Sovereign Network Homes (Former Network Homes) (202301684)

REPORT

COMPLAINT 202301684

Sovereign Network Homes

17 May 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

The resident’s complaint is about:
1. The landlord’s handling of queries relating to a service charge increase.
2. The landlord’s handling of a request to buy the property back from the resident.
This Service has also considered:
1. The landlord’s handling of the resident’s complaint.
2. The landlord’s record keeping.

Background

The resident holds a leasehold for a 1 bed flat in a building owned by the landlord. There is a service charge payable for maintenance, upkeep of the building and estate, and other amenities. The landlord has told this Service that it has no vulnerabilities on record for the resident, although the resident has discussed her mental and physical health issues in correspondence with the landlord.

Service charges

In early February 2022, the resident was sent a service charge statement for the financial year 2022 to 2023. This stated that her service charge had increased to £266.38 per month. The resident queried the increase on 3 March 2022, explaining that some elements had drastically increased and that she was being charged for items which were not part of the block where she lived (for example – being charged for lift maintenance when there was no lift). The landlord responded on 9 March 2022, telling the resident that it would investigate the points raised about the service charge and respond within 21 days. The resident chased the landlord for a response on 30 March 2022 and 31 March 2022.
On 5 April 2022, the landlord apologised for the delay in its response, explaining that it was investigating issues with the service charge estimates for the coming financial year. Although adjustments could not be made for April, the landlord hoped that it would be ready before direct debits were deducted for service charge payments due in May 2022. On 12 April 2022, the resident told the landlord that she had cancelled her direct debit and that she was keeping the sum due to one side until she received the revised statement. The landlord then told the resident it would respond in full within 5 working days. In response, the resident told the landlord that she was not happy with the delayed response and that she felt it had admitted that the current sum due was incorrect. She explained that the increase was significant, and that the landlord should be taking this seriously.
On 19 April 2022, the landlord told the resident that the estimates given the previous month were incorrect. It committed to investigating the issue and correcting the estimates as soon as possible, making it clear to the resident that it was in touch with other residents who had been affected by the same issue. The resident expressed frustration with the landlord’s handling of the issue to date. She chased the landlord for a response to her query on 26 April 2022, expressing concern about falling deeper into arrears while the dispute continued.
On 27 April 2022, the landlord told the resident that it had wrongly calculated the estimated service charge and that this was being revised. It stated that it would update its systems with the revised estimates by 29 April 2022 and that letters would be sent out to affected residents by 6 May 2022. The resident asked that she could be given the revised figure by email on 29 April rather than wait for the letter.
The resident chased the landlord on 12 May 2022,13 May 2022, and 16 May 2022 for a copy of the revised service charge letter. On 16 May 2022, the landlord responded and told the resident that it would give her an update by 20 May 2022. On 20 May 2022, the landlord told the resident that the estimates would be updated that day on its systems with letters sent out by 27 May 2022.
On 25 May 2022, the resident told the landlord and her local MP that she had not heard back about the service charge estimate, that she had received a warning letter about her service charge arrears, and that she was finding the situation very distressing. A day later, the landlord admitted that the letters about the charge had not been sent out on time and that work on this was still outstanding, with no clear date for when these letters would be sent. The resident asked the landlord for an update on 28 June 2022 and on 5 July 2022.
A revised service charge statement for 2022/23 was sent to the resident on 26 July 2022, lowering the charge to £214.56 per month. A further revised service charge statement was sent on 19 August 2022, lowering the charge to £162.90 per month.
On 28 August 2023, the landlord asked for an additional payment of £194.37 towards the service charge for 2022/23. This was a one-off adjustment once it had recalculated the amounts based on actual expenditure.

