Sanctuary Housing Association (202002585)

REPORT

COMPLAINT 202002585

Sanctuary Housing Association

25 January 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 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

The resident has complained that:
1. The landlord has not provided a reasonable explanation of, or supporting information for, the service charge items
2. The landlord has increased the rent twice within a year
3. The landlord has managed the rent account inappropriately by agreeing to a direct debit payment date that in turn resulted in arrears
4. The landlord has refused to buy back the shared ownership property, despite offering this option when the property was first bought

Jurisdiction

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.
The complaints in this case concern the administration and communication around the rent and service charges. These complaints are within our jurisdiction. However, for the sake of clarity, any complaint about the reasonableness of a service charge or rent, including the reasonableness of any increase, are outside the jurisdiction of the Housing Ombudsman Service and would be for the First Tier Tribunal.

Background

Service charge explanation

The leaseholder requested details about the service charges in a letter dated 1 January 2020. They queried:
1. Scheme security
2. Day to day repairs
3. Annual management charge and external management charge
4. Transfer to sinking fund
5. Budget schemes and transfers
The landlord’s internal correspondence acknowledges that it received these queries and that its initial response failed to answer the questions.
The landlord then offered to follow up within 10 days with the leaseholder due to the oversight. However there is no correspondence on file where the landlord did follow up with an explanation about the various items. The leaseholder complained in April 2020 that they had not received the answers, and this was not disputed in the landlord’s stage 1 response or its two stage 2 responses.
The 5 items included in the January 2020 letter were individually addressed in the landlord’s first stage 2 response in June 2020, after the items were chased again by the leaseholder in their escalated complaint.
The questions about the service charge items were not revisited in the leaseholder’s follow up to the stage 2 complaint and as such were not addressed in the landlord’s second stage 2 response.

Rent increases

The leaseholder’s 1 January 2020 letter asked why there had been 2 rent increases in 2019. This issue (as with the service charges above) does not appear to have been answered in the landlord’s initial responses (which focused on the request for the landlord to buy back the property – discussed below).
The leaseholder’s April 2020 complaint provided a more detailed breakdown of the increases. The leaseholder highlighted increases in:
1. July 2019 – a request for one off payment
2. September 2019 – a letter stating the account was in arrears
3. September 2019 – a service charge increase
4. October 2019 – a rent increase
5. February 2020 – a rent increase
6. April 2020 – a rent increase
The stage 1 response explained:
1. That the letters about arrears were the result of the timing of charges and payments. The charges were added to the account on 1 of the month but the payment made by direct debit on 26. Therefore the account was in arrears for 3 weeks.
2. That as of April 2020 the monthly figure for rent and service charges was £790.06 but the leaseholder’s direct debit had been increased to £911.21 to help clear arrears.
3. The response did not address the specific questions about the various changes to payments during 2019. The phrasing of the response also suggests that the increase of the monthly payment in April 2020 to exceed the actual amount by £121.15 had been done without consultation or discussion around the payment plan. It did offer the opportunity to retrospectively discuss the payment with the Income Team to decrease the overpayment if required
The first stage 2 response explained:
1. The arrears began in the second month of occupation. The leaseholder paid a month’s rent in advance in July, which covered until the end of August 2018. The next payment was made on 24 September. Therefore the period from 31 August-24 September did not receive the rent in advance. The leasehold agreement does say that rent must be paid in advance. The actual administrative arrangements of setting up the direct debit (and which led to these initial arrears) have been discussed in the section below.
2. The April 2019 rent increase was handled incorrectly by the landlord. It acknowledged this and referred to a compensation payment at the time. The increase to the direct debit in September related to the April 2019 rent increase. The direct debit was increased further in November to help decrease the arrears that had built up from April to September while the correct (increased) rent was not charged due to the landlord’s use of an incorrect letter format when notifying all residents of the increase.
3. The direct debit was then increased in April 2020 to match the rent increase from the same month. However the direct debit was increased further (as explained in the stage 1 response above) to cover the outstanding arrears.
Following further enquiries the landlord’s second stage 2 response explained:
1. That the landlord did not know why the leaseholders were not notified of the arrears in September 2018, when the account and charge/payment schedule were first set up. The landlord offered £25 as compensation for this communication failure.
2. That the landlord had apologised and offered compensation for the error in the April 2019 rent increase communication. However as the associated services were provided during 2019 it would not offer a refund for the April-September 2019 period.
3. That the landlord is able to modify the direct debit with 7 days notice
4. The one off payment in July 2019 brought the account into arrears when it was made, however due to the timing of the charges and payment the account moved back into arrears. As above, the landlord could not say why this was not explained at the time to the leaseholder or why they did not receive a letter about the arrears until September 2019

