Peabody Trust (202306297)

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REPORT

COMPLAINT 202306297

Peabody Trust

25 September 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 response to:
    1. The resident’s concerns about the level of the service charge.
    2. The resident’s concerns about the quality of service provided in the communal areas.

Background

  1. The resident is a leaseholder who purchased the property through shared ownership in June 2019. The property is a 2 bedroom flat. The landlord is not the freeholder of the building. The freeholder has appointed a managing agent to maintain and keep in repair the communal parts of the building.
  2. Under the terms of the resident’s lease, he is required to pay a service charge. This relates to the managing agent’s costs in keeping the building in repair. It also covers other expenses such as lighting and heating of the communal areas, building insurance, and administration fees.
  3. The managing agent passes on its service provision costs to the landlord. The landlord then calculates the overall service charge cost and apportions it amongst the resident and other leaseholders in the building. Under the terms of the lease, the resident must pay the estimated cost of his service charge for the year ahead. After the year ends, the landlord may adjust its accounts to reflect the actual cost of service provision. The resident must then pay any shortfall between the estimated cost and actual cost of his portion of the service charge.
  4. On 9 November 2022, the resident received a service charge statement from the landlord for the financial year 2021-22. The statement included a bill for £600.94. This was the difference between the estimated (£2,817.00) and actual (£3,417.94) cost of the service charge owed by the resident for 2021-22.
  5. Upon receiving the statement, the resident emailed the landlord and complained about the “ridiculous amount” he was required to pay for the service charge. He said he was told when signing for the property that service charges would decrease year on year as more of the vacant premises within the building became occupied. However, this was not the case and the resident was “very worried” about the rate at which it was increasing each year. He said there were “many problems” with the managing agent. He also referred to reports he made to the landlord in August 2022 about cigarettes being dropped from the roof terrace onto his balcony. He complained that the landlord had not taken any action to address this.
  6. The landlord responded to the resident to advise that its accounts team would review his email and respond directly to him. Following a number of follow up emails and phone calls from the resident asking for a response, the accounts team replied on 11 January 2023. A follow up email with some additional information was sent by the accounts team the following day. Both responses explained how the service charge deficit was calculated.
  7. On 16 January 2023, the resident raised a formal complaint with the landlord about the level of the service charge and the landlord’s communications with him in relation to this. He also raised issues with the quality of the service provided, including that:
    1. The windows in the building had only been cleaned by the managing agent twice in the 4 years since he lived there.
    2. He reported a broken bedroom window to the managing agent and the landlord when he moved in. No action was taken to fix it and it remained broken.
    3. The landlord had not taken any action in relation to the cigarettes being dropped onto his balcony.
  8. In its stage 1 response, issued on 3 February 2023, the landlord:
    1. Apologised for the accounts team’s response being delayed. It said this was due to staff shortages. It offered the resident £75 compensation for time, trouble and inconvenience, and poor complaints handling.
    2. Set out how the service charge deficit was calculated. It said the resident was not due any refund.
    3. Advised that the neighbourhood manager would address the service delivery issues raised and would respond to the resident directly.
  9. The resident asked the landlord to escalate his complaint on 8 February 2023. In addition to outlining the previous issues raised about cost and quality of service, he also referred to a mistake that had been made in the calculation of a heating bill.
  10. The landlord issued its stage 2 response on 27 March 2023. In the response the landlord:
    1. Explained that it had “identified several process gaps” and was “implementing a service solution for the handling of service charge enquiries from its residents.” It provided some examples of steps it was taking, such as building relationships with managing agents and weekly meetings between internal teams.
    2. Split the resident’s concerns into “a complaint” and an “enquiry”. It said it had dealt with the complaint about service by virtue of its explanation about service improvements. With regard to the resident’s enquiries, it said:
      1. It would look into the concerns raised about the heating bill and would then contact the resident to discuss this.
      2. A member of staff had discussed the quality of service issues concerning window cleaning, repairs and anti-social behaviour (ASB) with the resident. It provided an email address for the staff member and advised he would be the resident’s point of contact regarding the quality of service concerns.
    3. Offered the resident £70 compensation. This comprised £20 for time, trouble and inconvenience, and £50 for the delay in issuing the complaint response.
  11. The resident remained unhappy with the landlord’s response and referred his complaint to the Ombudsman.

