necessary to consult residents following an increase to the service charge;
    2. enquire with the resident as to any further specific invoices he wishes to view.