Direct debit date

This complaint relates to the complaint about the management of the account, as set out above. The leaseholder has complained that they were able to set up a direct debit payment that effectively moved their account immediately into arrears.
The leaseholder had paid the month in advance as required and signed up to pay by direct debit. However the date agreed to by the landlord meant that the account moved immediately into arrears. The landlord did not notify the leaseholder at the time that the account had moved into arrears. This complaint then stems from the leaseholder received arrears letters in September 2019 that can partly be traced back to a year earlier.
As noted above, the landlord was not able to answer why the leaseholder did not receive letters about the account being in arrears earlier.
The landlord did explain that the leasehold agreement does specify that all payments should be made on the 1 of the month, and that payments are made in advance for that month. The landlord’s explanation was a correct summery of the leasehold agreement. However the landlord did not explain why the leaseholder had been allowed to set up a direct debit schedule contrary to this requirement. The landlord did explain that residents can pay on different dates, but these are usually ahead of the payment due day (ie the 24th prior to the 1st when payment is due, as opposed to the 24th following the 1st, as had happened in this case).

Buy back of property

The resident asked that the landlord consider buying their share of the shared ownership property in January 2020. The landlord responded on 21 January to stated it would not buy the leaseholder’s share of the property.
The leaseholder queried what the process for this decision was, or on what basis it had been made. The landlord explained on 24 January that there was no specific process and that each request was considered on a case by case basis. The leaseholder asked for the details of the process by which requests were considered on a case by case basis.
The leaseholder’s follow up queries about how the buy back request were handled were not then responded to until the April 2020 stage 1 response to the formal complaint.
This response explained the history of when the landlord would consider buying leasehold properties and confirmed that there was no written procedure. However it acknowledged that the initial responses had lacked explanation, and that the following queries had not been answered. Therefore it offered £25 to acknowledge this failure in communication.

Assessment

Service charges

The landlord did not reply to the January 2020 or the April 2020 complaints that included questions about what the service charges were for, and what was the supporting information for the charges.
The first (of two) stage 2 responses, sent in June 2020, did provide details of the various items queried by the leaseholder.
The leaseholder’s follow up queries (that then resulted in the second stage 2 response from the landlord) did not further question the actual service charge amounts, suggesting that the first stage 2 response had provided the required explanation.
Any dispute over the actual level (including any increase) of a service charge would be for the First Tier Tribunal to assess and determine, following a complaint to it by the leaseholder. Therefore the reasonableness of the cost of a service charge item is outside the jurisdiction of the Housing Ombudsman Service.
In this case the landlord failed to respond to the January 2020 and April 2020 enquiries about the service charge items. The landlord did send the service charge breakdown with the relevant annual invoices, however it is reasonable to expect the landlord to provide a response to any follow up questions. Ultimately the leaseholder has the right to insect invoices as set out in Section 22 of the Landlord and Tenant Act 1985. As such it would be appropriate for the landlord to have provided the information included in the June 2020 stage 2 response earlier, and guidance about the leaseholder’s rights.
The landlord has offered compensation for the communication failures in this case. £75 was specifically about the stage 1 response’s failure to respond to all of the issues raised by the leaseholder in their April 2020 complaint. However while this redress is appropriate for that oversight, there is no reference to the lack of response to the January 2020 enquiries.
Therefore while the landlord has used its complaints procedure for the reason it is in place (ie to answer the overlooked queries) it has offered insufficient compensation as not every overlooked correspondence has been acknowledged.

