Sanctuary Housing Association (202015725)

REPORT

COMPLAINT 202015725

Sanctuary Housing Association

31 August 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 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

1. The complaint is about the landlord’s response to the resident’s reports about:

a)     The level of the service charge;

b)     The administration of the service charge.

2. This investigation has also investigated the landlord’s complaints handling.

Jurisdiction

3. 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.
4. After carefully considering all the evidence, in accordance with paragraph 39 g of the Housing Ombudsman Scheme, the complaint relating to the level of service charge is outside the Ombudsman’s jurisdiction.
5. Paragraph 39 g of the Scheme states that the Ombudsman will not consider complaints which, in his opinion ‘concern the level of rent or service charge or the amount of the rent or service charge increase’. In this case, it is clear from the resident’s correspondence with both the landlord and this Service that he has concerns about the reasonableness of the service charge, dating back several years. He has provided detailed analysis of the landlord’s estimated charges, its revised charges following his enquiries and how, in his view, this amounts to unreasonably high costs having been charged. This includes areas where he understands the landlord to have charged in excess of the actual costs it has incurred in its delivery of the service.
6. It is not the Ombudsman’s role to make findings about whether service charges have been charged at a reasonable level by a member landlord as such authority lies with the First Tier Tribunal (Property Chamber). The tribunal has the authority to scrutinise the terms of the lease in conjunction with costs charged to the leaseholder and make a decision as to whether the landlord’s position is appropriate. This includes whether the landlord acted in accordance with the lease in deciding not to recover/reimburse inaccurate charges that were highlighted by the resident’s enquiries.
7. I note that both the landlord and this Service have previously signposted the resident to the tribunal for possible consideration of the level of service charge, though I also note recent correspondence from the resident in which he has questioned whether he can progress his concerns to the tribunal prior to the completion of the Ombudsman investigation. The tribunal’s consideration of service charge issues is independent of this Service’s remit on service charges, which does not extend to the investigation of amounts charged.
8. The resident, in his correspondence with this Service, has defined his complaint as relating to specific issues in relation to service charges over a number of years, including the reasonableness of the charges. The Scheme provides the authority for the Ombudsman to best define a complaint in relation to the issues at hand. In this case, the complaint, as defined for the purposes of this investigation, has drawn a distinction between the level and the administration of the service charge as this provides clarity as to the Ombudsman’s position from a jurisdictional perspective and provides for those aspects of the complaint that are within jurisdiction to be identified and addressed. In addition, the Ombudsman’s remit allows for an investigation to consider a landlord’s complaints handling; this issue has also been considered here.

Background and summary of events

Background

9. The resident is a shared ownership leaseholder of the landlord at the property, the lease start date was 12 March 2013 and the resident purchased his part share in the property in June 2017. The landlord owns the freehold to the building within which the property is situated; it also manages the building on behalf of the occupying leaseholders and assured tenants.
10. Both tenants and leaseholders are liable for service charges for costs incurred by the landlord in its completion of its repair/maintenance and service provision obligations to the building, in accordance with their respective occupancy agreements. The resident’s service charge is broken down into a ‘service charge’ and a ‘personal charge’, with communal costs included in the former and costs apportioned to his individual property included in the latter. The lease also confirms that the landlord is responsible for supplying and paying for gas and water services to the property, with reasonable costs to be recovered through the service charge.
11. There is a history of the resident challenging elements of the service charge, dating back to the point when he purchased his part share in the lease in 2017. This investigation commences in June 2019, with the correspondence detailed below in the summary of events.

