Sovereign Housing Association Limited (201914045)

REPORT

COMPLAINT 201914045

Sovereign Housing Association Limited

12 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 leaseholder (shared owner) has complained that the landlord took too long to respond to two queries during the sale of their home.

Background and summary of events

The leaseholder’s solicitor requested that the landlord arrange the removal of a ’21 year pre-emption clause’ on 12 November 2019. They also requested changes to the clause about an Estate Rent Charge.
The leaseholder again advised the landlord on 11 December 2019 that the buyer of their shared ownership property required the removal of a ‘21 pre-emption clause.’ They explained they had heard the landlord had agreed to this during the sale of another property.
The shared ownership leasehold agreement for this property was signed by the first occupant in 2004.
A pre-emption clause can restrict who the owner may be able to sell the property to after the shared ownership lease has completed the final staircasing (ie the owner owns 100% of the property). The use of pre-emption clauses in the government’s standard model shared ownership lease was removed from April 2015. At this time the government also advised that landlords allow for existing lease agreements to be varied to remove any such clause following final staircasing, at the buyer’s expense.
The landlord responded on 7 January 2020. It explained that any variation would need to be at the buyer’s expense, and that it expected to have an update from its legal department the following day.
The landlord explained the following day that the planning consent (including the ‘Section 2016 agreement) had to be checked before it could agree to remove the clause. The landlord did not explain why it did not have the update as offered the previous day, and stated the update should be available the next day.
The planning consent is relevant as some shared ownership properties only receive planning consent so long as their use is guaranteed as ‘affordable housing,’ and/or with allocation restrictions. One method for this would be through the ‘Section 106 agreement’ and/or a pre-emptive clause restricting future sales.
The landlord did not respond on the 9 January as offered. The leaseholder chased the query, and asked about the complaint procedure, on the 10 January. The landlord contact responded the same day to say they could see no obstacle to varying the lease, but that they had to wait for the solicitor’s confirmation.
The leaseholder complained on 13 January that the landlord had not followed up as promised on the 10 January, and that the after had taken too long in general as it now threatened their sale of the property.
The landlord acknowledged the complaint on the 13 January. It explained that it had not had a response from its solicitor. It also explained (as above) how this was a standard clause in the government’s model shared ownership lease, and that until recently properties had been successfully sold with it in place.
The landlord received confirmation from the solicitor on 13 January that the lease could be varied, and the landlord instructed the solicitor to do so on 15 January 2020.
At the same time (15 January) the leaseholder chased the query from the buyer’s solicitor that the estate rent charge needed to be changed or removed from the lease agreement following a request from their lender.
The landlord updated on 20 January that requests about the estate rent charge were new, and so were taking longer for the solicitor to provide advice. The leaseholder followed up whether the information about the pre-emptive clause had been sent that day.
The following day the landlord explained it had spoken to the buyer’s lender and the lender had confirmed it would not be concerned with an Estate Rent Charge of the level included in the lease. The landlord offered to explain this directly to the buyer’s solicitor. The landlord did not provide any supporting information or correspondence direct from the lender. The landlord also explained its solicitor had not sent the information about the pre-emptive clause as it had been waiting to see if one or two variations were required to the lease (and to then handle them as one).
The landlord updated the leaseholder on 30 January that its solicitor had requested the proposed wording from the buyer’s solicitor that day for it to consider. If the wording was agreed by the legal department the deed of variation required by the buyer’s lender would then be drawn up.
The landlord stated on the 3 February that it had not received the wording from the buyer’s solicitor. However the buyers solicitor confirmed it had emailed on 28 and 30 January. This wording was then considered inadequate by the landlord’s solicitor. The final wording for the deed of variation was then confirmed as agreed on 14 February by the landlord.
Contracts for the sale were exchanged on 11 March with completion due on 27 March.
Throughout this period the leaseholder had explained they wanted the complaint open for the landlord to respond to once the sale was confirmed. They explained they wanted compensation for what they considered to be unnecessary rent payments caused by the landlord’s delays. The landlord responded on 28 March to explain:
1. Its understanding of the chronology from September 2019 until March 2020
2. That it felt it had liaised throughout with the leaseholder and their solicitor
3. That the estate rent charge was a new request for the landlord and it solicitor and so it had taken some time to resolve. The lease agreement was the government’s model wording.
4. That the landlord accepted the leaseholder had experienced a delay in the sale due to the ongoing legal queries. Although it felt these were outside of its control, it agreed to forego its standard admin fee of £180
The leaseholder escalated the complaint, explaining their focus was particularly the delays to address the estate rent charge:
1. They felt if the clause had not been included in the first place this issue would not have arisen
2. They felt the fact the landlord no longer included the clause in new leases, its removal should have been agreed to immediately in November 2019
3. The tenant sought compensation of the rent paid from December to February; the difference in their mortgage payments for December to February; the admin fee waiver; and a gesture of goodwill for the stress and inconvenience.
The landlord’s final response did not offer any further compensation. It apologised for the delays and inconvenience and repeated the offer of £180 in compensation by way of the admin fee waiver. It also explained:
1. The pre-emption clause was varied as soon as the landlord had confirmation it was able to do so in accordance with the planning consent
2. That the estate rent charge was a new issue, and the wording was based on the government’s model lease from the time it was first drawn up. It also noted that correspondence had been ongoing throughout the period, and that any sale of a property can be subject to unpredictable delays. It did accept there were some (unspecified) delays and as such repeated the offer of £180 in compensation for the inconvenience.