Rent increases and direct debit date

An important point in this assessment is to differentiate between a rent increase and a direct debit increase. The actual rent can only be increased once a year, as raised by the leaseholder and confirmed by the landlord. However the rent charged to the account is different to the amount paid by the leaseholder. The amount paid will include service charge items and any additional payments to manage the account (most notably to clear arrears).
The leaseholder’s complaint has conflated the two different types of increase. That is not to say that the amount the leaseholder pays can simply be changed as the landlord wants. However the amount charged per month may change more than once over the course of the year. This does not mean that the actual rent per month has increased more often than the annual increase as set out in the leasehold agreement.
The landlord provided copies of the rent statement with the second stage responses, and in response to this Ombudsman Case. These rent statements confirm, as stated in the landlord’s responses, that the actual rent only increased in April 2019 and April 2020. Therefore the rent has not increased more than once in a year.
However there have been other increases to the resident’s direct debit payments. The amount charged has not been disputed by either party. The leaseholder’s chronology of increases and the statements sent in support of the landlord’s stage 2 responses correspond with each other.
Instead the tenant has complained that the account has been managed unfairly (and as such some of the charges should be void). In particular the points of dispute for the tenant are:
1. That the landlord did not notify them the payment arrangement at the start of their occupancy would result in arrears
2. That the landlord’s error with the April 2019 rent increase letter allowed arrears to build up while it was resolved and before the correct (increased) amount could start being collect in September
3. Service charge increases in September 2019 due to a deficit
4. That at various points the landlord either did not notify the leaseholder of the arrears, or did not fully address the arrears when requesting one off payments, causing the issue to become protracted
The leaseholder has signed the leasehold agreement and as such is liable for the obligations it contains. This leasehold agreement should have been signed with independent legal advice. Therefore, even where there may be service failures by a landlord, this does not remove the leaseholder’s obligation to pay the relevant rent and service charges.
The charges themselves were set out in the leasehold agreement and have been itemised in the annual statements. As detailed above, the landlord failed to respond to the leaseholder’s queries about the supporting information for these charges.
In terms of the management of the account, it is the leaseholder’s obligation to ensure they meet the obligations of the leasehold agreement, and this would include paying their rent in advance and on the 1 of the month. They would have been aware that they had paid a month in advance in July 2018 and did not pay again until September 2018. Therefore the leasehold is in part responsible for the shortfall.
However it is also reasonable to expect the landlord to provide advice about the payment schedule (which it did not) and to then notify residents of arrears (which it did not for some time). Therefore this was a communication failure by the landlord.
The leaseholder complain that they felt the April-September 2019 increase should be voided due to landlord’s admitted error. However the landlord was correct to say that the services continued to be provided, and the leaseholder continued to live at the property during this time. Therefore while there was an administrative error, the fundamentals of the leasehold agreement (namely that the property is provided and maintained by the landlord, and paid for by the leaseholder) continued to apply. All parties would have been aware there was a rent increase due in April 2019 but delayed, therefore it is reasonable to expect that residents would have been able to plan for the overdue account reconciliation.
The landlord has separately offered compensation for the actual administrative error and that compensation was not disputed in this formal complaint and so is not part of this case. An administrative error (while inconvenient and requiring redress) does not negate the obligations as set out in the leasehold agreement.
The leaseholder has itemised each time they received a letter notifying them of changes to their rent and/or service charge direct debit payments. As the landlord explained, it is able to modify the direct debit as required so long as adequate notice is give. The leaseholder’s reference to each of the letter shows the landlord was notifying as required, and the dispute is around the number of increases.
As explained above, the account was in arrears. However these arrears were not the result of the leaseholder purposefully withholding payment or underpaying. Instead a series of miscommunication and or administrative issues resulted in the leaseholder not paying the amount they were due to under the lease agreement.
In addition to this the landlord then failed to have a simple conversation earlier in the process to either arrange an adequate one off payment to move the account fully into credit, or to agree a specific payment plan. Instead the landlord acted unilaterally to modify the direct debit more than once to try and bring the account into credit over 1 months (as preferred by its policy).
Therefore the landlord’s failure was:
1. To not set up the initial August/September 2018 payment in advance (though this is shared with the leaseholder who will have been aware of the terms of the lease and the payments already made)
2. To not discuss the arrears that had built up on the account earlier
3. To not proactively discuss either a sufficient payment plan or one off payment to move past the recurring arrears; and compounded this by unilaterally amending the direct debit (albeit in accordance with the agreement) during 2019/2020 to try and catch up with the arrears.
This communication failure has not been acknowledged in the landlord’s complaint responses. Therefore while there was no substantive failure insofar as the landlord was correct to say there were recurring arrears on the account, the communication and response to the situation could have been improved.

