Southern Housing (202306954)

Background

1. The resident has complained about the landlord’s response to his queries about his rent and service charges. He pays a variable service charge and has had issues with his direct debit, including that he did not receive an advance notice from the landlord. He has asked us to investigate after receiving responses from the landlord that he remains dissatisfied with, including that there are issues with the direct debit system.

What the complaint is about

2. The complaint is about:
   1. How the landlord handled the resident’s queries about his rent and service charge calculations, including issues with his direct debit payments.
   2. How the landlord handled the complaint.

Our decision (determination)

3. We found the landlord responsible for:
   1. Service failure in its handling of the resident’s queries about his rent and service charge calculations.
   2. Service failure in its complaint handling.

We have made orders for the landlord to put things right.

Summary of reasons

The landlord’s handling of the resident’s queries about his rent and service charge

4. The landlord failed to demonstrate that it sent an advance notice to the resident in 2023 or 2024, prior to taking the resident’s direct debit payments. It did not warn the resident or confirm when and what the payments would be.

Complaint handling

5. The landlord did not provide its complaint responses within the timescales set out in the Ombudsman’s complaint handling code.

Putting things right

Where we find service failure, maladministration or severe maladministration we can make orders for the landlord to put things right. We have the discretion to make recommendations in all other cases within our jurisdiction.

Orders

Landlords must comply with our orders in the manner and timescales we specify. The landlord must provide documentary evidence of compliance with our orders by the due date set.

Our investigation

The complaint procedure

What we found and why

The circumstances of this complaint are well known by the parties involved, so it is not necessary to detail everything that’s happened or comment on all the information we’ve reviewed. We’ve only included the key information that forms the basis of our decision of whether the landlord is responsible for maladministration.