Assessment and findings

Scope of investigation

  1. Where a complaint concerns service charges, it is important to distinguish between the remits of the Ombudsman and the First Tier Property Tribunal (the Tribunal). The Ombudsman can investigate:
    1. Whether the resident received the service being paid for.
    2. Whether the standard and level of service provided was appropriate.
    3. Whether the landlord provided key information to the resident on request about the service charges.
  2. The Tribunal is responsible for considering disputes about whether a service charge is payable. It may determine whether the level of service charge demanded is reasonable. The Ombudsman does not have remit to consider this.
  3. Our focus in this investigation is therefore on whether the landlord provided a fair and reasonable response to the resident’s queries and complaints, rather than on the amount of money he was required to pay for service.
  4. It is noted that the resident complained that his neighbours were offered more compensation than he was when they challenged the service charge. He said this was discrimination. The landlord responded and said it was not discriminating against him. It advised that complaints from other neighbours involved different issues than the resident’s complaint. The Ombudsman has not examined the complaints from neighbours. The resident’s complaint has been assessed on its own merits. If the resident remains concerned that he was discriminated against, he should seek independent legal advice.

The resident’s concerns about the level of the service charge

  1. The resident contacted the landlord in November 2022 when he received the service charge statement for 2021-22. The statement contained the following:
    1. A demand for the shortfall between the estimated service charge already paid by the resident, and the actual cost of his share of the service charge. This amounted to £600.94.
    2. A summary of how the actual cost was calculated.
    3. A comparison between the actual cost of services for the building and the estimated cost.
    4. General information to the resident about service charges. This was a pro forma summary that included information on rights and obligations in relation to service charges. It explained the role of the Tribunal and the rights of residents to apply to it.
  2. Landlords are required by the Commonhold and Leasehold Reform Act 2002 to include a summary of the rights and obligations when issuing a demand for the payment of service charges to residents. It was therefore appropriate that the landlord included this information with the 2021-22 statement. The summary of costs contained within the statement was high level. For example, it set out the overall cost of providing services to the building. It did not contain a detailed breakdown of the different services provided that made up the overall cost. However, the rights and obligations section of the statement explained that, as per the Landlord and Tenant Act 1985, the resident had a legal right to ask the landlord for a summary of costs that make up the service charge. If he requested and received such a summary, he was entitled to then ask to inspect the receipts and accounts from the previous accounting year.
  3. When the resident contacted the landlord about the service charge in November 2022, the landlord acknowledged the email and said its accounts team would respond. It was over 2 months later before that team did respond. This was only after the resident sent at least 3 emails and rang the landlord to chase the matter. In its complaint responses, the landlord acknowledged the delay in issuing the response was unreasonable. It apologised and in line with its compensation policy, it offered the resident £75 compensation in recognition of the delay. This amount aligns with the Ombudsman’s remedies guidance which suggests a compensation payment for distress and inconvenience of £50-£100 where there has been a failure in service of this nature.
  4. Although the landlord acknowledged through its complaints process the delay in the response from the accounts team, it did not consider the adequacy of that response. The response from the accounts team explained how the balance owed by the resident was calculated. This was not new information. The resident had already been sent this information in the 2021-22 statement. He did not contact the landlord in November 2022 to say he did not understand the calculation. His concerns were around the rate at which the service charge was increasing. The landlord did not acknowledge this in its initial response or in its complaint responses. The stage 1 complaint response simply explained the same calculation already contained in the 2021-22 statement and the response from the accounts team. This meant that the landlord did not fully address the resident’s complaint as required by its complaints policy and the Ombudsman’s Complaint Handling Code (the Code). This was a failing.
  5. The Ombudsman published an insight report on service charges in December 2023. This sets out that when queries are raised about service charges, the landlord should respond in a timely way and provide the information in a consumer-friendly format. The report suggests that even if residents do not specifically invoke their rights to obtain information under the Landlord and Tenant Act,  “it may still be appropriate to provide relevant and additional information to a resident to assist them in understanding the charge.”