Buy back of property

The landlord was correct to say it had no obligation to buy back the property. It is rare for landlords to buy back leaseholder (including shared ownership) properties. There is no obligation or mechanism in the leasehold agreement for the landlord in particular to buy back the property.
It is reasonable for a landlord to consider buying back properties, either in exceptional circumstances to support residents or where there is a commercial opportunity. However as there is no obligation it is reasonable that any such decision is taken on a case by case basis.
Therefore there was no failure in the substantive issue of the landlord refusing to buy back the leaseholder’s share.
The landlord has acknowledged there was a failure in its communication about this issue. Even for issues that are dealt with on a case by case basis, it is reasonable for residents to ask how the landlord has arrived at a decision. The landlord must be able to evidence any decision as part of providing a fair and transparent service.
The Housing Ombudsman Service’s role is to consider how a complaint about a landlord has been handled. Therefore the response to the complaint is as important as the issues which led to it. In this instance the landlord used its complaint procedure to make up for failures in its earlier services. In particular it provided the explanation that the decision not to buy back the share was based on the affordability for the landlord of the share. This explanation, together with the goodwill gesture to acknowledge the delayed response, was a reasonable response to the complaint.

Determination (decision)

I can confirm in accordance with paragraph 54 of the Housing Ombudsman Scheme:
1. There was service failure in the landlord’s response to the complaint about the enquiries about the service charge items
2. There was service failure in the landlord’s handling of the complaint about the rent increases / direct debit changes
3. There was no maladministration in the landlord’s handling of the initial direct debit date
I can also confirm in accordance with paragraph 55(b) the landlord has made an offer of redress that satisfactorily resolves the complaint about the handling of the request to buy back the leaseholder’s share of the property

Reasons

The landlord has acknowledged it did not respond to the service charge enquiries. However it has not acknowledged all the instances where it failed to respond (namely to the January 2020 letter as well as the April 2020 complaint).
The landlord’s communication around the cause of the arrears, and how to return the account to ongoing credit, could have been more proactive.
While the initial direct debit date did result in arrears that led to the communication failures in the account management as stated at paragraph 53, there was no failure in the use of that date itself. The leaseholder would have been as aware of the terms of the leasehold agreement and the payments made as the landlord.
The landlord has no obligation to buy back the property. It has acknowledged and offered redress however for the lack of explanation provided when initially handling this request.

Orders and recommendations

As a result of the determination above the landlord has been ordered to, within 4 weeks:
1. Pay the £150 previously offered through the complaint procedure if not already paid
2. Pay £100 to acknowledge the inconvenience caused by its failure to respond to the January 2020 letter (including both the service charge queries and the questions about the changes to the direct debit in 2019)
3. Pay £150 for its failure to: not contact the leaseholder earlier about the arrears; not contact the leaseholder to better discuss how to clear the arrears in full on the account, instead relying on unilaterally determined increases to the direct debit