Summary of events

12. In a letter to the landlord dated 9 June 2019, the resident questioned water/gas charges. He also asked why the 20 leaseholders, and not the 78 assured tenants had shared the costs for certain charges (including a management charge) and requested a rent statement covering the current financial year.
13. The landlord responded, stating an internal complaint reference number, to the resident on 25 June 1019. It said that it understood that his main concern was that personal charges were not included within the ‘scheme accounts’. It confirmed this was its existing process for personal charges and said it was ‘consulting the lease and will seek advice’ to see if there was a requirement to include personal charges in the scheme accounts. It also confirmed the resident’s view that there was a ‘variance’ to the water/gas charges for 2017/18, though not as significant as he had calculated.
14. On 7 July 2019, the resident questioned the landlord response. He confirmed that his main concern was that the landlord estimated water/gas charges and then did nothing to reconcile the difference when the actual costs were calculated. He requested confirmation of how gas/water charges had been calculated for 2017/18 and requested confirmation as to the staff member who had overall responsibility for financial matters at the landlord.
15. The landlord responded to the resident on 16 July 2019, it was not clear that this response had been sent through its complaints process however. The landlord responded to specific points raised by the resident – it confirmed that communal bills had always been reconciled in previous years, that the terms of the lease meant that personal charges did not require reconciliation at year end, that estimated charges for water/gas had not been inflated and that assured tenants were not liable for some charges that leaseholders were liable for. The landlord also provided a calculation of specific charges and confirmed the name of its Group Finance Director.
16. The landlord’s records show that, on 31 July 2019, it requested that no arrears action be taken on the resident’s account for the time being.
17. On 1 October 2019, the landlord sent the resident an updated rent statement.
18. In a further letter to the landlord dated 2 October 2019, the resident confirmed that, since his previous letters he had attended two meetings with the landlord to discuss the service charge issues he had raised (21 August and 9 September – records of these meetings not available to this investigation). The resident’s October letter referred to the 2018/19 audited accounts, which he had recently received, and again questioned why personal charges had not been reconciled against estimated charges. In his view, residents had been overcharged £418.96 each for the 2018/19 financial year. He also questioned the increases in estimated personal charges on these accounts.
19. Following a further meeting with the resident (27 November 2019), the landlord wrote to him (5 December 2019), in response to his complaint. It apologised for the delay in fully responding to the issues he had first raised in July 2019 and confirmed it had completed a review of the service charge accounts following his enquiries. The landlord confirmed points that had been discussed during the meeting, including:

a)     The apportionment split between communal/personal charges for water/gas and that electricity costs were 100% communal;

b)     2018/19 accounts had been calculated incorrectly for which it apologised and agreed to correct the figures;

c)     Personal charges are not managed through the scheme accounts process, though estimates each year are based upon actual costs plus inflation. The lease does not require actual charges for personal charges, though these costs must be reasonable;

d)     2017/18 accounts would be reviewed and if it was found that apportionment had not been accurate, revised figures would be calculated.

20. The resident responded to the landlord on 20 December 2019. He asked if the cost of re-auditing the accounts would be covered by the landlord and asked whether assured tenants would also be contacted regarding revised figures. He also said that personal charges had been ‘grossly overestimated/paid’ in previous years. He proceeded to provide an analysis of the 2017/18 gas/water charges, which, he said, had resulted in an ‘unreasonable’ charge. He also asked whether additional charges for communal water charges were included in 2018/19 accounts.
21. The landlord responded to the resident on 4 February 2020. The response was sent under the same complaint reference that had been detailed for previous responses, though, again, it was not clear whether it amounted to a response under its complaints procedure. The landlord:

a)     Confirmed that an incorrect apportionment had been used for water/gas charges in 2018/19 and 2019/20 (estimated charges) and that this would be rectified;

b)     Costs for re-auditing accounts would be paid by the landlord;

c)     All customers, including assured tenants, would be updated once re-auditing had taken place;

d)     Revised accounts for 2017/18, 2018/19 and 2019/20 (estimated charges) would take place;

e)     It offered reassurance that it was looking into the personal charges issues he had raised. It also said that personal charges were ‘fixed’ charges, so any ‘upside or downside within the financial year is not recognised, this should even out over a number of years’.

22. The resident responded to the landlord on 14 February 2020. He said that, in the main, his concerns were ‘on their way to being resolved’ within the ongoing re-auditing process. He asked if the 2019/20 gas figures would not be increased due to inflation as, in his view, this would be the only way in which personal charges could even out over a number of years.
23. The landlord did not respond to the resident until 3 July 2020, whereby it explained that the impact of Covid-19 had impacted upon its ability to complete the re-auditing of accounts. It explained that it hoped to get this completed and respond to the resident by the middle of the month. The resident responded the same day to thank the landlord for the update.
24. The landlord sent a further response under the same complaint reference number on 24 July 2020. It confirmed apportionment between personal/communal usage of gas, water and electricity charges. It also confirmed that it had completed the review of the 2017/18 and 2018/19 accounts which were complete and available to view. The 2019/20 accounts would be circulated in September, with any incorrect allocation of personal/communal charges to be ‘rectified during the completion of the scheme account process’.
25. The resident responded on 1 September 2020. Having reviewed the new figures provided by the landlord following the review of the accounts, he provided an analysis of charges which, in his view, demonstrated that each resident had overpaid significantly with respect to personal charges in both 2017/18 and 2018/19, resulting in unreasonable charges. He asked specific questions about deficits/surplus figures for 2017/18, overpaid personal charges for these same years, and electricity charges in 2018/19 and 2019/20. He also asked whether the landlord would send revised accounts and covering letters to him and other leaseholders and whether the landlord’s auditor had amended the 2017/18 and 2018/19 accounts.
26. In a further letter to the landlord dated 30 September 2020, the resident raised further concerns about 2019/20 personal charges, which showed, by his calculations a large overpayment by residents for water/gas charges. He also emailed the landlord on 3 October 2020, to confirm that his concern had always related to the personal charge element of the overall charge. He said that his calculations had demonstrated that landlords had ‘overcharged residents by a huge amount’ in respect of these charges for 2017/18, 2018/19 and 2019/20 and this was the substance of his enquiry.
27. The landlord sent the resident its final response on 20 October 2020, in which it:

a)     Responded to the deficit/surplus questions he had raised in September;

b)     Confirmed that over/underestimated personal charges were not reconciled at year end and not recovered or reimbursed as this was not a requirement of the lease, nor within its policy;

c)     Provided revised figures to show the correct apportionment of communal/personal charges for 2018/19;

d)     Confirmed that incorrectly apportioned electricity charges for 2018/19 had been rectified

e)     Confirmed that all leaseholders would receive revised audited accounts with covering letters;

f)       Said that it had made a decision to rectify its budgeting error for electricity costs for the 2019/20 accounts through the annual scheme accounts, rather than revising the estimated accounts;

g)     Confirmed that its auditor did not create its annual accounts, but conducted an audit of these accounts in order to give ‘reasonable assurance’ about how they had been prepared.

h)     Confirmed that the response represented the final stage of its complaints process and signposted the resident to both this Service and the tribunal. It confirmed that, if the resident had any ongoing concerns about whether the service charge had been ‘implemented in line with the lease agreement or are unreasonable’ then he should proceed to the tribunal.

28. The landlord has provided a copy of the letter it sent to its assured tenants on 17 November 2020, in which it confirmed the reapportioning of personal charges and said that it would reimburse personal charges, but would not seek to recover the undercharged eligible costs.
29. The landlord’s internal records show that it contacted the resident on 23 November 2020 to confirm that the complaint had reached the end of its complaints process and that he should now make contact to discuss the balance on his account. In a further email to him on 10 December 2020, it said that, whilst it was aware that he was disputing the service charge, it was satisfied with the level of the charge and that it would now pursue arrears on the account. It also reminded the resident of his right to refer the issue to the tribunal.
30. The resident contacted the Ombudsman on 1 March 2020. He provided a detailed analysis of the service charge over the years of his occupation. He confirmed that his complaint related to the landlord’s non-reconciliation of the personal charge, its refusal to repay the communal electricity costs and its collecting of a higher percentage of gas/water costs than it was entitled to. He said that the landlord had repaid assured tenants but refused to repay leaseholders and that communal electricity had effectively been paid twice for entire financial years.
31. In a letter to the resident dated 28 April 2021, the Ombudsman confirmed that the case was one that could be investigated, but also confirmed that the investigation would not ‘consider the level or reasonableness of the charges’, for which the resident was signposted to the tribunal, though how the landlord had communicated with him and administrated the service charge account in response to his complaint could be considered.

Assessment and findings

 Scope of the investigation

32. The jurisdiction section (above) details the reasons why this investigation has not considered the level or reasonableness of the service charge. It is clear from the complaint detailed in the resident’s correspondence with this Service that he has concerns about how the landlord has reconciled the personal charges over the various financial years, he also has ongoing concerns about how the landlord has factored in overpayments and overestimated charges (much of which have been highlighted by his own enquiries) into the finalised accounts and has specific concerns about certain charges. Each of these issues relate to how the level of the service charge has been calculated and therefore sit outside of the Ombudsman’s remit. Having considered the evidence on file, I am satisfied that the landlord, and this Service, correctly signposted the resident to the tribunal for consideration of these issues.
33. This investigation is concerned with the landlord’s administration of the complaint raised by the resident in relation to the service charge. In scrutinising the landlord’s various responses, this investigation shall consider whether the landlord responded to the issues raised, whether it communicated with him appropriately and whether it, in all the circumstances of the case, acted in a reasonable manner. The investigation shall not extend, however, to consideration of the merits of the landlord’s specific responses as to how it has apportioned costs, or recalculated charges following the resident’s reports as such issues are within the tribunal’s remit.