  6. The resident did not specifically cite that he was requesting a breakdown of costs as per his legal entitlement. However, it was clear from his initial contact with the landlord, and his subsequent complaint, that he was seeking an explanation about the increasing cost. It is acknowledged that the insight report was published after the events in this case. As per that report, it would have been good practice for the landlord to have provided him with a more detailed breakdown of costs. It could have explained if there were any particular costs that significantly increased from the previous year. The landlord should seek to respond to service charge queries in line with the insight report going forward.
  7. The landlord also failed to address the resident’s assertion that he was told the service charge cost would decrease as more of the empty units in the building became occupied. The resident’s lease provides that he will pay a “fair proportion” of the overall cost of the service charge for the building. Within the 2021-22 statement, this is shown as being 3.0967% of the overall cost. The following year, this reduced to 3.0874%. The resident’s percentage contribution was therefore variable. It would have been reasonable for the landlord to explain how this contribution percentage was calculated and whether it was affected by the occupancy of other units. It could then have reasonably explained that even if the percentage decreased as more units became occupied, rising costs elsewhere led to an overall increase in the amount of service charge payable by the resident. Its failure to do so meant it did not fully address the resident’s complaint.
  8. Although the landlord did not explain to the resident why the service charge costs had increased, it acknowledged that he was concerned about affordability. The landlord advised him to let it know if he was worried about not being able to pay his service charge or manage his finances. It also provided him with a weblink to information about its wellbeing and advice services. This was good practice.
  9. When escalating his complaint, the resident referred to a mistake in the calculation of a heating bill. He said he received a letter from the heating provider to advise a previous bill was wrong due to an error by the managing agent. Even though the landlord did not issue its stage 2 response until 6 weeks after the escalation request, it was unable to provide any substantive response to the resident on this point. It said in the stage 2 response that it would look into the concerns about the heating bill and someone would then contact him. The landlord’s failure to make enquiries into this prior to issuing the stage 2 response demonstrated a lack of a thorough complaint investigation. Its reasons for failing to do so are also unclear. There is no evidence that the landlord followed this issue up with the managing agent or provided the resident with a response shortly after the stage 2 response was issued. The Code requires landlords to track any actions outlined in complaint responses through to completion. It was unreasonable that the landlord did not do this.
  10. Overall, the Ombudsman finds that there was service failure in the landlord’s response to the resident’s concerns about the level of the service charge. It took some steps in its complaint responses towards recognising its failings and providing redress. For example, it apologised and appropriately compensated the resident for the delay in its response to his initial contact. It explained how it was putting in place new processes to provide a better response to service charge enquiries in the future. It provided signposting advice to financial support services. However, the landlord’s complaints policy and the Code require landlords to undertake thorough complaint investigations and to address all aspects of a complaint. As the landlord did not address why the service charge was increasing, despite more empty units becoming occupied, or respond to the heating bill query, it failed to provide reasonable redress to the resident. Accordingly, and in line with the Ombudsman’s remedies guidance, the landlord is ordered to pay the resident £100 compensation for the time and trouble spent in pursuing his complaint.
  11. The Ombudsman is aware that the landlord is in the process of delivering a 5 year homeownership improvement plan. It advised the Ombudsman in July 2024 that this includes, “a comprehensive review of all service charge processes… the team has undergone a full restructure.” It said that the plan also includes, “clear ownership of case management, proactive planning for busy times, and clear communication of financial information.” Accordingly, the Ombudsman does not make any wider orders in relation to the landlord’s administration of service charges.
  12. The resident is reminded of his legal entitlement to request detailed information from the landlord in relation to the service charge. The summary of tenants’ rights and obligations attached to the service charge statements provide more detail in this regard. Advice is also available to residents through support services such as the Leasehold Advisory Service.