6. The Ombudsman expects landlords to manage service charge enquiries effectively, transparently and fairly. This helps maintain good relationships with residents and prevents unnecessary disputes. Landlords should provide clear information and respond promptly to any service charge queries from residents. We have therefore assessed whether the landlord met these expectations.
7. On 1 March 2022, the landlord sent a letter to the resident detailing the new rent and service charge amounts for April 2022 to April 2023. This was reasonable as it provided a breakdown of the amounts relating to rent, communal and personal service charges and water. It later issued a year-end service charge accounts letter, which set out an estimate of the total costs incurred on his estate and building. On 24 February 2023, the landlord sent another letter setting out the resident’s new rent and service charges for April 2023 to March 2024.
8. It was reasonable and in line with the Ombudsman’s expectations for the landlord to provide estimates and then actual rent and service charge costs ahead of the year for 2023 and 2024. By sending this information, it gave the resident clear notice of upcoming charges, ensuring transparency and allowing its residents to plan their finances accordingly.
9. Following this, the resident reported on 4 May 2024 that his direct debit amount had increased, despite his account being in credit. The landlord responded reasonably, by amending the direct debit for May to take a reduced amount and changed the direct debit for June. The evidence shows the landlord resolved this issue promptly. However, it would have been reasonable if it had warned the resident before taking the money that it would not check the account or use any credit on the account, to avoid confusion.
10. On 19 May 2023, the landlord amended the resident’s direct debit to £471.53 for the month of May and confirmed it would be set at £520.17 per month going forwards, to cover the total rent and service charge.
11. While providing this information was reasonable, it had previously told the resident in its 24 February 2023 letter that the weekly charge for April 2023 to March 2024 would be £120.04. We understand that the resident thought this meant the monthly amount would be £480.16, however, this calculation only accounts for 28 days in each month and is not accurate for every month of the year. As this caused confusion for the resident, it would have been reasonable for the landlord to have also clarified what the direct debit amounts would be for each month.
12. It has since confirmed that following its annual rent reviews, it amends its resident’s direct debits to ensure the new rent will be covered. If the direct debit date is different to the rent review date, the first direct debit payment will be increased to cover the difference in rent for the days between the rent review and direct debit being taken. This is then amended back to the normal rent amount for the following payment. While it was reasonable for the landlord to provide this explanation to the Ombudsman, we have not seen anything to suggest that it has confirmed this to the resident, which it should have done. This may have helped the resident to explain the situation better and increased his confidence in the landlord.
13. The landlord therefore attempted to manage the resident’s expectations. However, as it did not clarify the monthly direct debit amounts, this caused distress and confusion for the resident. It told the resident that its finance team was reviewing the situation, and it advised him to check every year when the rent changes, to ensure the direct debit is set correctly. We recognise that it apologised for the inconvenience, and it is not entirely unreasonable for the resident to check the direct debit each year. However, it would have been reasonable for it to have assured the resident that it would resolve the direct debit issue and was taking his concerns seriously.
14. On 12 June 2023, the resident raised another query about the direct debit issue. He explained that in 2022, he received an advance notice from the collecting agency, which showed the dates and amounts for the direct debit. However, the amounts taken were £12.00 more per month. Although customer accounts later corrected the amount, the resident felt such issues should not occur and he raised this as part of his formal complaint on 2 July 2023. His frustration is understandable, as landlords should provide accurate and clear information about upcoming payments.
15. The landlord acted reasonably in apologising for the direct debit error, confirmed the direct debit had been amended and reflected the correct amount to be paid into the rent account.
16. In its stage 1 complaint response on 18 September 2023, the landlord explained that all direct debits are automatically amended in line with rent reviews, to ensure the difference between the old and new rent is covered, to prevent accounts going into arrears. Its finance team does not check each account individually, so it was unaware that the resident had enough credit to cover the difference. It acted reasonably by apologising and confirming that it was reviewing its rent review process with its finance team.
17. The resident was unhappy with this response, as the landlord failed to address that he did not receive an advance notice. The general rule around advance notices is that businesses (in this case, the landlord) are required to provide an advance notice to its customers before collecting funds via direct debit. This must outline the amount to be debited, the date of the transactions and the frequency of payments. Advance notices are crucial for maintaining transparency and allowing customers to prepare for the upcoming debit. They give customers an opportunity to query or dispute any unexpected changes.
18. Under the direct debit guarantee, there are specific requirements that an organisation or landlord has to comply with. This includes that if there are any changes to the amount, date or frequency of your direct debit, the landlord should notify its resident of this (normally within 10 working days) in advance of the account being debited, or as otherwise agreed.
19. The Ombudsman has requested evidence of the landlord providing advance notices to the resident in 2022 and 2023; however, these have not been provided. We therefore have no evidence to suggest that it complied with the requirements to provide an advance notice prior to the direct debit payments. This suggests that it did not send the advance notices as it should have, to warn the resident and confirm when and what the payments would be, which is unreasonable.
20. In its stage 2 complaint response, the landlord confirmed that it had experienced intermittent problems with its direct debit platform since August 2022 and it moved to a new platform on 1 August 2023. This was a reasonable step, given the issues it was experiencing with direct debits. It was also reasonable for it to communicate this to the resident, as it showed him that it was taking the situation seriously and intending to improve it. It confirmed that it hoped changing platform would increase stability and reduce risk of payment issues in the future. It was reviewing the process of direct debit amendments, including whether it is possible to consider the account balances where there are rent changes. This demonstrates a willingness to react to the feedback it received.
21. On 26 February 2024, the landlord sent a letter to the resident, to advise of the resident’s new rent and service charges for April 2024 to March 2025, which was reasonable. It has also provided copies of advance notices addressed to the resident on 4 and 5 March 2024. However, it has been unable to evidence that it sent these to the resident, and the resident has said he did not receive it, and it was not in his junk mail, as the landlord suggested. He also raised to the landlord in April and July 2024 that the direct debit charge was incorrect.
22. The landlord apologised for the issues the resident had experienced with the direct debit and explained it was aware there had been issues. It was working with its payment provider to avoid the situation arising again. It advised that some rent accounts were showing a credit that was not actually there and added a message to advise its residents. It also reassured the resident that the actions it had taken had been lawful. It was reasonable for it to publish a message to all of its residents, to try and provide assurances about the situation.
23. Following the complaints process, the landlord has confirmed to the Ombudsman that it is currently progressing through a tender process to consolidate payment services under a single provider. This is a reasonable decision by the landlord, which shows that it has learnt from the feedback it has received. It has also explained that it could not reasonably have taken early action, due to the complexity of the situation. It confirmed in its stage 2 complaint response that it moved to a different platform in August 2023, to ensure a more streamlined and consistent service for its residents.
24. However, as the switch to a new platform in August 2023 has not rectified the issues, it is reasonable that it has now chosen again to consolidate its payment services. This demonstrates that it is trying to make decisions that will benefit its residents, which is reasonable.
25. The Ombudsman recognises that the landlord has apologised for the situation, offered £25 and sent the resident the credit that had built up on his rent account. While this was reasonable, we do not consider that this goes far enough to put things right for the resident. The landlord could have done more to resolve the situation, as it caused confusion and distress to the resident. It has failed to reassure the resident about its direct debit system and has failed to demonstrate that it has provided an advance notice for 2022, 2023 or 2024. This has understandably caused the resident to lose trust in the landlord, meaning he no longer pays by direct debit.
26. The Ombudsman has therefore found service failure in the landlord’s handling of the resident’s queries about his rent and service charge calculations. We order the landlord to pay the resident a further £75 for the distress and inconvenience caused by the situation. It should also send a letter to the resident to explain the changes it has made or is planning to make to its direct debit system, to provide assurances that the system will be improved for its residents.

27. The Ombudsman’s complaint handling code (“the Code”) sets out when and how a landlord should respond to complaints. The resident formally complained on 02 July 2023, and the landlord provided written acknowledgement on 31 July 2023. The Code states that landlords must acknowledge complaints within 5 working days of receiving them. Therefore, the landlord significantly exceeded this timeframe, which was unreasonable.
28. The Code states that landlords should issue their stage 1 complaint responses within 10 working days of the complaint acknowledgement. Nevertheless, the landlord provided its stage 1 complaint response on 18 September 2023, which was 25 working days beyond the timeframe set out in the Code and was unreasonable. While we recognise that the landlord apologised for the delay in its complaint response, it should have provided an update or explanation in the interim.
29. The resident escalated his complaint to stage 2 on 12 October 2023, and he chased the landlord on 27 November 2023. The landlord acknowledged his escalation request on 14 December 2023, which was 40 working days over the timeframe set out in the Code and was unreasonable. The landlord subsequently provided its stage 2 complaint response on 28 December 2023, which was within the 20-working day timeframe set out within the Code.
30. Still, the landlord’s application of its internal complaints process caused significant delay to the resident receiving a response to his complaint, which would have likely caused frustration to the resident. It provided £25 for the complaint delay; however, the Ombudsman does not consider this to go far enough to put things right for the resident.
31. We have found service failure in the landlord’s handling of the complaint and have ordered the landlord to pay the resident a further £75 compensation. This is in line with our remedies guidance where there has been a minor failure by the landlord and it has not appropriately acknowledged it.

Learning

32. The landlord should ensure it complies with the rules regarding direct debits and that it sends out advance notices to its residents, prior to taking direct debit payments