London & Quadrant Housing Trust (201914099)

REPORT

COMPLAINT 201914099

London & Quadrant Housing Trust

15 January 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 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:
1. Response to Government guidance on fire safety and cladding in relation to the building which the resident owns a property in.
2. Request for the resident to pay its legal fees in relation to her application to sub-let the property.
3. Complaint handling.

Background and summary of events

Background

The resident is the shared owner of the property (the property) which the complaint concerns. The landlord is the freeholder.
The property is a flat situated in a purpose–built block (the building).
Advice Note 14 will be referred to throughout the assessment. This advice note was issued by the Government in December 2018 as part of its Building Safety Programme. In summary the advice was for owners of high-rise leaseholder buildings where the external wall system of the building did not incorporate Aluminium Composite Material (ACM). The advice set out checks which owners could carry out to satisfy themselves, and their leaseholders, that their building was safe. This guidance was consolidated in ‘Building Safety Advice for Building Owners’, issued in January 2020. Paragraph 1.4 of this guidance states “for the avoidance of doubt, building owners should follow the steps in this advice as soon as possible to ensure the safety of residents and not await further advice or information to act”.
In response to the guidance some lenders took the view that, if certification could not be provided to demonstrate compliance with the Government’s guidance on fire safety, they would be unwilling to offer a mortgage on properties within these buildings as they would have a value of £0.
In January 2020 The Royal Institution of Chartered Surveyors (RICS), The Building Societies Association (BSA), and UK Finance agreed a new industry-wide valuation process to help people buy and sell homes and re-mortgage in buildings above 18 meters (six storeys). Form EWS1 was introduced to prove to lenders that external cladding had been assessed by an expert.