Assessment and findings

Pre-emption clause

This issue was first raised on 12 November. The deed of variation was instructed on 15 January, after it received confirmation from its solicitor on 13 January.
It is reasonable for the landlord to base its decision on appropriate expert advice. Any request to vary a legal agreement would be expected to be assessed and supported by an appropriate legal professional. Therefore in terms of actually instructing the solicitors to prepare the deed of variation, the 2 day period in January was not an unreasonable time.
Equally the time from the first request until the variation was agreed (2 months, including the Christmas shutdown) is not unreasonable. The landlord’s solicitor had to consider the request by researching the relevant planning documents. There is no specific procedure that dictates how long this process should take.
There were points in the ongoing correspondence where the landlord failed to respond by agreed dates. This would have caused understandable concern for the leaseholder, particularly as the landlord made this error more than once. However the delays in updates were not significant enough for a finding against the landlord, and the landlord did respond when chased with an explanation. N the future the landlord will want to consider setting more realistic deadlines to help manage resident expectations.

Estate rent charge

This issue was first raised on 12 November. However it was not then addressed by the landlord again until 15 January, when chased by the leaseholder. The landlord’s solicitor only requested the proposed wording from the leaseholder’s buyer’s solicitor on 30 January, 2 and half months after the issue was first raised.
There was them some lack of understanding by the landlord and/or its solicitor about when the details were received from the buyer’s solicitor. Ultimately the deed of variation was agreed 2 weeks later.
The period from 30 January until 14 February was not unreasonable. As the landlord explained, this was a relatively new issue and resulted from the model lease it had originally used from the government. Therefore it was appropriate for the landlord to secure appropriate expert advice about any variation.
However the period from November until January is unexplained, and no evidence has been provided of any ongoing discussion or research. Therefore this was a failure in the landlord’s service.
The landlord has offered £180 in compensation for any inconvenience caused. This is a reasonable offer of redress for this delay to this enquiry. The leaseholder’s requests for compensation explain they are seeking rent and mortgage refunds. Furthermore as they considered the landlord’s service to be lacking they felt the admin fee waiver should be in addition to any compensation for the inconvenience caused.
The mortgage payments are not the responsibility of the landlord. These are an obligation that the leaseholder has entered into with their lender. Furthermore, any rent (or compensation for mortgage payments) would normally only be considered where the property (or part of the property) is independently confirmed to be uninhabitable. During this period the leaseholder had the full use of the property and as such continued to have the obligation to pay any fees due under the lease agreement.
Residents are advised to seek independent legal advice when buying any property, including shared ownership. Any purchase, or later sale, or a shared ownership property will include additional queries given the involvement of a third party (the landlord) a well as the buyer and seller. Therefore it is expected that residents have considered this context when agreeing to buy a shared ownership / leasehold property.
Our role is to assess the landlord’s handling of the individual queries. There is no policy or procedure which sets out the time within which a sale must be completed. Therefore we must assess the reasonableness of the landlord’s handling of each enquiry on a case by case basis.
The two clauses relevant to this case were included in the original lease as they were part of the government’s model lease at that time. Therefore it is reasonable that they were in place at the time of the sale, and would only be reconsidered when raised as part of any sale. It is also reasonable that the landlord would rely on independent expert advice before agreeing to any variation.
As such the key issue is the time taken to secure this expert advice. As explained above, the only unexplained period of delay in securing this advice was from November until January for the estate rent charge.

Determination (decision)

Therefore I can confirm in accordance with paragraph 55 (b) of the Housing Ombudsman Service Scheme the landlord has made an offer of redress that is consider satisfactory to resolve this complaint