Tower Hamlets Council (202100772)

REPORT

COMPLAINT 202100772

Tower Hamlets Council

3 March 2022

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 the landlord’s response to the resident about:
1. The decision to replace the flue system on the communal boiler system instead of installing individual boilers.
2. The handling of the Section 20 consultation process.

Background and summary of events

Background

The complainants are joint leaseholders of the landlord, a local authority, and for the purposes of the report are referred to as ‘the residents’ and ‘they.’ The property is a flat on an estate, in one of five blocks served by a communal heating system.
Under the lease, the landlord covenants to provide heat to the radiators between October and April each year; maintains and renews the existing central heating and hot water apparatus; and has the right to discontinue the supply on giving the leaseholder one year’s notice and subject to the leaseholder bearing the cost of adaptations to alternative heating and hot water methods.
The repairs policy confirms that the landlord is responsible for supply of services to leasehold properties, and leaseholders are required to pay a proportion of the cost of communal maintenance. The policy advises that it may not be appropriate to undertake some extensive works as a responsive repair and these will form part of planned maintenance. The landlord’s website adds that consent will not be given for a leaseholder to be disconnected from the communal heating system; and confirms that it switches off communal heating at the end of the winter period.
The Landlord and Tenant Act 1985, The Commonhold and Leasehold Reform Act 2002 and The Service Charges (Consultation Requirements) (England) Regulations 2003 set out the consultation requirements for major works which exceed certain amounts for leaseholders. The landlord should give notice in writing of an intention to carry out major works, and describe the works; explain why they are necessary; state the estimated cost; invite observations on the proposed works and expenditure; and specify the deadline for when these can be made. If leaseholders wish to challenge service charges, they are able to apply to the First-Tier Tribunal to decide the reasonableness of the charges.
The landlord operates a two stage complaints procedure in which it responds at each stage within 20 working days, although it endeavours to respond to stage one complaints in 10 working days in line with the Housing Ombudsman Service’s Complaints Handling Code.