Summary of events

On 3 September 2019 the resident wrote to the landlord to submit her request to purchase the remaining 25% share of the property (the staircasing request). The resident confirmed that she had a mortgage in principal and a completed valuation.
On receipt of the resident’s staircasing request the landlord requested the resident pay its administration fee of £235. The landlord confirmed that on receipt of the payment it would issue a staircasing confirmation letter setting out next steps.
On 21 October 2019 the resident wrote to the landlord regarding her staircasing application. The resident explained that her lender had requested a cladding report in order to approve her mortgage.
On 25 October 2019 the resident wrote to the landlord to chase for the cladding report. The resident said that she had spoken with the landlord the previous day who had informed her that her enquiry was with its staircasing team. The resident noted that the landlord had written to her in 2017 confirming that testing was completed on the external walls and it met Government guidelines and requirements.
On 28 October 2019 the landlord wrote to the resident. The landlord opened by apologising for the delay in responding to the resident’s enquiry dated 21 October 2019, explaining that it was experiencing a high volume of enquiries. In summary the landlord said:
1. Many mortgage providers were requiring copies of test information for cladding on buildings already occupied and where mortgages had previously been granted. The landlord said that while the cladding reports were being compiled leaseholders were experiencing delays in their mortgage applications being approved.
2. It was inspecting all its “tall blocks” with the intention of collecting evidence to prove that the cladding on its buildings was designed and installed correctly. The landlord said that this process would take time as the inspection was complicated and often required “high level access”.
3. It had a dedicated cladding review team and it had passed the resident’s enquiry to it for a response.
On 1 November 2019 the landlord wrote to the resident regarding cladding. In summary the landlord said:
1. In December 2018 the Government published Advice Note 14. The landlord explained that the guidance suggested that owners of building 18 meters or above should carry out checks to ensure that their buildings were safe.
1. It had around 400 high rise buildings. The landlord confirmed that it had received a large volume of correspondence regarding the cladding on these buildings including for the purpose of sale and re-mortgage of a property. The landlord advised that “unfortunately [it] did not always have the information and results that [had] been requested”.
2. Prior to Advice Note 14 certification regarding cladding was completed via a desk top assessment. The landlord confirmed that all its buildings would have been passed.
3. Following Advice Note 14 the guidance required it to reinspect its high–rise buildings to check the materials specified in the wall systems.
4. It had taken “an active role in inspecting cladding systems throughout its housing stock”.
5. There could be around five components to each cladding system with hundreds of possible component materials, meaning that there were “hundreds of thousands of combinations of wall systems possible”. The landlord explained that testing of all systems “would take years”.
6. It was carrying out inspections using a risk based approached “looking at higher buildings with cladding systems [it knew were] a concern” first.
On 4 November 2019 the resident made a formal complaint to the landlord about its response to her request for information on cladding. In summary the resident said:
1. In September 2019 she contacted the landlord to request permission to sublet the property. The resident explained that she made the request as she had to move out of the property to care for a terminally ill relative.
1. The landlord informed her she could not sublet the property until she owned 100%. The resident confirmed that she therefore submitted a staircasing application.
2. On 21 October 2019 she requested information from the landlord regarding the cladding on the building. The resident said that despite the landlord acknowledging her request and confirming that a response would be provided within five working days she had not received a response “other than a generic general email about cladding”.
3. The landlord’s delay in providing information on the cladding was causing her “significant financial costs”. The resident confirmed that the fixed rate for her mortgage had expired and she was paying for a property which she was not living in. The resident noted that she had reduced her working hours in order to care for her relative.
The resident concluded by confirming that the landlord must provide a timeframe setting out when the cladding report would be available. The resident said that if a report would not be available the landlord should reimburse her “out of pocket expenses” and grant her permission to sublet the property without her owning 100%.
On 5 November 2019 the landlord wrote to the resident. In summary the landlord said:
1. It was aware that the resident had made a complaint that it was unable to provide a cladding report.
1. Its response dated 1 November 2019 “was all the information [it could] provide at the moment” and it had no further updates to provide.
2. It would be able to refund the resident’s administration fee if she agreed to close her staircasing application.
3. It had forwarded the resident’s request to sublet to its subletting team for a response.
On the same day the resident responded. In summary the resident said:
1. She wished to staircase while she was away looking after her relative.
1. She was unable to proceed with her staircasing application as she required a cladding report. The resident requested when the report would be available.
2. If the landlord could not provide a timeframe for the cladding report she would refer the matter to its subletting team.
3. She had not paid the administrative fee however she had paid a valuation fee, £150 solicitors fees and her mortgage rate had gone up.
On 11 November 2019 the landlord responded. In summary the landlord said:
1. It was unable to refund the resident’s valuation fee or solicitors fees in respect of her staircasing application.
1. It had no further updates in relation to the cladding report for the building.
