The Riverside Group Limited (202118590)

REPORT

COMPLAINT 202118590

The Riverside Group Limited

17 February 2023

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 complaint is about:
1. the level of service charges compared with other properties on the development.
2. the landlord’s response to the resident’s concerns and queries in relation to service charges and the service provided.

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.
After carefully considering all the evidence, in accordance with paragraph 42(e) of the Housing Ombudsman Scheme, the following aspects of the complaint are outside of the Ombudsman’s jurisdiction:
1. The level of service charges compared with other properties on the development.
Paragraph 42(e) of the Scheme states that ‘the Ombudsman may not consider complaints which, in the Ombudsman’s opinion concern the level of rent or service charge or the amount of the rent or service charge increase’.
The resident has said that he is being overcharged in service charges compared with surrounding properties on the development. The resident has given specific examples of the breakdown of cost that he pays; together with examples of charges paid by other properties.
Paragraph 42(g) of the Scheme states that the Ombudsman may not consider complaints which ‘concern matters where the Ombudsman considers it quicker, fairer, more reasonable or more effective to seek a remedy through the courts, other tribunal or procedure’.
The Ombudsman cannot determine whether service charges are reasonable in themselves or when compared with other charges levied against other properties. Complaints about the suitability of specific service charges are therefore outside of the jurisdiction of this service.
The First Tier Tribunal (Property Chamber) is better placed to consider issues relating to the setting of service charges. Whilst we are unable to consider this aspect of the complaint, we can assess the landlord’s response to the resident’s queries and complaint concerning the charges and services.
The assessment and findings will therefore focus on the remaining elements of the case which are within the Ombudsman’s jurisdiction.

Background and summary of events

Background

The resident is a leaseholder, and the landlord is the freeholder of the property. The Shared Ownership Lease started in July 2015. The property is part of a scheme for residents who are over 55 years old.
The lease sets out the covenants, or obligations, of the resident and landlord. The following relevant obligations are set out for the landlord:
1. Clause 5.3(c) states that ‘The Landlord shall maintain, repair, redecorate, renew and (in the event of the Landlord reasonable opinion such works are required) improve…The common parts’
2. Clause 5.4 under Lighting and Cleaning of Common Parts, states; Subject to Clause 5.5 (Landlord’s Protection Provisions) and to Clause 5.3 (Repair redecorate renew structure) and so far, as practicable to keep the Common Parts of the Building adequately cleaned and lighted.
The lease sets out the following covenants for the leaseholder, or resident:
1. Clause 7.1 states that ‘The Leaseholder covenants with the Landlord to pay the Service Charge during the Term by equal payments in advance at the same time and in the same manner in which the Specified Rent is payable under this Lease’
2. Clause 7.4(a) states that ‘The relevant expenditure to be included in the Service Provision shall comprise all expenditure reasonably incurred by the Landlord in connection with the repair, management, maintenance and provision of services for the Building’.
The resident has brought the case to the Ombudsman on behalf of himself and nine other residents who reside in the same block and are subject to the same service charges.
Paragraph 48 of the Scheme states that “The Ombudsman may accept an individual’s complaint as a test case if its facts equally affect others”. The Ombudsman has confirmed that the matter will be considered as a test case, in the name of the resident only.