Summary of events

In 2017, the landlord obtained an options appraisal to replace or upgrade the communal heating system that served three blocks, on a separate estate to the residents. This states that a cost to replace the communal system was less than to install individual boilers, and while individual boilers provided greater freedoms to residents, these lasted half as long as a communal boiler. The recommendations included to replace communal boilers with high efficiency models and to reinsulate distribution pipework.
Between 2018 and 2020, information provided advises that the communal heating system on the residents’ estate developed issues. In 2020, there were multiple repairs reports about heating and hot water related issues, and quarterly system checks noted flue issues, flues which showed signs of distress, and one of the boilers required replacement.
The landlord wrote to customers on 3 November 2020 and advised that it planned to carry out repairs to the system. It detailed that flues were corroded and had failed due to age; a fan unit was aged and noisy; and there was a failed boiler, for which parts were no longer made. It proposed to replace the existing flue system and to replace the boiler with highly efficient boilers. It stated that the works would start in February 2021 and leaseholders would have to pay a share of the estimated cost of the works, £220,000 to £235,000, via the service charge. It provided contact details if residents wanted to discuss the works.
The landlord wrote to customers again on 4 January 2021, and advised that after listening to customers’ concerns, it had changed the scope of works to only replace the flue system. It stated that the works would start in May 2021 and leaseholders would have to pay a share of the estimated cost of the works, £135,000 to £145,000, via the service charge. It provided contact details if residents wanted to discuss the works.
The landlord raised a complaint on 25 January 2021 on receipt of an email from the residents.
The residents raised confusion about the most recent letter; queried if the boiler replacement had been shelved for a later date; and said there should be proper consultation before being expected to pay for the works. They stated there had been a failure since before Christmas with the system; it was time it was scrapped; and it should be replaced with individual boilers in each flat that could be purchased for around £1,000. They stated that multiple residents were affected by system failures which was not the case with individual boilers. The residents also noted that the heating being turned off between May and October did not account for heating needed during that period. They advised that the boiler was the largest service charge cost each year, £900,000 had been spent over the past 20 years trying to ‘patch up’ a system installed in the 1970s, and there needed to be a proper consultation.
The landlord issued its stage one response on 17 February 2021, after informing the residents of a response delay on 10 February 2021.
1. It explained the November 2020 letter was sent to inform of the proposed works, and the January 2021 letter was sent to update about the revised scope of works after feedback. It explained that the revised works were a replacement of the heating flue system and only included works critical for its operation and supply of heating and hot water.
2. It explained it usually sent out information letters to all customers prior to issuing Section 20 notices to leaseholders; and leaseholders would still have the opportunity to comment on receipt of Section 20 notices, which would be issued shortly.
3. It explained it had carried major works in 2013 to partially refurbish the system, and had also undertaken capital works in 2019 which it had capped the charge to leaseholders for.
4. It provided an estimate of the charge to leaseholders for the proposed works, and provided some explanation about the costs between 2014 and 2020 associated with maintenance of the system and what these comprised.
5. It apologised for a communal system failure over the Christmas period and the distress this caused. It stated that all efforts were made to obtain parts and reinstate the system, and that this was now being closely monitored.
The landlord issued a Section 20 notice of intention on 2 March 2021, which detailed the works, explained that the residents’ estimated share of the cost would be £1,049.89, and explained how to make observations by 5 April 2021. The notice explained that in 2018, issues arose with the flue system due to age and corrosion, however it was not possible to carry out major repairs due to existing works and scaffold. In 2019, the flue system deteriorated further beyond repair. Investigation and advice from specialists established that it was not possible to replace or upgrade the current system type due to regulations, and the recommendation was to replace the current flue system with a conventional one that would comply with regulations, operate silently, require no electrical power and be future proofed for new boiler installation.
The landlord escalated the complaint following a letter it received on 2 March 2021, where the residents complained:
1. The November 2020 and January 2021 letters had made no mention of Section 20 consultations and the first letter had stated the work was scheduled to start in February 2021.
2. The complaint response made no mention of any planned work for the boiler proposed to be replaced in the first letter, and removed from the second letter. The response also did not address multiple dwellings being affected when there was a breakdown, which individual boilers would eliminate; or the system being off from May until October.
3. The residents advised that the system was out of date and queried if it was still suitable to serve the blocks and dwellings; if it was eco-friendly; and if it was cost effective. The biggest service charge costs were boiler repairs and fuel which were too high and unjustified, which putting off boiler works did not address. The landlord should cost a new individual boiler system which would be cheaper than what the landlord intended to spend to replace the flue.
4. The residents queried the plans for the long term spend on the boiler room and the outdated system. The £145,000 estimate for the works would bring the total spending on the system over the past 20 years to over £1m. They raised concern that after paying for the upgrade, the system may have to be replaced in a short space of time due to the government’s green agenda.
The landlord issued its final response on 6 April 2021.
1. It noted the residents stated the letters made no mention of Section 20 consultation, and said the stage one response explained information letters were sent to make all residents aware of proposed majors works in advance, in advance of formal leaseholder consultation. It highlighted that Section 20 letters had been sent to leaseholders with a consultation start date of 2 March 2021 and end date of 6 April 2021.
2. It noted the residents stated the second letter did not include the boiler replacement mentioned in the previous letter. It advised that after feedback, it made the decision to change the scope of works, and the reference to the boiler was removed from the second letter.
3. It noted the residents’ comments about the age, cost effectiveness and eco credentials of the boiler system and stated preference for individual boilers. It advised that there were originally two boilers of different ages which served the blocks, one of which failed in 2011 and was replaced by a bank of eight high efficiency boilers. It advised that while there was some heat loss from one building to another, the distribution system was replaced by a well-insulated pipework system in 2007.
4. It advised that a previous options appraisal (referenced at Paragraph 7 of this report and later supplied to the residents) was carried out which focused on the communal heating system that served three of its buildings. It advised that it was not value for money to replace the boiler and it took the decision to keep the heating system.
5. It advised that the residents’ estimate of around £1,000 for an individual boiler option was not realistic to decommission the communal heating system and install a fully compliant heating system for the estate, and its own estimate was nearer to £2,000 per dwelling.
6. It acknowledged that the residents asked to be informed about the long-term spend, and advised that it would continue to keep customers informed about proposed works and costs. It advised that it was always looking at ways to improve efficiency and was continually reviewing its building services products. It advised that it would supervise works more closely and expedite works due to the service history.
The residents contacted this Service, restated dissatisfaction that the boiler system was not being replaced (due to age and frequent breakdowns), and stated that the desired outcome was for the landlord to install boilers in each flat. They restated that the Section 20 consultation process was not followed correctly and stated that costs were unreasonable.

Assessment and findings

Scope of investigation

It is clear from the residents’ complaint that they have concerns about the cost implications of matters in relation to the communal boiler.
This investigation notes that under paragraph 39 (i) of the Housing Ombudsman Scheme, the Ombudsman will not investigate complaints which, in the Ombudsman’s opinion concern matters where the Ombudsman considers it quicker, fairer, more reasonable or more effective to seek a remedy through the courts, a designated person, other tribunal or procedure.
This means that the Ombudsman does not have the jurisdiction to investigate complaints about the level of service charges, as the appropriate body that has jurisdiction to consider such complaints is the First-Tier Tribunal (Property Chamber). The Tribunal can determine the appropriate level and amount of service charges recoverable by a landlord; decide if the charges were reasonably incurred; by whom they are payable, and when. If the residents have continued dissatisfaction that the landlord’s approach is not cost effective, or disputes that the landlord followed proper procedure to legally recharge them, this appears to be in effect a dispute over the reasonableness of the major works charges, which the First-Tier Tribunal may be able to decide.
The Ombudsman has however considered the complaint in relation to the landlord’s decision-making and consultation process, and considered whether in its response it has kept to the law, followed proper procedure and good practice, and acted in a reasonable manner.