The landlord concluded by providing a link to its complaint procedure should the resident wish to take it further.
On the same day the landlord wrote to the resident to confirm that it would grant permission for the resident to sublet the property for a period of six months. The landlord explained that in order to formally approve the resident’s subletting request a license to sublet was required. The landlord confirmed the resident was required to instruct a solicitor to act on her behalf and she would also be responsible for paying its legal fees (£420) for the license to sublet.
On 14 November 2019 the resident made a second formal complaint. In summary the resident said:
1. It was unsatisfactory that the landlord had not provided her with a timescale for when the cladding report would be available. The resident confirmed that as a result she had not been able to purchase the remaining share of the property.
1. While the landlord had granted permission to sublet the property despite not owning 100% it was unfair that it required her to pay its legal fees in order to do so.
2. She was out of pocket as a result of the landlord failing to provide the cladding report.
3. The situation was very stressful.
On 17 November 2019 the resident wrote to the landlord to request that it grant permission to sublet for a period of 12 months rather than six. The landlord responded to confirm that it was happy to grant permission for 12 months.
On 20 November 2019 the landlord wrote to the resident in response to her complaint dated 14 November 2019. In summary the landlord said:
1. Normally it would not allow shared owners to sublet but due to the resident’s circumstances it had granted permission. The landlord said it would waive its administration fee however the resident was required to pay its legal fees.
1. It had requested an update regarding the cladding report. The landlord said it was sorry that the situation had caused upset, noting that the problem was nationwide.
On the same day the resident responded. In summary the resident said:
1. She was grateful that the landlord has waived the subletting administration fee.
1. The landlord should pay its own legal fees. The resident said that it was unethical that the landlord was asking her to pay them. The resident reiterated that she worked part time.
2. She was aware that the cladding issue was nationwide however the landlord’s response to her request for information on the building had been unsatisfactory. The resident stated that the landlord had still not indicated when a cladding report would be available for the building despite requesting the report in October 2019.
3. She had “already exhausted” the option of making a complaint about the cladding report, however she would like a final response so that she may refer the complaint to the Ombudsman if necessary.
On 27 November 2019 the landlord sent a separate response to the resident regarding her subletting application. The landlord reiterated that it had agreed to waive its administration fee to sublet however said that “all customers” were required to pay its legal fee. The landlord concluded by confirming that the resident’s lender’s decision to not offer a mortgage was based on their interpretation of Government advice rather than any action it had taken.
On 28 November 2019 the landlord provided the resident with a comprehensive response in relation to the concerns which she had raised regarding her staircasing application. In summary the landlord said:
1. It was sorry that it was unable to provide the information which the resident’s lender was requesting. The landlord acknowledged that this was “very frustrating” for the resident.
1. In recent months lenders had begun making extra requirements of people who applied for mortgages on properties in purpose-built blocks, namely independent certification that a property meet the requirements of Advice Note 14. The landlord confirmed that in the “short-term at least” it was unable to provide this.
2. To obtain certification it must employ a specialist fire engineer to carry out intrusive tests of the building structure. The landlord confirmed that this involved opening the building up and testing the materials used in its construction. The landlord explained that the results following the testing need to be analysed and any resulting work planned and carried out before the correct evidence could be provided. The landlord said that this was “a complex and lengthy process”.
3. It predicted that, due to the extent of the Government’s guidance, most of its buildings would require some form of remedial work. The landlord confirmed that it therefore must prioritise the work based on risk.
4. While certification to demonstrate compliance with Advice Note 14 could not be provided, it did not mean that the property was unsafe. The landlord noted that it was not a legal requirement for a building to meet the conditions of Advice Note 14.
5. Along with other housing associations it was calling on the Government to step in to provide assistance to allow mortgage lenders to relax their stance.
6. It was able to provide the following information about the building:
7. It had Building Control sign-off on completion
8. It had approval from a licensed warranty provider on completion
9. It had an up-to-date Fire Risk Assessment – the landlord confirmed that it reviewed these each year and any recommendations are dealt with immediately or put into a programme of works to be completed as soon as possible.
10. It would be in touch when it had more information.
In February 2020 the resident contacted the Ombudsman as she was not satisfied with the landlord’s response to her enquiry regarding cladding on the building.
On 6 February 2020 the Ombudsman wrote to the landlord to make enquires regarding the status of the resident’s request and asked it to provide a formal response under its complaint procedure if it had not already done so.
In response the landlord contacted the resident to request the outcome she was seeking in respect of her complaint. The resident responded on 20 February 2020 confirming that she would like the landlord to grant her permission to sublet her property without her having to pay its legal fees. The resident confirmed that she would also like to be “compensated for the loss of rent [she had] incurred over the past five months”.
On 2 March 2020 the landlord wrote to the resident to advise that its response would be delayed, but it would be provided by the end of March 2020. The landlord said that the delay was due to the complex nature of the complaint.