Buyback request

In January 2022, the resident made enquiries with her landlord as to whether it would buy the property back from her. The resident disclosed some sensitive information about her mental health to the landlord and explained that she felt these health issues had been caused by frustration with the landlord’s responsiveness and willingness to take action on issues. In early February 2022, the landlord told the resident that her request would be passed to the leasehold management team.
In early March 2022, the resident asked for an update on her buyback request. The landlord responded, asking her to send an email which outlined the reasons for her request, and that this would be forwarded to a manager to consider. The resident did this on the same day, explaining that she wanted the property bought back from her at a market rate because living there was having a detrimental effect on her mental and physical health. A couple of days later, the landlord confirmed receipt of the buyback request and told the resident that it was waiting for confirmation of the next steps in the process.
In late March 2022, the resident chased the landlord for an update on the request. A day later, the landlord told the resident that her request had been rejected and recommended that she sold the property on the open market. The resident queried this rejection and asked to speak with the manager involved.
The landlord then told the resident that it was changing its buyback policy and that her request could be presented at a panel meeting for consideration. It warned the resident that it would only buy properties back in exceptional circumstances where the resident had attempted to sell the property on the open market before making the request. The next panel meeting was to take place in mid April so the resident needed to provide a response quickly.
The resident provided a response in early April which explained the following:
1. She suffered from significant physical and mental health issues which she believed had been made worse by disputes with the landlord.
2. She had put the property on the open market but had not been able to find a buyer.
3. There had been many issues with the landlord’s responsiveness to complaints and other issues since the resident became the owner of the flat, including sharp increases in service charges.
In late April 2022, the landlord told the resident that the panel had rejected her request on the basis that the resident’s circumstances were not exceptional and that she had the option to sell the property on the open market or sublet it without requiring the landlord’s consent. The resident told the landlord that she would rather rent the property out as she did not think it was possible to sell.
In early May 2022, the resident forwarded comments from a surveyor’s report which stated that the property needed an EWS1 form signed off by the landlord which confirmed that any cladding on the external walls met current government guidance. The resident told the landlord that this meant she could not sell the property, and that she was concerned that her lender may not give her permission to rent out the property. She told the landlord she felt stuck and feared for her safety, that the property had not been built to a good standard and had recurrent issues with mould and leaks, and that the landlord had not taken her mental health issues seriously enough. The resident asked that her buyback request was reconsidered. The landlord told the resident that it would respond to her request in mid May.
In mid May 2022, the landlord told the resident that it had considered the buyback request again and that it was still not prepared to purchase the resident’s property. This was because the resident had not shown that she was in exceptional circumstances and the landlord did not have the financial reserves for buying back the property. The landlord also promised to provide a EWS1 form for resale as soon as possible, but confirmed that this was not required for the resident to sublet her property.
Shortly after this, the landlord told the resident that the revised buyback policy had been approved and that it was ready to share in the next 10 days. The resident then asked the landlord how a decision on the buyback could have been made when the policy had not yet been approved, telling the landlord that she was also not happy with subletting her property, as she wanted to end her relationship with the landlord entirely and that she could not get permission from her lender to do this. The landlord responded, telling the resident that her request had still been denied as she was not facing exceptional circumstances and that it had no legal or contractual obligation to buy her property.
In early June 2022, the resident asked to see the revised buyback policy and expressed frustration that the landlord had followed an unapproved policy. The landlord responded, telling the resident that her request had been assessed against the policy in place at the time, but that it was being reviewed and amendments were pending approval after being checked by lawyers. The resident expressed considerable upset about this, restating that she did not understand why her request had been assessed against a policy which had not been approved.
In mid June 2022, the landlord told the resident that it felt the resident had misunderstood its position. It explained that the policy had been amended to clarify grounds which it did not consider to be exceptional circumstances and that the policy had been approved in January 2022, although the landlord had also asked external lawyers to check the policy to make sure it was not discriminatory, with the lawyers approving it in May 2022.
The landlord has told this Service that it has no records available about the buyback request, including records of panel discussions and decisions or notes from telephone contact with the resident, other than correspondence with the resident.

Complaint

The resident raised a formal complaint on 13 April 2022 about the lack of response to her buyback request, issues with the service charge calculation, and removal of rubbish on her estate. The resident also expressed dissatisfaction with the officers who had been handling her service charge query. The landlord acknowledged the complaint on the following day and defined the complaint as being about the buyback request, dumping of rubbish, handling of her service charge query, and the conduct of specific members of the landlord’s staff.
On 29 April 2022, the landlord gave the resident a Stage 1 response. It stated that staff had responded to emails from the resident in a timely manner and asked the resident to send any evidence she had of rude or impolite emails. It apologised for delays in referring the resident’s buyback request to the correct team, and told the resident that queries about service charges were out of scope for its complaints process.
In correspondence about another topic, the landlord told the resident on 26 May 2022 that she could escalate her complaint to Stage 2. The resident asked for escalation of her complaint on 14 June 2022.
A Stage 2 complaint response was given to the resident on 18 July 2022. This defined the complaint as being about the handling of the service charge query and the handling of the buyback request (including the landlord’s decision). It upheld the complaint about the handling of the service charge query, acknowledging that there had been significant delays in providing information on this to the resident, with a new estimate now provided and any overpayments credited towards arrears on the resident’s account. It did not uphold the complaint about the handling of the buyback request, stating that there had been a delay in referring the request to the right team but there had been no obligation for the landlord to accept the request. £435 compensation was offered for delays (although the landlord did not specify which delays this related to), with this sum was credited to the resident’s service charge account to tackle arrears.

