London & Quadrant Housing Trust (202000180)

REPORT

COMPLAINT 202000180

London & Quadrant H T

16 February 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

The complaint is about:
1. the administration of service charges
2. the landlord’s handling of the associated formal complaint.

Background and summary of events

The resident holds a shared ownership lease with the landlord in respect of the property. In accordance with the lease, the resident is liable to pay a service charge for “all expenditure reasonably incurred by the Landlord in connection with the repair, management, maintenance and provision of services for the Premises…”
The service charge is calculated before the start of the account year (1 April to 31 March) and comprises an estimate of likely expenditure for the account year, plus an amount towards the reserve, less any unexpended reserve. As soon as practicable after the end of each account year, the landlord will make an adjustment to actual expenditure and shall either recover the difference from the leaseholder or refund the difference.
In the event that the resident has been overcharged, the landlord’s policy provides that the overpayment will be refunded as a single credit to the account in the next financial year. If the resident has been undercharged, then a deficit charge will be applied in the next financial year, with the balance spread over 52 weekly instalments.
The resident’s account was £1,397.63 in credit following the 2017/2018 financial year. This was because the landlord did not receive any invoices from the estate’s management company. The resident was advised that the final service charge statement for 2018/2019 was likely to show a deficit since it would include more than 12 months’ worth of invoices.
The draft statement for 2018/2019 showed a service charge deficit of £4,384.56. On 1 August 2019, the resident requested a telephone call as he had some queries about the amount owed and the invoice from the managing company. A senior member of staff responded on 13 August 2019 and asked to defer the call until a revised statement had been sent, which would be by the end of September 2019 at the latest. She explained that she was soon to go on leave, the service was entering into its busiest weeks and she wanted to remove a duplicate invoice from the statement. The resident was adamant that he wished to speak with someone. The landlord explained the reconciliation process and reiterated on 30 August 2019 that it would best to wait until the statement had been finalised, as it would be providing additional information with the statement.
On 18 September 2019, the resident raised a formal complaint about the uncertainty over his service charges. He sought to understand what was owed, and for the landlord to review its processes.
In the landlord’s response of 4 October 2019, it explained that the estimated charges were based on the budget provided by a managing company at the development stage. However, there was a large difference between the estimated charges and the actual charges as the freeholder had appointed a different managing company which set a significantly higher budget. It noted that overpayments or underpayments of variable service charges are rectified at the point of reconciliation.
The landlord stated that the invoice it had paid did not match the budgets provided by the managing company, and that it had asked the managing company to clarify the variance. The landlord said that it would update the resident once the matter was resolved. It provided a table of the resident’s contributions, the budgets for 2017/2018 and 2018/2019, the invoice paid on the resident’s behalf (covering the period from 27 August 2017 to 31 June 2019), and the revised service charge statement for 2018/2019 (showing a £4,064.69 deficit).
On 10 October 2019, the resident stated:
1. The invoice from the managing company showed errors which the landlord was challenging. It would be prudent to wait for the final amount to be confirmed before billing the residents an inflated figure.
2. The invoice included a period of 15 days before he owned the property. He expected this to be raised with the managing company.
3. The invoice covered up until the end of June 2019 (22 months of service charge payments).
4. He could not understand why the landlord could not use payments it had received from him up to June 2019 to offset the amount owed, rather than only using money that he had paid from previous financial years.
The landlord met with the resident on 11 November 2019 to discuss the matter further.
On 12 November 2019, the resident noted that the managing company had invoiced the landlord for the period from August 2017 to June 2019, and that the landlord was only matching off payments from September 2017 to March 2018. He proposed that all payments made up to June 2019 should contribute toward the amount charged by the managing company. As it was, the resident felt that he was being asked to contribute towards a debt that had largely been paid already.
The landlord explained on 2 December 2019 that, in terms of account reconciliation, the estimated amount in any single year covers the period from April to March and the expenditure included must have been incurred during the same period. It is not relevant what year the invoice relates to; what matters is the year the landlord paid it.
The landlord stated that the managing company had confirmed that there was an overcharge of £335.56 and had confirmed it would be reducing this amount from its next invoice. It included a breakdown of the invoiced amounts and a table showing the variance. The landlord said it would also credit back some of the total cost of the invoice relating to a period in 2017, to reflect the number of days of his ownership.