On 14 April 2020 the landlord provided its final response. The landlord opened by apologising for the delay in responding to the complaint. The landlord noted that it had been carrying out inspections on the building over the last few months and it was important to wait until it had a full picture regarding “building safety and form EWS1”. In response to the complaint the landlord said:
1. It had enclosed a letter (the letter) which it was due to issue to all resident which summarised the situation in relation to the cladding on the block. The landlord requested that the resident read the letter prior to reading the rest of its complaint response. [A summary of the landlord’s letter is provided below at paragraph 32 of the report].
1. It granted permission for the resident to sublet the property on 20 November 2019. The landlord confirmed that in response the resident requested that it waive the requirement for her to pay its legal fees. The landlord confirmed that it had reviewed its decision to not accede to the resident’s request and found “no fault”. The landlord confirmed that its decision was in line with its policy which stated that:
2. It will refund the administration fee where an application cannot progress because of the mortgage lender’s requirements.
3. It would not refund any other costs incurred as the inability to progress an application is as a direct and uncontrollable result of the lender’s interpretation of Government advice.
4. The liability for the legal costs associated with subletting would follow the same principles.
5. It was unable to provide compensation because of the resident’s inability to progress her staircasing application as it was a “direct and uncontrollable result of lender’s interpretation of Government advice, rather than a failure [on its part]”.
6. It had reviewed its communication with the resident in respect of her staircasing and subletting enquiries and applications. The landlord said that it had found “partial fault”. The landlord explained that the resident’s communication with its homeownership team was acceptable however communication by its cladding team was unsatisfactory. The landlord confirmed that it would make changes to the way that it communicates with its residents.
7. Although it was unable to provide form EWS1 it did not mean that the building was not safe. The landlord said that the building had the correct fire strategy in place.
The landlord concluded by confirming that the resident may refer her complaint to the Ombudsman if she was not happy with its response.
The landlord’s letter provided residents with an update on cladding. In summary the landlord said:
1. Form EWS1 had been introduced to prove that a building was compliant with Government guidance.
1. Although compliance with the requirements of the Government’s guidance was not laid down in legislation, lenders were taking the view that if independent certification could not be provided it would not offer a mortgage.
2. To provide form EWS1 it must undertake complex intrusive inspections, carry out safety tests and in many cases complete remedial works. The landlord confirmed that in the short term it was therefore unable to provide the certification that mortgage lenders were asking for.
3. In respect of the building:
  1. It was just over 18 meters tall which meant that lenders would be likely to require form EWS1 prior to offering a mortgage.
  2. It was timber framed. The landlord confirmed that timber frames were commonly used in construction and “despite the word timber and its connotation with fire it [did] not mean that the building [was] unsafe”.
  3. The cladding used was manufactured by Rockpanel, one of the leading manufacturers of fire-resistant products in Europe. The landlord confirmed that it had no plans to remove or change this.
  4. It had carried out numerous inspections since November 2019. The landlord confirmed that one of the inspections found some issues with ‘fire stopping’ internally, which was a term used to describe the sealing of any openings and compartments to prevent fire from spreading.
  5. It had carried out works to resolve the insufficient fire stopping. The landlord confirmed that there was one block which still needed this work and it anticipated this will be completed towards the end of April 2020.
  6. Because of the minor deficiencies, it had instructed a specialist fire consultant to carry out a Type 2 Fire Risk Assessment (FRA).
  7. The London Fire Brigade had visited on several occasions and had not requested a change to the fire strategy or further remediation works. The landlord confirmed that this meant that the London Fire Brigade was satisfied with the measures it had put in place to keep residents safe in the event of a fire.
4. It owned several hundred buildings which were affected by the Government’s guidance. The landlord confirmed that it was due to complete its programme to remove ACM cladding from high-rise buildings by April 2020 and it was undertaking inspections and carrying out remedial works to several buildings where it had identified issues with safety since the guidance was issued.
5. It must prioritise its buildings based on risk. The landlord confirmed that high risk was defined by height, occupancy and building materials “among other factors”.
6. It would issue a copy of its prioritisation policy in Spring 2020 which would help residents understand the timescale for inspections.
7. Historically the building would be very high on its priority list “however” because the intensive surveys it had undertaken in recent weeks did not identify any specific concerns, and because the cladding was Rockpanel, it deemed the building “lower risk”.
8. As the situation with cladding was constantly changing it updated its website regularly.
As the resident was not happy with the landlord’s response she referred the complaint to the Ombudsman. Within her referral the resident noted the following points:
1. The landlord’s complaint handling had been poor.
1. The landlord had failed to inform residents regarding the impact of Advice Note 14.
2. The landlord’s request for her to pay its legal fees in respect of her subletting application was unfair.
3. The landlord had provided misleading information regarding the safety of the building. The resident noted that the fire risk assessments undertaken in 2019 and 2020 highlighted potential fire risks.

