The Guinness Partnership Limited (202404980)

Background

1. In February/March 2024, the landlord advised the resident his building insurance service charge was increasing from £104 to £370 per year. The resident challenged the increase saying he could get a quote for £121.25. The resident said the landlord had told him the charge was based on the total premium for its entire stock which it then equally shared between all its properties. The resident said he did not think this was fair and raised a formal complaint. At the end of the formal complaints process, the resident remained dissatisfied with the landlord’s response and asked us to investigate.

What the complaint is about

2. This complaint is about the landlord’s response to the resident’s concerns about his building insurance service charge.

Our decision (determination)

3. We have found there was service failure by the landlord in its response to the resident’s concerns about his building insurance service charge.

Reasons

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.

What we have not considered.

4. We do not investigate complaints about the level of service charge or the amount of the service charge increase. We will also not investigate whether the building insurance charge was ‘reasonable’ or provided value for money. If the resident wanted to pursue his concerns about these matters, he may wish to challenge the charges by applying to the First-tier Tribunal (Property Chamber) or the court.

What we have considered

5. In accordance with the lease, the landlord is responsible for arranging buildings insurance and the resident is obliged to contribute to the cost through his service charges. The landlord does not have full control of the building insurance costs as the premium is set by the insurer. However, we would expect the landlord to provide clear and transparent responses to the resident’s concerns.
6. In its complaint responses, the landlord said it had carried out a Section 20 consultation in December 2021 regarding a long-term building insurance agreement. The landlord stated that, after the consultation closed on 28 January 2022, it obtained multiple quotes and selected what it considered to be the most competitive option, with a total premium of £2,970,190. This reflects a structured and procedurally appropriate approach to procuring the insurance contract.
7. The landlord has provided us with a copy of its Notice of Estimate which informed the resident of the expected cost and its intention to enter into a qualifying long-term agreement. This states that it received 2 quotes, 1 of which was the £2,970,190 referred to in its complaint responses. We appreciate the resident’s concern that he did not receive this notice. We are unable to determine whether this letter was delivered or not.
8. The landlord acknowledged there was an increase but maintained this was the cheapest available option. It also explained that premiums were calculated by insurers based on risk factors such as property details, location, rebuild costs, and claims history. It attributed the increase in costs to the removal of previous subsidies that had kept leaseholder charges artificially low (£104) and rising rebuild values and insurance market rates. The landlord said it had reviewed the premium and reduced the charge from £370 to £250 per year, following complaints and feedback.
9. As set out previously, the level or reasonableness of charges is not a matter we will consider. However, we are satisfied the landlord’s response, to this point, provided the resident with sufficient detail to help him understand how it had tendered the costs and the reasons for the increase.
10. We are not satisfied, however, that the landlord provided sufficient detail to justify its approach of equally splitting the total premium across its entire stock, before apportioning to the flats in the resident’s block. This was part of the resident’s initial complaint.
11. At the time of the complaint, the landlord did not have a copy of the resident’s lease and so we asked it to explain how it satisfied itself the resident’s building insurance charge was apportioned correctly. The landlord told us all leases in the residents block were drafted in the same form and contained the same relevant provisions. The landlord provided us with an example lease.
12. The landlord confirmed there were 14 flats in the resident’s block (referred to in the lease as the “building”). The lease also refers to “estate” charges and permits service charge costs for the block and estate to be apportioned equally between the 14 flats, giving the resident a 1/14 share.
13. However, the landlord provided no lease-based justification for equally splitting the total premium across its entire stock, before apportioning by the number of flats in the resident’s block. This left the resident uncertain whether the charge was correctly calculated and undermined his confidence in its fairness and accuracy.
14. For this reason, we find service failure. To put things right, we have ordered the landlord to apologise and pay the resident £50 in compensation. This amount is consistent with our compensation guidance, which applies where there has been a service failure that the landlord did not fully remedy. We have also ordered the landlord to seek legal advice as to whether its current approach, to equally apportion the total insurance premium across all of its properties, complies with the resident’s lease.

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.