Summary of events

It is not disputed that on 7 February 2020 the resident visited the landlord’s offices to discuss the service charges relating to his property.
On 26 February 2020, the landlord contacted the resident to confirm which properties had the same level of service charges on the development.
On 2 March 2020, the resident requested a breakdown, “in layman’s terms”, of the service charges for the properties in his block. He requested confirmation of whether the only extras compared with a neighbouring block was gardening and window cleaning. The resident added that he felt disadvantaged in having to pay “so much” compared with the other property types in the development.
The landlord responded on 3 March 2020 and attached the relevant page of the annual budget. The landlord recommended that the resident contact the Citizens’ Advice Bureau or LEASE for assistance in understanding his obligations, as this was the only breakdown the landlord had.
On 15 May 2020, the resident raised a formal complaint. The resident complained on the following grounds:
1. That he and other affected residents felt that they were being overcharged in service charges; namely £67.00 per month compared with £18.94 charged to occupants of the neighbouring block.
2. That the service charge budget revealed that neighbouring social housing residents paid £46.36 and received more services.
3. That the landlord informed him, after completion, that he would have access to all the services in ‘Joseph William Mew’ block; however, this turned out not to be the case.
The Landlord issued the stage one response on 22 May 2020. The Landlord’s response said that:
1. It previously informed the resident that the responsibilities and contributions of the Joseph William Mews sheltered block, were “very different” to the responsibilities and contributions of the resident “which are detailed [and] determined by the lease agreement”.
2. While a direct comparison with another block was not appropriate, the majority of elements within the service charges “would be included within the rental contribution of the supported block”.
3. The resident’s charges were for the following elements:
  1. communal services – window cleaning and the garden contract;
  2. professional fees – structural insurance, management charge, audit fee; and
  3. repairs and maintenance – day to day repairs (external), cyclical repairs contributions, sinking fund contributions.
The resident escalated the complaint to stage two on 28 May 2020. The resident acknowledged the stage one response but confirmed that he still felt that he was being overcharged. The landlord acknowledged the request and confirmed the stage two escalation the same day.
The landlord issued the stage two response on 10 June 2020 and said that:
1. Different property types on the same development will have different contracts and that the services that a landlord is obliged to provide will be governed by the terms of the lease.
2. The main difference between the resident’s property and the bungalows was that the bungalows are self-contained, whereas the resident’s property had shared communal areas.
3. It had not received any complaints regarding the grounds maintenance but if there were issues, these should be raised with the leasehold officer.
4. With reference to the service charge budgets for the previous five years, the charge had risen from £50.40 in 2015 to £67.60 in 2019.
5. That prior to 2017 day to day repair and cyclical fund contributions were not being collected.
6. That structural insurance premium had increased since 1 October 2018.
The landlord concluded by referring the resident to the First Tier Tribunal; LEASE (the leasehold advisory service); and the Ombudsman.
The parties continued to correspond over the same issues which was prompted by the resident’s referral of the complaint to the tenants’ panel on 23 June 2020. The issue remained that the resident felt he was not getting value for money in relation to the service charges. The resident requested that the panel visit the properties to assess the service charge banding.
The landlord produced a tenant panel hearing report for the panel and resident, dated ‘July 2020’ and after the hearing, in response. The report reiterated:
1. That the resident was not subsidising services provided to the sheltered block.
2. That the landlord was unable to agree to the resident’s request to change service charge bands.
3. The service charge is based on the requirements set out in the lease.
4. That the landlord was unable to agree to the resident carrying out his own grounds maintenance himself.
The tenants’ panel responded, in an undated letter to the resident, confirming that its lead had visited the resident on 8 June 2021. The letter confirmed that it would only focus on the charges applicable to the resident and not the neighbouring schemes. The panel lead added:
1. That the service charge breakdown provided by the landlord did not confirm exactly what was included and what was not.
2. There was no information on adjustments to account for the cover in place by the home warranty provider.
3. There was no information on what would happen to a sinking fund should it not be required.
4. There appeared to be an overlap between cyclical contributions, responsive repairs and the sinking fund.
5. That “certain things were spoken of at the outset” in relation to using certain facilities within the supported living scheme, which were subsequently withdrawn.
6. That greater effort should be made to enable residents to understand what they are agreeing to in terms of service charges.
The landlord responded to the letter received from the tenants’ panel lead, back to the panel. This letter was also undated. The response highlighted that new issues had been introduced but it responded by stating that:
1. In relation to the sinking fund, charges were set “based on the life cycle costings for full replacement for each of the following elements; roofs, footpaths, fencing and replacement sheds”.
2. The warranty cover was paid for by the landlord to protect against latent defects. Therefore, this was different to the sinking fund.
3. There is no overlap between the sinking fund and cyclical contributions. The cyclical contributions were confirmed as relating to “painting / redecoration of the external areas and maintenance of land drainage”.
4. The responsive repairs related to unexpected issues and there was no duplication with the cyclical repairs.
5. Ultimately the responsibility rested with a purchaser in understanding their obligations under the lease.