Assessment and findings

The Ombudsman’s internal guidance for caseworkers considering complaints about cladding [1] sets out that, as the Government’s expectations in relation to cladding and fire safety are only detailed in guidance, there is an element of discretion for a landlord as to how and when it chooses to comply with it.
The Ombudsman’s guidance further sets out that when investigating a complaint relating to the Government’s guidance on fire safety and cladding the Ombudsman will consider the following points:
1. What are the landlord’s long-term plans for compliance with the guidance and are these fair and reasonable?
1. How has it communicated with shared owners/leaseholders regarding the situation and was this communication appropriate?
2. How has it responded to the individual circumstances of the leaseholder?
These points will be considered when assessing whether the landlord’s actions and response to the complaint were fair in all the circumstances.

The landlord’s response to Government guidance on fire safety and cladding in relation to the building which the resident owns a property in

As the Government’s expectations in relation to cladding and fire safety are only detailed in guidance there is an element of discretion for a landlord as to how and when it chooses to comply with it.
It is clear from the landlord’s correspondence with the resident, in addition to information published on its website [2], that the landlord is taking steps in order to comply with the Government’s guidance in respect of the building. This is because the landlord explained that it will be responding by inspecting its buildings and then completing any remedial work identified. In the Ombudsman’s opinion this is appropriate as, while the guidance is not a legal requirement, it has been established as best practice in relation to building safety and form EWS1 is required by lenders.
Within its correspondence to the resident and on its website the landlord explained that it is taking a risk-based approach to prioritising its buildings for inspection considering height, occupancy and known building materials. In the Ombudsman’s opinion it is appropriate that the landlord has shared this information, to provide an outline of its approach and to demonstrate that its approach in prioritising the inspections is fair and rational. The landlord also explained that the inspection would take a significant amount of time to complete. In the Ombudsman’s opinion this was appropriate to manage the resident’s expectations. The Ombudsman recognises that the process to obtain certification is complicated and requires input from experts, which there is currently a shortage of within the industry.
The Ombudsman has not seen any evidence that the landlord informed the resident regarding the impact of Advice Note 14 on mortgage applications either following its introduction in December 2018 or on receipt of the resident’s staircasing application in September 2019. As the impact of the guidance was widely recognised within the industry by mid-2019 the landlord should have made the resident aware of the situation, as a minimum on receipt of her staircasing application, so that she was informed of the situation and aware of the potential impact on the property which she owned. In the Ombudsman’s opinion it was unsatisfactory that it did not do so as the resident was therefore unable to make an informed decision on her staircasing application – whether to proceed or not.
The most recent fire risk assessment completed prior to the landlord’s final response, dated 7 April 2020, set out:

As we have discovered during this assessment the flats do not have adequate compartmentation to enclose a fire into a defined area and burn out its contents. This means that a fire could not be contained and would spread throughout the building… the retraction of the stay put policy must be immediate….

On 1 May 2020 the landlord wrote to all residents to note that it had changed the fire strategy for the building due to fire stopping issues. The landlord confirmed that the new strategy included a waking watch and a new evacuation procedure; to exit the building. The landlord advised that it would complete further investigation to fix the fire stopping issues identified to make the building safe and to produce form EWS1. As the fire risk assessment identified a need to change the fire strategy it was appropriate that the landlord immediately implemented it.
The Ombudsman understands that on 18 and 19 November 2020 a specialist fire engineer conducted an inspection on the external wall to inform next steps to achieve compliance with Advice Note 14.