The resident’s concerns about the quality of service provided in the communal areas

  1. Where a managing agent is appointed by the freeholder, rather than by the landlord, the relationship between the parties can be complex. The landlord does not benefit from the same contractual relationship with the agent as it would a contractor that it appointed. However, the landlord should be proactive in overseeing that managing agents are discharging their responsibilities and providing a quality service. Holding them to account benefits both the landlord and residents.
  2. The Ombudsman explored this relationship in more detail in a spotlight report on managing agents published in March 2022. The report recognised that the responsiveness of agents and freeholders can be variable. In some cases, the ability of the landlord to influence this is limited. However, the report stated, “we would expect landlords to demonstrate that they have taken reasonable steps to engage with the managing agent or, if they are unresponsive, the freeholder.” In the current case, the landlord has produced no evidence to demonstrate that it at any stage engaged with the managing agent in relation to the concerns raised by the resident.
  3. The resident advised that he complained for years to the landlord about the quality of service provided. In line with the Code, complaints will usually only be considered in relation to events occurring within the previous 12 months. The Ombudsman has therefore not investigated historical reports made by the resident. We limited our focus to reports made during 2022 and up until the complaint was made in January 2023. The landlord’s records show that the resident made a number of reports about the quality of service during this time, including the following:
    1. In March 2022, the resident sent an email querying his service charge. He received no response so followed this up with a further email. In the follow up email, he referred to the managing agent as being “inefficient” and said that the windows were rarely cleaned. He queried why he was paying for a service he did not receive. There is no evidence the landlord responded to either the initial email or the follow up email.
    2. In August 2022, the resident advised the landlord that cigarettes were being dropped from the roof terrace and landing on his balcony. The landlord advised the resident it would put notices up in the building regarding this. It also said it would inspect the balcony as if there was a gap through which the cigarettes were falling, it was potentially a health and safety issue. It is not known from the landlord’s records whether this inspection subsequently took place. If it did, it provided no update to the resident.
    3. In November 2022, the resident advised the landlord that there were “many problems” with the managing agent. He said his neighbours also felt “frustrated and disappointed” with the agent. He also asked for an update on action taken by the landlord in relation to the cigarettes. The landlord’s accounts team responded to the resident in January 2023 in relation to his query about the service charge calculation. It made no reference to the quality of service concerns raised or the query regarding the cigarettes.
    4. In January 2023, the resident submitted his formal complaint. He said the windows had only been cleaned twice in 4 years. He reported a broken window in his property to the agent when he first moved in, but it still had not been repaired. He complained no action had been taken in relation to the cigarettes.
    5. In February 2023, when escalating his complaint, the resident outlined that he was unhappy with the administration of the building. He referred again to no action being taken by the managing agent in relation to a broken window, or by the landlord in relation to the cigarettes.
  4. Prior to the formal complaint being made, the only action the landlord appeared to have taken was to respond to the resident in August 2022 regarding the cigarettes. However, it failed to then provide him with an update in relation to the action it had taken regarding the cigarettes. It only acknowledged the quality of service concerns regarding the managing agent in its stage 1 complaint response in February 2023. It was unreasonable that it was only after the resident submitted formal complaint, that the landlord showed a willingness to engage with him on these issues. The engagement that did then take place during the complaints process was however limited.
  5. The Code requires landlords to issue full responses to complaints. It is understandable that sometimes this may not be possible, for example, it may take a long time to complete a repair. In such circumstances, it is reasonable to expect that a landlord would take at least some steps to move the issue along during its complaint investigation. In this case, the landlord’s stage 1 response simply stated that its neighbourhood manager would address the quality of service issues raised with the managing agent and would respond to the resident directly. There is no evidence that the landlord contacted the managing agent during the stage 1 complaint investigation. This meant that the stage 1 response lacked substance and was, in effect, a holding response.
  6. As outlined above, the Code requires landlords to track any actions proposed in complaint responses through to completion. Despite the stage 1 response advising that the neighbourhood manager would follow the issues up with the managing agent, this did not happen. Internal enquiries were made with the neighbourhood manager only 2 working days before the stage 2 response was issued. This was almost 6 weeks after the escalation request and when the stage 2 response was already overdue. The neighbourhood manager advised his colleague that he was not aware of the complaint or the stage 1 response. He then phoned the resident that same day and spoke to him. The resident explained what his quality of service concerns were.
  7. From the evidence that is available, it is apparent that the landlord did not carry out a thorough investigation into the quality of service issues at either stage of the complaint process. This is demonstrated by the fact that the staff member the landlord deemed best placed to investigate and liaise with the managing agent, knew nothing about the stage 1 complaint or response. He was only contacted about it 2 working days before the stage 2 response. This meant that other than a phone call with the resident, there was no investigation into the quality of service issues prior to the stage 2 response being issued. This was unreasonable and demonstrated poor complaint handling practice.
  8. The stage 2 response addressed the quality of service issues as follows:
    1. Window cleaning – the landlord said it would obtain a copy of the window cleaning schedule from the managing agent and review this. As outlined above, any actions proposed in a complaint response should be followed through to completion and the resident should be updated. There is no evidence that the landlord subsequently requested a copy of the window cleaning from the managing agent. If it did, it provided no update on its review of this to the resident.
    2. Window repair – the landlord told the resident that he should report any future delays in the managing agent attending to repairs. This was appropriate advice as the landlord can only assist with issues that it is made aware of. However, the stage 2 response did not address the complaint about the window repair itself. It is not known from the information provided to the Ombudsman what the specific nature of the repair was. However, the resident said when raising his complaint that the repair remained outstanding. He told the Ombudsman the same when referring his complaint to us. The landlord should reasonably have addressed this in its stage 2 response and set out its understanding of what the issue was. If it was not satisfied the repair was complete, the onus was on the landlord to follow this up with the managing agent, not on the resident to continue reporting it remained outstanding.