An undated file note stated that the resident had called to chase a response to his complaint about how a service charge team had dealt with a query logged in June 2019. He said that he had found the process very difficult to navigate in terms of having his concerns escalated.
On 9 December 2019, the landlord responded to the resident’s concerns about the handling of his enquiries about the service charge. The landlord noted that the resident had raised 11 enquiries with the service charge team since 10 June 2019, and it had engaged with him by way of a telephone conversation lasting over one hour, meeting with him (including showing him a record of each payment and how it was accounted for) and through its email responses. It stated that some of his enquiries were put on hold pending the meeting, but all other enquiries were responded to within 7.5 days, well within the department’s target of 10 working days. The landlord explained that it was not able to respond to enquiries as quickly as some residents would like, given an average of 379 queries per month, the complex nature of service charges and the need to liaise with other departments.
The landlord asked for further information about the resident’s concerns about the escalation process, to enable it to respond to this aspect of the complaint; however, it was overall satisfied that the resident’s enquiries had been dealt with in a satisfactory manner.
On the same day, the resident explained that the response did not capture the essence of his complaint. He stated that his issues were that:
1. His query began in June but had not been resolved, and it was generating considerable anxiety for him.
2. He had been advised of a deficit of over £4,000 in a way that grossly misrepresented the situation. When he tried to obtain clarification over the telephone, he was told that the letter was a fair representation of the situation and would not change.
3. The landlord was not flexible with its processes and he was being asked to ‘double-pay’ a significant sum.
4. The complaint was not escalated to someone who had the time/power to change the system.
5. He felt that the complaint about the service charge process should not have been dealt with by the people who run the process.
On 10 January 2020, the resident followed up as he had not received a response to his email of 9 December 2019. In summary, the landlord’s response of 14 January 2020 stated:
1. It could see how receiving a letter about a large deficit could cause alarm, but it did not agree that it was a gross misrepresentation of the situation, as it showed the expenditure incurred by the landlord in providing services to the resident, in accordance with its legal obligations.
2. It did not consider it would be beneficial to repeat the technicalities of how service charges are collected, accounted for and reconciled, as this information had been outlined previously.
3. Each department is responsible for managing and responding to complaints relating to its area. The resident can escalate the matter by outlining his remaining areas of dissatisfaction and asking the Customer Relations Team to review the complaint.
The resident noted on 16 January 2020 that he had not been provided with an email address for the Customer Relations Team. The landlord responded with an email address but informed the resident an hour later that it was no longer active. It confirmed that it would submit the complaint with the Customer Relations Team once he had confirmed his outstanding concerns. The resident reiterated that he was unhappy with the time taken to obtain answers, the landlord’s practice of charging residents twice for services because of where the financial year ‘arbitrarily’ falls, the wording of the letters, and the difficult complaint process.
The landlord’s Customer Relations Team informed the resident on 28 January 2020 that it had nothing further to add to the previous responses. It concluded the matter by providing advice on how to refer the complaint to the Ombudsman, should the resident wish to take the matter further.
On 20 February 2020, the resident expressed concern that accounting errors had not been applied to the statement he had been provided, and that the £6,901 quoted for management costs was not correct because it did not reflect a credit of £335.56 and apportioned savings of £158.72. On his calculation, the total would be £6,621.65. The resident noted that the statement did not show that £4,426.48 had already been paid for the period in question. He stated that this should amount to £182.93 monthly. He further noted that his credit from the previous year had not been deducted, despite instructing the revenue team to do so.
On 2 March 2020, the landlord responded that the final balance was £4,064.69, which came to £365.38 per month. It suggested that the resident contact the revenue team to amend his direct debit to reflect his account credit of £1,397.63.
On 4 March 2020, the landlord added that it expected to receive the invoice for management costs in the 2019/2020 year and it would be reflected in the year end accounts of 2019/2020. It confirmed that the £158.72 had been applied to his account. The landlord clarified that the purpose of the statement was to compare the landlord’s estimated expenditure with actual expenditure rather than a statement of payments made to the resident.
On 23 March 2020, the resident stated that he would pay the outstanding charges and the new rates but reserved the right to challenge them at a court or tribunal.