The landlord’s request for the resident to pay its legal fees in relation to her application to sub-let the property

The lease agreement for the property sets out that the leaseholder may not sublet the property. The landlord’s Guide to Subletting sets out that the landlord may grant permission for a shared-owner to sublet the property in exceptional circumstances.
As the resident was unable to staircase to 100% ownership, as the landlord was unable to provide certification to demonstrate compliance with the Government’s guidance in order for the lender to approve her mortgage offer, the landlord granted her permission to sublet the property. In the Ombudsman’s opinion this was appropriate as the resident’s position was through no fault of her own and due to her personal circumstances and need to care for a relative away from the property.
The landlord confirmed that it was able to waive its subletting administration fee (£150). This was reasonable as the resident’s mortgage application could not progress due to the absence of certification to demonstrate compliance with the Government’s guidance.
While the resident is dissatisfied that the landlord would not waive the legal fee in the Ombudsman’s opinion its decision was fair as it reflects the legal position set out in law. Section 19 of the Landlord and Tenant Act 1927 (the Act) allows a freeholder to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with a licence or consent to assign, underlet, charging or parting with the possession of the demised premises.

The landlord’s complaint handling

The resident raised a formal complaint on 4 November 2019 and 14 November 2019 in relation to cladding. It was not until 14 April 2020 that the landlord provided a formal response to the complaint under its complaint procedure. The Ombudsman notes that, while the landlord did not provide a formal response under its complaint procedure during the period 4 November 2019 to 14 April 2020, the landlord was responding to the concerns which the resident raised. However, in the Ombudsman’s opinion the landlord’s informal responses do not mitigate its lack of response under its complaint procedure. This is because the purpose of a complaint procedure is to address complaints at the earliest stage. Further the landlord’s delay in responding to the complaint formally also delayed the resident’s access to the Ombudsman.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme there was:
1. Service failure by the landlord in respect of its response to Government guidance on fire safety and cladding in relation to the building which the resident owns a property in
2. No maladministration by the landlord in respect of its request for the resident to pay its legal fees in relation to her application to sub-let the property
3. Service failure by the landlord in respect of its complaint handling

Reasons

The Ombudsman appreciates that the resident’s current situation is difficult and that she is in this position through no fault of her own. This is because until the landlord is able to provide certification, in line with the Government’s guidance, the leaseholder is effectively in limbo as she is unable to staircase the property or sell it as lenders will not lend on it because of the cladding issue.
While the Ombudsman is satisfied that the landlord is taking appropriate steps in response to fire safety and the Government’s guidance, as it has committed to undertaking remedial works to make the building compliant with Advice Note 14, the Ombudsman is concerned regarding the landlord’s communication with the resident regarding the same. The Ombudsman has not seen any evidence that the landlord informed the resident regarding the impact of Advice Note 14 on mortgage applications following its introduction or on receipt of the resident’s staircasing application in September 2019. As the impact of the guidance was widely recognised within the industry by mid-2019 the landlord should have made the resident aware of the situation, so that she was informed of the situation and aware of the impact on the property which she owned.
It was appropriate that the landlord used its discretion to grant permission for the resident to sub-let the property as she was unable to staircase to 100% ownership as it was unable to provide certification demonstrating compliance with Advice Note 14.
The landlord’s decision that it would not waive its legal fee in relation to the resident’s subletting application was reasonable as it was in accordance the Act.
The landlord significantly delayed in providing the resident with a formal response under its complaint procedure. This is unsatisfactory as the purpose of a complaint procedure is to address complaints at the earliest stage. Further the landlord’s delay in responding to the complaint formally also delayed the resident’s access to the Ombudsman.

Orders and recommendations

Orders

The landlord should pay the resident the following compensation within four weeks of the date of this report:
1. £200 for not informing the resident of the potential impact of Advice Note 14 at an appropriate time, specifically on receipt of her staircasing application
2. £100 in respect of its complaint handling
The landlord should write to the resident (and other leaseholders) to provide an update on the remedial works required in order for the building to be compliant with Advice Note 14, and following the inspection in November 2020, within four weeks of the date of this report – if it has not already done so.

Recommendations

The landlord should ensure that the granting of the temporary consent to sublet the property does not result in the resident being disadvantaged and charged again for further permission to sublet if required.

[1] https://hos.dev.civiccomputing.com/about-us/corporate-information/policies/dispute-resolution/guidance-on-cladding/

[2] https://www.lqgroup.org.uk/your-home/homeowners/information-for-leaseholders-who-live-in-apartment-blocks