The decision to replace the flue system on the communal boiler system instead of installing individual boilers

This Service’s spotlight report on heating and hot water confirms that heat networks are a potential source of low-carbon heating, and form part of the government’s plan to reduce emissions. The report notes that heat networks can benefit residents by reducing heating costs, but recognises they can cause problems such as inability to switch providers; affect many residents simultaneously; and require leaseholders to contribute to substantial maintenance costs. The report identifies that landlords should provide clear and timely information to leaseholders, have a clear plan for maintenance which is available to residents, and have long-term investment strategies that provide for the maintenance and potentially the replacement of the system.
The evidence shows that as freeholder and in accordance with the lease, the landlord has the right to maintain and renew the system, however it should communicate changes and consult residents, particularly leaseholders, before works. In this case, the landlord held wider customer consultations and then a Section 20 consultation with leaseholders. It appears to have considered customer views and responded to these by changing the scope of the works, prior to the Section 20 consultation. It then considered the residents’ views, including that individual boilers would be cheaper, and set out a position that it disagreed with this.
While the residents’ desire to have greater autonomy over their heating and bills is understandable, the landlord’s decision-making appears reasonable as this was based on the opinion of staff and contractors, who it is entitled to rely upon; it referenced the history of issues with the system since 2018 and clearly considered the condition of the system; and considered the flue system to be at the end of its life, making it reasonable for works to be carried out that are critical for the operation of the communal heating.
The landlord also appears reasonable to use information from the four year old options appraisal for a different estate, as this may still be applicable to similar stock. The report recommended to insulate pipework, which was done at the residents’ estate in 2007 and therefore suggests the pipework meets specialist recommendations. The report also noted that the expected lifetime of communal boilers is around 25 years which, given a communal boiler on the residents’ estate was replaced by eight boilers in 2011, suggests the desired outcome to install individual boilers involves decommissioning boilers expected to have a further 14 years of life left, which may not be economical.
The residents raised dissatisfaction that the landlord did not specifically address the system being off from May until October. It would have been customer focused for the landlord to specifically address this aspect, however the suspension of the service in this period is a term of the lease, which the residents agreed to in signing the lease. This investigation is aware that it is common for landlords to turn off communal heating in the summer months as heating is not generally required during these, however some landlords have consulted with residents to slightly extend how long communal heating is on, where possible. A recommendation is therefore made in regard to this.
Overall, the evidence shows that the landlord considered wider resident feedback in relation to the works, and that although it did not respond to all the residents’ points or deliver the residents’ desired outcome, it did consider salient points and set out its position on these, which is in accordance with what the Ombudsman would expect to see.

The handling of the Section 20 consultation process.

The law confirms that the landlord should give notice in writing of an intention to carry out major works, and describe the works; explain why they are necessary; state the estimated cost; invite observations on the proposed works and expenditure; and specify the deadline for when these can be made. The Section 20 notice issued in March 2021 demonstrates that the landlord did follow proper process and procedure to consult leaseholders before the works, to allow the residents to provide formal feedback for the landlord to consider in conjunction with other leaseholders’ views, and there is no evidence that it did not intend to do so.
The landlord has explained that the letters in November 2020 and January 2021 were general letters to all residents to make them aware of the planned works. This appears accurate, as these refer to tenants and leaseholders, and shows the landlord’s good practice to inform all residents affected by works. It is understandable however that the letters had capacity to cause some confusion and concern to leaseholders, as they used some of the format of a Section 20 notice; stated a significant cost impact for leaseholders; and omitted to say how a leaseholder could formally comment on the works. In such correspondence, it could be helpful to incorporate additional wording that confirms that where applicable, Section 20 correspondence will be forthcoming to affected leaseholders. This investigation also notes that the landlord’s Section 20 consultation information does not appear to include information about leaseholders’ rights to take a dispute to the First-Tier Tribunal. Recommendations have therefore been made in regards to these.
Overall, the landlord’s handling of the Section 20 consultation process as it has been brought to this Service appears appropriate.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration in the landlord’s decision to replace the flue system on the communal boiler system instead of installing individual boilers.
In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration in the landlord’s handling of the Section 20 consultation process.

Reasons

The landlord demonstrates that it considered the residents’ views that individual boilers should be installed and set out its position on this based on the opinion of its staff and contractors, on whose opinion it is entitled to rely.
The landlord demonstrates that it followed the Section 20 consultation process.

Recommendations

The landlord to review this Service’s spotlight report on heating and hot water and ensure that its strategy for the communal heating system on the residents’ estate and other estates reflects current best practice.
The landlord to consider inclusion of a paragraph in information letters to all residents which confirms that where applicable, further Section 20 correspondence will be forthcoming to affected leaseholders.
The landlord to consider inclusion of information about the First-Tier Tribunal in Section 20 consultation information.
The landlord to consider carrying out a consultation with residents about extending the timeframe over which the communal heating is provided.