Assessment and findings

Records provided to this Service by the landlord were limited with significant gaps. The landlord has advised that it does not have copies of internal correspondence or telephone contact notes which it could share with the Ombudsman in connection to the service charge issue or the buyback request. Our assessment has been based on the limited evidence provided by the landlord, as well as information and evidence provided by the resident.

The landlord’s handling of queries relating to a service charge increase.

Concerns about the service charge increase were first raised by the resident on 3 March 2022. A revised service charge statement was issued on 26 July 2022, 145 days later. This is a significant delay in providing clarity on the revised monthly service charge for 2022 to 2023, particularly as the landlord’s initial response promised an answer within 21 days, and it would have been frustrating and distressing for the resident to wait so long for an answer.
The landlord failed to keep the resident adequately updated about what steps it was taking to resolve the issues. It is positive that the landlord told the resident that it had identified errors in the statement and that it was going to be revised, but the resident had to chase the landlord on many occasions for updates on progress. Failing to keep the resident informed of developments in her case would have been frustrating, undermined the landlord and leaseholder relationship, and cast doubt on whether the landlord was taking the issue seriously or with any urgency.
The landlord missed its own deadlines for providing a response to the resident on several occasions. Although this Service appreciates that significant work was required to resolve issues with the estimated service charge, the resident should have been kept up to date with any issues or expected delays, and she should not have been left to chase the landlord for responses. By repeatedly missing deadlines, the landlord would have frustrated the resident, given the impression that it was not taking appropriate action to resolve the issue, and failed to make sure that the resident was aware of what work it was doing to help resolve the dispute.
The resident expressed concern about the affordability of the service charge increase, as well as pointing out things which were itemised in the statement which were not applicable to her building or property. These concerns were not addressed until the revised statement was issued on 26 July 2022, nor did the landlord attempt to come up with a plan for how the resident should proceed while there was doubt over the correct monthly charge. As the increase of the service charge was significant, and non-payment of a service charge can ultimately lead to loss of home, the landlord should have discussed payment options and plans with the resident at an early date and considered whether an interim charge figure would have been appropriate pending the final calculations. It should also have considered whether to avoid making any demands for payment of service charge arrears and discussed decisions with the resident. It would have been reasonable for the landlord to take steps to handle the resident’s very real concerns about affordability and agree a way forward while the charge was being revised. Failing to do this led to the further breakdown of the landlord/leaseholder relationship.
Due to the landlord’s failure to investigate issues with the service charge increase within agreed timescales, failure to keep the resident updated about the progress of its investigation, failure to discuss what steps both parties should take while the revised estimates were produced, failure to discuss what should be paid pending the final revised estimate, and significant delays in providing a revised service charge statement, this Service has found service failure in the landlord’s handling of queries relating to a service charge increase. Although the landlord has offered the resident compensation for failings in connection with overall delays, this Service does not think this is enough to put things right and restore the landlord/leaseholder relationship. This is because it is not clear how the landlord calculated its offer or what portion of the compensation is specifically for failings in how it handled the resident’s queries about the service charge increase, the many times which the landlord missed deadlines to provide the resident with further information, the landlord’s awareness of the resident’s considerable distress, and as the landlord sent a warning letter about arrears despite being aware that these were subject to dispute. We note that this Service would have found maladministration in the landlord’s handling of this issue but for the landlord’s offer of compensation.

The landlord’s handling of a request to buy the property back from the resident.

