Paradigm Housing Group Limited (202225687)

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REPORT

COMPLAINT 202225687

Paradigm Housing Group Limited

31 January 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:
    1. communication relating to the resident’s annual service charge statement.
    2. response to the resident’s request for a breakdown of the service charges.
    3. administration of the resident’s service charge account.

Background

  1. The resident is a leaseholder of a 1-bedroom flat in a complex managed by the landlord.
  2. On 14 May 2022, the landlord wrote to the resident providing the annual service charge statement. The resident requested a breakdown of her service charges on 17 June 2022, after she received notification of her monthly direct debit payments. When reviewing the service charges, the landlord noted that the resident should not have been charged for communal cleaning and advised her that the direct debit would be amended.
  3. On 30 August 2022 the resident called the landlord to query why the landlord had increased her direct debit amount despite confirming that communal cleaning charges would be removed. The landlord advised the resident that she had not made 2 previous payments. On the same date the resident provided evidence of the previous payments. The landlord investigated the issue and apologised to the resident on 31 August 2022 when it found that she had made the previous payments. The landlord confirmed that it would reduce her direct debit payments accordingly and take steps to ensure that it correctly invoices her in the future.
  4. On 7 September 2022 the resident complained to the landlord. She was unhappy that the landlord had not provided her with any rationale of the increased service charges. She was unhappy that her direct debit amount had increased after the landlord confirmed it would deduct the communal cleaning charges. She was unhappy that the landlord had not contacted her when it believed her account was in arrears.
  5. In its stage 1 complaint response, the landlord did not uphold the complaint. It provided the resident with a breakdown of the service charge costs and an explanation as to how it estimates the service charges at the start of the financial year and then makes an adjustment at the end of the financial year when the actual charges are available. It confirmed that there had been significant repairs when it completed fire safety upgrades and a roof repair.
  6. The resident escalated the complaint to stage 2. After receiving a breakdown of the service charge statements, she understood that the amount charged was correct but recommended that the landlord communicate the reasons for the increase in future when it sends its annual charge.
  7. The resident remained unhappy that the landlord had not addressed her issue as to why 2 previous payments had not been allocated to her account and why the landlord had not contacted her when it believed she was in arrears. After reviewing the breakdown of service charges, the resident raised a further query as to why the landlord took payment before she received an invoice. She was concerned about inaccuracies and felt there may have been financial impropriety.
  8. In its stage 2 complaint response the landlord upheld the complaint. It apologised for its handling of the resident’s payments. It confirmed that it had received 1 of the payments and misallocated another. It advised that it had rectified the error by allocating the payment to her account. The landlord stated that its systems are old and human error occurs. It advised that its process of posting invoices to its residents is manual and time consuming and therefore sometimes the invoice is sent after the payment is taken. The landlord did not agree that there was financial impropriety but did accept there was service failures.
  9. As a resolution, it offered the resident £150 compensation for her inconvenience of having to complain to get clear responses. It also advised that it is looking at improving its systems and is using the learnings from this case to reduce the risk of manual errors.
  10. When the resident brought her complaint to this Service, she remained unhappy because she felt the landlord had not communicated the reasons behind the increase in the service charges when it provided its annual service charge statement, and because the landlord did not contact her when it believed she was in arrears. As a resolution to the complaint, she wanted the landlord to provide notice of a substantive increase and clearly outline what the increase is for. She also wanted the landlord to investigate if there were financial improprieties and determine if other residents were affected.

Assessment and findings

Communication relating to the resident’s annual service charge statement

  1. The resident’s lease agreement sets out that she is responsible for annual service charges. The landlord’s service charge policy sets out that its aim is to provide a clear approach about how service charges are calculated, applied, communicated to residents, and consulted upon where required. Service charge invoices and rent change notifications will be sent out with at least 4 weeks’ notice prior to the first Monday in July. This will include an annual statement detailing the service charges and calculation of over or under recovery from previous years.
  2. The resident was unhappy that when she received increased service charges there was no reasoning behind the increases. The landlord provided the resident with an annual statement on 14 May 2022. This letter provided a link to its website providing a guide to service charges and included a phone number should the resident want further information about the service charges. This correspondence was appropriate and in line with its policy.
  3. This Service finds that there was no maladministration in the landlord’s communication of its service charges. This is because it provided notice of the service charges in line with its policy and appropriately signposted the resident should she want further information on the charges.

Landlord’s response to the resident’s request for a breakdown of the service charges