Assessment and findings

In reaching a decision we consider whether the landlord has kept to the law, followed proper procedure and good practice, and acted in a reasonable way. Our duty is to determine complaints by reference to what is, in this service’s opinion, fair in all the circumstances of the case.
In the pre-complaint correspondence, between February and March 2020, the resident raised legitimate questions about how the services charges were calculated and requested this information in layman’s terms.
The pre-complaint correspondence demonstrated that the landlord was responsive in engaging with the resident and that these responses were within appropriate timescales. The landlord also provided the resident with suitable information in the form of the service charge budget and referred the resident to the lease.
In a legal context, the landlord was correct in its stance, that the lease sets out the resident’s obligations in respect of service charge payments and sets out the services which would be provided. The landlord was also correct in stating that it is the resident’s responsibility to ensure understanding of these obligations.
However, paragraph 4.4 of the Housing Ombudsman’s Compliant Handling Code states that ‘Where a key issue of a complaint relates to the parties’ legal obligations the landlord should clearly set out its understanding of the obligations of both parties and seek clarification before doing so where this is not initially clear.’
While the landlord was entitled to rely on the obligations detailed in the lease and while the landlord did provide the service charge budget, the suggestion that the resident contact the Citizens’ Advice Bureau (CAB) or LEASE was not helpful to the resident. The Landlord had access to all of the relevant information and an understanding of the services charges, which could have been shared with the resident. Fundamentally, the resident was seeking clarification on the points raised and signposting to the CAB or LEASE did not provide this.
Similar responses were provided in the two formal complaint responses. However, the landlord did not acknowledge the secondary issue in these responses. This was in relation to discussions between the parties regarding the inclusion of certain services; services which were subsequently retracted. It is not disputed that these conversations did take place and the issue did require an acknowledgment at the complaint stages. It is reasonable to conclude that this was not addressed as the landlord did not include this in its complaint definition.
The landlord should have addressed the issue of the exclusion of specific services, at the complaint stages.
The matter was then taken forward by the tenants’ panel. The landlord continued to engage and provide responses to the panel. While the responses broadly reiterated the responses provided earlier in the process, the panel expanded on the issues raised and went into more detail than that of the initial complaint.
The tenants’ panel highlighted a number of factors which in its opinion, constituted shortcomings in the landlord’s approach. The panel said that the landlord’s explanations were “somewhat vague and unclear in places” and it made recommendations around the landlord’s communication. While the landlord noted the points raised, the landlord’s responses did not indicate an acceptance of the recommendations or demonstrate any intention of making any improvements. This presented a real opportunity for the landlord to adopt a thoroughly resolution focused approach to the dispute, in adopting the recommendations, which was not taken. In consideration of the period of time over which the wider discussions were held, it would have been appropriate for the landlord to have followed paragraph 4.4 of the compliant handling code more closely.

Determination

In accordance with paragraph 42(e) of the Housing Ombudsman Scheme, the complaint about the level of service charge compared with other properties on the development is outside of jurisdiction.
In accordance with paragraph 52 of the Home Ombudsman Scheme, there was service failure in relation to the landlord’s response to the resident’s concerns and queries in relation to service charges and the service provided.

Reasons

The Ombudsman cannot assess the level of service charges as it is not within the jurisdiction of the Scheme.
The evidence demonstrates a service failure on the part of the landlord in respect of its response to resident’s concerns and queries in relation to service charges. The landlord has not provided sufficiently comprehensive responses to the resident’s queries around the service charges and has not followed the recommendations, or responded in full, to the comments of the tenants’ panel.

Orders

Within four weeks of the date of this report, the landlord to pay the resident compensation of £100 for the avoidable distress and inconvenience caused to the resident by the service failures identified in this report.

Recommendations

The landlord should consider reviewing the information that it provides to prospective leaseholders, in relation to service charges. This is with a view to providing clear and transparent information in simplified, non-legal language. The tenants’ panel provided some useful suggestions which should be considered as part of this process.
The landlord is reminded of its obligations under section 22 of the landlord and tenant act 1985. Under this section, leaseholders have a legal right to ask the landlord for a summary of the service charge account. This summary should show how the costs related to the service charge demand; any items which the landlord did or did not receive a bill for in relation to a specific accounting period; and whether the costs relate to work for which an improvement grant has or will be paid. Additionally, the where the service charge is paid by the leaseholders of more than four homes, the summary must be certified by a qualified accountant. The landlord should refresh its understanding of this section of the act.