Administration of the service charge

34. The resident wrote to the landlord on multiple occasions between June 2019 and February 2020, detailing the issues he considered unresolved within the service charges. Having reviewed the resident’s contact and considered the landlord’s various responses, I am satisfied that the landlord investigated the issues raised and responded accordingly.
35. The landlord confirmed the apportionment of charges, confirmed why some charges were attributable only to leaseholders, it provided a rent statement upon request, confirmed the details of its senior financial officer, explained that personal charges were not required to be reconciled at year end, responded to the view that estimated charges had been inflated and confirmed where the resident’s enquiries had led to inaccuracies to be identified and how this would be rectified.
36. The landlord also confirmed that it had reviewed the service charge following the resident’s enquiries and that it would undertake a full re-audit of the accounts to ensure they were calculated correctly. These were reasonable, and appropriate steps to take given the inaccuracies it had acknowledged. The resident, in his contact to the landlord of 14 February 2020, expressed a view that he was largely satisfied with how things had progressed up to that point given that the re-audit was ongoing. The landlord also confirmed that the cost of the re-audit would not be recovered from residents and that they would all be informed when the re-audit had taken place. Again, these actions were reasonable, demonstrating the landlord acting in a transparent manner.
37. Following the completion of the re-audit (July 2020), the landlord confirmed the results of this process to the resident. He was not satisfied with the outcome of this process and again raised concerns about the level of personal charges. He also asked specific questions about surplus/deficits from the accounts and what would happen to overpaid personal charges. These issues were responded to by the landlord in its final response, in which the landlord also confirmed that the accounts, together with covering letters would be sent to leaseholders and assured tenants. The landlord also clarified the role of the auditor, as requested by the resident, and confirmed how it would treat the revised figures in respect of the 2019/20 financial year.
38. Though the resident clearly did not agree with information presented within the landlord’s complaint responses, the substantive elements of his concerns sit outside the remit of this investigation as they relate to how the landlord has calculated charges and interpreted the lease with respect to personal charges. With respect to its administration, its responses were satisfactory however as there is evidence that it provided a considered response to each of the issues that had been raised. In addition, it is noted that the landlord took the time to meet with the resident on several occasions and kept him updated on the progress of the case throughout.

Complaints handling

39. Whilst the landlord’s administration of the service charge presents as reasonable, there are concerns over how the resident’s complaint was handled. It is clear from the landlord’s correspondence that it raised a specific complaint reference number back in June 2019, upon receipt of the resident’s reports about the service charge. It was then not clear, from the various responses that it sent, whether it was responding as part of its complaints process or whether it was merely responding to the issues he had raised as part of its general service delivery.
40. On the one hand, the reference to the same complaint reference number throughout indicates that it was going through a complaints process. However, its responses did not clarify this and did not include any information about potential escalation of the complaint, other than to require the resident to reply with any further queries.
41. It is essential that a landlord’s complaints process is clearly defined, with appropriate options for escalation detailed at each stage of the process. This provides transparency and reassurance for the resident and allows the landlord to manage the process in a timely manner. Whilst the landlord’s responses between June 2019 to February 2020 present as service responses, rather than complaint responses, it would have been helpful to have provided this clarity throughout. This might have enabled the resident to make an informed decision about how to progress his concerns (whether through the Ombudsman or through the tribunal) at a much earlier stage.
42. Having completed the re-audit of the accounts in July 2020, the landlord’s responses, from a complaints handling perspective, became tighter, with a decision to complete the complaints process with its October 2020 response and confirmation of his options for escalation. However, by this point, the resident’s complaint had been open for nearly 16 months, an excessive delay in the circumstances.
43. The matters under investigation went through the landlord’s complaints process before the introduction of the Ombudsman’s complaints handling code (introduced on 1 January 2021) and it is noted that the landlord’s complaints process has now been amended to reflect the requirements of this code. However, it is worth noting that one of the principal aims of the introduction of this code is to ensure transparent and timely complaint processes in all case. Providing such a service will mean that a complainant can then make an informed decision about next steps in the event that they remain dissatisfied.

Determination (decision)

44. In accordance with paragraph 54 of the Scheme, there was no maladministration with respect to the landlord’s administration of the service charge account.
45. In accordance with paragraph 39 (g) of the Scheme, the complaint about the level of the service charge is outside the Ombudsman’s jurisdiction.
46. In accordance with paragraph 54 of the Scheme, there was service failure with respect to the landlord’s complaints handling.

Reasons

47. The landlord responded to the issues raised by the resident in response to his reports about the service charge. This included acknowledgement of inaccuracies highlighted by his reports and how it would revise and reflect these in the charges over the financial years that had been affected. Whilst the resident clearly remained dissatisfied with the level of charges and how the landlord had reflected the changes in the final figures, these matters sit outside the remit of the Ombudsman.
48. Whilst the landlord responded appropriately to the complaint about service charges, from an administrative perspective, there are concerns about how it managed the complaint. The landlord’s earlier responses were unclear as to the status of the complaint and, as a result, the complaints process was unnecessarily protracted. Had the landlord progressed to a final response at a much earlier stage, then the resident might have been able to make an informed decision to progress his complaint in a timely manner.

Orders and recommendations

Order

49. The landlord to pay the resident £100 in compensation for the service failures identified with its complaints handling.
50. The landlord to confirm compliance with the above order by 28 September 2021.

Recommendation

51. The landlord to review the complaints handling service failures identified on this case and to consider how it will ensure that complex issues raised by residents, such as service charges, are progressed appropriately through its overall service delivery processes, including the complaints process where appropriate.