The landlord is under no legal obligation to purchase the property from the resident. However, it does operate a policy which allows it to buy properties formerly owned by the landlord back from residents. To qualify, a resident must make a formal written request for a buy back, giving detailed reasons and make their own attempts at selling the property on the open market before making a request. The policy states that this option will only be used in exceptional circumstances. The following circumstances are not considered ‘exceptional circumstances’ in their own right:
1. Financial pressures.
2. Loss of job.
3. Non-terminal health issues.
4. Lack of EWS1 form.
5. Not wanting to sublet.
There are no timescales set out in the policy for making a request or for when the landlord will respond to such a request.
The resident expressed a high degree of dissatisfaction with living in her property, asking if the landlord would buy it back from her, on 13 January 2022. In her message, she told the landlord that she had been suicidal for some time and that she felt this was due to issues with the landlord’s behaviour. On 4 February 2022, 16 days later, the landlord responded and offered to consider a buy back request. At this point, the landlord could have discussed the reasons for why the resident was so dissatisfied with living at her property, what options she had, and given detailed information on the landlord’s buy back policy and requirements. The landlord’s failure to do this presents a missed opportunity to find out more about the reasons behind the resident’s dissatisfaction with her property, and to give her realistic advice on the prospects of success of her buyback application.
On 15 March 2022, the landlord outlined what the resident needed to do to make a buyback request. This is a delay of 43 days from the initial request and the landlord’s response still did not give a detailed explanation of the policy and the ‘exceptional circumstances’ criteria. The resident gave a detailed account of her personal circumstances on the same day and why she wanted the landlord to buy back the property in her request but, as she did not know about the ‘exceptional circumstances’ criteria at this point, it did not fully explain why the resident felt that her circumstances were exceptional.
A short delay in the landlord’s response to the buyback request meant that the resident had to chase the landlord for updates on its decision. Although a decision was given on 29 March 2022, only 14 days after the request, the landlord should have been mindful of the resident’s poor mental health and given her a clear idea of when a decision would be made. The decision also did not give reasons why the request had been rejected. Giving reasons for the rejection would have given the resident insight into why the landlord had reached this decision, given her more confidence that her request had been considered carefully, and allowed the landlord to justify its actions.
It is positive that the landlord allowed the resident to make a fresh buyback request shortly after it turned down the initial request. This time, the landlord did explain the criteria required from the resident and that her request would only be approved in exceptional circumstances. Although the landlord gave a very short deadline for a fresh request to be submitted, it explained to the resident that this was because a panel was due to meet on 13 April to reach a decision. The resident’s fresh request was far more detailed as a result, putting her in a better position for her request to be considered against the policy as she was now aware of the criteria.
It is also positive that the landlord reconsidered the buyback request after the resident gave information from a surveyor about the need for an EWS1 form, even if the landlord did not agree to buying the property. This demonstrates that the landlord was willing to listen to the resident and reconsider the request in light of fresh evidence.
It is unclear why the landlord told the resident on 19 May 2022, after the final rejection of the buyback request on 13 May 2022, that it was revising the policy further. This created understandable confusion, with the resident believing that she had been treated unfairly by being assessed against what appeared to be an unapproved policy. It is evident from correspondence that the resident was in a state of considerable distress at this time, with the resident making frequent comments on her attempts at self-harm and suicide, so it would have been good practice for the landlord to clear up any ambiguity around the revised policy and the impact on the resident’s buyback request as soon as possible. This Service acknowledges that concerns about the resident’s welfare were paramount at this point and that the landlord acted quickly and sensibly in addressing the resident’s comments, offering referrals to the local authority’s Adult Social Care department and giving contact details for crisis teams. However, clarification on which policy was in place when the resident’s request was made was not offered until 16 June 2022, over a month later. A prompt response on this point may have allowed the resident and the landlord to better focus on the resident’s personal circumstances rather than raise hopes that her buyback request may be reconsidered.
As the landlord has not been able to provide any contemporaneous records of the panel’s decision making process and reasons for that decision, the Ombudsman cannot say with reasonable confidence that the landlord has considered the resident’s request appropriately and reached a fair decision. This is unsatisfactory and has been taken into account in our finding below on this aspect of the resident’s complaint.
Due to delays in assessing the buyback request, failing to initially inform the resident on the criteria for a buyback request, and delays in clarifying which policy had been in effect when requests were considered, this Service has found service failure in the landlord’s handling of a request to buy the property back from the resident.

The landlord’s handling of the resident’s complaint.

The landlord operates a 2 stage complaints process. Stage 1 complaints are acknowledged within 5 working days and responded to within 10 working days. Escalation requests are acknowledged within 5 working days and responded to within 20 working days.
The policy in operation at the time of the resident’s complaint stated that complaints regarding service charges are not covered by the landlord’s complaints policy and that these will be dealt with under a separate service charge dispute procedure or referred to First-Tier Tribunal (Property Chamber).
The Stage 1 response addressed all the points raised by the resident apart from issues with the service charge estimate. Although the complaints policy at that point did state that service charge complaints were out of scope, the landlord should have considered whether this point in the policy was correct and applied to this case as the resident’s complaint was about how her queries had been handled rather than the increase itself. The Stage 1 response also confused matters as it stated that a separate Stage 1 complaint had been raised under a different process for the service charge issue, when no evidence has been provided to this Service that this was the case. Failing to adequately address the service charge element of the resident’s complaint would have been frustrating for the resident, suggested that the landlord was unwilling to take this issue seriously, and led to delays in investigating this point.
It is positive that the landlord advised the resident that she could escalate her complaint when she expressed dissatisfaction with the Stage 1 response. This Service has not seen evidence that the resident’s escalation request made on 14 June 2022 was acknowledged, but there was a high level of correspondence around this time between landlord and resident regarding safeguarding concerns about the resident’s mental and physical health which discussed some of the points raised in the resident’s initial complaint. Although the landlord should have acknowledged the escalation request within the timescales set out in its policy, this Service appreciates that the landlord’s primary concern at this point was to address as much of the resident’s concerns as possible while taking appropriate steps to try and safeguard the resident.
The Stage 2 response resolved some of the issues which this investigation has identified in the Stage 1 response. It is positive that the landlord acknowledged the service charge issue and investigated this point, finally giving the resident a revised estimate of her service charge and upholding her complaint. Although the landlord is correct that it had no legal obligation to buy the property back from the resident, it should have upheld the complaint about delays in processing this request. It is not clear if the £435 offered as compensation was for delays in responding to the service charge query and/or delays in processing the buyback request.
Due to the landlord’s overall confused approach to considering the service charge dispute during the complaints process, and the landlord’s failure to breakdown what the compensation was for, this Service has found service failure in the landlord’s handling of the resident’s complaint.