When carrying out our investigation, we asked the landlord for any records it held in relation to the window repair. In its response in June 2024, it told us it held no records as the managing agent had changed. It committed to follow this up with the new managing agent. It is understandable that the landlord does not have records belonging to the previous agent. However, if it had thoroughly investigated the resident’s complaint at the time it was made, it ought to have had records of its own communications with the agent. The fact it does not indicates that it took no steps before, during or after the complaints process, to enquire into the window repair and satisfy itself it had been completed.

  1. ASB – the landlord said the resident should provide details of the perpetrators to the neighbourhood manager in order that he could further investigate. The stage 2 response does not state what the ASB related to, but read in conjunction with other records, this would appear to concern the cigarettes bring dropped from the balcony. It would appear from internal records that the resident told the landlord during a phone call that cigarettes were no longer being dropped but that he would send details of the perpetrator to the landlord. It was therefore appropriate that the landlord asked the resident in its stage 2 complaint response to provide it with any information he had that may assist with identifying perpetrators. However, the response did not address his complaint, which was that the landlord had taken no action in relation to the cigarettes. While this may have been discussed during the phone call, for completeness, it should have been addressed in the complaint response.
  1. Overall, the Ombudsman finds that there was maladministration in the landlord’s response to the resident’s concerns about the quality of service provided in the communal areas. It did not engage with the resident in relation to his concerns until he raised a formal complaint. It then failed to thoroughly investigate the issues during both stages of the complaints process. It did not follow up on commitments made in the complaint responses. Despite repeatedly explaining his concerns to the landlord, at no stage did the resident receive a definitive response from the landlord setting out its view on whether it found the quality of service provided by the managing agent acceptable. In line with the Ombudsman’s remedies guidance, the landlord is ordered to pay the resident £300 compensation for the distress and inconvenience caused by this maladministration.
  2. The Ombudsman’s remit enables us to consider whether a resident has received the service being paid for, and whether the standard of service was appropriate. However, we are unable to in this case as the landlord has not provided us with relevant records. It does not hold such records as it did not make appropriate enquiries with the managing agent at the time the complaint was made. It is recognised that since the complaint was made, a new managing agent has been appointed. The landlord is therefore ordered to contact the resident and enquire whether, since the new managing agent was appointed, he has any concerns with the services provided. If he does, the landlord should raise these with the managing agent and keep the resident updated on its communications in this regard. If the resident is unhappy with the update provided, he may raise a further formal complaint with the landlord in relation to the service provided by the new agent.
  3. The landlord was ordered in a separate Ombudsman investigation (case reference 202306132) to self-assess against the recommendations in the spotlight report on managing agents. It subsequently carried out that self-assessment in August 2024. It indicated that it was commencing a review of managing agent sites across its estate to identify what its legal obligations are, how the sites are set up, and the governance arrangements in place. The review will consider how to promote better partnership working and resident engagement. This is a positive development and the Ombudsman hopes that the outcomes of this review will benefit both the landlord and residents.