  1. Under section 22 of the Landlord and Tenant Act 1985, leaseholders have the right to request certain information about service charges. The relevant regulations state that a leaseholder may “inspect accounts, receipts and any other documents that are relevant to the service charge”. The leaseholder must make this request in writing and the landlord must provide this information, or the facilities to inspect this information, within one month of the request.
  2. The landlord’s service charge policy sets out that residents can request a summary showing how the service charge is calculated and spent. Where the service charges costs relate to occupants of more than four dwellings, the summary will be certified by a qualified accountant.
  3. It is not disputed that there were service failures in the landlord’s response to the resident’s service charge queries. In its complaint response the landlord apologised that the resident had to complain to get clear responses and it offered £150 compensation for this inconvenience. It advised the resident that it would take the learnings from this case to improve its systems.
  4. When a landlord has accepted a failing, it is the role of this Service to consider if redress offered by the landlord put things right and resolved the resident’s complaint satisfactorily. This Service considers whether the landlord’s offer of redress was in line with the Ombudsman’s Dispute Resolution Principles: be fair, put things right and learn from outcomes.
  5. The resident requested a detailed breakdown of the leaseholder costs, the cleaning costs and the maintenance and service contracts. The landlord provided a revised invoice 2 months later on 16 August 2022, however, this invoice did not provide a breakdown of the costs as requested by the resident. The landlord provided the breakdown of the charges on 29 September 2022 in its stage 1 complaint response. This was over 3 months from the date that the resident requested the information.
  6. On balance, this Service finds there was reasonable redress with the landlord’s response to the resident’s service charge enquiries. In its complaint response it acknowledged the inconvenience caused to the resident, offered compensation, and apologised. It also advised that it was working to provide more accurate service charge communication to its customers.
  7. It is noted that in its complaint response the landlord was reviewing its service charge process to provide more accurate service charge communication to its residents. This Service’s insight report sets out key learnings for landlords to consider. This includes consideration of process improvements it can make to ensure it fulfils its legal obligations to provide information on service charges to residents on request. Steps such as liaising with residents about how they would prefer the information, and amending its format to make the charges clearer could improve residents understanding of the information and reduce enquiries and complaints.

Administration of the resident’s service charge account.

  1. The landlord’s Service charge policy sets out that any arrears that may arise will be collected through its arrears collection procedures. Leasehold arrears will be recovered as a sundry debt. Stage 2 of its arrears collection procedures sets out that if a resident misses a payment, it will contact the resident for an explanation. It will also check that the direct debits are being paid for the correct amount and check that all payments have reached the resident’s account.
  2. The landlord accepted failings in its administration of the service charges. After the resident requested a breakdown of the service charges, the landlord found that it had allocated charges for communal cleaning to an area that she did not have access to. The landlord advised it would remove the charges. This was appropriate in the circumstances.
  3. After it confirmed that it would remove the charges, the landlord sent the resident a letter advising that her direct debit would increase, however, the letter did not provide a reason for the increase. When the resident queried the increase with the landlord, it advised her that she failed to make 2 previous payments, and this was the reason for the increase. The landlord did not follow its arrears collections procedure and contact the resident for an explanation before increasing her direct debit. This failure caused distress to the resident which was not considered in the landlord’s complaint response.
  4. The resident specifically complained that the landlord had failed to contact her when it believed that she was in arrears. Although the landlord explained why it increased the direct debit in its complaint response, it failed to acknowledge its error in not contacting her for an explanation. It further failed to demonstrate that it would implement any improvements to reduce the risk of it happening again. This represents a service failure.
  5. When the resident provided proof that she had made the payments, the landlord took appropriate action to put things right. It confirmed that it had received the payments, apologised, allocated the payment to her account, and reduced her direct debit to the appropriate amount. The landlord acted promptly and reasonably when it realised that it had made an administrative error to put the resident back to the position she would have been in before it made the error.
  6. After the resident received her service charges, she queried why her payments pre-dated the invoices received. The landlord explained that this was because their systems were old, and a lot of the work is manual. As such, sometimes the invoices were posted after the payment is received. It further advised that it is in the process of improving its systems so that there is less manual work and to enhance the customer journey. While the invoices were generated after the payment was made, the resident had been made aware of the service charge summary and the direct debit increase before the payment was taken. As such, this Service finds that this is a reasonable response.
  7. This investigation found a series of administrative errors within a relatively short period. The landlord charged the resident for services that she was not receiving, it was unaware of 2 previous payments made by the resident, it increased her direct debit without providing an explanation, and subsequently realised that it had misallocated a previous payment. This Service is satisfied that the landlord took reasonable steps to put things right, however, these errors negatively affected the resident’s confidence in the landlord’s administration of her service charges.
  8. This Service finds that there was service failure with the landlord’s administration of the resident’s service charges. This is because it did not follow its arrears policy and failed to contact the resident before increasing her direct debit. This caused distress which was not considered or addressed in its complaint response.

Determination

  1. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was no maladministration with the landlord’s communication relating to the resident’s service charges.
  2. In accordance with paragraph 53(b) of the Housing Ombudsman Scheme, there was reasonable redress with the landlord’s response to the resident’s service charge queries.
  3. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was service failure with the landlord’s administration of the resident’s service charge account.

Orders and recommendations

Orders

  1. It is ordered that the landlord review this case to determine why it failed to follow its arrears policy and identify any learnings it can put in place to reduce the risk of the same issue reoccurring.
  2. It is ordered that the landlord pay the resident compensation of £100 for the distress and inconvenience caused by its service failure in the administration of the service charges. Specifically, its failure to follow its arrears policy and contact her when it believed she was in arrears.
  3. The landlord should provide evidence to this Service that it has complied with the above order within four weeks of the date of this report.

Recommendations

  1. It is recommended that the landlord re-instate the offer of £150 for its service failure in its response to the resident’s request for a breakdown of the service charges. The finding of reasonable redress was based on this offer.
  2. If it has not already done so, it is recommended that the landlord review its service charges for other residents in the same block, to ensure that they were not charged for communal cleaning of an area they did not have access to.
  3. It is recommended for the landlord to review this Service’s insight report and consider any process improvements it can make to ensure it fulfils its legal obligations to provide information on service charges to residents on request. https://www.housing-ombudsman.org.uk/wp-content/uploads/2023/12/Insight-report-16.pdf