The landlord’s record keeping.

The Ombudsman has issued guidance about record keeping, Spotlight on: Knowledge and Information Management (available via this link: https://www.housing-ombudsman.org.uk/wp-content/uploads/2023/05/KIM-report-v2-100523.pdf). This stresses the importance of good record keeping, describing it as ‘the closest thing the sector could get to a silver bullet’ enabling landlords to provide a better service.
The landlord has told this Service that it cannot provide internal correspondence or phone contact notes for the service charge issue, or information connected to the buyback request other than correspondence with the resident. Gaps and omissions in the evidence provided have meant that the landlord has not been able to clearly demonstrate what steps it took to resolve the resident’s concerns, as well as its overall management of the issues raised by her.
This investigation has therefore highlighted issues with the landlord’s record keeping. The lack of evidence has had an impact on the landlord’s ability to fully review the history of this case while investigating the resident’s complaint and restricted its ability to put things right and learn from its mistakes. The Ombudsman therefore considers it appropriate to make a separate finding about the landlord’s record keeping.
Due to the landlord’s failure to keep adequate records about the service charge dispute, and about how it handled the buyback request, this Service has found service failure in the landlord’s record keeping.

Determination

In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was:
1. Service failure in the landlord’s handling of queries relating to a service charge increase.
2. Service failure in the landlord’s handling of a request to buy the property back from the resident.
3. Service failure in the landlord’s handling of the resident’s complaint.
4. Service failure in the landlord’s record keeping.

Orders and Recommendations

Orders

Within 4 weeks of the date of this report, the landlord must:
1. Arrange for a senior member of the landlord’s housing management team to apologise to the resident for the failings identified in this report. A copy of this apology must be provided to this Service.
2. Contact the resident to ask whether she would like her records updated to reflect any vulnerabilities she may have. If the resident asks for her records to be updated, this must be done within a week. The landlord must provide confirmation to the resident with what information has been placed on her record. This Service must be provided with confirmation that this order has been completed.
3. Pay the resident £825 directly, less the £435 already paid to the resident, comprising of:
  1. £600 for inconvenience, time and trouble, and distress caused by the landlord’s handling of queries about the service charge.
  2. £50 for distress and inconvenience caused by the landlord’s handling of the resident’s buyback request.
  3. £25 for distress and inconvenience caused by the landlord’s handling of the resident’s complaint.
  4. £150 for distress and inconvenience caused to the resident by poor record keeping.
Within 8 weeks of the date of this report, the landlord must:
1. Create a procedure for buyback requests. This procedure must include:
  1. Information which will be provided to a resident, including a copy of the buyback procedure and an explanation of how a request will be assessed.
  2. A timescale for providing a response to a request.
  3. How the decision-making process will be documented (for example, a standardised form or in minutes from panel meetings).
  4. Confirmation that a resident will be given a written response, giving detailed reasons for the landlord’s decisions.
  5. A copy of this procedure must be provided to this Service.
2. Contact the resident once the buyback request procedure outlined in the above paragraph is finalised and offer her a fresh request for a buy back. The resident must be informed in detail of how her request will be assessed and what the landlord would consider ‘exceptional circumstances’. A copy of this correspondence must be provided to this Service.

Recommendations

The landlord should review its record keeping procedures, taking account of recommendations from Spotlight on: Knowledge and Information Management (available via this link: https://www.housing-ombudsman.org.uk/wp-content/uploads/2023/05/KIM-report-v2-100523.pdf). This review should look specifically at concerns around record keeping in connection to service charge queries and buyback requests highlighted in this report.