Compensation calculation

  1. It is recognised that the landlord offered the resident compensation as follows:
    1. £75 in its stage 1 complaint response in February 2023.
    2. £70 in its stage 2 response in March 2023.
    3. £75 compensation in a subsequent stage 1 response issued in September 2023. This concerned the same complaint regarding the service charge. It is unknown why the landlord issued a response given the complaint at that time had already completed the internal complaints process and had been referred to the Ombudsman. When the resident asked to escalate it, the landlord clarified that it would not investigate it at stage 2 as a second stage response to the complaint had already been issued in March 2023.
  2. These compensation offers were made by the landlord in acknowledgement of the delays in responding to the resident’s enquiries and complaints. As explained above, it did not identify in any of these complaint responses that it had failed to address all aspects of the resident’s complaint regarding the level of the service charge. It did not investigate the resident’s quality of service concerns. The compensation of £100 and £300 ordered by the Ombudsman in this report are for those failings, rather than on account of delays. These amounts have been calculated on the understanding that the resident has already been compensated by the landlord for the delays. However, if any of the £220 compensation offered in the 3 complaint responses has not already been paid, the landlord should pay the outstanding amount in addition to the £400 ordered by the Ombudsman.

Determination

  1. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was service failure in the landlord’s response to the resident’s concerns about the level of the service charge.
  2. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration in the landlord’s response to the resident’s concerns about the quality of service provided in the communal areas.

Orders

  1. Within 4 weeks of the date of this report, the landlord should:
    1. Apologise to the resident for the failings identified in this report. The apology should follow the best practice set out in the Ombudsman’s remedies guidance. It should be made by a senior member of the landlord’s staff.
    2. Pay the resident £620 compensation. This is broken down as follows:
      1. £100 for time and trouble spent in pursuing the complaint about the level of the service charge, in response to which there was service failure by the landlord.
      2. £300 for distress and inconvenience caused by the maladministration in the landlord’s response to the resident’s concerns about the quality of service provided in the communal areas.
      3. £220 for the delays in the landlord’s response to the resident’s enquiries and complaints. This amount was offered in the landlord’s complaint responses of February 2023 (£75), March 2023 (£70), and September 2023 (£75). If any of this compensation has already been paid, it may be deducted from the £620 ordered above.
    3. Contact the resident and enquire whether, since the new managing agent was appointed, he has any concerns with the services provided. If he does, the landlord should raise this with the managing agent.
  2. If the landlord is required to raise quality of service issues with the managing agent as per the above order, it should provide the resident with an update within 8 weeks of the date of this report. The update should explain the issues raised by the landlord with the agent, the agent’s response if received, and any further action the landlord intends to take. If the resident is unhappy with the update provided, he may raise a further formal complaint with the landlord in relation to the service provided by the new managing agent.