Assessment and findings

The resident has correctly identified that the reasonableness of the service charges and his liability to pay them are matters for the First Tier Tribunal (Property Chamber) to determine rather than the Ombudsman. This investigation considers the separate issues of the administration of the charges and the way in which the landlord communicated with the resident.
The landlord sought to recover the fees it had paid to the managing company for the period of 27 August 2017 to 31 June 2019. The landlord intended for the deficit to be addressed through monthly payments from the resident in the financial year commencing April 2020, and it was prepared to apply the resident’s credit from 2017/2018. However, the resident’s view is that the landlord should have deducted the service charge payments made in the period of April 2018 to June 2019 from this amount.
The landlord’s accounting practice (refer to paragraph 13) is based on defined account years of 1 April to 31 March and is consistent with the service charge provisions of the lease and its policy. While the resident is entitled to disagree with the landlord’s practice and propose what he considers is a fairer system, the landlord is equally entitled to maintain its existing practice. It is noted that any overpayment arising from this system would be reconciled at the end of the account year.
It is clear that the landlord did not meet the resident’s expectations in its communications with him. It is indeed understandable that the resident wanted the matter to be resolved as soon as possible. However, it is noted that the landlord met its timescale of 10 working days to respond to his enquiries for the most part, and that it also took the time to discuss the matter with him over the phone and in person. The Ombudsman is unable to comment on the clarity of the information conveyed in the call or during its meeting with the resident; however, the landlord’s emails demonstrate that it repeatedly explained its position and provided the resident with information to assist him to understand. The landlord also appropriately credited the resident’s account when he pointed out that he had been charged for a period prior to the commencement of his lease. Although the resident felt that his concerns had not been resolved after many months, it is unclear what more the landlord could have done, short of adopting his suggestion that it adjust its accounting practice to include payments made from April 2018 to June 2019.
At the time the resident submitted his complaint, the landlord had yet to discuss the service charge statement with him, for reasons set out in paragraph 6. Given that the resident wanted to understand what was owed, it was not unreasonable for the landlord to respond to his queries outside of the complaint procedure in the first instance.
The evidence shows that the landlord engaged with the resident’s concerns and proceeded to issue a complaint response when the resident unequivocally stated that he wished to pursue the matter through the landlord’s formal complaint process. While this was appropriate, the landlord’s response of 9 December 2019 omitted to include information on how to obtain a stage two review. This was particularly important, given that the resident had complained about the lack of a clear pathway for the escalation of his concerns.
There is no evidence that the landlord acknowledged the resident’s email of 9 December 2019 prior to his follow-up one month later, and its response of 14 January 2020 fell outside the 20-working day timescale set out in the Ombudsman’s complaint handling code for landlords. Although the response attempted to address some of the resident’s outstanding concerns, the resident’s complaint journey was complicated by the suggestion that he needed to contact the Customer Relations Team separately to escalate the matter. The landlord initially omitted to provide contact details and later provided an email address that was no longer in use. This was poor customer service and no doubt contributed to the resident’s overall frustration.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme, there was no maladministration by the landlord in respect of its administration of the service charges, but there was a service failure in its complaint handling.

Reasons

The landlord responded to the resident’s queries about the service charge deficit within its timescales for the most part and it remedied acknowledged errors. The explanations it gave about service charge reconciliation for the accounting year and recovery of the deficit were consistent with its policy and the lease agreement. However, the landlord’s complaint handling was poor. There was an undue delay in responding to the resident’s email of 9 December 2019, and the complaint journey was unnecessarily complicated by the lack of clear and accurate information about how to escalate his concerns.

Orders

The landlord is ordered to pay the resident £75 in compensation for the frustration and inconvenience caused by the deficiencies in its complaint handling.
The landlord should provide evidence of compliance with this order within four weeks of the date of this report.